>> Alice Carruth: It's been a long time coming, the origins date back to the Ansari X-Prize in October 2004. The discussions that followed were something along the lines of, if you build me a spaceport, I'll build you a spaceship. New Mexico went all in on that agreement with Spaceport America, which was completed 11 years ago. And today, Virgin Galactic delivered on their side of the deal: flying its first commercial passengers to space.
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Today is August 10, 2023. I'm Alice Carruth, and this is T-Minus. Virgin Galactic takes its first commercial passengers to space. Viasat reports positive Q2 results. BlackSky Technology books five launches with Rocket Lab. And our guest is Chad Anderson, managing partner at Space Capital on Q2 space investment and stabilization in the market. On to today's intel report. It was a beautiful morning in New Mexico. The skies were clear. The air was still. All was quiet, except for the sound of engines igniting. For today, Spaceport America was hosted the first commercial passengers going to space. Virgin Galactic has been promising their first commercial flight for a number of years. And after a series of good flights, they finally delivered. Three commercial passengers -- Jon, an 80-year-old former Olympian from the UK; Keisha and her daughter Anastatia, recipients of tickets thanks to Space for Humanity from Antigua and Barbuda -- all experience their first taste of the overview effect. Flying the spaceship was NASA veteran CJ Sturckow and first-time space pilot Kelly Latimer. The vehicle was carried up to 44,500 feet by mothership Eve before being released to ignite the engine. The passengers experienced over 3G's and traveled about 1,000 miles per hour before the engine cut off. The spaceship reached an apogee of 88.5 kilometers, about 54 miles above the Earth's surface. The passengers experienced several minutes of microgravity before the spaceship turned into a glider and returned to the runway at Spaceport America. Congratulations to all involved. Welcome to space to four of the crew: Jon, Keisha, Ana, and pilot Kelly. The good news continues for Q2 financial reports. We'll be talking more about that with Chad Anderson from Space Capital later in the show. Viasat reported $780 million in revenue during the last quarter, a 36% increase compared to the same period last year. It wasn't all sunshine and flowers, though, as the company is still investigating issues with its Viasat-3 Americas communication satellite. The vehicle experienced a malfunction while deploying its reflector in July. Viasat says that despite the malfunction, the vehicle continues to perform as expected. And BlackSky is also reporting a jump in revenue for the last quarter. The Earth observation company says they made $19.3 million in revenue in the second quarter of 2023, up 28% from the prior year. The company also announced a five-year contract deal with Rocket Lab. Rocket Lab has been used by BlackSky Technologies for six launches since 2019. The new contract is expected to see BlackSky satellites launched by Rocket Lab's Electron rocket from New Zealand starting next year. And Rocket Lab continues to show that it's in the game as the leader of global launch, signing a new agreement with a confidential customer for a HASTE mission from the Mid-Atlantic Regional Spaceport next year. HASTE -- which stands for Hypersonic Accelerator Suborbital Test Electron -- held its first successful launch this summer. Rocket Lab says that they signed the agreement with the undisclosed customer just days after the test in June. NASA has renewed its contract with Spire Global to provide Earth observation data to the US space agency. The contract represents a half million US dollar increase from the previous award of $6 million in June 2022. The award is part of NASA's Commercial Smallsat Data Acquisition Program, which Spire has been part of since 2018. With this contract extension, Spire's data will now be available to all US government-funded research and federal agencies for scientific purposes. It's not all good news for Earth observation company HawkEye 360. The company is the latest to fall victim to issues with solar interference. Their satellites are experiencing problems in orbit due in part to a failure with the propulsion systems made by Austria-based Enpulsion. HawkEye has requested temporary permission from the Federal Communications Commission to operate three of its satellites at a lower altitude. The company has also requested permanent authority to operate its constellation at orbital altitudes of 400 to 615 kilometers given the propulsion failures. OneWeb has launched a major US partnership with IP Access International. IP Access isn't just any partner, they're major players in terrestrial and space mobile connectivity, especially for enterprises and emergency services. This move is building on OneWeb's momentum after completing their global satellite constellation. Now, imagine combining OneWeb's high-speed, low-delay satellite network with major ground cellular services all under one roof. Put those two systems together and you get what the companies are calling "SuperGIG," a service designed especially for critical mobile operations, marrying terrestrial and space networks. Lynk Global, a major player in satellite-to-phone connectivity, and Vodafone Cook Islands announce the start of their new direct to mobile phone satellite service to Vodafone Cook subscribers using Lynk's cell towers in space. The Cook Islands, vast and remote, crave this innovation. It drastically extends their connectivity without the huge setup costs. Imagine not just islanders but fishermen and tourists having unmatched connectivity. This isn't about just one partnership, it signals a future where remote regions globally could bypass traditional infrastructure. Russia is back in the lunar game after a 47-year hiatus, launching the Lunar 25 craft. Their aim? For all the fans of Apple TV's For All Mankind out there, the Russians want to turn fiction into reality with a soft landing on the Moon's south pole, an uncharted territory that might hold significant water-ice deposits. Oh, yes, that region again. NASA's prior findings suggest water is present there. And if Lunar 25 succeeds, it could accelerate how we plan for fuel, oxygen, and life support for future space missions. This launch is more than just about water, it's a testament to the Russian space program's resilience amid major economic and geopolitical challenges caused by Russia's invasion of Ukraine. They're not alone. India's Chandrayaan-3 is on a similar quest. The Moon race is heating up. The International Space Station National Lab is partnering with NASA to fund up to $5 million in research that aims to harness the unique environment of space to fight diseases like cancer. This is a strategic move, aligning with the Biden-Harris Administration's Cancer Moonshot initiative, which targets reducing 4 million cancer deaths by 2047. What's special? The research calls for innovative applications of stem cells by manufacturing and more, focusing on novel treatments and patient care breakthroughs. This not only benefits humanity but also aids astronaut health for long-duration space missions, like Artemis. Proposal submissions kick off soon, with an informative webinar on August 24. A link is in the Show Notes. That concludes our briefing for today, but you can find links to all the stories we've covered in our Show Notes. We've included a few extras on the cost of India's Lunar mission, Blue Origin's mega rocket, and US intelligence agencies working together to protect commercial satellites. You'll find them all at space.n2k.com. And hey, T-Minus crew, if your business is looking to grow your voice in the industry, expand the reach of your thought leadership, or recruit talent, T-Minus can help. We'd love to hear from you. Send us an email at space@n2k.com, or send us a note through our website so we can connect about building a program to meet your goals. Our guest today is Chad Anderson, managing partner at Space Capital. Chad came on T-Minus when we first launched the show and gave us a really good update on Q1 reports, and has just recently come out with Q2 reports. 2022 was all doom and gloom for the second quarter, so I started off by asking Chad, what are we looking at in 2023?
>> Chad Anderson: Q2 is an interesting time, sort of check the pulse of what's going on. So it's one of our most viewed reports. And, you know, I think the key takeaway this year is that there's signs of stabilization. So we saw another $6 billion invested in Q2 across the space economy. We've now seen $280 billion invested into nearly 1,800 unique space companies over the past decade. Big part of that was Maxar take private. There was a big private equity deal done for Maxar. About 4 billion of that was equity, which makes up a big piece of that. If you remove that, then still a pretty low quarter. But overall, if you look at everything that's happening here, there's stabilization across the board. Things are looking healthy from a forward-looking perspective. So there's really healthy front-to-funnel, you know, early-stage companies. There are a number of rounds in the amount of capital that seed and series A companies raised actually increased quarter over quarter. So that's promising for what's to come. And also, obviously, the public markets have had a bit of a bull run in the first half of this year, which is a leading indicator for private markets.
>> Alice Carruth: So reading you report, Space Capital seems to break up the space economy in three different areas. Can you talk me through those three areas and what you're seeing for the future coming through those?
>> Chad Anderson: The space economy is quite broad. So, you know, for us, it's a lot more than just rockets and satellite hardware. We're really interested in the data that's coming off of orbital assets. And so we're really investing in next-generation digital infrastructure from orbit. You know, if you look across industries, you've got launch, which makes up about 10% of all activity, investment activity and market value. And then you've got what we call emerging industries, which are space stations and, you know, manufacturing in orbit and some of these new areas. Satellites make up 88% of all the value in the space economy today. And that's GPS, geospatial intelligence, and satellite communications are the three key technology stacks. And then we've got this really useful framework where we look at in terms of the infrastructure -- so the satellites that are in orbit generating the data -- the distribution -- so the companies that are harnessing that data and making it accessible -- to the tech community who's then building applications based on those really valuable data sets from orbit. So a lot of value accrues in the application space. And at Space Capital, we invest across all those sectors and technology layers.
>> Alice Carruth: A report came out looking at M&A (or mergers and acquisition) as a really hot area. And we've obviously seen a few of those happen in this last quarter. What other takes have you come from this last quarter, and what do you see happening in the next quarter or throughout the rest of the year?
>> Chad Anderson: Yeah, I mean, so on the M&A front, a lot of this is just typical market cycle stuff. So where we're at in, you know, at the tail end of 18 months of downturn. What we started to see in Q2 was a number of M&A transactions. These weren't really necessarily positive outcomes for investors. A lot of these were opportunistic investments, small dollars going in to acquire struggling companies for the most part. You know, we've still got a ways to go before we start to see some of the more growth-related companies -- companies with strong prospects in front of them -- getting picked up for premiums. And so that's kind of where we are. We're looking at this, you know, if you kind of look at it through the lens of the Gartner Hype Cycle, 2021 was clearly the peak. And we're in a bit of the trough at the moment. But we are seeing a lot of innovation in the space economy still. We're seeing a lot of really interesting companies and teams executing. And the three areas that we're really looking at that we think are going to drive significant near-term growth are satellite communications going direct to cellular. So you can see that's in SpaceX's Starlink and teaming up with T-Mobile and several other companies and telcos that are getting involved in this. We think that's a massive opportunity. Climate measurement and action powered by geospatial intelligence. So Earth imaging satellites getting valuable information about our weather and changes on the surface of our planet. And the era of spatial computing powered by precise positioning and Apple's Vision Pro. This is maybe something that not a lot of people think of as fitting within the space economy, but spatial computing, you know, mixed reality future is underpinned by all of the key satellite technology stacks -- GPS and positioning, geospatial intelligence, and layering digital information on top of maps -- and satellite communications, which is allowing these experiences to persist across space and time.
>> Alice Carruth: It's quite interesting that you picked up on Earth observation as being a key area. And obviously recently, Planet has just come out and said that they're laying off about 10% of their employees. And we've obviously seen others go under like Virgin Orbit in this last quarter. Do you think we're going to see more of that going forward throughout this year?
>> Chad Anderson: Yeah, I mean, talent's been a really interesting story in Q2. We have seen some struggling companies either get acquired or fail altogether, which is always difficult and sad to see. Although, you know, if you sort of step back and you look at this from the macro market perspective, we think a lot of this is really healthy in the long term. But, no, I mean, we've even seen, you know, large companies that are well capitalized and doing well trimming staff, you know, as well. And I think seen as more of a positive in terms of the companies are sort of buckling down, recognizing that they may be over-hired in the peak of the market, thinking about structuring their business to focus on revenue and prioritizing profit. You know, I think that's what we saw in the case of Planet. You know, we've seen it in several other large companies as well. But, you know, the key takeaway for us as investors is that these companies and the leaders at these companies are finding ways to do more with less, which is a really positive signal for private market investors like ourselves.
>> Alice Carruth: So we've just seen SES coming out saying that about 10% more revenue this quarter than they've had in previous years and Rocket Lab's had some really good results as well in Q2. What other companies should we be looking at going into Q3, thinking what's going to be progressing, you think?
>> Chad Anderson: Yeah, I mean, I think, you know, Rocket Lab is the really interesting one. I think they're up 85% on the year. And, you know, that's a Space Capital family company. We invested in that company in the past as well, so it's great to see that. Look, I mean, there's still relatively limited opportunity to invest in the public markets. You know, we saw a lot of companies go public via SPAC. A couple of those are post-product, you know, revenue-generating companies like Rocket Lab, like Planet Lab. But there were many others that were just sort of taking advantage of or looking to use the public markets as a way to raise capital. And, unfortunately, you know, most of those companies were fully unprepared for the level of financial, you know, disclosures and things and what it means to be a publicly traded company. And so, unfortunately, we've seen a lot of those not trade very well. What I would say is that there is a lot of really interesting things happening in the private markets. You know, since SpaceX opened up the space economy for new entrants to come in a little over 10 years ago, a lot of companies have been coming in and innovative and building their business over the last five to seven years. And so a lot of those companies are now at the point where they're sort of ready for the public markets in the traditional route. Meaning that they've done the hard work to prepare themselves, you know, to be in a position to go public and succeed when they get there. I think we're just waiting now for the public markets, for the IPO window, to open up again, and then we'll start see some more interesting names for retail investors to participate.
>> Alice Carruth: So you mentioned some of the SPACs, and one of the ones that comes to my mind is Virgin Galactic, who haven't had a particularly successful time when it comes to their stock. But yet are having a successful time when they're finally picking up their business. Why do you think that is? Why do you think the market has reflected their flight plans?
>> Chad Anderson: I think that the market might be. This company has been in existence for a very long time, and they have raised a significant amount of capital. So they are now operationally finally getting to operational flights, which is really great to see. But I think what we've learned now is kind of something that we've always, you know -- the lens in which we have always looked at this company is, even if it gets to operational flights, you know, how does it actually make money, and how does that actually translate to profit? You know, how did they make up for all the capital they've raised to date? And it's difficult to see, you know. In the earnings call, it was really about, you know, we are now into operational mode, and we're going to be doing more of these operational flights. But they're not going to generate a whole lot of revenue. So, you know, I think that just really reflects the difficulty in launch as a business proposition. You know, I mean, it is technically very difficult to get to orbit, which Virgin Galactic is not, but, you know, to even get a prototype flying. And then to move from that prototype to, you know, operational flights and a regular launch cadence is very, very difficult. And even if you can manage to do all of that, the business model and the unit economics in launch are really brutal. So it's very, very difficult to build a successful business in launch. And I think we're seeing that play out in the stock price of Virgin.
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>> Alice Carruth: We'll be right back. Welcome back. So we started off the show talking about commercial passengers aboard a space flight ticket. Would you do it? Well, there are plenty of companies now offering the opportunity. Another option could be a balloon flight to the edge of space. Florida-based Space Perspective is developing a high-altitude balloon ride, and announced that they've already sold 1,600 tickets for their six-hour journey. Their Spaceship Neptune capsule offers a 360-degree panoramic view, is equipped with a laboratory and nine recliners, eight for the customers and one for the captain. And the cost? A mere $160,000. Certainly, a better option for those of us that are a little concerned about experiencing the rocket ignition g-force. That's it for T-Minus for August 10, 2023. For additional resources from today's report, check out our Show Notes at space.n2k.com. We'd love to know what you think of this podcast. You can email us at space@n2k.com, or submit the survey in the Show Notes. Your feedback ensures we deliver the information that keeps you a step ahead of the rapidly changing space industry. We're privileged that N2K and podcasts like T-Minus are part of the daily routine of many of the most influential leaders and operators in the public and private sector, from the Fortune 500 to many of the world's preeminent intelligence and law enforcement agencies. This episode was mixed by Elliott Peltzman and Tré Hester, with original music and sound design by Elliott Peltzman. Our executive producer is Brandon Karpf. Our chief intelligence officer is Eric Tillman, and I'm Alice Carruth. Thanks for listening.
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