Australia’s space sector needs more than science and engineering

By on 14 July, 2020

Australia’s professionals can help ease the space sector’s growing pains.

This article was authored by Nicholas Borroz for Position magazine.

The space industry is growing quickly, and the time is ripe for professionals with various backgrounds to get involved.

SpaceX recently launched another Starlink satellite to orbit, bringing the current tally to 300 – a number that will be dwarfed by the megaconstellation’s anticipated thousands. Investors are excited about space and are putting billions of dollars into firms in the sector. So much investment interest exists, in fact, that financial services firms are emerging that are totally focused on the sector – like Space Angels, for instance.

All systems go?
The situation in Australia reflects what is happening globally. Since creating a space agency in 2018, the Australian government has repeatedly increased its support for development of the domestic space sector. It recently committed $150 million to fund Australian enterprises that are involved in NASA’s upcoming Moon mission. The new Launches and Return Act, on the other hand, paves the way for launches in Australia by lowering insurance requirements for would-be launch service providers.

Numerous space firms of significant size exist in Australia, and they occupy various niches throughout the sector. Gilmour is providing launches, Fleet is providing satellite-based IoT, and Arlula is providing imagery. These are just a few firms – there are many others. With such a rapidly growing competitive landscape, Australia may well succeed in meeting the government’s goal of growing the space market to AU$12 billion by 2030.

So, it’s a good time to enter the space business, right? Not necessarily. The truth is that many new space firms are facing difficulties. While there has indeed been a proliferation of new firms, those firms in fact face significant hindrances to successfully doing business. As in any quickly growing industry that is filled with new entrants, there is significant confusion and uncertainty. And it must also be said that there is something different about the space sector – many business plans seem sci-fi-inspired and appear to be far-fetched. There is arguably an overabundance of ambition, in other words, tempered by a lack of concrete business plans.

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All this is not to say that the space industry is doomed. On the contrary, it will likely continue to grow. The point is that as more firms enter the industry, they will need support services to succeed. And this has another important implication: opportunities are growing for business service professionals to participate in the space sector. Such professionals do not necessarily have backgrounds in science or engineering – they can be lawyers, financiers, investigators, auditors, management consultants, and more. As more individuals with such non-science/engineering backgrounds get involved in the space sector, this will ultimately help advance sustainable growth of the space sector.

Quantifying key challenges
Today, there are three big hindrances to doing business in the space sector: price opacity, launch dependability, and (in)activity. These issues exist both in Australia and also globally, and they are especially problematic for new firms. It is these three hindrances, among others, that present opportunities for individuals in professional services to engage in the space sector.

The first issue is price opacity. What this means is there is very little consensus or awareness about what appropriate prices are. This is true for everything ranging from a small 1N thruster for a satellite, up to the price per kilogram to launch a satellite to low Earth orbit. Firms are naturally secretive about their transactions, as is the case in many industries. Additionally, the space sector is changing rapidly – firm-to-firm transactions are becoming more common compared to firm-to-government transactions. This all means that price points are in flux and any particular firm’s sense of appropriate price points is based on limited knowledge.

Is $1,000 an appropriate price for a 1N thruster? The thruster producer only has a sense of whether $1,000 is an appropriate price based off their own previous sales. They may have been selling 1N thrusters for $1,000 a piece and think that $1,000 is a fair price, but it is possible that other thruster producers sell to similar clients for $2,000. If that is the case, the thruster producer selling for $1,000 is losing out on potential profit – either by charging clients more for 1N thrusters, or by undercutting competitors’ price points and stealing their customers.

SpaceX rockets under construction. Image: SpaceX.

Professionals can assist here. They can do market research to gather information about price points. In doing so, they can help firms to buy or sell services or products more intelligently. Professionals can gather such information from government contracts, industry publications, media citations, and human sources. Giving such market intelligence to firms in the space sector will give those firms a leg up in doing business. It is worth paying for.

The second issue is launch dependability. Every firm in the space sector ultimately depends on launches. Of course, this is especially true for firms that operate satellites; satellites need to be on orbit in order to function. But this is also true for other businesses in the space sector. Firms creating cameras for satellites sell to satellite operators, for instance, but their ability to sell to those satellite operators depends on the operators getting their satellites to orbit. Imagery service providers, on the other hand, depend on imagery collected by satellites, but those satellites need to get to orbit in order to collect imagery. Ground station operators monitor and communicate with satellites, but they can only monitor and communicate with satellites that have gotten to orbit. So, the profitability of many companies, not just those building satellites, depends on launches.

The issue with launch services is that they vary significantly in terms of dependability, and it is not exactly clear which launch firms are more dependable. Without spending time considering the various options and knowing different firms’ track records, then one has little understanding of the situation. The launch industry, perhaps more than any other industry in the space sector, is plagued by delays. From SpaceX down to the hundreds of aspirational launch services firms around the world (including in Australia), it is common to state a deadline will be met, only to later miss that deadline.

A sad exemplar
The collapse of Vector Space Systems last year is a case in point. There were high expectations that Vector would be a new successful launch firm. But for years, despite the hype, it consistently fell behind deadlines. Financiers finally had enough, Vector shuttered its doors – in the process harming other companies that had business plans depending on the firm’s service commitments.

Again, business service professionals can help. And their help is worth it. For many businesses in the space sector, it is worth spending thousands of dollars in consulting fees to know if a launch provider will likely delay its launches or development plans. Assessing the dependability of launch service providers does not require having an engineering or science background. A professional with a consulting background can review publicly available information about different launch firms, compare their history of meeting deadlines, and make an informed evaluation about which are more dependable.

The third hindrance to doing business in the space sector is (in)activity. Due to significant hype about the space sector, there has been an explosion in the number of space-sector firms. They are promising to do everything from launch rockets to set up infrastructure on the Moon. The issue is that many of these firms are inactive. Yes, they have an interesting business plan. Yes, technically they may even be registered and have listed principals. But many of these companies have no capital and no customers. They have no research and development program. This is obviously a problem for firms in the space sector planning to partner with them. If a potential partner turns out to be inactive, that hurts your business.

Professionals can help clients in the space sector figure out which of their potential partners are actually active. This is essentially due diligence – Is the company registered? How many employees does the company have? Do those employees have relevant expertise? Does the company have an office, or does it just list a post box address? Has the company raised money? What is its reputation amongst peers and competitors? There are dozens of such questions that professionals can answer to assess whether a potential partner company is actually active. Such due diligence services are worth the price of admission for firms in the space sector – they need to know who is worth working with.

A big opportunity for growth in Australia’s space sector is in this area of providing professional services. The three hindrances described above, as well as others, can all be addressed by such individuals. Yes, some of the space-sector consultants will be snake oil salesmen; there will be a fair share of space firms who spend more than they ought to for an unnecessary due diligence. But the services are genuinely needed. If a space firm has a plan to make millions of dollars, it ought to spend money to figure out if it is charging the right price, launching on the right rockets, and working with the right partners. If it thinks it does not need such business intelligence, then it will fail.

The provision of such professional services will make for smarter, savvier space firms. On the one hand, the rise of professional services will likely make the space sector a bit more cutthroat, which is arguably regrettable. But in the process, it will also likely make business in the sector more efficient, and there is nothing regrettable about that – as science fiction gives way to profit margins as a source of inspiration for space firms, then the space sector overall will grow more quickly. This will ultimately advance space exploration, which, in a sector full of science-fiction nerds, is the fundamental interest that drives many of them in the first place.

So, to the professionals of Australia: it is time to start interacting with the space sector if you are not already doing so. To individuals in the space sector: it is time to start interacting with professional service providers if you are not already doing so. This is an exciting, potentially historic era for engagement with space, both for Australia and for humanity more generally. Advance commercialisation, and in doing so advance humanity’s ability to become a spacefaring species.

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