Is “NewSpace” obsolete?
by Jeff Foust
|“I think the usefulness of the term is evolving,” said Christensen. “I think at the moment it’s of modest value, in my view.”|
That growth has fueled by the most fundamental propellant: money. Just a few years ago, the industry lamented that entrepreneurial ventures had to largely rely on super-wealthy founders or angel investors. Now, institutional investors are getting involved: SpaceX raised $1 billion earlier this year from Google and Fidelity, while OneWeb, one of those new satellite constellation ventures, raised $500 million last month from a diverse group of investors, ranging from Airbus and Qualcomm to Coca-Cola. Venture capitalists, meanwhile, are opening up their checkbooks for smallsat ventures at a quickening pace.
All this sounds like a rousing success for NewSpace. However, as established companies respond to the growth of these entrepreneurial firms in various ways, some wonder if the “NewSpace” moniker itself has outlived its usefulness.
“I think the usefulness of the term is evolving,” said Carissa Christensen, managing partner of The Tauri Group, during a panel session at the Space Frontier NewSpace 2015 conference in San Jose, California, July 18. “When the term originally started floating around, it was profoundly useful as an organizing principle and term around which people could coalesce.”
That’s changed, she argued. “I think at the moment it’s of modest value, in my view,” she said. Worse, she said its usefulness may soon become negative. “It is starting to be an ‘us-them’ in a way that’s not productive.”
Other members of that panel on “risk and opportunity” at the conference concurred. “Maybe it’s time to put that away,” said Chris Kunstadter, senior vice president of XL Group, a space insurer, of the distinction between NewSpace and traditional space companies.
A reason that the NewSpace term was now less useful, they said, was that some of the innovation those entrepreneurial firms are known for is being adopted by more traditional space companies.
“I think we are seeing that the entire space industry is learning that there are new approaches that can be effective: new approaches to funding, new approaches to risk, and new approaches to building spacecraft,” said Ben Haldeman of Planet Labs, one company that falls squarely in the NewSpace realm. “I think we’ll continue to see that progress, and continue to see new companies come in with new innovative business models, and then continue to see traditional companies adapt and take new approaches.”
During a separate panel two days earlier at the conference, representatives of established aerospace companies—sometimes called, often derisively, “OldSpace”—argued that were doing just that: taking new approaches to doing business and embracing innovation, sometimes in cooperation with those NewSpace companies.
“I don’t like the term ‘OldSpace,’ and I don’t much appreciate the term ‘NewSpace’ either. I think we’re all part of the space industry,” said David Lackner, vice president of business development at Space Systems Loral (SSL). “You don’t see, in biotechnology, ‘new biotech’ and ‘old biotech,’ you just see biotech.”
|“We love the idea of NewSpace and bringing that in there, but we need to do that in a very incremental way,” said ULA’s Kovacs.|
He acknowledged that entrepreneurial ventures were forcing the company, which has traditionally built large geostationary orbit communications satellites, to be more innovative. He noted the company won a contract to build a constellation of imaging satellites for Skybox Imaging, beating out both other traditional and “smaller, upstart” satellite manufacturers.
“The CEO [of Skybox], at the celebration ceremony, came in and told us, ‘The reason we chose you guys is because we felt you were the most agile. You matched our culture and our drive and the way we do things more than anyone else,’” Lackner recalled.
Airbus Defence and Space is playing a similar role in OneWeb, manufacturing its fleet of satellites. It also participated in OneWeb’s $500-million financing round announced last month. “We’re very proud of being part of this new dynamism,” said Helene Huby, head of transversal innovation at Airbus Defence and Space.
That project, she acknowledged, is challenging both in its size—up to 900 satellites—and its use of an all-new satellite bus. “But we want to be part of this NewSpace growth,” she said.
In addition to its OneWeb investment, Airbus Defence and Space has established an “innovation center” in Silicon Valley, led by Paul Eremenko, a former Google executive and DARPA program manager. The company is also creating a venture capital arm to provide funding and technical expertise to startups.
“In discussions with several NewSpace startups, they need capital and they also need our expertise,” she said. “We need them because they challenge us on our costs and they challenge us on our business models.”
United Launch Alliance’s Les Kovacs said that the company is working with several companies that traditionally fall in the NewSpace camp. Besides its work with Blue Origin on the BE-4 rocket engine that ULA plans to use on its new Vulcan vehicle, he noted the company has worked with XCOR on a new upper stage engine, and with Masten Space Systems on a concept called Xeus to turn a Centaur upper stage into a lunar lander.
Kovacs said that ULA’s position as the only company—at the moment—launching national security payloads limits the degree to which it could take risk. “We’re extremely disciplined and measured in how we do this,” he said. “We love the idea of NewSpace and bringing that in there, but we need to do that in a very incremental way, so we don’t upset the apple cart and then, all of a sudden, lose a satellite worth one and a half billion dollars.”
That ULA is at all embracing NewSpace, though, is in large part due to the growth of SpaceX, exacerbated by a political climate that is forcing ULA to look to a future without the Russian-built RD-180 that powers the Atlas V. “It’s amazing to me the see the change recently” at ULA, said Dennis Stone, program executive for NASA’s Commercial Space Capabilities program.
The company’s engineers, Stone said, “are so much more upbeat right now. They’re so much more excited, and freer than apparently they thought they were in many years to innovate. I asked why and they have a one-word answer: ‘SpaceX.’ One even had two more words: ‘Thank you, SpaceX.’”
Established space companies, panelists said, are reacting to avoid “disruption” by new entrants, a reference to the “disruptive innovation” business model. “The traditional space companies and the people who run them can ignore NewSpace companies at their peril,” SSL’s Lackner said. “Disruption is not a serious threat until suddenly it is.”
|“The traditional space companies and the people who run them can ignore NewSpace companies at their peril,” SSL’s Lackner said. “Disruption is not a serious threat until suddenly it is.”|
But as traditional space companies work with entrepreneurial ones, or otherwise incorporate their technologies and business models, does NewSpace itself lose its uniqueness? Kunstadter noted one difference between the two is that while traditional firms can incorporate innovation—citing Boeing’s development of “all-electric” communications satellites that use lightweight electric propulsion—they do so largely in response to customer demands. NewSpace companies, in contrast, are more often creating new markets.
Even with that distinction, Christensen believes the lines between the two categories of companies have blurred. “Every single massive company that you can think of is looking at small satellite systems, is looking at reducing the cost of launch, is looking at change and incorporating innovation into what it does,” she said. “That’s fantastic. That’s enormously positive, and I think we in the industry benefit from that kind of change.”
“I think there’s a time to say, ‘Let’s declare victory,’” she concluded.