Space is really expensive. The industry from a long time has been the exclusive domain of governments, the military, and politicians. This has, unfortunately, resulted in inefficient and expensive methods of exploring and developing the economic, industrial, and physical foundation for an unlimited future. Space ventures are considered to be incredibly expensive, and even today the field remains dominated by government funded projects and mega corporations.
SpaceFund has brought together the revolutions of NewSpace and the digital financial technology by building a renaissance team of leaders from the space, finance, and blockchain communities. As the SpaceFund team works on building a portfolio of the most important companies of this generation, they will also help these revolutionary companies to tokenize their offerings as well – providing a leverage point for the tokenization of space.
STOupdates got in touch with Rick N. Tumlinson, a “godfather” of the space revolution and one of the top one hundred most influential people in the space world to discuss about how the future of space industry will look like and how the new advances in digital asset ownership field will affect the industry.
How does the model of fundraising in space industry differs from other industries? What kind of limitations exist for the firms working in this field?
The space industry is very compact only limited for a few people and barriers to entry are really huge. The prohibitive costs and limited access also assured that the sort of radical technology revolutions that happened in the development of the internet couldn’t happen in space. As the ecosystem exists today, the majority of space companies require the type of financial backing that only governments, the largest corporations, or billionaire patrons can provide.
- Government Funding: The legacy of the government space race is the foundation on which this new revolution is built and there are major efforts underway by national governments to support commercial space activities. But government funding is not as easy as it sounds, it always comes with strings that can inhibit or stifle creativity. Such money also comes with the bureaucratic burdens of paperwork, coordination of multiple constituencies, and in some cases geographic constraints too.
- Venture Capital: It has been one of the most important resource to generate funding in space industry for last few years. Nearly half of all space investors from 2000-2017 were venture capital firms. VC investments in space stands at $1.6B during 2017 but still its a long way to go if you compare it with other related fields like artificial intelligence ($12B), and fintech ($12.9B).
- Corporate Investors: A number of influential and well known corporations and organizations have contributed towards the growth of private space economy over the course of the current decade. Such as Google participated in a $1.2B funding round for O3b, SoftBank led a $1.2B equity round for OneWeb in 2016 etc.
Tell us about SpaceFund and its ecosystem briefly and the main vision behind starting this project.
SpaceFund provides insider, knowledge-based investing in a diversified portfolio of space companies. We believe that new advances in digital asset ownership, specifically regulated and fully compliant Security Tokens in particular, are the best solution to the space liquidity problem at the moment. At SpaceFund, we have democratized financial instruments and regulated digital securities (security tokens) to unlock liquidity and smooth compliance.
With our rigorous analysis, our team builds a portfolio of the most important companies of this generation, we will also help these revolutionary companies tokenize their offerings as well – providing a leverage point for the tokenization of space. SpaceFund has developed a model to remove barriers to space investing, allowing a much wider pool of investors to profit from the space revolution that is now underway.
What is the current state of space related ventures in the market? What are the problems they are facing and how can SpaceFund help solving them while making the market more efficient?
The stats say that only between 12% and 17% of space companies have received private funding of any kind since the year 2000. Interestingly, NewSpace Hub’s database lists over 1,500 space companies across the world, this directly means that more than 80% of companies remain unfunded by private capital. This number is staggering. A struggle for resources is boiling up amongst the most audacious cohort of NewSpace companies while a gap is growing between the summed financial needs of these companies and the extremely limited pool of attainable investor capital. The nature of space ventures means high operational and market risks, correlating directly to high investment risk. Space companies often have long development cycles and their markets may take more time to mature than a typical startup.
With the arrival of security tokens and combining it with the experience of SpaceFund vision we believes that liquidity problems will be a thing of past. This new digital financial technology utilizes the transparency, security, and ease-of-access of the immutable blockchain ledger. By reducing friction to trade, security tokens can provide near-term exit opportunities for investors, greatly increasing liquidity of investments in private companies. SpaceFund has coupled this new financial technology with a traditional venture capital structure that mitigates risk through both diversifying investor interests across dozens of companies and providing the expertise to choose the most high growth and high value projects. This provides investors with the groundbreaking combination of near-term liquidity and informed investing in the space industry.
Space investing is generally considered to be highly risky and operating in this industry is also capital intensive? How does SpaceFund plans to offer a stable platform where the users and investors don’t have to go through a lot of ups and downs?
Capital is in high demand, but supply is running thin. The gap is growing between the summed financial needs of the space industry companies and the extremely limited pool of attainable investor capital. Operational and market risks correlate directly to the high investment risk and can be a significant roadblock while raising capital – especially from the traditional or nonspace-aware investors.
SpaceFund’s model for space investing utilizes the best practices from venture capital and tokenization to provide significant benefits to investors and the frontier-enabling companies who need their support. SpaceFund’s model helps mitigate investor risk and provides them with a more stable investment platform in two important ways – by providing investors with diversification across up to 30 companies with a single investment and by providing investors with confidence that the selected investments are of the highest quality due to our specialized expertise and extensive deal flow network. By aggregating investor capital into a single pool, SpaceFund can support capital intensive business models and provide project funding certainty.
With the arrival of security token model of fundraising, what benefits do you think it will bring for the space industry? Also tell us in brief about the disadvantages/ limitations security tokens might have for the industry.
I firmly believe that tokenization will continue to open investment opportunities to the new generation of investors. Security tokens provide the increased liquidity needed to open space investing to the world. They solve the investment lifecycle and liquidity problems by providing near-term liquidity through reduced friction to trade and ‘built-in’ regulatory compliance.
The smart contract technology that forms the basis for security tokens will also provide an additional function that solves one of the major problem unique to the space industry i.e. ‘restrictions on foreign ownership’. Companies can use these smart contracts to restrict tokens from being traded in certain restricted jurisdictions, or to restrict certain types of foreign transfers or control.
The low-cost and ease-of-use of security tokens might allow bad actors to participate and fraudulent activities to occur. With such low barriers to entry for tokenization, anyone with the necessary know-how and financial resources can create an offer for security token sale.
Early stage startups have quite high chances of being a failure and if startups attempt to fundraise with this method at very early stages, there is high risk of loss when investing in security tokens. Ideally, security tokens should only be utilized for companies which have proven products in proven markets, who need investment to scale rapidly to meet market demand.
The tradability of security tokens depends on the transparent and compliant operation of exchange platforms where these tokens can be traded in secondary markets. While many online exchanges are expected to launch in the coming months, it is still unknown how many investors will participate in these exchanges and how quickly these communities will grow.
Tell us in brief about SpaceFund reality ratings. What are they and what is their importance?
The SpaceFund Reality rating (SFR) provides critical, intelligent, and detailed information about the status of the growing space industry, and makes as much of this data available to the general public. The reality ratings are designed to provide investors, customers, regulators, media, and the industry itself with a quick user guide and assessment of players old and new in the various sub-sectors of the space industry. The SFR is structured to cut through the hype of PowerPoint and animations and get to the core questions that any outsider needs to answer. The vision behind the reality ratings is to close the information gap, first with the SpaceFund Reality rating databases, and then through other ongoing research and publication initiatives.
In an overall sense how do you expect the tokenized future of space ecosystem will look like?
These are several challenges that SpaceFund solves, and the opportunities that we are aiming to unlock. By combining the insight and knowledge of founding insiders from the NewSpace industry with the insight and knowledge of those who helped create the concept of tokenized assets, SpaceFund opens space to new investors and brings new capital to the brilliant and disruptive space startup community. The challenge that stands ahead of us is not one of gravity, technology, or potential, but the most important thing is how to bring together those with capital and investment expertise and those visionary entrepreneurs who will leverage these new opportunities. In near future, we are very close to see an open free market where space investing is set to become more accessible.
The space revolution is knocking at the door. By opening the industry to creative minds and new players, it will transform life on Earth through a flood of new ideas, concepts, and technologies. Everything combin ed will lead to a new space industrial infrastructure that will support expanding human communities in the universe.
Anything you would like to add for the community?
SpaceFund brings together two of the most important revolutions of the modern era, combining NewSpace with digital financial technologies. SpaceFund is curating a global community of those who believe the future can be better than the present and are willing to provide their dedication and resources to make it happen. Together, this community will begin to realize the dreams of those who first took those great steps into the sky. The promise of space can at last be realized and the airlock to the frontier can be opened to the people of Earth.
Editor’s Note: Some of the quotes from Rick have been rewritten in simple words to make it easier for the readers to get a clear understanding.