A few years ago, or a lifetime ago in COVID years, I wrote an article for SpaceQ discussing the difference between “New” Space and “Old” Space in which I argued that they really weren’t different ways of addressing a single space market . I argued instead that they were actually different business models that happened to share space as the medium through which services were delivered to customers on the ground.
Since that time a lot has happened, including 3 years of global pandemic. I have also learned a lot in the interim as a result of working with the space entrepreneurs and investors in my capacity as a coach, mentor and advisor. We have also seen, in the past few months, a decided shift in the investment climate in the wider markets that is having a significant effect on space sector investment.
So, it seemed like a good time to revisit the subject of the “New” space sector. This time, however, I wanted to do a deeper dive into the subject. This time it is going to be a multi-part series. In this first part, I am going to briefly review the main players in the drama we call entrepreneurial space – and briefly discuss the parts they will play in developing the plot.
In future parts we will spend a bit more time looking at those principal players – particularly founders and investors. We’ll also take a look at some of the major decisions that confront founders (and their investors) as they seek to establish and then grow their businesses. Finally, we’ll discuss what it takes to support and develop a dynamic and robust “space ecosystem” and what part other players, including the government, should be playing.
Before we get started, let me briefly recap the basic argument that I made in my original article, because I still think that is a good way of understanding the state of space. Things have definitely evolved and while the division between “Old” or “Legacy” space and “New” or “Entrepreneurial” space has blurred, it has not gone away.
Critical to understanding this difference is understanding the roots of the business models of the two types of space business. I summarize this difference as follows – traditional space companies have tended to be customer focused and technology driven, while entrepreneurial space companies are typically investor focused and market driven.
In other words, traditional space companies have grown their businesses by understanding and serving a relatively limited set of mostly large, mostly institutional, customers. They keep those customers coming back by developing proprietary technologies that they continue to evolve to meet the customers evolving needs. They understand that those customers are naturally risk averse and that they are particularly sensitive to the reputational risk. So legacy space businesses have developed processes that are designed to mitigate and retire risk early in the development process and which feature a lot of customer visibility and control over the design, development, test and integration. In short, they conform to the typical model of traditional, large, process-oriented, government contractors.
Entrepreneurial space companies, on the other hand, start from the idea that there is a wider market that can be served from space. They are focused on raising capital in the markets in order to develop the technology they need to address that market. This is a very typical model of entrepreneurial business – which, by the way, is why I prefer the term “entrepreneurial space” to “new space.” Although this model is new to the space sector, it is not really a new way of doing business. The important thing to realize is that the forces that shape these companies are entirely different from those that have shaped traditional space companies. Sometimes these differences are obvious, sometimes they are subtle, but they are often profound.
These forces and their effects will be the central subject of this series.
For the moment, though, I’d like to take the remainder of this article to introduce the main players in this drama.
The heroes of the piece will, of course, be the entrepreneurs that start, own, and run new space companies. We will refer to this group as Founders. Founders cover a wide range of backgrounds, experience and motivations. In general, though, they tend towards a younger demographic. Some are starting their business immediately after finishing their education, others are starting a business after working in the field for a few years. A few arrive as founders after a significant career – but in this case the career has been in an academic or research capacity rather than in business.
The point being that although they are a diverse group the one characteristic that they share is that they tend to be much more at home in the lab than in the boardroom. In other words, Founders tend to have much more expertise and experience with technology and engineering than they do with management and business.
The second group in our cast of characters is the group that is probably the least we’ll understood by the others. These are The Investors. This is a group that is often portrayed, unfairly, as the villain of the piece. The reasons for this cartoonal stem, I would maintain, from a lack of understanding about what investors do, how they work, and how to work with them. Which is why we will spend at least one article in this exploring those topics.
The final player in the drama is the Government. This sounds, and is often treated, like a single entity, but like each of the others, the Government is actually a collection of individuals. Like investors, government officials are also not always well understood by the other groups. Sadly, I would argue that the reverse is also true, in that neither entrepreneurs nor investors are particularly well understood by public sector policy makers. To some degree this is a natural consequence of the fact government officials are generally more accustomed to situations where the government is acting as a customer and source of business rather than as an enabler, facilitator and catalyst – which are the roles that it needs to learn how to fill in order to be effective in this situation.
All of which means that there is lots of interesting discussion to be had.
In the next installment we’ll look at some business basics and on what is usually called the Founder’s Journey.
Editor’s note: This is the first article in a six part series focused on entrepreneurial space.