In the wake of the fiftieth anniversary of the moon landing, attention has returned to the National Air and Space Administration (NASA) and its current efforts to place humans on the lunar surface, amidst competition from China. While America’s military-industrial complex delivered a timely victory over the Soviets in the first space race, the Apollo program consumed 4 percent of the federal budget at its peak. This government-centric approach was as unsustainable for Washington as it was for Moscow, and we left the moon in 1972, not to return for half a century. While returning to the moon in a sustainable way has been the stated space objective of the Trump administration, NASA’s initial response to that mandate was discouragingly unimaginative and unambitious, essentially proposing a slower, more complex, and less certain repeat of the “flags and footprints” mission of the 1960s.
President Trump also called for the creation of a Space Force, backed by the assertion that “it is not enough to merely have an American presence in space; we must have American dominance in space.” While a dedicated service for this strategic domain is indeed the right choice, the key to securing dominance in space will not be found in any sci-fi weapons systems, but rather through the exploration and development of space with commercial and international partners that share American ideals. America is by now painfully aware that our technically superior military can seize just about any territory, but will never truly secure it. Real dominance comes only from economic and soft power victories that the usual suspects at the Pentagon don’t understand. They are too eager to pour more money into their traditional space toy box.
The first Space Policy Directive, directed by the National Space Council and issued by the White House in December 2017, called on the government to “lead an innovative and sustainable program of exploration with commercial and international partners to enable human expansion across the solar system and to bring back to Earth new knowledge and opportunities.” This call to action demonstrates more sophisticated thinking and sets exactly the right goal for building a better future for everyone in space.
The good news is, after two years of grand space talk with little actual progress, it has finally become clear that, in order to achieve our audacious space objectives at a reasonable cost, the United States must leverage the ingenuity and daring of the commercial spaceflight sector. In the last few months, NASA has moved in a positive direction, awarding numerous contracts for its lunar program and seriously engaging the entrepreneurial space firms through its marque Artemis program. The success of this engagement will depend on commercial space firms securing access to sufficient private capital. Much of that capital will be in the form of foreign direct investment eager to cash in on the next U.S. technology boom. The U.S. government must, therefore, facilitate investment that aligns with national goals, and should guide startups toward investment partnerships that provide them full participation in government-led opportunities. At the same time, the United States must be cautious of hostile foreign actors working themselves into the U.S. space industry via investment. So far, things are looking good.
In their 2018 Report on the Space Economy, the Space Foundation estimated global space revenues at US $383.51 billion, of which $211.45 billion was fully commercial activity. A report from Bank of America Merrill Lynch estimates that the market will grow to $2.7 trillion over the next 30 years. By contrast, a recent report by Ap Annie estimates that global smartphone users spent just $86 billion on apps in 2017. Assuring that the United States gets the best share of the growing space economy is a far more important goal than repeating a one-off journey to the moon, or even to Mars.
The Space Angels Network reports that, in 2017, major investors channeled $3.9 billion into commercial space startups. Of that total, $3.25 billion was invested in U.S. firms. The largest portions of that investment came from venture capital and Amazon founder Jeff Bezos’s significant contribution to his Blue Origin launch company. While 2018 was another promising year, with the Space Angels reporting over $3 billion invested in space by the third quarter, space investment in the first quarter of 2019 has already eclipsed that number. Importantly, investors profited from the sale of several of these firms. Most notable was Northrup Grumman’s $7.6 billion acquisition of pioneering commercial launch provider Orbital ATK in 2017.
The international investment climate is particularly interesting. At the end of 2018, Cloud Constellation Corporation of Los Angeles announced a $100 million second round, or “series B,” investment from Hong Kong-based HGH Group to fund the development and deployment of its Space Belt, a system of secure data satellites. This is a perfect example of a deal in which investor relations with China should be reviewed by the Committee on Foreign Investment in the United States (CFIUS). Another Southern California startup, Richard Branson’s Virgin Orbit, is slated to launch these Space Belt satellites. In 2009, the Abu Dhabi sovereign wealth fund, Aabar Investments, invested $280 million in Branson’s Virgin Galactic space tourism operation, and added an additional $100 million to launch the Virgin Orbit satellite launching system in 2011. In 2018, Branson secured a $1 billion investment commitment from the Saudi sovereign wealth fund for his combined space group. However, that deal was suspended in November of 2018 over Branson’s concerns with the involvement of the Saudi government in the murder of dissident reporter Jamal Khashoggi. Instead, Branson boldly moved forward with the first New Space IPO.
It is notable that Branson, a British citizen backed by Middle Eastern capital, chose to set up and grow his operations in the United States. The attractive talent pool and access to the U.S. government as a customer are the primary reasons firms choose to conduct research and development within American borders; America’s clearly-defined and effective regulatory environment for space launches is also unique and valuable to firms. Rocket Lab, founded in New Zealand, moved its headquarters to Huntington Beach, California under the moniker “Rocket Lab USA.” While it performs launch operations from the east coast of New Zealand’s North Island, these launches are regulated under U.S. law by the Office of Commercial Space Transportation (AST) of the Federal Aviation Administration. Cooperation of this nature is a win-win for the entrepreneurs, New Zealand, and the United States. As a nominally American firm, Rocket Lab will gain access to capital and customers, and is already launching NASA payloads into its orbital class Electron rocket. New Zealand will benefit from establishing launch operations on its territory, gaining infrastructure and expertise that will likely evolve into independent national capabilities under a regulatory regime based on the successful American model. U.S. government and commercial satellite operators win through lower cost and more flexible launch options, sustained by a competitive marketplace. As was the case with commercial aviation, the expansion of U.S. operational norms into global market offers U.S. manufacturers and service firms a head start and furthers their global legitimacy.
Rocket Lab is a perfect example of international commercial space funding done right. Founder Peter Beck’s innovative mono-propellant (combined fuel and oxidizer) and engine concepts received early funding from the U.S. Operationally Responsive Space Office in 2010, which partners with NASA and several Defense Department entities interested in disruptive space innovation. Rocket Lab secured contractual work with the U.S. Defense Advanced Research Projects Agency (DARPA) in 2011, a rare achievement for a foreign firm. California venture capital fund Khosla Ventures led the firm’s A-Round in 2013, supporting the development of the firm’s Electron rocket. Electron was a promising small orbital launch system featuring traditional kerolox (kerosene + liquid oxygen) engines supplied with innovative electrical, rather than mechanical pumps. In 2014, a New Zealand governmental innovation initiative added to the funding mix, and U.S. aerospace giant Lockheed Martin joined the following year.
On the other side of the globe, the national government of Luxembourg has uniquely positioned its small state as the “can-do environment to pioneer the future of space,” and founded a national space agency whose primary mission is centered around economic development rather than scientific discovery. The Grand Duchy is hoping to parlay its success with global satellite operator SES S.A. into a leading position in space resources extraction on asteroids and the moon. In 2017, the country announced a bold regulatory initiative, broadly defining private property rights in outer space in a pro-commercial context. For a country with few natural resources and territory, such a move is both bold and immediately practical. Luxembourg’s stable government and well-managed economy have attracted significant foreign talent and investments that are strategically aligned with the current U.S. administration’s calls for the development of a sustainable space economy. In 2018, Luxembourg announced the formation of a $100 million space investment fund. The Luxembourg fund and other European investment funds are the best opportunities for U.S. firms to acquire foreign investment free of most geopolitical and national security complications.
Airbus is another European entity that has been engaged with the New Space movement for some time. The aircraft maker is regularly found at space investment events in California and meeting with space startups and venture capital firms in Silicon Valley. Airbus Ventures, the investment arm of the commercial aircraft giant, has adopted the tagline “Reaching for the Stars is in our DNA.” In 2017, the firm led the Series A investment in the Japanese space-communications startup Infostellar; they also made a major investment in Swiss-based Astrocast, which plans to provide space-based communications to Internet of Things (IoT) devices. Last year, Airbus Ventures participated in a $35 million A-round for SpinLaunch, a California-based firm planning to “slingshot” satellites into orbit.
U.S. policymakers and regulators should encourage and facilitate expanded European co-investment in U.S. and other Western commercial space startups. Continued financial commitments will further align these investors and their home countries with U.S. economic, security, and geopolitical interests in space.
Dr. Greg Autry researches entrepreneurship in context of commercial spaceflight at the University of Southern California where he is the founding director of the Southern California Commercial Spaceflight Initiative. Dr. Autry served on the Presidential Agency Review Team at NASA and as interim White House Liaison at the space agency. He is currently a member of the Commercial Space Transportation Advisory Committee (COMSTAC) at the FAA and serves as Vice President of Space Development for the NSS.