While some ventures, like Virgin Galactic, have the benefit of well-heeled founders, other NewSpace companies struggle to raise money. (credit: Virgin Galactic)

What space startups really need

The concept of a business accelerator may be just the thing the NewSpace industry needs to grow.

by Rocky Persaud
Monday, November 26, 2007

The “NewSpace” industry—entrepreneurial efforts by startups and new businesses to exploit new opportunities, technologies and business models to bring about the private use and commercialization of the space—has been building for the last five to ten years.

The most successful of these are only at the angel-stage of attracting investors. Bigelow Aerospace, SpaceX, Armadillo Aerospace, Blue Origin, Space Adventures, Zero Gravity Corporation, XCOR Aerospace, and Virgin Galactic have made names for themselves, appear to be well-managed, and have been supported by angel investors. For several of those, the founders self-financed with millions cashed in from successes made from other companies in other industries. However, venture capital is so far staying away, and it may be a decade or more before any VCs specializing in the NewSpace industry emerge to consider investing in any of them.

The newly-founded Space Angels Network was created to address the need of space startups for cash in the range of $100,000 to $2 million. The requirements for the Space Angels Network unsurprisingly specifies a solid business plan and good management team needs to be in place for investors to be interested. Angel groups began emerging in the 1980’s when venture capital groups retreated from early stage investments to concentrate on funding companies at later rounds—less risky investments but smaller rewards. VCs also used to participate in the management of the companies they invested in by taking on administrative roles. These days, they usually limit themselves to seats on the board of directors. But what a lot of entrepreneurs need more than cash is people to help them along so they can make it to ranks of successful start-ups.

What the industry needs is a “space business accelerator”. This would be an organization that mentors new space entrepreneurs from startup and seed-stage through to its first angel investment and beyond. It would provide expertise in management, finance, accounting, product development, marketing, and perhaps some research services as well. More than just a traditional business incubator, a business accelerator helps with the incorporation, serves as the initial management team for the first few years, and interviews new managers to replace the initial team once the founder is ready to grow his company without them. They are full partners until the founder has graduated Entrepreneurship 101. Startups typically don’t require full-time CEOs or marketing VPs, so an accelerator team would be able to help with several companies at once. The people that a good accelerator would bring in would help inject a much-needed heavy dose of reality to space startups struggling with their businesses.

The original accelerator is The Foundry, located in Menlo Park, California. It is focused on medical device technologies and has been around since 1998. It typically spins-out technology developed by its own in-house research team, but it also evaluates technology from outside inventor-clients as well. The Foundry has helped create a dozen medical device companies and raised for them over $200 million in capital. Its reward for that is over $1 billion in value for the graduated companies and The Foundry itself.

New accelerators are being created in the US and Europe, focusing on specific geographic locations or industries. These usually have partnerships with universities and venture capital groups. The success rate of companies graduating from business accelerator programs is usually in the 85–90% range.

Many space entrepreneurs start out with no real business experience, and need this sort of help. An enterprising group of professionals who know what they are doing when it comes to managing companies and training entrepreneurs would have much to gain by forming a space business accelerator.

Rocky Persaud is Chair of the Canadian Space Commerce Association, an entrepreneurial group interested in the commercial opportunities available in the development of space and opening the space frontier.

Home