More Space Company M&A, Failures Seen Coming
The commercial space universe is about to see mergers and acquisitions, particularly in the small-satellite and small-satellite launch market, investment experts said Tuesday at a Washington Space Business Roundtable event. Expect more business failures over the next year or two in the smallsat launch market as the imbalance of many startups vs. a minimal commercial market starts to catch up with the burgeoning industry, said Bryce Space and Technology CEO Carissa Christensen. Launch supply always outstrips demand, as nations want their own launch capabilities, and governments are the chief market for small launchers, she said.
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Commercial space, going through a startup boom, is due for an increase in business failures as more companies reach a maturity point where they need more access to capital and a clear path to success, Christensen said. She said those failures could drive M&A by big aerospace companies scooping up startups' technology or capabilities.
Space venture fund Seraphim Capital Managing Partner Matt O’Connell said when low earth orbit (LEO) constellations aren't an immediate financial success, there will be marriages with geostationary orbit or medium earth orbit operators. He said cable ISPs could show interest. One challenge to M&A in space is it doesn't mean big returns for venture capital investors, he said. Razor's Edge Ventures venture capital fund Managing Director Rob Painter said consolidation is possible among satellite-adjacent businesses like data analytics.
Christensen said venture investment in space has been primarily U.S. investment money going to American companies since 2015, though the proportions have been dropping. She said there are policy options for preserving that as a U.S.-centric phenomenon. She said NASA announcing what services it anticipates buying commercially from LEO activities generated more market confidence. Space firms increasingly turn to government as a potential customer to address the slowness of target markets developing on the private sector side, she said.
O'Connell said the upside of Britain's launching its own version of In-Q-Tel, the VC firm that invests in technologies of possible use to U.S. national security agencies, is that it's good to have more such firms. The downside is that they could someday become competitive.
The commercial space universe has shifted from a vicious cycle, where somewhat unreliable launch technology meant launches and satellites were filled with redundancies and hugely expensive, to a virtuous cycle of cheaper, smaller satellites and cheaper launches, said Pamela Melroy, CEO of Melroy & Hollett Technology Partners consultancy. SpaceX, and improvements in technology overall, drove that shift , she told a Center for Strategic and International Studies event earlier Tuesday. A former NASA space shuttle commander, Melroy said space manufacturing capabilities will be another transformative step in commercial space, and orbital debris could be raw material for orbital satellite manufacturing. She said the U.S. orbital debris regulation is in "the worst possible place of no one [agency] in charge."