Home >Companies >Start-ups >Global space venture funding booms, but VCs in India stay shy

BENGALURU : There’s a yawning gap between space venture funding in India and abroad. Space startups raised a record $3.2 billion in funding last year globally, according to space analytics firm Bryce. It took off in 2015 and has crossed the $2 billion mark every year since then.

Data tracker Tracxn, which excludes debt financing, puts the global figure at $2.3 billion for 2018. Even that is far from the $21.5 million invested in Indian space startups since 2015.

There are a number of reasons for the gap, despite India being among a handful of countries with a well-developed space programme. The primary one is that venture capital investors in India are still lukewarm to space tech.

“The VC ecosystem in India is yet to get involved in a big way," admits Sheetal Bahl, partner at Delhi-based growX ventures, which has made early bets in two Indian space startups, Pixxel and Bellatrix Aerospace. “It’s mostly seed-stage funds like ours that are taking early positions."

Bahl hopes the scene will change in a year or two so that his portfolio startups can raise follow-up funding. Even a good venture would die if it’s starved of funding in this space.

But the typical venture capital model, especially with closed funds having a time frame of eight to 10 years, doesn’t jell with capital-intensive businesses with long gestation periods. Also, venture capitalists like to see success demonstrated by a few companies generating revenue. The viability of private space enterprises has not yet been established.

Globally, 80% of space venture funding last year was in the US, with China and the UK taking the lion’s share of the rest, according to Bryce. The US has the most developed ecosystem. There, billionaire angels like Jeff Bezos and large corporations like Boeing are willing to take moonshots in a space with tremendous potential, even if business models are yet to be proven. That supplements venture capital investment.

It’s called it ‘the billionaire space race’—Amazon’s Bezos has invested over $2.3 billion in Blue Origin, while Google and other investors have pumped over $2.4 billion into Elon Musk’s SpaceX. Blue Origin and SpaceX want to be the first private enterprises shooting rockets into space.

Leading the pack of investors among venture capitalists is Japan’s SoftBank. It joined hands with other investors to invest $1.7 billion in OneWeb, which aims to have a constellation of satellites providing high-speed internet access from space that can also reach rural or remote areas.

But it’s not just the big sharks in play. Opportunities are opening up for small fry too, thanks to Moore’s law. “Launch costs are down from millions of dollars to hundreds of thousands, it’s 80% cheaper to make satellites, and it takes months rather than years to put them into orbit," points out Bahl. Off-the-shelf electronics and smartphone microprocessors are enabling even fresh graduates to have a go.

These startups are finding niches in a variety of areas, from reducing launch costs with better rocket propulsion systems to using satellite data to provide analytics.

All this is easier said than done, however. Even a well-established mission like Chandrayaan-2, with seasoned engineers working on it for years, was delayed by a day because of a “technical snag in the launch vehicle system."

Space is still the great unknown. “To the layman, there’s empty space out there. But it’s actually vibrant with infinite energy," explains professor M. Krishnaswamy, retired director of the remote sensing satellite programme at Isro. “We study space aerodynamics, but we don’t exactly know what is there in that atmosphere. Every aspect of space is like that." It explains why newbies without deep knowledge and experience run into problems.

The Indian startup space suffered a blow last year when Team Indus flopped after reaching the last stage of the Google Lunar Xprize competition to land a rover on the moon. It had raised funds from a number of high-profile people, including Nandan Nilekani of Infosys, but failed to launch the rover, nearly eight years after the startup was founded.

Hype followed by failure comes with the territory of startups. “We know of 75-plus companies making new kinds of launch vehicles to make it cheaper and easier. Most of these will die in the next few years," says Bahl. “There are unknown risks because it’s a new industry. So a very high failure rate is to be expected."

Global cues are playing a part. We could see commercial human space flight soon from Virgin Galactic and SpaceX. Satellites have reduced from 1000-kg clunkers to shoebox-sized nanosatellites of 1-10 kg, which is enabling startups to plan constellations of them that can provide continuous coverage of the entire planet. The sky is no longer the limit.

*Malavika Velayanikal is a contributing editor with Mint.

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