Author: Carlos M. Entrena Utrilla
In this new blog series , we talk about our philosophy as a company. We will cover all sorts of topics, from how we approach system development and the role that we want to play in the cislunar economy, to more down-to-Earth topics such as our work ethics and our team dynamics. We started this discussion with our company vision. Today, I want to talk about a topic that is closely related to it: our approach to technology development.
The end to the “typical” space approach is near
When people think about space companies, they immediately think “technology development”. This has been a common trend for the past 20 years: a company wants to market a technology, so they develop the technology and then try to find a market for it. Think SpaceX, Planet, Spire, Rocket Lab… the “usual suspects” when you think commercial space. All of these companies started their technology development from scratch and have reached the market with a high level of vertical integration: they design, manufacture, integrate, and operate their own assets.
Ground-level view of a Falcon 9 lifting off from its launch pad. The Falcon 9 is the paradigm of the success of vertical integration in the space industry. NASA/Joel Kowsky
This approach has definitely helped the space industry: vertical integration has allowed these and many other companies to circumvent the oligopolies of the traditional space manufacturers, freeing them to follow different approaches, accept different levels of risk, and create a wave of change in various segments of their respective industries. The best example of this impact is launch: SpaceX has singlehandedly managed to reduce the cost of launch to orbit by over 40%, while enabling commercial capabilities for cargo and crew launch to mature. However, the “vertical approach” also has some obvious issues:
Extensive technology development requires large capital expenditures before any revenues appear.
Development processes can take years, further delaying revenues and increasing capital needs.
Excessive focus on technology creates the risk that the resulting product does not fit the market (we’ve seen this struggle in the Earth Observation market, for example).
There is also another, less spoken of issue, with vertical integration: it slows the development of an industrial ecosystem. If every company just builds everything they need by themselves, there is no place for dedicated manufacturers, integrators, or designers. In most cases, it also makes little sense to vertically integrate: if your business is about agriculture data, why develop all the capabilities required to design and integrate satellites?
Companies should focus on the levers that actually drive your business, and these rarely require vertical integration.
After all, there is a reason why most other industries (e.g., automotive, electronics) have complex webs of supplier-providers relationships, with most companies specialized in a single segment of the value chain. It just so happened that, in the late 90s / early 2000s, the commercial space sector was so distorted (by a number of reasons that won’t fit here) that it was actually cheaper to vertically integrate instead of procuring stuff from others. However, that era is no longer with us.
We live in the golden era of space technology
We’re seeing the change already. More and more companies that aim to operate or leverage data from space systems have realized that they don’t care too much about the space system itself: they mostly worry about the quality of their services. Earth observation companies are no more advertising their satellite manufacturing capabilities, but rather their data processing and analytics. We’re also seeing new players in all sorts of satellite systems, from propulsion to full system integration, that aim to specialize in a specific part of the value chain instead of building and operating their own systems. Finally, companies like Orbital Wave are now taking over the operations of the satellites themselves, bringing the service approach to space itself and putting an end to the vertical integration philosophy.
It is no coincidence that we’re seeing this development now. After 20+ years of technology development by new space companies (and of them forcing the old space folks to catch up with them), the industry is full of offers for satellite components. In a recent Request for Information (RFI) that we ran at Plus Ultra during summer, we contacted more than 100 companies offering satellite communications systems (both lasers and radio), small satellite buses, or small satellite propulsion. The vast majority of these companies did not exist 20 years ago.
Overview of global small satellite manufacturers, showing the large amount of companies in the sector. satsearch.co
100 companies may seem like too many, but the distribution by subsystem actually resulted in a healthy number of providers for each subsystem, guaranteeing competition in quality and pricing. There is sure to be some consolidation to come in the near future (e.g., in the satellite electric propulsion segment) but, for now, we should enjoy the great moment that the satellite industry is traversing. More competition means higher quality systems for lower costs, which satellite operators should definitely enjoy.
The space of the future requires services
However, there is a very clear message that this number of companies is sending to the industry: the satellite technology business is saturated. With at least 17 companies officially marketing electric propulsion systems for small satellites, is there space for anyone else? Same for Software Defined Radios (11 companies), satellite antennas (18 companies), or laser communication terminals (6 companies). And these are just those that we found suitable for our application (a lunar constellation), there’s sure to be more out there.
If you’re a company working on a space service, is it really worth it to spend some tens of millions of euros in your own technology just for the sake of vertical integration? Short answer: no. The long answer is: no, in most cases. There are still (and there always will be) business opportunities out there for amazing new pieces of technology. However, it is clear that the space industry is not suffering from a lack of options in terms of satellite components. If anything, the industry is lacking from a lack of demand for these components.
We have too much technology, but not enough services to use it.
That is precisely what the space industry of the future will need: more services. Not only are services the final element of many value chains (connecting the industry to the consumer), but also enable new businesses to appear, as they lower the barriers and costs of entry into the industry and make it easier for new projects to start operations.
Again, we have seen this development already on Earth (as you see, I’m not saying anything really revolutionary). 20 years ago, if you wanted to launch a satellite, you had to spend 100-200M€ on a large satellite with one of the main satellite primes, and it took years. Now, you can launch a cubesat to low Earth orbit in a matter of months: some company will assemble it, another one will launch it and deploy it to your ideal orbit, another one will take care of your operations, and a different company will provide their ground stations. You need zero knowledge about satellites and can focus on using whatever data your satellite is providing. Service, service, service.
The Moon is born in the new paradigm
The Moon, as usual, is a different story. Most lunar companies are still stuck in the “vertical integration” paradigm. In some cases, you even find investors, regulators, or space agencies, pushing for vertical integration as well. The reason is simple: they saw it work for Earth orbit 20 years ago, and think the Moon needs the same. However, that’s not true. Vertical integration was required for Earth orbit due to very particular market dynamics that we do not see on the Moon.
The lunar market is still nascent, and it is leveraging all the lessons from Earth-space markets to avoid the need of “verticalization”. For example, we see a basic level of true competition in landers, communications, and even rideshare. Also, no country is supporting a regional monopoly (yet), and most space agencies are aiming to foster competition, as they also benefit from the cost reductions. Finally, the lunar market also benefits from the extensive technology development done for Earth orbits. Some modifications will be needed to deal with the lunar environment, but a satellite’s a satellite after all.
If we want to foster the creation of a dynamic lunar industry, we need to forget about vertical integration, and start developing new services that enable more lunar businesses to appear.
Services require a different technology approach
If you read about our company vision, that last paragraph probably sounds familiar. At Plus Ultra, we want to “empower space businesses and facilitate space development”. Thus, we focus on deploying and managing space infrastructure to offer new space services. The discussion above probably gives you more insight on how we developed our vision and our company concept. You can probably picture how we approach technology then.
Developing our own technology would have delayed our time to market, and somewhat defeated the purpose of our vision. After all, if we build a satellite manufacturing factory, we’re not a lunar company anymore, we’re a satellite manufacturer. Completely different businesses! We wanted to stay focused on the Moon and on being a service provider above all, as that’s what we believe the lunar industry needs the most.
Therefore, we aim to minimize our own technology development. This means that:
We will tailor the capabilities of our services to existing components and technologies.
We prefer using commercial components, whenever they are available.
If something is not available, we will consider whether it’s worth it to develop it in-house for the value this component would provide to our services, or for the new services it can generate. If it’s not valuable enough, we will discard that capability for the time being.
This approach comes as a surprise to some investors the first time we talk with them: a space company that does not develop technology? Well, after reading the discussion above, I hope you understand better why we made this choice.
There’s a world beyond technology
It sounds very straightforward, right? Since the technology market is saturated and an industry-enabling role will require offering new services, we just will not develop new technologies. However, this creates a new question: doesn’t this make your systems extremely easy to replicate? Well, not developing technologies does not mean not doing any development.
Designing a satellite to fly to and operate on the Moon is not an easy task, especially if we want to operate them commercially. Our commercial success will strongly rely on designing a system that is perfectly aligned with customer needs, as well as minimizing the cost of our systems while maximizing their capabilities.
This forces us to carry out satellite design ourselves, as we are the ones interacting with the customers, we know the financial limits of the project, and we need to raise the funds for it. If we were to rely on a traditional prime for Harmony, our costs would likely be 10x those that can make the system profitable, and it would likely be a system “dead on arrival” (with no commercial value).
So what do we do exactly? What makes sure that Harmony is unique, and that other future lunar systems that we deploy are unique? We:
Have a deep understanding of all current satellite and lunar technologies in the market, their costs, and capabilities.
Understand market dynamics in the lunar industry, finding gaps in the existing capabilities and improve life for lunar businesses.
Continuously verify our assumptions with customer interactions, ensuring that we identify commercial opportunities with current technologies.
Know from experience the key drivers of designing lunar systems, allowing us to make optical technical decisions based on commercial input.
Commercial development and ensuring product-market fit are typically overlooked in space companies. How many new space players have pivoted from their initial products because the market did not exist? We’re even seeing large companies like SpaceX or OneWeb struggling with the market fit of their LEO constellations, as they continuously announce new applications (e.g., maritime) in hopes of finding enough markets to make the system profitable.
Harmony presents a unique design and alignment with the needs of its customers
There is indeed a world beyond the technology development. We are just staying focused on the business that we want to develop and focus on the levers that we have to make that business successful. This is nothing more than a variation of Akin’s law #39 for spacecraft design:
The three keys to keeping a new […] space program affordable and on schedule:
1) No new launch vehicles.
2) No new launch vehicles.
3) Whatever you do, don't develop any new launch vehicles.
It may look revolutionary, but we’re just doing what makes sense!