By Joel Kranc
The “New Hope” referenced in the title is not only a call back to the first Star Wars movie released in 1977 but is apropos if investors’ interest in the so-called space economy.
The World Economic Forum (WEF), in an April 2024 report on this topic, says the space economy is expected to reach $1.8 trillion by 2035, which will “impact and create value for nearly all industries on Earth and provide solutions to many of the world’s greatest challenges.”
In Canada, a Deloitte report in collaboration with Space Canada says that the domestic space economy could be worth C$40 billion by 2040.
But what is the space economy? Scott Streiner, Senior Advisor at Deloitte Canada says it can be a difficult question to answer. “There’s still a discussion, including at the international level, about exactly what counts and what gets counted as the space economy,” he explains.
“Space is increasingly becoming critical infrastructure and an enabler for so much other economic activity that the question becomes where do you draw the line?” he adds. “We know some of what’s in. We know that rocket launches are in. We know that satellite design and manufacturing, and deployment are in. The questions start to arise when you get the use of satellite-based data.”
The New Space Race
Streiner also says that “strengthening Canada’s position in the space sector is a strategic imperative. For the sake of the country’s economic competitiveness and productivity, and to help ensure national security and essential services for citizens, Canada needs to bring energy and determination to the new space race.”
Investors are already looking at this specialized section of the economy. According to Space Capital’s Q1 2024 Space IQ report, total investment by industry breaks into $245.5 billion for satellite investment, $33.7 billion for launch and $3.7 billion for emerging industries. Of note are companies like SpaceX, which launched its first successful commercial launch in 2009; Planet Labs, which started imaging the entire earth daily in 2017 and in 2022; and Apple, whose iPhone14 was equipped with direct-to-phone SatCom service.
As of Q1 this year, $6.5 billion private equity investment was made in the space economy sector, a 33% quarter-over-quarter jump across 103 companies. Also, early-stage deal activity is healthy with 64% of the total round share.
Unlike the past, where much of the space economy was a public sector-driven activity, the private sector, as seen from the above statistics, is stepping in to provide services as required.
Bringing It Home
Streiner notes that things like exploration remain a public sector endeavor. But utilization, which can include things like data, earth observation (climate etc.), and satellite communications, are where the private sector is taking a larger role. And, he adds, the ratio is changing where more dollars are starting to come from the private than the public sector.
Because there are both private and public sector companies working on this, there is naturally an overlap of industries and initiatives. This can lead to a kind of P3 (public, private, partnership) mentality when looking at investing.
One example Streiner points to is the issue of space health. He notes that the Canadian Space Agency, in an effort to be part of future lunar missions and space exploration, explored this niche of space health and, “maybe provide solutions that we come up with for astronauts who are in space for the long term, [which] could have applications in indigenous and rural communities as well.”
The Canadian Space Agency did it as a competition. Five companies were narrowed down as finalists with Montreal-based MD Applications winning the bid and receiving $500,000 in funding to look at various health/space-related issues.
“It’s kind of like a stage one for potential further development. So you see in samples like that where public agencies are creating demand for what are effectively P3 type arrangements,” explains Streiner. “Depending on how the future funding is structured, and the possible terrestrial applications, there might be some significant margin in that activity.”
However, the WEF says the space economy’s impact will increasingly go beyond space itself and become more about connecting people and goods – things like supply chain and transportation, food and beverage, defense, digital communities and so on, will generate more than 60% of the increase in the space economy by 2035. In that time, and as investors find their footing in this sector, a process of standardization, accessibility and awareness, will be required to get broad acceptance and involvement.
May the force be with them.
