Space for new ideas: investment in new space

In his earlier career, Christian Ziach used to work on space missions. Now, he’s investing in start-ups taking off into space. The HTGF Principal is viewed as an expert in the field of new space. In this interview, he talks about his latest investment, sheds light on the commercial use of space, highlights opportunities for start-ups, and he also reveals how he once helped to bring a rock sample from space down to Earth.

Christian, where does your fascination with space travel come from?

I was once able to accompany a successful mission into space. In 2012, I took up a position at the German Aerospace Center. Together with our French and Japanese colleagues, we sent a space probe to an asteroid in 2014 and successfully landed on it in 2018. Rock samples were collected and then brought back down to Earth. It was a textbook mission. SpaceX was already very active at this time and it was becoming increasingly clear to me that commercial space travel would continue to grow in significance and that a paradigm shift was on the cards.

The new space scene has developed strongly ever since. HTGF is also investing in start-ups from this field.

We’ve held a stake in Reflex Aerospace since December. They develop satellites that are precisely tailored to customer requirements, but at the price of a satellite from “off the shelf”.  

Christian Ziach, Principal at HTGF

That sounds like squaring the circle.

While this might sound like a contradiction, it can actually be achieved through a fully digital approach to design and development as well as the use of state-of-the-art production processes such as 3D printing. The start-up also has a really good overall set-up with very strong partners and is part of the joint venture UNIO. The latter is a consortium of renowned companies seeking to establish their own satellite telecommunications constellation. Last week the EU also earmarked 2.4 billion euros to build its own satellite constellation, which will lead to exciting synergies. Ultimately, these and other satellites will have to be launched into space. We’re also well positioned in this regard with our portfolio company Orbex, which is developing a cost-efficient launcher and is well placed to secure a piece of the booming new space market.

Picture: Orbex

Why has the commercial potential only started to be exploited in the last few years? The problem was always the really high start-up costs involved. With traditional rockets, it cost more than 20,000 euros to transport just one kilogram into space. With such high initial costs, nobody wanted to risk the possibility that the satellites wouldn’t work after being launched into space. They therefore underwent very intensive testing, which pushed the costs up even further. There was also a very low willingness to test out anything truly innovative in space. Instead, there was a focus on technologies that had been tried and tested in space, and innovations fell by the wayside. As a result, we didn’t return to the moon and we built the International Space Station at painstaking effort, but otherwise remained in low-Earth orbit in crewed space flight. Even in the commercial sphere, there were no truly successful business models for a long time – with the exception of the field of satellite telecommunications. That was until SpaceX transformed the market.

SpaceX is Elon Musk’s space exploration company. What impact is it having on current market developments?

Musk recognised that the high start-up costs were an obstacle to the increased use of space travel and that it was ludicrous to throw away rockets after only being used once. He therefore invested the millions he’d earned from his PayPal exit in SpaceX and set about establishing a rocket production process that was highly vertically integrated and through which he was able to drastically reduce manufacturing costs. He also succeeded in making the first stage of rockets reusable. Plans are even in place for the launch of a fully reusable rocket in the near future. For years he was ridiculed for the project by established companies, particularly in Europe. But nobody’s laughing now, with SpaceX launching rockets into space on an almost weekly basis and having taken a lot of commercial market share from Ariane in Europe. 
In addition to reducing initial costs, there were also many achievements in the field of microelectronics, which led to smaller, more efficient and less expensive satellite systems. All this has resulted in a paradigm shift in the field of space travel.

What characterises this new paradigm? Space travel used to be the domain of the nation state. Now we are seeing an increasing number of private companies entering the fray. Knowledge of space travel is no longer confined to just a few states. This is why we often talk of the democratisation of space travel. Companies like SpaceX or Blue Origin, set up by Amazon founder Jeff Bezos, are now able to send astronauts into space. Very real plans are already in place for the next space station to be set up and operated by private companies. NASA, ESA and Co. would then become tenants as it were. It can therefore be expected that costs for research, development and production in space will continue to fall drastically, which will help new business models to break through.

In what areas are we already seeing the advantages of space travel?

There are many. Take climate and the environment, for example. It was satellites that first showed us the extent of the hole in the ozone layer. Only then was a ban on chlorofluorocarbons, or CFCs, introduced. Only satellites are able to reliably supply us with comprehensive weather and climate data. We need this data to fill in knowledge gaps and to continue to change our actions accordingly. Or, to take a more specific example, satellites are already helping firefighters to detect and put out forest fires.

So satellites will continue to play a major role?

Absolutely! And not just in climate research. We need a close-knit and well-functioning satellite network to meet the ever-increasing demands in the logistics sector. In order to trace supply chains, for example. Or if we want to see more autonomy in road transport. These are just some of the many aspects that will continue to drive growth in the field of space.

Picture: Reflex Aerospace

And how are we positioned in Europe?

We’re late to the party. Let us take Ariane 6 as an example, the follow-up programme to Ariane 5, a European heavy-lift space launch vehicle. The new programme is set to be initiated before the end of the year. But the problem is that the technology is already outdated before the project has even been launched. Because Ariane 6 is still a throw-away rocket.

Why are we not quicker off the mark?

I predominantly see two major challenges in Europe. Firstly, there is a lack of courage to try and leapfrog a couple of technology generations ahead. Secondly, we are always simply observing the success of others. Falling into a trap of blindly copying what’s being done elsewhere. But this is too short-sighed. What we need in Europe are commercially driven companies and initiatives that also pursue truly self-supporting business models. It’s not enough to simply hold out for state initiatives and to be dependent on state subsidies.

How will the industry develop moving forward?

It will continue to grow! However, we shouldn’t expect a linear progression to continue on and on in the same direction. The Gartner hype cycle will not stop short of the field of new space. Setbacks and consolidation are to be expected. That is completely normal and has also been observed in other sectors such as the internet economy and fintech. We also can’t forget that start-ups from the new space sector often operate at the limit of what is technically feasible and only address existing markets up to a point. In some cases, solutions are also being developed for markets that are only just emerging. There are huge opportunities for investors here to bet on the right teams and topics at an early stage, but there’s also a risk that the timing isn’t right. For instance, the turnaround in interest rates brought on by inflation has made it more difficult for start-ups and they have to prove at an earlier stage that their business model is viable. The important thing is to not view space as a short-term trend. The Americans and Chinese see space as a new economic sphere to be leveraged, cultivated and safeguarded. They are therefore setting the course by optimising framework conditions for innovative companies, for example. Space travel can thus be regarded as a critical enabling technology. If we don’t want to fall too far behind in Europe, then state institutions and also investors will have to take consistent action.

Many thanks for speaking to us, Christian.

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