Space Startup Funding: Perspectives from CEOs and Co-Founders

The new space wave has changed the fundamentals of this industry. Increased access to space and a reduction in mission costs converge with technological advancements. This dynamic has quickly opened the space industry and in ways that traditional space stakeholders might not have anticipated.

Space startups across the globe share a delicate balancing act between bootstrapping and external funding. Impressive ideas and sound research often get lost in the shuffle, because ideas may not be translatable to actionable business services or at least minimum viable products (MVPs) to keep the initial payroll afloat. And yet, a lot of new startup founders continue to navigate an increasingly cluttered landscape. Many investors in the tech world are pouring millions into “unicorn” start-ups, those valued above USD 1 billion, at higher rates every year, and the space industry is not lagging behind.

Unicorns by country 2021 | Statista

The number of unicorn companies found in China in early 2021 was bigger than those of 11 other countries, including Germany, India and the UK, combined.

StatistaJennifer Rudden

I had the opportunity to discuss these issues at length with two space startup CEOs and co-founders in Spain. They have different business propositions and approaches, but their trajectories and stories intersect in the importance of finding the right funding strategy and timing. I find their insights relevant to the broader conversations in the growing global space economy.

Daniel

The Madrid-based ienai Space focuses on electric micropropulsion systems for nanosatellites. CEO and co-founder Daniel Perez Grande, has a doctorate degree in plasma physics and nuclear fusion and more than a decade of experience in aerospace engineering. Since its foundation in 2019, ienai has successfully financed its operations with personal capital, local and national funds, equity-free accelerator programs, and contracts.

Daniel Perez Grande on LinkedIn: #amazing #electricpropulsion #increíble

The ABSOLUTE commitment of the ienai SPACE team to deliver our first flight hardware is simply #amazing. Here we are assembling the final unit to be delivered...

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Daniel and his team have also focused on frequent verbal touch points with qualified sources of funding. Daniel said:

“We have followed the stealth model to prioritize R&D and proof of concept and one-on-one conversations averaging 100+ meetings to refine and articulate our message. I personally dedicated one year of market research to speak to the nuances of the business. My team and I are all strong communicators, but we really haven’t had the time to do so until now with the new launch of our website and the unveiling of ienai Go. We have plans to be able to communicate more of what we do.”

By conducting its market due diligence and informal networking, the ienai Space has successfully bootstrapped from the start. However, this success didn’t come easily.

“We tested the presentation of our MVP and pitch early on with several business angels. It was complicated. Although we received interest early on, we also encountered poker faces as well. We encountered no interest, no understanding, and no vision of why this is important. You have lots of startups with fewer resources in this new space scenario. So, startups have to be super focused. It’s very important to focus on pitching the adequate investment funds that know what you focus on. A concrete and pragmatic approach without unnecessary waste is critical. We’re lucky to have found our CFO before any of the current discussions with private investors. It isn’t easy to find which space investment funds are both specialized and knowledgeable about the ecosystem, and there aren’t many in Spain. However, we wanted to maximize our search at home first.”

Yanina

UARX Space Solutions is based in the northwestern autonomous community of Galicia. Co-founded by a wife and husband team, the company has been designing and developing in-orbit transportation services beyond low-Earth orbit since 2016.

Yanina Hallak, CEO and co-founder, has worked for more than a decade in both Argentina and Spain. Both countries have traditional, well-established space and defense industries that work with a few private contractors for most missions.

“My husband and I had experience working on traditionally larger satellite missions with configurations averaging in weight to 1,500–3,000 kg. We knew how to work a more cumbersome process that often required processes and standards built on precedent and little room for innovation. I have found that in Argentina, like in Spain, there is the mindset of traditional space thinking. For example, we have to put 65 screws, and none can be missing for the mission to continue. So, there’s less motivation to take greater risks for innovation. Now more space startups are surfacing over the years. The problem is that some of them don’t last more than six months. Others have a great idea, but the first thing they seek is capital. We believe that when you don’t have a demonstrated product or at least a proof of concept, it is harder to get financial buy-in.”

UARX has also been able to self-finance with capital funds and assistance from the local government. The UARX team also knows how to leverage its expertise for professional services contracts. Perhaps founders should consider self-reliance as a prerequisite for business in the new space panorama more often, as Yanina confirms:

“The biggest problem is that people start believing in you only when you demonstrate something. Until you demonstrate something, it will be difficult. Some startups have great marketing, but it’s just marketing. Others play the subtle game. In our case, we are not too interested in the show-off business. We are more focused on gradual demonstrations and iterations to earn street credibility by proving ourselves. My team understands that we cannot afford to pay higher salaries. In a couple of years, this will only be an anecdote in the company’s history. Space entrepreneurs need to have a team that embraces and backs up the company vision. Although we are not shooting for a dramatic increase in personnel to keep the working culture agile, I want a larger working team.”

Key takeaways:

News about the billion dollars invested in the space industry often capture the headlines. However, as these entrepreneurs point out, the external funding sources may not be specialized in specific niche verticals. Additionally, public institutions and traditional space agencies may still resist dealing with relatively new actors and prefer to work with established private contractors.

By taking the road less traveled, both ienai and UARX have successfully matured their businesses. As a result, they foresee being in good shape to service customers for the five-year short term and the more extended 15-year period. Both Daniel and Yanina explained the importance of being proactive and selective about the proper financial backing at the right time. Having robust financial advisory frameworks is essential. Early-stage self-sufficiency may not be as popular given the frequent splash of quick valuations in the billions of dollars for many tech companies worldwide. However, it may just be why the new space community is open for business after all.

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Stream of consciousness [photos]

I came across this furniture layout in a coffee shop. The shop was full of people, but no one was occupying this area. As I walked about, the austerity reminded me of the type of grit and personality typically associated with space entrepreneurs who are courageous to innovate in this industry. The green aesthetic pays tribute to the sci-fi film The Matrix (1999).

Challenges harden us, but they also set us up for success. Lurking underneath the self-doubt and criticism is a new dawn for projects and ideas.