Space Tech's Investment Case Is Increasingly "Normal"
In a wide-ranging conversation, we talk to a lawyer with strong investment connections about spacefaring, Elon Musk, satellite costs and the wealth management attractions of space.
Space flight and related technology is already a commercial reality in this day of SpaceX (Elon Musk) and Blue Origin (Jeff Bezos). Wealth managers may still have the impression that this segment is a proposition where payoffs take decades to bear fruit. But increasingly, returns can come in short-term periods as the sector matures.
According to the not-for-profit Space Foundation, the space economy was valued at $469 billion in 2021, up 9 per cent from 2020, the highest recorded growth since 2014. (McKinsey, November 28, 2022).
A benefit of modern spacetech is that one does not have to wait for, say, one to 15 years to monetize it. The return time horizons on investments are getting shorter, and that attracts more money, Alykhan Sunderji, founding partner, Sunder Legal, told Family Wealth Report. Sunderji is based in San Diego, California.
One example of a fairly short-term return model on investment is the Project Kuiper satellite, he said. (These are Amazon-backed satellites to build high-speed communications.) “There are massive efficiencies that can be gained.”
Sunderji’s work in the legal world, helping space-sector entrepreneurs and others, has given him a ringside seat in an area that’s now more Wall Street than Buck Rogers. For example, Elon Musk’s SpaceX launches are so regular that they’re no longer prime-time news.
“There are people who are dreaming about space and investors in space are also very excited about it,” Sunderji continued. He said there are several “adjacent” opportunities – technologies and industries that are influenced and driven by space flight.
Imaging tech is becoming more attainable and commercially viable all the time, Sunderji said, to give one example.
“The reduction in launch costs has made on-planet activities more feasible off-planet. Think of how high-speed internet and massive data centers made on-premises computing feasible off-premises,” he said. The costs for heavy launches in low-Earth orbit (LEO) have fallen from $65,000 per kilogram to $1,500 per kilogram (in 2021 dollars) – a greater than 95 per cent plunge, according to McKinsey. In a way, the drastic fall in launch costs resembles the Moore's Law trajectory of rising computer power from shrinking computer chips.
FWR talked with Sunderji about tech ideas such as orbital data centers, which don’t need the costly cooling tech used for such facilities on the Earth’s surface, as an example of what can be developed.
Sunderji’s firm represents space companies. Based on the US Northwest in Seattle, he talks to many firms, both the big-brand names (Boeing, SpaceX, Blue Origin, and others). Sunderji also talks to family offices and ultra-high net worth investors and entrepreneurs interested in the area. The angel investment community is often a powerful network to draw upon.
The sector is on a roll. In January, Seraphim Space Investment Trust, a UK-listed trust, predicted strong growth in areas such as cell phone connectivity from space; commercialization of the moon; defense, cyber and climate-related issues, and a surge in the number of countries’ space agencies. On the flipside, agencies may try to control space-launch volumes and manage the problem of “space junk” – dead satellites and other craft orbiting the Earth and creating a hazard to new equipment.
And Seraphim is – perhaps unsurprisingly – bullish on the sector overall. According to its January note: “Despite the backdrop of greater economic uncertainty, raising interest rates, soaring inflation and recession we believe new records will be established in spacetech in terms of giant commercial projects being funded. Whilst the second half of 2022 saw growth staged funding rounds reduced and postponed due to economic uncertainty, we believe several mega-rounds will close in 2023, producing another overall record year.”