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Private equity players breach the final frontier: Space investment

The "NewSpace" field has opened up in the wake of government entities pulling back their spaceflight programs across the world, which has given rise to a whole new class of Infrastructure-as-a-Service investment opportunities.

Investment firms showcasing their investee companies is nothing new, but it was a different event that Auctus Investment Group (ASX: AVC) put on in Melbourne last month.

Auctus is a global investment manager with more than $530 million in assets under management, focusing on opportunities across private equity, infrastructure and private real estate. One of its funds is called US Opportunities Limited (USO), which was established to invest in late-stage ‘growth’ private equity and pre-IPO opportunities across the United States, sourced through Auctus’ long-standing partnerships. USO was established to provide non-US investors the opportunity to co-invest alongside leading US institutions and family offices, in unique, hard-to-access opportunities.

The event that Auctus held in mid-March certainly showcased an investment fitting that description.

  • Through USO, Auctus was a seed investor in US company Voyager Space in June 2021, tipping in US$15 million. The Colorado-based Voyager Space is an Infrastructure-as-a-Service company operating in the “NewSpace” field – a term that covers the private space industry, as distinct from the government entities that have dominated spaceflight since the 1950s.

    Voyager Space’s services range from robotics, through to communications technology and space hardware. The company is already the largest commercial user of the International Space Station (ISS), and owns the only piece of commercial infrastructure in space, the Bishop Airlock. Sent up to the ISS and installed in December 2020, the Bishop Airlock – named after the chess piece – provides five times the existing payload volume of the ISS’ airlocks, enabling any entity or organisation to move equipment, technology or research materials (and waste) into or out of the ISS, by paying a fee to Voyager.

    In August 2023, Voyager announced it would partner with Airbus Defence and Space in a joint venture called Starlab, to develop, build, launch and operate the Starlab commercial space station (the partnership was finalised in January). Starlab, which is scheduled to be launched in 2028, will replace the ISS, which will be “de-orbited” in 2030.

    In October 2023, US aerospace company Northrop Grumman announced that it was joining the Starlab project, and abandoning its own station project. The company plans in particular to develop an autonomous docking system for its Cygnus spacecraft, which will resupply the station. Starship, a two-stage super-heavy-lift launch being developed by Elon Musk’s SpaceX, will carry Starlab into space.

    At the Auctus event, Voyager Space chief executive officer Matt Kuta, a former F-15 pilot in the USAF, and Starlab chief executive officer Tim Kopra, a former US Navy test pilot and NASA astronaut who served as commander of the ISS on one of his two missions to it, took guests through how Starlab will cement the private sector’s role in LEO, or low-earth orbit – and spearhead the ‘space economy,’ in a way that the ISS could never do.

    The ISS is owned and capitalised by five government space agencies: NASA, the European Space Agency (ESA), Russia’s Roscosmos, the Japanese Aerospace Exploration Agency (JAXA), and the Canadian Space Agency (CSA). Although there have been many commercial experiments and programs conducted on the ISS, to exploit zero-gravity, it is designated as a US laboratory, and that “has limited its commercial operation,” explained Kopra.

    “The main limitation is that when a company goes up there, like Moderna or Merck, for example, they can’t keep any IP that comes out of their work, they have to share it with the US government, because it’s government-owned infrastructure,” he said.

    “Whereas a commercial station can work with any company; when it comes to the IP, we can have whatever sort of business relationship we and the client decide to establish. That’s what really opens the door for the commercial side – there are many different avenues in which both we and our customers can generate revenue.”

    It is not only commercial research and development that Starlab expects to host as landlord; Kopra also believes that zero-gravity manufacturing will also be a pillar of its revenue. “We expect use-cases to accelerate once the station is deployed,” he said: intriguingly, hotel giant Hilton has signed-on to design the astronaut living facilities, and will also work with Voyager to examine opportunities for marketing of the space station and astronaut experiences onboard.

    However, government-backed research buttresses the business case at the outset: NASA is the anchor customer, having awarded Starlab US$217.5 million ($334.6 million) in development funding. NASA is effectively underwriting about two-thirds of the expense, with the balance being its pre-payments for astronaut slots: the first four-person crew will be NASA astronauts. Starlab is also teaming-up with the ESA for its post-ISS needs. “That is a really great value proposition for us and for our customers, and investors, in terms of recovery of spending and moving into profitability,” said Kopra.

    “We will have a vehicle that will be placed on the rocket fully built, we don’t have to test or assemble in space, which will enable us to start generating revenue three weeks after Starlab is in space. That flows into a breakeven point that is within two to three years. And then, if you think about a 30-year lifespan, we truly see a massive level of cash flow that can be generated,” he said.

    At present, the only Australian investment exposure to this venture is through Auctus Investment Group shares on the ASX.

    James Dunn

    James is an experienced senior journalist and host of The Inside Network's industry events.

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