Launching the Seraphim Space Investment Trust PLC (LSE:SSIT) on the markets this summer could not have come at a better time in terms of public consciousness about the space industry.
The July initial public offer in London for what is the first listed space technology fund came in the same month as Sir Richard Branson and Jeff Bezos took off to the edge of the Earth's atmosphere, or just beyond.
But with environmental, social and governance (ESG) concerns more important to more investors than ever, the criticisms of a space tourism race between billionaires from the likes of Prince William has perhaps caused some investors to think twice about this industry.
However, as Mark Boggett, chief executive of the firm that manages the trust, Seraphim Space (Manager), says, dismissing the space sector because of headlines about Bezos and Branson means potential investors could miss out on many companies developing technologies that are doing many positive things to help the planet.
What’s more – if you read all the way to the end – he says the industry is positioned to have a major positive impact on the planet.
Boggett feels pictures of billionaire space tourist astronauts are distracting from the impact their companies have made in helping lower the cost of going to space.
“The cost of going to space has fallen by nearly 100 times – that’s to a large part down to SpaceX, Blue Origin and Virgin Galactic.
“Yes, that makes it more feasible to be able to go to space for fun but, more importantly, it makes it more feasible to commercially do things in space.”
Not only has rocket travel become a lot cheaper, but there has also been a revolution in satellite industry, with a reduction from the size of a school bus to that of a shoebox, with a corresponding reduction in cost.
“Bringing those two things together opens up space to a whole range of new opportunities – in particular that it's now feasible to launch constellations of hundreds or even thousands of satellites – this is the game changer,” says Boggett.
“These constellations are gathering vast quantities of data or providing communication at a low cost – what we refer to as a digital infrastructure in the sky.
“That is enabling them to monitor our planet, to allow us to use resources more efficiently, to catch bad actors who are dumping effluent into a river, to monitor all sorts of environment-damaging activities – there is no longer any place to hide, a global audit to hold companies and countries to account.”
The portfolio, which as of the end of 2021 stood at 21 companies, is hugely diverse, with each one addressing markets estimated in the billions of dollars, including:
- Spire Global, which uses its constellation of over 100 small CubeSats to gather comprehensive weather data to predict environmental change and also provide maritime tracking services;
- ICEYE uses the world’s largest constatation of radar satellites, which can see through clouds and operate day and night to collect data about every square meter of the Earth’s surface every three hours, with its change detection algorithms providing completely new levels of knowledge about the planet;
- Satellite Vu is engaged in reducing energy waste from buildings, an issue which is estimated to account for 40% of all energy-related carbon emissions, which the firm’s constellation of smallsats monitor via infrared cameras every few hours;
- ChAi, which fuses space collected data with AI to help predict commodities prices;
- Hawkeye 360’s constellation of satellites picks up radio frequency signals generated from radios, radars, cell towers and satellite phones, where applications include maritime domain awareness – combatting illegal fishing and piracy;
- LeoLabs, which uses a network of ground-based radars that can track every piece of debris down to 2cm up to 1,000km away in orbit. By mapping the skies, LeoLabs is creating the air traffic control system for space that rocket launchers, satellite operators, regulators and insurers will rely upon.
The majority of the portfolio investments are still unlisted, with the exceptions currently being AST SpaceMobile Inc (cell towers in space) listed on NASDAQ, Arqit Quantum Inc (cyber security by satellite) also listed on Nasdaq, and Spire Global (weather analytics), which recently listed on the New York Stock Exchange.
Almost all the companies currently in the portfolio are what Boggett calls the first stage or ‘V1’ for the space industry.
“That’s a trillion-dollar investment opportunity that we are at the forefront of right now – first movers piecing together this digital infrastructure in the sky. We're identifying the emerging category leaders and picking off these businesses one by one,” he says.
What he calls V2, “is even more exciting”. But more on that later.
Why, then, is Seraphim one of the few companies with its investment shotgun trained on the space barrel if it’s such a lucrative potential goldmine, to fudge metaphors horribly?
Boggett and fellow managing partners James Bruegger and Rob Desborough, who all previously worked together at YFM Equity Partners, have assembled a heavyweight senior and advisory team that means Seraphim is a go-to source of space information in the venture capital industry, with its quarterly Space Index also a widely used barometer of investment activity in the sector.
Sitting on the advisory panel are such industry figures as Jan Wörner, former director general of the European Space Agency; Candace Johnson, co-founder of various space ventures including SES ASTRA; and Matt O’Connell, former CEO of OneWeb and founder of GeoEye.
“A large proportion of our SpaceTech dealflow originates from other VCs,” says Boggett, investors you may assume would naturally be expected to be their competitors.
“As a specialist investor we are in demand to validate valuations and to provide an in-depth understanding of the competitive market and technology differentiation – we are invited into most transactions to provide confidence to the generalist investors in a new emerging growth sector.”
But, he says, Seraphim has generally already decided who its next 20 investments are likely to be.
“We’ve built an information asymmetry in the space domain, helping us understand which are the best-positioned companies in each of the category sub-sectors. These are private companies and we take the time to go through each one thoroughly.
“All of our portfolio companies have a symbiotic relationship with each other – both customers, partners, suppliers – we’ve created an ecosystem.”
That brings us finally to Boggett’s ‘V2’.
“The investment trust is today focused on the low-hanging fruit – but we're keeping an eye on V2 – which is another trillion-dollar market. Today the cost per kilo to access space is $1,000 whereas this is expected to decline sharply over the next few years falling as low as US$200.
“This opens up a whole range of in-space opportunities – opportunities such as data centres, clean energy and agriculture in space.
“Just think about it. Solar farms harvesting the energy from the sun and bringing energy back down to earth, or agriculture in space. This could bring an end to the reliance on fossil fuels and the problem with lack of space on earth to grow enough food to meet the needs of feeding the growing population.
Ultimately, he says, these are the sort of challenges and game-changing opportunities that are likely to be addressed in V2: “Space is going to be harnessed to save humanity. Space is going to make a massive impact on the planet.”