While space represents the ultimate boundary for exploration, venture capital investment in this sector is only beginning to gain momentum. Keeping this perspective in mind during TC Sessions: Space 2020 held last week, we interviewed three investors who are currently supporting companies poised to become industry leaders, to discover their potential areas of future investment.

Joining us were Tess Hatch from Bessemer Venture Partners, with a sustained interest in the practical application of space technology; Mike Collett of Promus Ventures, a firm specializing in investments within advanced technology software and hardware; and Chris Boshuizen of DCVC, also a cofounder of Planet Labs, who shared valuable insights. Their discussion covered a range of compelling subjects, including the risks posed by space junk, the advantages of manufacturing in space, and an assessment of the U.S. government’s role in encouraging space innovation.

A recording of this insightful conversation is available for those who were unable to attend the live event and can be viewed below.

Space debris poses a challenge to future space activities

Hatch, a recent contributor to discussions on this subject, explained that there is no widespread agreement on whether space junk represents a significant problem requiring increased governmental oversight, or if technological innovations will naturally address the situation. Despite companies such as Astroscale and D-Orbit dedicating efforts to this challenge, opinions vary. The prevailing view within the commercial sector appears to be that space businesses are capable of self-regulation and can deploy large satellite networks without creating additional space debris from discarded launch components or rocket stages, she observed.

Hatch indicated that dedicating resources to this area might be considered in the near future – within a few years. However, she currently prioritizes investments with a quicker potential for returns for her fund’s investors.

Collett and others emphasized that environmental responsibility is a key consideration for all companies within their investment portfolios. They highlighted a general commitment to minimizing the creation of unnecessary space debris. Boshuizen further pointed out that Planet Labs consistently prioritized and implemented responsible practices.

Nevertheless, Boshuizen expressed apprehension regarding newer investors who may not fully appreciate the importance of addressing space debris. “Not all investors share the same level of understanding regarding space-related issues,” he stated, adding that the influx of new capital from outside the industry is positive, but it’s crucial for these investors to recognize the significance of this concern.

He also acknowledged that the technologies needed to remove existing debris are still under development. Boshuizen explained, “We haven’t yet reached a point where removing debris from orbit is a simple task. The ability to capture and return debris is a complex undertaking – likely still several years away – but it’s an area we should encourage and support.”

The benefit of diversifying investment locations

According to Collett, whose company makes investments throughout the United States, Europe, and New Zealand, the investment landscape is “truly worldwide,” and that “certain locations offer specific benefits for initial growth.” He explained that some areas excel at offering startup funding from government sources that doesn’t require giving up equity, which helps these companies become attractive to international investors.

He pointed out that despite its small size within the European Union, Luxembourg “has publicly stated its belief that the space industry could represent a significant portion of its economic output,” and is actively working to achieve this. This includes offering temporary funding and other financial assistance to startups that might otherwise struggle to stay operational. Collett also highlighted the contributions of other “private sector entities” globally, such as national wealth funds and, within Europe, both the European Investment Bank and the European Space Agency, a 45-year-old collaborative organization comprised of numerous member nations focused on space exploration.

Collett stated, “Their shared objective is to facilitate the sale of their products and services to businesses and individuals globally.”

How they rate the U.S. government on its relationship with space startups

Boshuizen expressed a positive view, stating he considers the U.S. government to be “particularly supportive” of space startups. He highlighted several initiatives – including organizations like the Defense Innovation Unit and In-Q-Tel, as well as various other governmental bodies – that are actively working to foster growth within the sector. Unlike private companies often constrained by the need for immediate profits, these entities are focused on long-term strategic goals.

“Their objective is to develop essential infrastructure, address widespread challenges, and make forward-looking investments utilizing public funds to generate benefits for the nation’s population,” he explained. “Consequently, within the United States, a considerable number of programs are accessible, including the SBIR program, which offers funding to businesses tackling fundamental technological hurdles and facilitating innovation.”

He emphasized that this funding is “essential” as it significantly contributes to establishing the credibility of emerging technologies with prospective investors. Government support effectively communicates, “this product may still be a couple of years from reaching the market, but this investment demonstrates its viability and confirms a genuine demand for your innovation.” He believes many of the companies attending this space industry gathering have likely benefited from these programs.