For years, space exploration was mostly limited to long-range telescopes and science fiction writers. It was never something an average person could hope to be a part of. But, that may be changing as new commercial enterprises make it their mission to operate in space.    

Life on Mars?

NASA has found evidence that liquid water has flowed on Mars, the US space agency said on 28 Sept, citing new findings from its Reconnaissance Orbiter. Liquid water allows for the possibility of microbes and suggests that Mars could potentially support life.

“It took multiple spacecraft over several years to solve this mystery, and now we know there is liquid water on the surface of this cold, desert planet,” said Michael Meyer, lead scientist for NASA’s Mars Exploration Program, in a statement.

Until recently, almost all space activity was developed and financed by governments, mostly in Russia and America. In the US, new technology was driven by the National Aeronautics and Space Administration (NASA). In Russia it is Roscosmos, the Russian Federal Space Agency. 

Over the years, though — and especially after the recent recession — space funding has been slashed. In the mid-1960s, America spent about 4.4% of its total budget on space-related endeavours, according to the White House. Now, that figure is about 0.47%. As a result, NASA — like other government-backed space agencies around the world — is losing its monopoly on space-related innovation.

Suddenly, entrepreneurs, venture capitalists and even individuals have a way to dabble in space.

This has opened an exciting new frontier for investors. Suddenly, entrepreneurs, venture capitalists and even individuals have a way to dabble in space.

Manned missions to the outer reaches of the Milky Way is an extremely far-off goal, but investing in companies that make small satellites and inexpensive rockets to help other industries see things from high above, can now be done. To be sure, opportunities are almost as thin as the air outside earth’s atmosphere, and the ones that do exist are risky. But that hasn’t dissuaded some cashed up and aggressive investors to bet on this emerging sector.

What’s at stake?

For David Cowen, a San Francisco-based partner with Bessemer Venture Partners the chance to explore the Final Frontier can’t come soon enough. “We need to become an interplanetary species to survive,” he said. “The stakes are very high.”

Cowen’s not some rabid Star Trek fan — he’s a venture capitalist with a firm that has a stake in a number of space-related businesses like Spire, a Glasgow-based satellite company that tracks ship locations and weather, and Rocket Lab, a New Zealand-based business developing small satellite launch systems.

While space is still a tiny industry compared to most other sectors, it’s a rapidly growing one. In 2011, there were only 100 companies in this industry. Now there are about 1,000, including about 700 private businesses, according to the aptly named Richard Rocket, co-founder and CEO of New Space Global, a Cape Canaveral, Florida-based firm that tracks the global commercial space sector for investors. About 70% of the companies are US-based, but there’s a big space industry in Europe, too, he said.

And, those innovative companies are taking us one step closer to space colonisation. “No one’s building the whole system, but everyone’s building parts,” Cowan said. “So you’re seeing a whole ecosystem develop at a pace that no one has ever seen before.”

There will be some companies that end up as road kill, others will go public and be successful and others will get acquired. But the tipping point is coming.

While the sector is growing quickly, it’s difficult to track year-over-year revenue growth because most of the companies are private — and many don’t yet generate revenues. One indication of growth, though, is how much private money is going into the sector, Rocket said. Over the last five years, there’s been a 30% year-over-year increase in private investments into the companies that he tracks. “Billions are being injected into these businesses,” he said.

There are ways to invest now, such as buying shares in publicly traded aerospace companies, like Airbus and Boeing. Or, or by getting in on the ground floor with those that have interests in space or satellite technology research and development, like Virgin Group, which owns Virgin Galactic, a space travel company. There’s no question, though, that this is a long-term play.

A new era

Over the past four years as NASA ended its space shuttle program and entrepreneurs moved into the industry, the sector has taken off.

Entrepreneurs like Elon Musk, one of the world’s most famous inventors and the founder of Tesla and co-founder of PayPal, has made it his mission to get people to Mars. His company, SpaceX, based in Hawthorne, California, in the US, is building rockets and spaceships at cheaper prices than NASA could ever do. Most notably, he’s driven down the costs of spaceship manufacturing and launch by about half — from a reported $100m to about $55m — by manufacturing 80% of the rockets in house as opposed to using third-party companies as NASA had done, said Chris Quilty, a Tampa, Florida-based equity analyst and senior vice-president at Raymond James & Associates. As of right now, SpaceX’s unmanned rockets are being used to launch satellites into orbit and resupply the International Space Station, but they could one day be used to send people into space. 

Ultimately, cost is key when it comes to space exploration. Mars One, an organisation that hopes to put people on the Red Planet, estimates that it will cost $6bn to put four people on Mars. “Right now we launch 100 rockets a year globally,” Quilty said, explaining those are mostly unmanned launches to put satellites into orbit. “We need to have significantly more if we’re going to set up, say, a moon base.”

While investors can’t buy into SpaceX directly, Fidelity Investments in the US invested an undisclosed sum in the business last January, which means that some of its shares are in the fund company’s mutual funds, which the public can own.

Musk isn’t the only entrepreneur who’s banking his money and reputation on space. Richard Branson's Virgin Galactic is hoping to be the first space tourism company. Tickets for a trip up into space cost about $250,000, but it’s still unclear when the first flight will get off the ground. Last December, one of its shuttles crashed during a test, killing a pilot, which set back Virgin’s timeline and public image.

Exploring investments

One of the major areas of space innovation is in satellite manufacturing. Satellites, when they were purchased by governments, typically cost about $1bn to build and launch, but a company like Skybox Imaging, based in Mountain View, California, and which was bought by Google for $500m in July 2004, has developed a CubeSat — a small 10x10x10 satellite — for $5m. It’s been able to launch it into space for another $5m. And San Francisco-based Planet Labs, a privately held company, is developing small satellites for $50,000 per device, Cowan said.

These satellite companies are imaging-related, which means their devices take pictures of the Earth. Their customers are in the agriculture, mining, real estate, oil and gas and other sectors that need better aerial views of land. “These are huge established industries that are relying heavily on satellites to increase their own profitability,” Rocket said. 

Then there are businesses that are trying to build cheaper rockets, like Orbital ATK, a New York Stock Exchange-listed company that makes launch vehicles and has supplied NASA with cargo services in the past. It’s trading for $72, but Quilty said Orbital ATK could reach $90 over the next 12 months.

Investors can also buy into companies like Google or Airbus, which have started making space-related investments, said Rocket, but these companies have a lot more going on than otherworldly pursuits.

Whatever one buys into, it’s important to be patient, but it won’t take forever to see returns, investors say. Over the next five years, more space-focused companies are expected to list on public exchanges and more businesses will make money, said Quilty. “There will be some companies that end up as road kill, others will go public and be successful and others will get acquired,” he said. “But the tipping point is coming.”

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