A World of Opportunity in the Space Economy
Anu Rajakumar: The space economy is evolving, and its growth is reshaping industries far beyond rockets and satellites, offering fresh opportunities to rethink how investors approach diversification and innovation. As technological advancements accelerate and private companies play an increasingly pivotal role, the space economy is emerging as a compelling frontier for investment and industrial development. What exactly is the space economy, and why is it gaining traction as a transformative opportunity? How can investors navigate its complexities, debunk common myths, and identify the right opportunities while managing risks?
My name is Anu Rajakumar, and joining me today are Daniel Hanson, Senior Portfolio Manager and Head of the US Quality Equity Team, and Evelyn Chow, Portfolio Manager of the Neuberger Berman Climate Innovation and Next Generation Space Economy Strategies. Dan and Evelyn, welcome to Disruptive Forces.
Dan Hanson: Thanks for having me, Anu.
Evelyn Chow: It's a pleasure to be here.
Anu: Evelyn, for listeners who might be new to this, how would you describe the space economy, and tell us what's driving all the buzz around it right now?
Evelyn: Anu, I'd say the interest right now is nothing short of astronomical, if you'll permit the pun. I think people tend to think of space as just something that's very out of reach and out of touch, but really, I think it's a new theater for innovation and growth that's not only enhancing our lives on Earth today, but also possibly beyond that. I think there are some wide-ranging implications for how we consume, how we collaborate, and how we create.
Maybe to put some numbers around the opportunity, some estimates show that by 2035, space is going to be a $1.8 trillion opportunity, spanning a number of dimensions and sectors. I think what's important to highlight about that is it's growing very, very fast. Over two times, GDP growth is driving this rapidly expanding TAM. There are a lot of drivers behind that, not just from the perspective of how technology and innovation has really started to scale and enable some of these profitable pools of growth, but also things like geopolitical concerns driving sovereignty, that are catalyzing defense tech in a way that we've not seen really in the prior decade.
I'd say that, beyond some of what I've discussed here, a really important company to highlight and, frankly, a juggernaut in the space is SpaceX, which has catalyzed a number of opportunities and technologies that have really paved the path for many other companies in this area. I think we'll be talking a little bit more about SpaceX later in our conversation, but just to frame some of the really important firsts that it's been able to capture, Falcon 1 was the first privately developed liquid-fueled rocket to reach orbit.
SpaceX is also the first company to successfully deploy reusable rockets, which is really the linchpin of launch infrastructure today in terms of getting launch costs down in a very rapid, scalable way. Last but not least, it was the first commercial enterprise to return human space flight to the US, which is, frankly, one of the roots of inspiration for how we've been exploring space over the last 50 or 60 years.
Anu: Terrific. I like that term, theater for innovation. That's a really great line. I think you've highlighted the rapid growth for this industry. Obviously, there's a lot of hype here and maybe also some misconceptions about the space economy. What would you say are the biggest myths that you hear about, and how would you both set the record straight?
Evelyn: Absolutely. I think the single largest myth surrounding the space economy today is this notion that it's not mature and it's lacking in incumbents. I think it's really important for us to remember the history of how the space economy has developed. We have been doing space for over 50 years. It's transformed from a government-led domain in the decade since JFK signed the country's Communications Satellite Act into law, all the way to a space where venture capital has become very important and where funding has proliferated over 20 times in the last 10 years.
What I would say is, from the 1990s onward, you've seen a lot of companies that are extremely well entrenched. These are the US primes, essentially the defense contractors of both the US and the EU become really pivotal in joining forces with government and putting their own money to work. These are names like Raytheon, Boeing, Lockheed Martin, Northrop. That has paved the way for the modern space economy that emerged in the 2000s, fueled not just by SpaceX, which we've talked about a little bit already, and we'll talk about more later in this podcast, but also companies like Blue Origin, Virgin Galactic, Rocket Lab, et cetera, that are really fueling the build-out of launch infrastructure over time.
Dan: There are multiple myths. As Evelyn addressed, this idea that the space economy is not mature, we think we could put that to rest further on this idea that there's this myth that space technology, more generally, is nascent, it's unproven, and I just go back to look at the history books. The Apollo program in the 1960s, 60 years ago, upwards of 5% of GDP was spent over a decade to get the US to the moon.
That really catalyzed an entire set of capabilities, again, largely commercial actors, as Evelyn mentioned, the large legacy defense contractors, the aerospace complex, put that spending to work to innovate and get us to orbit. Again, 60 years ago. It's been a robust global objective over time. These are very much proven technologies. I guess as to myth number three, the idea that investing in the space economy is highly speculative, limited to early-stage companies, we would say, as with any broad industry space, there's multiple actors, multiple ways to thread the needle in terms of investment opportunities.
It spans from extremely mature, well-established investments like the legacy defense aerospace industry. The most recent astronauts in the US made it up to the space station through the United Launch Alliance, which is a joint venture between Boeing and Lockheed, very highly publicized. They were brought back down to Earth through SpaceX's Dragon capsule. That in one mission bookends the extreme breadth of the well-established incumbent capabilities. Equally, there's a very broad ecosystem of innovative new ideas that are leapfrogging off of these capabilities. We think it's a broad, robust industry. It's well over half a century. It's a global industry, and we think it's fertile hunting ground for investors.
Anu: Great. I think those are very important points to put out there for listeners. When we think about the space economy, I think the first thing that probably comes to mind are rockets, satellites, but space technology shows up across other sectors and industries as well. Evelyn, is this a broad opportunity, or is it niche, again, to those just rockets and satellites?
Evelyn: I think that's a great question, Anu. A lot of people seem to think about space economy as being just launching rockets and people into orbit, and that couldn't be further from the truth. There are actually a lot of practical applications already happening today that are redefining how sectors on earth are really investing in themselves and growing. I think probably the five biggest areas I'd call out revolve around supply chain and transport, food and beverage, especially things like precision agriculture, retail, clearly digital communications via satellites, and last but not least, defense, which has emerged as a really critical area driving further investment in space.
I think just to maybe zoom in on some of those points, when I think about what's happening in terms of satellite communications, that's really been historically the largest revenue source for a lot of space-based players. You can think about what are, at this point, household names like SpaceX's Starlink, Amazon's Project Kuiper, Eutelsat's OneWeb in the EU. These are all progressively reaching full deployment, and this market is benefiting from the acceleration of both broadband as well as just increased connectivity.
An interesting stat that I came across as we were thinking about this podcast, apparently, something like 10% of the EU's GDP now depends on space-based navigation systems. That's only poised to grow. I think that number is even bigger in the US. I think a space to watch, for sure. Then maybe the last point I'd round out here is the military use of space and space as a war-fighting domain has been, frankly, fraught with controversy over the last couple decades. Given some of the impetus for sovereignty that is happening all around the world, it's becoming an ever more critical area of investment today.
You've heard of Golden Dome in the US. That may be a very big opportunity. There's a huge emphasis within that on space-based missile interceptors that's really propelling a new generation of younger companies like Voyager, Anduril, et cetera, that are becoming extremely important, but also conferring a lot of opportunities to these legacy defense contractors like L3Harris and Raytheon.
Anu: Great. Terrific insights. Thank you, Evelyn. On a lighter note, I did also see that Tom Cruise is looking to film one of his future movies in space, so maybe we'll get the entertainment sector somehow into this economy as well.
Evelyn: Maybe by the LA Olympics.
Anu: [laughs] Exactly. Now, we've mentioned SpaceX a few times already, and of course, we can't talk about the space economy without mentioning SpaceX. Dan, tell us how SpaceX specifically has really changed the space game and what sets them apart from the others in this field.
Dan: It certainly is captivating the space economy. Generally, SpaceX specifically is absolutely captivating the public, seeing these amazing, massive missions go into orbit. What's exciting to me as an investor is looking under the hood. This is just a classic disruptive, innovative business with a very deep competitive moat. We think enduring competitive advantage versus competitors, the key aspect of which is a cost advantage.
SpaceX, founded 23 years ago, has grown to be a very mature 15,000-employee business, profitable with cash on the balance sheet. Actually, two distinct profitable segments: the launch segment and the Starlink business. The core of the business is about a cost advantage. The legacy space industry, going back to the Apollo program, was largely built on a cost-plus model where private sector contractors executed on government contracts. The stories of the Cold War $800 toilet seat or $600 hammer, that cost-plus attitude really drove the space industry for decades.
SpaceX came and disrupted that with a commercial view of, "Hey, we've got to pay the bills." Necessity being the mother of invention, they went through vertical integration. They just radically address costs in a way that has resulted to a juggernaut business and cost advantage. To frame it in the space shuttle era, it was about $50,000 to get a single kilogram into orbit. With the Falcon 9 program, which is the workhorse of SpaceX today, over 400 launches flown, over 80% of those are reused. That dramatically drives costs down. Costs have gone from $50,000 down to $2,000 per kilogram.
With the Starship, which is still being prototyped, there's been nine launches thus far. The goal is another order of magnitude, taking costs from $2,000 down to $200. That massive cost advantage is, in large part, catalyzing what Evelyn touched on in terms of the broader ecosystem. Think of it almost as what Apple did with its App Store ecosystem, by having a platform for third-party developers to innovate on top of, SpaceX is catalyzing an incredibly innovative, robust ecosystem.
Literally, garage-based entrepreneurs can get to orbit and pilot, whether it's asteroid mining that seemed like science fiction in the 1970s. Jeff Bezos talked about Gerard O'Neill, the Princeton professor, talking about these types of industries, asteroid mining. This is becoming reality on the back of SpaceX's reliable and low-cost launch capability. That's just an example of their leadership and how it's really catalyzed a whole ecosystem.
I should also touch on Starlink, which is their low-orbit communications platform. As Evelyn mentioned, there's Amazon's Kuiper, there's other low-Earth orbit technologies globally, but Starlink is by far away the leader with upwards of 5 million subscribers, and that's growing. It's really a hockey stick in terms of growth trajectory. That's all serviced by 7,000 satellites in orbit.
Today, for about $600 for a little plastic dish and about $120 a month, you can have high bandwidth, you can stream Netflix in the Yukon. It is amazing. Maybe more meaningfully, you're providing education and economic empowerment to underserved populations globally at a highly competitive price to legacy fiber in the ground. Those are just a couple instances of how SpaceX, as a leader, is catalyzing awareness, broader investment, and really unlocking opportunity in a way that is not about speculative throwing things against the wall but a P&L-positive, cash flow-positive innovation model.
Anu: Truly an incredible company. Actually, I do have a million-dollar, or maybe it's a billion- or trillion-dollar question, but do you think they will IPO at some point or go public? What's the view on their future?
Dan: Gwynne Shotwell, the day-to-day leader of the business, has talked about Starlink potentially being available in a public form at some point. For the time being, I think they enjoy being private. It gives them control over this unique scale business.
Anu: Totally. Now, I'm curious, with everything going on in the world, obviously geopolitical tension, supply chain disruptions, et cetera, what should investors really be paying attention to in terms of risks, if they're thinking about putting money into the space sector?
Dan: My advice and attitude would be don't change your lens as an investor, and invest in philosophy and process. My approach is one of quality investing, looking for long-term compounders, looking for businesses with unassailable deep moats, where I have conviction three, five, seven years out, the business is going to compound to create more value by creating value for its customers.
That lens is every bit as applicable to the space economy. What's exciting is the growth of the space economy, what some of these businesses, not all of them, but some of them, really do have deep moats, distinctive advantages, first mover advantages. There's some of the benefits we see of scale businesses, for example, and sometimes it's connected to a first mover advantage. That certainly is a big part of the landscape and, in my view, is not unique to space, but rather keeping the discipline to an investment framework.
Having said that, clearly, there is a big role for private and public funding. There is absolutely a global space race going on in terms of China and all the global actors having real commitments and progress in their space capabilities. There is that nation-state aspect. Even in the US budget now, there's increased visibility on what's called MILNET, the idea of a military network, and as Evelyn alluded to, a number of projects recognizing that nation-states need to have capabilities in space, so there's an opportunity for investors to, I think, participate.
More generally, our view is that don't rule out space as a part of the ecosystem, but neither raise nor lower the bar in terms of thinking about an investment philosophy. There certainly is an opportunity to be speculative, the typical venture capital model of many shots on goal, and you're going to have a couple of winners that will swamp any losses. At the same time, for investors who are much more conservative and take a high-quality, very curated approach, investing in mature cash flow positive businesses, there are also some, we think, attractive opportunities.
Evelyn: I think I would echo a lot of what Dan has brought up. I think he referenced something that's very important to consider in terms of why investing in space today is very different from doing so, let's say, in the 2000s dot-com bubble time frame. I think the word he used was scale. That could not be more important, because as Dan talked about when we were discussing SpaceX, what is now present in this environment is the opportunity to actually drive not just growth, but profitable growth in the space economy. That's a lens, as a more growth-oriented investor, that I tend to use.
I think some of the things that we've been discussing earlier in this discussion around what are mature companies in this space, who are the incumbents, it's really important to understand-- I mean, SpaceX has dwarfed anybody else in terms of the number of launches. Even end-to-end space solutions providers like Rocket Lab, they've launched almost 70 times at this point. I think you're just really starting to see this opportunity to actually capitalize on companies that know what they're doing and can do it in repeatable, industrialized ways. That's very important.
I think maybe just one other aspect of what people should keep in mind when investing in the space economy is, the US is clearly the global leader in terms of space investment. Over 60% of funding globally, both public and private, in space comes from the US. There are new geographies like the EU, especially with its acceleration in defense spending, as well as areas like Japan, Korea, India, that have become really critical parts of the space supply chain, unfortunately catalyzed, in large part, post-Russia-Ukraine, given that was where many of small SATs came from prior to the conflict.
I think for a global investor, there's a lot of opportunities to play in multiple sandboxes. We've highlighted a lot of companies, I think, both here and around the world, but just something to consider.
Anu: Yes, absolutely. That's great context, and it leads really nicely into my final question, which is where I'll put my multi-asset hat on and ask from an asset allocation perspective, how can investors think about adding an allocation to space economy strategies within their portfolios? How does the space economy fit in the context of their traditional investments?
Dan: In my view, investing, it's all about bottom up, understanding each business one at a time. Investors get excited about the Mag 7. They get excited about big tech growth. The reality is the growth we're seeing, the innovation, the deep moats in the space economy, there's some amazing opportunities. They sit in the industrial geeks, aerospace sector, from a sector standpoint, but don't sell yourself short. They're amazing growth opportunities outside of the technology sector.
Anu: Great. Thank you so much for all of those thoughts today. I can't let you go without a quick bonus question for you both. Today, I have a two-parter. Firstly, as space travel becomes more commercial and potentially accessible, I'd like to know, are you personally interested in taking a trip into space? That can be a yes or no. Secondly, hypothetically, if you were to spend a month in space, what is one earthly comfort that you might miss?
Evelyn: I can dive into this first. I think we talked about that $1.8 trillion TAM. Space tourism is estimated to be $4 to $5 billion of that. It gets a lot of the attention. I don't think it's going to get a lot of the dollars. I think putting aside the enormous quantities of capital that would have to be invested in order for me to go into space, sure, send me up.
[laughter]
Anu: Is there anything that you would miss on Earth if you went up for a month?
Evelyn: Oh, absolutely the food.
Anu: [laughs] That's a good one.
Evelyn: I don't know if you've seen space ice cream, which by the way, they don't serve in space, but I've heard, generally speaking, the culinary delights are not that great up there.
Anu: Much better in New York City, I think?
Evelyn: Yes.
Anu: [laughs] Dan, what about you? Would you go, and what would you miss?
Dan: Well, it's not the top of my bucket list, but it's somewhere on the list. Sure, that would be-- It's going to happen in our lifetimes. It will be much more of a routine prospect. More generally, like if I were up there for a month, I just think I would miss getting dirt under my feet. I like nature on Earth, which maybe brings-- There's a couple of the big visionaries around space. It would be, on the one hand, Elon Musk, who wants to go interplanetary and sees that as a multi-millennium imperative.
Another opposite of the spectrum is a Jeff Bezos view, who wants to support a space ecosystem to get all the dirty industry off of the earth, to recognize the planet is a precious, amazing thing, and let's turn it into a park and get all the dirty manufacturing, get all the data centers and so forth up in orbit. I think if I were up there for a month, I would only appreciate further the beauty of what we have here down on the planet, but all of the above.
Anu: All right. As I've heard more and more often, it's like, just a reminder, feel the grass. Touch the grass and feel it and appreciate what we have here. Thank you so much, Evelyn and Dan, for sharing all of these insights on the space economy. I think you both gave great history primers on this area. You've demystified what's happening beyond our atmosphere. Clearly, it's a fast-evolving opportunity that go beyond satellites and rockets.
I know I personally didn't immediately appreciate that these innovations touch such a wide variety of industries. Evelyn, I think you mentioned precision agriculture and finance, and how investors can gain exposure in different forms. This is not just a homogeneous category. There's a lot of different opportunities within the space economy. I hope today's conversation gave our listeners some new perspectives to think about. Once again, Evelyn and Dan, thank you for joining me today.
Evelyn: Thanks, Anu.
Dan: Thank you.
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The space economy is quickly moving from science fiction to investable reality, reshaping industries far beyond rockets and satellites. But with hype and misconceptions clouding the landscape, how can investors separate signal from noise and identify the true drivers of value in this rapidly expanding market?
On this episode of Disruptive Forces, host Anu Rajakumar sits down with Dan Hanson, Senior Portfolio Manager and Head of the US Quality Equity Team, and Evelyn Chow, Portfolio Manager for Climate Innovation and Next Generation Space Economy Strategies. Together, they discuss how investors can navigate risks, debunk myths, and access a universe of opportunities well beyond Earth’s atmosphere.
A World of Opportunity in the Space Economy
Anu Rajakumar: The space economy is evolving, and its growth is reshaping industries far beyond rockets and satellites, offering fresh opportunities to rethink how investors approach diversification and innovation. As technological advancements accelerate and private companies play an increasingly pivotal role, the space economy is emerging as a compelling frontier for investment and industrial development. What exactly is the space economy, and why is it gaining traction as a transformative opportunity? How can investors navigate its complexities, debunk common myths, and identify the right opportunities while managing risks?
My name is Anu Rajakumar, and joining me today are Daniel Hanson, Senior Portfolio Manager and Head of the US Quality Equity Team, and Evelyn Chow, Portfolio Manager of the Neuberger Berman Climate Innovation and Next Generation Space Economy Strategies. Dan and Evelyn, welcome to Disruptive Forces.
Dan Hanson: Thanks for having me, Anu.
Evelyn Chow: It's a pleasure to be here.
Anu: Evelyn, for listeners who might be new to this, how would you describe the space economy, and tell us what's driving all the buzz around it right now?
Evelyn: Anu, I'd say the interest right now is nothing short of astronomical, if you'll permit the pun. I think people tend to think of space as just something that's very out of reach and out of touch, but really, I think it's a new theater for innovation and growth that's not only enhancing our lives on Earth today, but also possibly beyond that. I think there are some wide-ranging implications for how we consume, how we collaborate, and how we create.
Maybe to put some numbers around the opportunity, some estimates show that by 2035, space is going to be a $1.8 trillion opportunity, spanning a number of dimensions and sectors. I think what's important to highlight about that is it's growing very, very fast. Over two times, GDP growth is driving this rapidly expanding TAM. There are a lot of drivers behind that, not just from the perspective of how technology and innovation has really started to scale and enable some of these profitable pools of growth, but also things like geopolitical concerns driving sovereignty, that are catalyzing defense tech in a way that we've not seen really in the prior decade.
I'd say that, beyond some of what I've discussed here, a really important company to highlight and, frankly, a juggernaut in the space is SpaceX, which has catalyzed a number of opportunities and technologies that have really paved the path for many other companies in this area. I think we'll be talking a little bit more about SpaceX later in our conversation, but just to frame some of the really important firsts that it's been able to capture, Falcon 1 was the first privately developed liquid-fueled rocket to reach orbit.
SpaceX is also the first company to successfully deploy reusable rockets, which is really the linchpin of launch infrastructure today in terms of getting launch costs down in a very rapid, scalable way. Last but not least, it was the first commercial enterprise to return human space flight to the US, which is, frankly, one of the roots of inspiration for how we've been exploring space over the last 50 or 60 years.
Anu: Terrific. I like that term, theater for innovation. That's a really great line. I think you've highlighted the rapid growth for this industry. Obviously, there's a lot of hype here and maybe also some misconceptions about the space economy. What would you say are the biggest myths that you hear about, and how would you both set the record straight?
Evelyn: Absolutely. I think the single largest myth surrounding the space economy today is this notion that it's not mature and it's lacking in incumbents. I think it's really important for us to remember the history of how the space economy has developed. We have been doing space for over 50 years. It's transformed from a government-led domain in the decade since JFK signed the country's Communications Satellite Act into law, all the way to a space where venture capital has become very important and where funding has proliferated over 20 times in the last 10 years.
What I would say is, from the 1990s onward, you've seen a lot of companies that are extremely well entrenched. These are the US primes, essentially the defense contractors of both the US and the EU become really pivotal in joining forces with government and putting their own money to work. These are names like Raytheon, Boeing, Lockheed Martin, Northrop. That has paved the way for the modern space economy that emerged in the 2000s, fueled not just by SpaceX, which we've talked about a little bit already, and we'll talk about more later in this podcast, but also companies like Blue Origin, Virgin Galactic, Rocket Lab, et cetera, that are really fueling the build-out of launch infrastructure over time.
Dan: There are multiple myths. As Evelyn addressed, this idea that the space economy is not mature, we think we could put that to rest further on this idea that there's this myth that space technology, more generally, is nascent, it's unproven, and I just go back to look at the history books. The Apollo program in the 1960s, 60 years ago, upwards of 5% of GDP was spent over a decade to get the US to the moon.
That really catalyzed an entire set of capabilities, again, largely commercial actors, as Evelyn mentioned, the large legacy defense contractors, the aerospace complex, put that spending to work to innovate and get us to orbit. Again, 60 years ago. It's been a robust global objective over time. These are very much proven technologies. I guess as to myth number three, the idea that investing in the space economy is highly speculative, limited to early-stage companies, we would say, as with any broad industry space, there's multiple actors, multiple ways to thread the needle in terms of investment opportunities.
It spans from extremely mature, well-established investments like the legacy defense aerospace industry. The most recent astronauts in the US made it up to the space station through the United Launch Alliance, which is a joint venture between Boeing and Lockheed, very highly publicized. They were brought back down to Earth through SpaceX's Dragon capsule. That in one mission bookends the extreme breadth of the well-established incumbent capabilities. Equally, there's a very broad ecosystem of innovative new ideas that are leapfrogging off of these capabilities. We think it's a broad, robust industry. It's well over half a century. It's a global industry, and we think it's fertile hunting ground for investors.
Anu: Great. I think those are very important points to put out there for listeners. When we think about the space economy, I think the first thing that probably comes to mind are rockets, satellites, but space technology shows up across other sectors and industries as well. Evelyn, is this a broad opportunity, or is it niche, again, to those just rockets and satellites?
Evelyn: I think that's a great question, Anu. A lot of people seem to think about space economy as being just launching rockets and people into orbit, and that couldn't be further from the truth. There are actually a lot of practical applications already happening today that are redefining how sectors on earth are really investing in themselves and growing. I think probably the five biggest areas I'd call out revolve around supply chain and transport, food and beverage, especially things like precision agriculture, retail, clearly digital communications via satellites, and last but not least, defense, which has emerged as a really critical area driving further investment in space.
I think just to maybe zoom in on some of those points, when I think about what's happening in terms of satellite communications, that's really been historically the largest revenue source for a lot of space-based players. You can think about what are, at this point, household names like SpaceX's Starlink, Amazon's Project Kuiper, Eutelsat's OneWeb in the EU. These are all progressively reaching full deployment, and this market is benefiting from the acceleration of both broadband as well as just increased connectivity.
An interesting stat that I came across as we were thinking about this podcast, apparently, something like 10% of the EU's GDP now depends on space-based navigation systems. That's only poised to grow. I think that number is even bigger in the US. I think a space to watch, for sure. Then maybe the last point I'd round out here is the military use of space and space as a war-fighting domain has been, frankly, fraught with controversy over the last couple decades. Given some of the impetus for sovereignty that is happening all around the world, it's becoming an ever more critical area of investment today.
You've heard of Golden Dome in the US. That may be a very big opportunity. There's a huge emphasis within that on space-based missile interceptors that's really propelling a new generation of younger companies like Voyager, Anduril, et cetera, that are becoming extremely important, but also conferring a lot of opportunities to these legacy defense contractors like L3Harris and Raytheon.
Anu: Great. Terrific insights. Thank you, Evelyn. On a lighter note, I did also see that Tom Cruise is looking to film one of his future movies in space, so maybe we'll get the entertainment sector somehow into this economy as well.
Evelyn: Maybe by the LA Olympics.
Anu: [laughs] Exactly. Now, we've mentioned SpaceX a few times already, and of course, we can't talk about the space economy without mentioning SpaceX. Dan, tell us how SpaceX specifically has really changed the space game and what sets them apart from the others in this field.
Dan: It certainly is captivating the space economy. Generally, SpaceX specifically is absolutely captivating the public, seeing these amazing, massive missions go into orbit. What's exciting to me as an investor is looking under the hood. This is just a classic disruptive, innovative business with a very deep competitive moat. We think enduring competitive advantage versus competitors, the key aspect of which is a cost advantage.
SpaceX, founded 23 years ago, has grown to be a very mature 15,000-employee business, profitable with cash on the balance sheet. Actually, two distinct profitable segments: the launch segment and the Starlink business. The core of the business is about a cost advantage. The legacy space industry, going back to the Apollo program, was largely built on a cost-plus model where private sector contractors executed on government contracts. The stories of the Cold War $800 toilet seat or $600 hammer, that cost-plus attitude really drove the space industry for decades.
SpaceX came and disrupted that with a commercial view of, "Hey, we've got to pay the bills." Necessity being the mother of invention, they went through vertical integration. They just radically address costs in a way that has resulted to a juggernaut business and cost advantage. To frame it in the space shuttle era, it was about $50,000 to get a single kilogram into orbit. With the Falcon 9 program, which is the workhorse of SpaceX today, over 400 launches flown, over 80% of those are reused. That dramatically drives costs down. Costs have gone from $50,000 down to $2,000 per kilogram.
With the Starship, which is still being prototyped, there's been nine launches thus far. The goal is another order of magnitude, taking costs from $2,000 down to $200. That massive cost advantage is, in large part, catalyzing what Evelyn touched on in terms of the broader ecosystem. Think of it almost as what Apple did with its App Store ecosystem, by having a platform for third-party developers to innovate on top of, SpaceX is catalyzing an incredibly innovative, robust ecosystem.
Literally, garage-based entrepreneurs can get to orbit and pilot, whether it's asteroid mining that seemed like science fiction in the 1970s. Jeff Bezos talked about Gerard O'Neill, the Princeton professor, talking about these types of industries, asteroid mining. This is becoming reality on the back of SpaceX's reliable and low-cost launch capability. That's just an example of their leadership and how it's really catalyzed a whole ecosystem.
I should also touch on Starlink, which is their low-orbit communications platform. As Evelyn mentioned, there's Amazon's Kuiper, there's other low-Earth orbit technologies globally, but Starlink is by far away the leader with upwards of 5 million subscribers, and that's growing. It's really a hockey stick in terms of growth trajectory. That's all serviced by 7,000 satellites in orbit.
Today, for about $600 for a little plastic dish and about $120 a month, you can have high bandwidth, you can stream Netflix in the Yukon. It is amazing. Maybe more meaningfully, you're providing education and economic empowerment to underserved populations globally at a highly competitive price to legacy fiber in the ground. Those are just a couple instances of how SpaceX, as a leader, is catalyzing awareness, broader investment, and really unlocking opportunity in a way that is not about speculative throwing things against the wall but a P&L-positive, cash flow-positive innovation model.
Anu: Truly an incredible company. Actually, I do have a million-dollar, or maybe it's a billion- or trillion-dollar question, but do you think they will IPO at some point or go public? What's the view on their future?
Dan: Gwynne Shotwell, the day-to-day leader of the business, has talked about Starlink potentially being available in a public form at some point. For the time being, I think they enjoy being private. It gives them control over this unique scale business.
Anu: Totally. Now, I'm curious, with everything going on in the world, obviously geopolitical tension, supply chain disruptions, et cetera, what should investors really be paying attention to in terms of risks, if they're thinking about putting money into the space sector?
Dan: My advice and attitude would be don't change your lens as an investor, and invest in philosophy and process. My approach is one of quality investing, looking for long-term compounders, looking for businesses with unassailable deep moats, where I have conviction three, five, seven years out, the business is going to compound to create more value by creating value for its customers.
That lens is every bit as applicable to the space economy. What's exciting is the growth of the space economy, what some of these businesses, not all of them, but some of them, really do have deep moats, distinctive advantages, first mover advantages. There's some of the benefits we see of scale businesses, for example, and sometimes it's connected to a first mover advantage. That certainly is a big part of the landscape and, in my view, is not unique to space, but rather keeping the discipline to an investment framework.
Having said that, clearly, there is a big role for private and public funding. There is absolutely a global space race going on in terms of China and all the global actors having real commitments and progress in their space capabilities. There is that nation-state aspect. Even in the US budget now, there's increased visibility on what's called MILNET, the idea of a military network, and as Evelyn alluded to, a number of projects recognizing that nation-states need to have capabilities in space, so there's an opportunity for investors to, I think, participate.
More generally, our view is that don't rule out space as a part of the ecosystem, but neither raise nor lower the bar in terms of thinking about an investment philosophy. There certainly is an opportunity to be speculative, the typical venture capital model of many shots on goal, and you're going to have a couple of winners that will swamp any losses. At the same time, for investors who are much more conservative and take a high-quality, very curated approach, investing in mature cash flow positive businesses, there are also some, we think, attractive opportunities.
Evelyn: I think I would echo a lot of what Dan has brought up. I think he referenced something that's very important to consider in terms of why investing in space today is very different from doing so, let's say, in the 2000s dot-com bubble time frame. I think the word he used was scale. That could not be more important, because as Dan talked about when we were discussing SpaceX, what is now present in this environment is the opportunity to actually drive not just growth, but profitable growth in the space economy. That's a lens, as a more growth-oriented investor, that I tend to use.
I think some of the things that we've been discussing earlier in this discussion around what are mature companies in this space, who are the incumbents, it's really important to understand-- I mean, SpaceX has dwarfed anybody else in terms of the number of launches. Even end-to-end space solutions providers like Rocket Lab, they've launched almost 70 times at this point. I think you're just really starting to see this opportunity to actually capitalize on companies that know what they're doing and can do it in repeatable, industrialized ways. That's very important.
I think maybe just one other aspect of what people should keep in mind when investing in the space economy is, the US is clearly the global leader in terms of space investment. Over 60% of funding globally, both public and private, in space comes from the US. There are new geographies like the EU, especially with its acceleration in defense spending, as well as areas like Japan, Korea, India, that have become really critical parts of the space supply chain, unfortunately catalyzed, in large part, post-Russia-Ukraine, given that was where many of small SATs came from prior to the conflict.
I think for a global investor, there's a lot of opportunities to play in multiple sandboxes. We've highlighted a lot of companies, I think, both here and around the world, but just something to consider.
Anu: Yes, absolutely. That's great context, and it leads really nicely into my final question, which is where I'll put my multi-asset hat on and ask from an asset allocation perspective, how can investors think about adding an allocation to space economy strategies within their portfolios? How does the space economy fit in the context of their traditional investments?
Dan: In my view, investing, it's all about bottom up, understanding each business one at a time. Investors get excited about the Mag 7. They get excited about big tech growth. The reality is the growth we're seeing, the innovation, the deep moats in the space economy, there's some amazing opportunities. They sit in the industrial geeks, aerospace sector, from a sector standpoint, but don't sell yourself short. They're amazing growth opportunities outside of the technology sector.
Anu: Great. Thank you so much for all of those thoughts today. I can't let you go without a quick bonus question for you both. Today, I have a two-parter. Firstly, as space travel becomes more commercial and potentially accessible, I'd like to know, are you personally interested in taking a trip into space? That can be a yes or no. Secondly, hypothetically, if you were to spend a month in space, what is one earthly comfort that you might miss?
Evelyn: I can dive into this first. I think we talked about that $1.8 trillion TAM. Space tourism is estimated to be $4 to $5 billion of that. It gets a lot of the attention. I don't think it's going to get a lot of the dollars. I think putting aside the enormous quantities of capital that would have to be invested in order for me to go into space, sure, send me up.
[laughter]
Anu: Is there anything that you would miss on Earth if you went up for a month?
Evelyn: Oh, absolutely the food.
Anu: [laughs] That's a good one.
Evelyn: I don't know if you've seen space ice cream, which by the way, they don't serve in space, but I've heard, generally speaking, the culinary delights are not that great up there.
Anu: Much better in New York City, I think?
Evelyn: Yes.
Anu: [laughs] Dan, what about you? Would you go, and what would you miss?
Dan: Well, it's not the top of my bucket list, but it's somewhere on the list. Sure, that would be-- It's going to happen in our lifetimes. It will be much more of a routine prospect. More generally, like if I were up there for a month, I just think I would miss getting dirt under my feet. I like nature on Earth, which maybe brings-- There's a couple of the big visionaries around space. It would be, on the one hand, Elon Musk, who wants to go interplanetary and sees that as a multi-millennium imperative.
Another opposite of the spectrum is a Jeff Bezos view, who wants to support a space ecosystem to get all the dirty industry off of the earth, to recognize the planet is a precious, amazing thing, and let's turn it into a park and get all the dirty manufacturing, get all the data centers and so forth up in orbit. I think if I were up there for a month, I would only appreciate further the beauty of what we have here down on the planet, but all of the above.
Anu: All right. As I've heard more and more often, it's like, just a reminder, feel the grass. Touch the grass and feel it and appreciate what we have here. Thank you so much, Evelyn and Dan, for sharing all of these insights on the space economy. I think you both gave great history primers on this area. You've demystified what's happening beyond our atmosphere. Clearly, it's a fast-evolving opportunity that go beyond satellites and rockets.
I know I personally didn't immediately appreciate that these innovations touch such a wide variety of industries. Evelyn, I think you mentioned precision agriculture and finance, and how investors can gain exposure in different forms. This is not just a homogeneous category. There's a lot of different opportunities within the space economy. I hope today's conversation gave our listeners some new perspectives to think about. Once again, Evelyn and Dan, thank you for joining me today.
Evelyn: Thanks, Anu.
Dan: Thank you.
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