Even to casual observers of the space industry, it’s clear that a revolution has been underway in the past decade or so. Private firms have emerged to invest billions into funding a new generation of space enterprises to further humanity’s exploration and utilization of space. As investors throw their financial weight behind an ever-growing stream of new space startups, we find ourselves firmly in the era of New Space, or Space 2.0, as the industry is forecast to become a trillion-dollar market in the coming years.
Since the birth of space exploration, the tone for the sector was set by massive state space agencies in the USA (NASA) and USSR (Roscosmos), who, historically, used their space programs to wage an ideological proxy war with each other. Today, however, space exploration is driven by the markets, free of any military or political agendas. As New Space continues to innovate space exploration for all humankind, the question remains as to how the big players of the Old Space era will survive in a world that they didn’t create.
Old vs New Space: The Next Stage of the Space Industry
During the Cold War, both Western and Eastern superpowers treated space as a battleground to display each side’s scientific and industrial superiority over the other. While this led to a golden age of space exploration in the 1960s and 1970s, as the Cold War ended in the 1990s, government enthusiasm for further space development began to taper off. It took the intervention of private companies in the new millennium to begin the New Space era and rejuvenate public interest in furthering space exploration.
New Space companies are defined by their agility, as they innovate new ways to deliver commercial solutions like imaging and communication satellites into space. Private companies can launch a rocket with an onboard payload in a shorter timeframe than their government counterparts and can court commercial investment partners to help them realize their projects ahead of schedule. Furthermore, commercial innovation drives the New Space industry in a way that was never seen with the Old Space agencies, whose ambition was limited by the political and economic agendas of whatever government was in power at the time.
ABL Space: New Startup Comes to Lockheed Martin’s Rescue
Even the more established players in the aerospace and defense industries have staked their future in private space startups. Two of the USA’s biggest defense contractors, Lockheed Martin Space and Boeing Defense, have entered into a partnership to create the United Launch Alliance (ULA) to provide a commercial offering to NASA and the Department of Defense conceived to rival the upcoming crop of New Space upstart businesses. However, the ULA has only managed to launch 17 commercial missions to date, a figure dwarfed by the work rate of the New Space industry. Apparently, the union did not meet the expectations of its founders.
So, in 2019, Lockheed Martin has entered into a direct partnership with rocket company ABL Space Systems to purchase 26 RS1 rockets by 2025, with an option for a further 32 ABL Space launches by 2029. It seems as if Lockheed Martin is increasingly reliant on New Space business models to help keep its offerings competitive, especially with regard to maintaining its long-standing relationship with America’s space and defense agencies. But it’s also interesting that ABL calls Lockheed its major supporter.
Across the water in Europe, other startups are rising to meet the demands of the New Space market. German company Rocket Factory Augsburg (RFA) is a leading developer of low Earth orbit (LEO) rocket solutions to provide agile launch services for commercial clients determined to get their smallsat devices into near-Earth space. The company aims to become Europe’s leading commercial launch company, which would certainly give it claims to an increasingly profitable marketplace. For the moment, however, its biggest customer is actually RFA’s parent company, OHB SE. That said, RFA has already been the recipient of funding from the European Space Agency (ESA), which once again displays how traditional space agencies are becoming increasingly reliant on commercial partners to remain relevant.
Benefits and Risks of New Space Startups
Emerging space startups certainly appear to be the main drivers of innovation in the modern space industry, but they’re not without their risks. Like any startup business model, some startups struggle to remain financially sustainable as they’re reliant on the goodwill of investors and venture capital. More established players in the space industry, be they industry behemoths like Lockheed Martin or established space agencies like NASA, don’t have the same concerns about cash flow.
Space startups also have to succeed in a commercial marketplace that, by its very nature, is extremely competitive. However, New Space startups enjoy agility that traditional operators will always struggle to match. They’re not reliant on government funding to execute projects and are not subject to the same political whims of whichever party is in power in determining their success.
Perhaps the biggest difference between the agents of Old and New Space lies in the willingness to take risks. Government agencies and established companies have traditionally had very low-risk tolerance, and the thought of a series of crashed launches funded by taxpayer money is often too much to countenance. Private companies, on the other hand, will be more willing to take risks in R&D if it will help generate innovation further down the road. Ultimately, there’s a good chance that any losses will eventually be recouped. The competitive nature of the markets and economies of scale is much more likely to result in something like space tourism being widely accessible in the near future than if it were left to the auspices of state space agencies.
New Space Benefits:
- Willing to take risks
- Not reliant on government funding or political goodwill
- Innovation-driven by competition
- Agile business models
Final Thoughts: Will Older Space Companies Survive?
The market forces of profit and competition have helped New Space businesses drive innovation so successfully that it’s possible that the established players, be they multinational aerospace corporations or state space agencies, are in danger of being left behind. Where public enthusiasm once dictated the pace of space exploration, profit margins are helping ensure that progress continues to be made in driving down the costs of rocket launches and opening new horizons for deeper space travel.
However, Old Space can still have a part to play in the industry’s future if the major players can embrace the obvious benefits of the commercial space sector. Already, NASA is contracting projects out to private space companies to help bring its most ambitious projects to fruition, like the Artemis Program that aims to return astronauts to the Moon’s surface by 2024. Whether by partnerships or acquisitions, it’s clear that the survival of Old Space’s biggest players will be contingent on the progress that New Space startups like ABL Space can provide.