It's estimated the value of the global space economy, spanning multiple sectors including communications, transport, defense, climate change, and more will grow from $680 billion in 2023 to $1.8 trillion by 2035, according to a recent report by McKinsey & Company. The final frontier is more than a shiny object – it is rich with economic potential. However, gaining a foothold in the space economy, particularly when it comes to defense, can seem like an impossible feat for those who don’t already have a seat at the table.
Startups and innovators seeking an opening to participate in government space projects can find the myriad of federal requirements mysterious and/or confusing – and even when innovators get a proper introduction, there are pitfalls. Is the project too niche to yield a market beyond the defense department? Is there funding available in the commercial world? How can startups sustain themselves to the point where commercial revenues begin to unlock more opportunity?
As the commercial space frontier expands and changes, these are just some of the challenges innovators are trying to steer through. I met with Eric White on his Federal News Network podcast, The Space Hour, to discuss how startups and small companies can navigate the perceived landmines for seamless growth across both commercial and government markets.
A closer look at the agencies leading the space game
At BMNT Ventures, formerly H4XLabs, we work with government Small Business Innovation Research (SBIR) portfolios. Whether we’re working with NASA’s SBIR Ignite program, The Aerospace Corporation, or the Space Force’s SpaceWerx, we know there are synergies across these space-based defense programs that can be leveraged for better outcomes. These programs are focused on higher commercial impact capabilities beyond defense and bringing solutions from outside the federal government to address areas that are not only of concern to the government, but that also offer commercial potential. They deploy a startup mindset to quickly operationalize technologies while being intentional about where they're putting their investments.
While certain technologies are more defense-oriented, minimizing threats in space and ensuring the U.S. and its allies have the ability to operate freely in space, other technologies are useful on the civil side. We work to understand those connections, and the synergies between these organizations so they are better informed about what may be a viable solution.
Crossing the 'public/private divide'
While the economic potential of space is eye popping, companies and startups have to be able to sustain their innovations through the so-called Valley of Death – in other words, the timeframe between the early stages of their innovation to the point where commercial revenues begin to unlock more opportunity. They generally fall into two categories:
The first is small businesses, which can continue to move forward and work towards other research contracts, slowly commercializing.
The second is startups, especially those with access to venture-backed funding. They tend to target work that might serve private, as well as public interests. They could look to Space Force to fund some of their work, but often, venture capitalists funding those companies haven’t yet bought into defense tech. Venture capitalists are really funding space commerce, meaning many venture-backed companies interested in pursuing government contracts are also in a market that the commercial world would pay for. The question becomes, does their innovation have dual-use potential? If it does, is there a funding source that can be tapped outside of government? Depending on whether you are the startup, the venture capitalist, or the government agency, can you leverage those funding sources to advance the technology more quickly, and reach the point of real viability?
Looking into the space-innovation crystal ball
2023 was a challenging year to raise money for space innovation, but we’re starting to see the venture markets open for space companies again in 2024. I predict that in the next few years we’ll start to see some of these companies mature their technologies and close their business cases.
With concerns about security, and climate change, I see opportunities with insurers, technology that can solve problems, such as how to refuel satellites to make them more sustainable, how to deal with traffic in space, along with defense considerations. These opportunities on the commercial side are relevant to federal agencies because it furthers their existing position of buying services “off the shelf” rather than generating their own systems.
The Air Force is a good example of this, as they have just released a strategy to harness more commercial technologies, including those of startups. While conversations are just now getting under way into how these partnerships will affect policy questions, including liability, there’s no question the space economy will continue to grow, and present opportunities benefiting both government and commercial businesses. The work that we are doing, helping companies and agencies align their goals, and their funding, will bring those opportunities to fruition that much faster.
Listen along to my full conversation with Eric White here, or check out the timestamps below:
00:33 How BMNT Ventures is supporting the final frontier
03:38 What pain points are space innovators facing?
06:03 Where are investment dollars are going?
09:37 Current state of innovation practices
12:19 BMNT’s heritage of defense
