Assembling an Economy in Space

The International Space Station (ISS) National Laboratory manages all non-NASA research in the U.S. portion of the space station, including academic and commercial projects in basic and applied science, education/workforce development, and technology innovation. As director of investment and economic analysis, Sven Eenmaa works to support the buildout of the low-earth economy by incubating and accelerating early technologies.

Q: When your team evaluates project proposals, what are you looking for?

Our priority is to make sure that however awesome the science, however cool the technology, there is—or could be—a business case. On a venture capital scale, most of the companies we work with are pre-seed or seed. It’s early-stage development generally with a significant scientific component, so it’s not necessarily a question of yes or no so much as can it get there? We want to move the needle in de-risking technologies sufficiently that they become investible by private capital.

Q: What becomes possible when R&D is done in space?

For remote sensing and earth observation, the ISS National Lab provides a venue to test and develop new sensor and communications technologies before committing to using them on a satellite.

With pharmaceuticals and advanced materials, if you remove gravity from the equation, you see different molecular dynamics. Given the expense, the research prioritizes high-value products, but progress is promising enough that as costs continue to come down, we’ll start seeing, maybe in the 2030s or ’40s, some in-space manufacturing.

Q: What’s the role of publicly supported R&D in building out the space economy?

We’re spending less than $100 million per year on pure R&D in orbit, not including the cost of the space station itself. To put that in context, combining private and public sources, the U.S. spends over $600 billion a year on R&D overall.

The commercial space economy is developing quickly, but it will still be some time before private capital can move in to completely support early-phase research and development. So it’s public support that drives this innovation forward, whether it’s remote sensing capabilities to manage climate, better weather forecasting, new drugs, or new materials. There are so many areas where this work adds value to our lives.

Proof-of-concept development, which is difficult to fund purely in private markets, can create massive value down the line. That’s without including indirect terrestrial uses to calculate impacts, even though they can be very large. Think about all the apps, services, and business that wouldn’t exist without GPS—a space-based technology developed with public funds. Using your phone for directions and things like Uber and Doordash are all tangential benefit of GPS.

I think it’s very important that our country acknowledges the value which gets created from this type of government support.

Q: How does supporting buildout of the space economy fit with national priorities in space?

The more we can develop commercial infrastructure for the space economy, the more NASA budgets can be allocated to things like preparing to send people to the moon or Mars or to do deep space exploration—the very high-level research work that’s really in the governmental wheelhouse.

NASA has committed to keeping the ISS operating through 2030. It’s a priority to maintain capabilities and human presence in low earth orbit, so the goal is to have commercial platforms functioning and able to deliver services to NASA before the ISS gets decommissioned.

Through our work, we aim to help build a very strong service provider network, which is moving toward becoming commercially viable without government support.

Q: Engineering and science are obviously crucial for advancing space. What is the role of finance?

Space is a capital-intensive industry, so finance has a role to play. There’s capital out there interested in space. The early venture investors I interact with are trying to find opportunities at the inflection from science to business.

There are new space companies, like SpaceX, that were predominantly private-capital funded. Several others are SPAC companies that are publicly traded. So there are paths to success.

Space is not monolithic either. Some areas have the exponential growth potential that interest venture investment. Others will lend themselves to lower growth rate levels, which are more suitable for private equity markets.

But as with any new and risky area, there’s cyclicality and volatility to the flow of investment. A few years ago, we were hearing predictions that commercial space had arrived and the sector was ready for the government role to decline. Instead, the big wave of SPAC activity in 2021 was followed by a contraction in access to private capital.

For now, even thinking specifically about commercial space, government is still an important part of the mix—which is fine because it’s expensive technology and there is governmental need for it. We can look for more balanced flows of public and private investment down the line. In all of that, finance has a role.

Q: What other models are there for funding the technologies and infrastructure of a developed space economy?

Again, governments are definitely a big part of the revenue mix. The commercial space station models expect national space agencies will be, in essence, anchor tenants. Many countries that don’t have or want space station capabilities would like to have astronauts in orbit, so there’s already a sovereign astronaut market. That can become a meaningful sliver of the commercial space economy.

When nascent space players can fill a strategic need from the government side, that will help the company to absorb some of the initial, non-recurring R&D, engineering expenses, and scale up. Eventually they can deliver modified versions of the solutions to commercial markets. That’s not a new model. We’ve seen many technologies developed and companies built on government and defense work in the past.

In a variation on that, Northrop Grumman is already providing in-space servicing to extend the life of geosynchronous satellites that are running out of fuel. Their space tugs are soon going to have the ability to do repairs and other tasks. Other companies are moving along similar lines.

In-space servicing capabilities overlap with potential approaches to cleaning up orbital debris. Space junk is a topic the industry is paying a lot of attention to because damage from impact with a piece of debris can be massive and we don’t want there to be so much debris that an orbit become unusable.

Unfortunately, there’s no clear revenue model yet, but if companies can pay their bills and build experience doing in-space servicing of satellites they’re in better position to develop active debris removal technology. It gives you an idea of how the infrastructure of space and the ecosystem of service providers can come about.

Q: Launch is an area that has seen a lot of private investment.

Going back to 2017 or 2018, there was discussion that there would so many new launch companies that the market would be crowded, and nobody would make money.

That’s not what happened. Quite a few rocket companies have gone out of business or had a rough time for various reasons. SpaceX has done a phenomenal job, and they have something like 80% of global market share in terms of mass to orbit.

If you think about the future models of a built-out space economy with in-space manufacturing, you don’t want just one company doing launch. We’ll see what comes out of Blue Origin, United Launch Alliance, Stoke Space, and Rocket Labs.

Q: Satellites are among the oldest part of the private space economy. What are the developments that you’re watching in that domain?

Early communications satellites were built on a different economics. The satellites needed to stay in geostationary orbit [about 22,000 miles above earth] for 15 years or more to make the model work.

The decline in launch costs, lower cost of components, and higher compute powers, as well as a shift to low-earth orbit [less than 1,200 miles above the planet’s surface] allows a shorter lifetime for the assets—commonly five to seven years. And rather than being standalone, they are commonly part of large satellite constellations. SpaceX’s Starlink, Amazon’s Project Kuiper, and a few others are developing the constellation model to deliver broadband everywhere.

Being closer to earth, meaning reduced delay in signals getting going up and back, along with declines in computational cost, better sensors, and better data processing capabilities, has opened multiple potential revenue streams including communications and imaging services.

With the tragic war in Ukraine, we’ve seen all the imaging that is no longer behind the wall of intelligence agencies. These capabilities are also providing tremendous value tracking CO2 emissions, wildfires, weather, methane emissions, forest footprints, and on. I’m also interested in the supply-chain applications.

The engineers have figured out how to affordably send satellites up and deliver high-quality data. Satellite data was too expensive for many uses for so long that I think the commercial market data analytics side has lagged, but with AI and computational capabilities ramping up, that will get addressed.

Q: How did you come to do this work?

When I graduated from Yale SOM, I went to work on Wall Street as a banker and research analyst. I’m old enough that I saw the early internet companies grow from seedlings into huge trees. I also worked on clean tech, where I experienced the innovation curve, with costs coming down and deployments increasing. I’m drawn to sectors experiencing periods of extraordinary innovation and growth. Five years ago, I joined the ISS National Lab because I think what we are seeing with space today is somewhat analogous.

We’ve been sending things to space for a long time. Sputnik was launched in 1957. The first commercial satellite was 1962. But during the space shuttle era, it cost about $65,000 to get a kilogram of material into low-earth orbit. Today, the raw transportation cost on SpaceX’s Falcon Heavy rocket is $1,500 a kilogram. That’s almost a 98% decline. When SpaceX’s much larger Starship becomes a reality, that could again reduce launch costs substantially.

The initially gradual but then rapid decrease of launch costs brings to mind what happened with the costs of communications, solar and wind energy, computation, or genome sequencing. Obviously, none of those are exactly analogous. There are different capital intensities, different regulatory environments, etc. But the parallels caught my attention and when I had the opportunity to leverage what I learned from my Yale days and from my Wall Street days, I was excited move to a new area for a chance to grow, learn, and work in a field where I would be part of changing the game a little bit.

Q: What did you have to learn in this new sector and sitting at a nonprofit?

Wall Street, obviously, is very competitive and fast paced. A lot is asked of you. But success or failure is narrowly defined. You probably do not have a broad range of stakeholders whose needs you need to meet.

In the nonprofit world, there are many more interested parties. That’s great. And it’s great that you see a lot of very motivated, mission-driven folks. But it’s not necessarily the case that “mission” means the same thing to everybody. So there is more complexity.

My focus was finance and strategy, but Yale SOM gave me the grounding to do so many different things. My understanding of organizational behavior has been very valuable. And my time at Yale SOM was spent with a mix of students who came from and were going on to not just for-profit sectors but also the nonprofit and public sectors. Interacting with such a range of people over two years was super helpful.

Even so, when I joined the ISS National Lab team, I found myself going back to my textbooks and notes from Yale SOM classes to help myself think through how so many varied stakeholders work together.