The Weekly (11/3)

The first passengers to board commercial flights following World War II likely had no idea the scale to which air travel would grow to in the ensuing years. The same could also be true for early adopters of the internet in the 90s, who couldn’t dream that their social lives would be spent online.

The lucky space tourists that have taken flight over the last several months might be included in that list of folks who couldn’t really comprehend the full extent of the frontier ahead.

Some hints of the coming changes are apparent, including the frequent headlines about SpaceX, Blue Origin, and other private companies launching rockets and deploying satellites into orbit. 

According to a report from Mckinsey, the space market has “grown to approximately $447 billion—up from $280 billion in 2010—and could grow to $1 trillion by 2030.” The market is obviously growing, but could this just be the beginning?  

The space race has attracted some of the deepest pockets in the world: venture capitalists, billionaires, and private equity firms seem to be racing to orbit in search of profits and maybe a little bit of adventure too. It’s safe to say that the space industry is set to take off over the next decade, but why now? 

We’d argue it’s the perfect storm of innovation and cost efficiencies.

Space has long been a potent incubator for innovation. From the launch of Sputnik 1 in 1957 (which brought us velcro, by the way) to today, space ventures have enabled us to combat some of the world’s most daunting challenges: from climate change to national security.

Attacking problems such as establishing internet in remote locations, food scarcity, energy disruptions, mining efficiencies, and even more tactical insurance underwriting could unlock billions in terrestrial good will. The potential for disruption has spurred a new generation of businesses looking upwards for uncapped growth potential.

It can’t be understated that the new age of innovation has been spurred by cost efficiencies in the space community. Estimates argue that the costs for heavy launches in low-Earth orbit (LEO) have fallen from $65,000 per kilogram to $1,500 per kilogram (in 2021 dollars)—a greater than 95 percent decrease. In an odd way, the cost efficiencies were in fact spurred by the innovations of the past: 3-D printing, computer-aided design, etc. 

As the price tag for space activity has shrunk, capital has swarmed, and the ideas of what might be possible have flourished. Lower costs have opened the door to new start-ups and encouraged established aerospace companies to explore novel opportunities that once seemed too expensive or difficult. 

The combination of innovation and profits spurred by cost efficiency is an investor’s dream scenario. Pushing the status quo while building a lasting business is the goal of every venture backed business, and the space economy seems to be no different. 

This is just the beginning of the space economy but, just like the early adopters of commercial flights and the internet, we too are uncertain of the unbounded potential that could lie ahead.

Have a great weekend,

- Your Titan Team

Disclosures:

As of writing, SpaceX is a 8.91% holding in the ARK Venture Fund.