Fieldfisher webinar "Driving space business in a changing world: Financing, investment and M&A"- further comments from panellists
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In our recent webinar, delegates flagged a range of questions for our expert panellists. We are delighted to provide responses from the panellists, in order to offer delegates further insight into the impact on the space sector of some current market developments.
Here our panellists, Mark Boggett (MB), Stuart Martin (SM), Tim Bird (TB) and John Worthy (JW) offer their comments.
1. Market trends: Good to hear if you see investor and market trends more toward any specific areas of market, e.g. GEO/MEO/LEO/Polar, connectivity between and C/Ku/Ka/Laser? Also any demise of TV distribution via dedicated satellites for Over The Top (OTT) with IP connectivity?
SM: There is a lot in this question! Geo is pretty stable, but LEO is growing quickly. The big investments (OneWeb, Starlink, Kuiper etc.) are going into comms. Growth in capacity is the goal, so a lot of investment going into technologies that enable maximum use of bandwidth. Laser will increasingly be part of it – to ground, as well as intra-satellite. Satellite-TV revenues are decreasing, but customers are ‘sticky’. It will be a while before it disappears completely.
JW: We are likely to see continued interest in improved connectivity across numerous verticals and regions, both through constellations and other infrastructure. Key will be the balance between robust delivery of service and the price points which offer value to the customer, relative to terrestrial solutions, where satellite services have superior reach.
2. Encouraging FDI: From a policy perspective, how should we attract more foreign direct investment into commercial space in the UK?
MB: This is an absolute key requirement. A budget is required to lure the best companies to UK. Spire Global Inc came to UK due to a $2m Scottish Enterprise grant – they now have 70 people producing satellites in Glasgow.
SM: We need to recognise that we are in a competitive landscape, and that other nations are very proactively seeking FDI. Our approach, currently, is very passive and sometimes even hostile.
JW: The UK has made progress over recent years in demonstrating an attractive ecosystem for space business, but there is still more to do and other nations are working hard to show their credentials too. With the target of capturing 10% of world space business by 2030 moving closer, the UK should continue to show its appeal by ensuring the regulatory frameworks avoid imposing undue restrictions, which may cause space businesses to move elsewhere.
3. Future gazing: Interested to hear predictions on UK space sector specifically
MB: From a VC perspective, Brexit is not helpful. UK now excluded from a myriad of EU funded schemes in terms of grants and equity.
SM: The UK space sector will continue to grow!
JW: The UK is well placed for growth in space business, but cannot be complacent. The UK government needs to ensure that the Brexit impact does not get in the way of technology development, investment opportunities, FDI or recruitment of key talent.
4. Significance of ground segment: Mark mentions finance is drifting towards constellations while the industry itself continues to see the ground segment as (far and away) the main hurdle to the commercial success of the sector. Do you see any increase in interest in the ground segment?
MB: This is a key focus for us as it is underfunded, only 2% of total VC investment in this area. I expect that we’ll see steady increase in investment into the sector but it will remain muted relative to constellation and analytic investments.
SM: Yes. It is very significant that Amazon has moved into this space some time ago, and now Microsoft are doing the same with Azure Orbital. There are also a lot of companies developing lower-cost and more user-friendly end-user terminals, which are key to the success of the constellations.
JW: Ground segment is vital to the delivery of service to the customer and probably has attracted less investor interest than it deserves. A key factor in the investor appetite will be delivering the technology/commercial solutions which will address the current challenges in ground services.
5. Public markets for space: Momentus plans to list through a SPAC as announced recently. How do you view the future of space company exits via public markets?
MB: This is great news for Momentus but I don’t think this SPAC market is sustainable. I think it’s a passing trend like ICO’s from 2017/18.
SM: I hadn’t spotted Momentus specifically, but I think as the industry matures we are likely to see more of this. There are plenty of other examples.
TB: SPACs come around in a wave every 10-15 years, usually just before an equity bubble bursts. Many in the past ended up returning funds to investors because they were unable to close deals in the time-frame permitted. Where there is only one real target they can work, but co-ordinating both the equity raise and negotiating the acquisition at the same time is a huge challenge. Whilst Momentus suggests there is considerable interest in space as a sector right now, it does not mean space SPACs are about to take off in the UK any time soon. They are mainly appropriate for more developed targets and in particular ones which have real traditional assets. I still think VC / PE is more relevant, particularly if government grants / funding was more generous.
6. Systemic changes from COVID: What do you think will be the enduring changes, that emanated during the pandemic, which will have the greatest effects on the space industry for years to come?
MB: UK National space policy will hopefully be the biggest change. Government investment in OneWeb will hopefully be leveraged to develop UK launch capability and manufacturing capability.
SM: The enduring changes will be where trends that were already happening got accelerated. For example using satellites for remote analytics, satellite communications to enable remote healthcare, and to improve healthcare resilience.
JW: The pandemic has accelerated many of the trends which have been emerging over recent years, such as mobile working, reliance on fat pipe connectivity and the ability to respond rapidly to changes in the economic climate.
7. Public listing – a bubble?: What does the panel think of companies such as Momentus going public? Some outsiders (maybe even insiders) may view current events as a space.com bubble?
MB: Flash in the pan.
SM: There have been a few space companies that have gone public, and this is an encouraging sign. It gives more people a chance to be invested in the sector, which has to be a good thing. A bubble tends to occur when there is greater demand to invest in a ‘hot’ sector, than there is availability of stock. I think there is some evidence of that happening, but only time will tell.
TB: Great to see renewed interest and excitement in Space as an asset class, but should not be seen as the direction of travel. If anything, it possibly signals a high water mark followed by renewed scrutiny of valuations.
If you missed the webinar, a recording is available from John Worthy.
To read more on our previous webinar 'Fieldfisher space investment webinar: Confident outlook for space business investment in UK and Europe', please see here.
