WASHINGTON — European satellite prime contractor Thales Alenia Space (TAS) and satellite-services provider Telespazio are investing about $80 million in Spaceflight Industries, with a focus on Spaceflight’s startup BlackSky geospatial intelligence company.
What TAS gets is a foothold in the United States as a manufacturer, and a window on how U.S. “New Space” companies have been able to pack so much capacity into such small, inexpensive satellite packages.
Spaceflight and BlackSky get cash and a lot more, according to TAS Chief Executive Jean-Loic Galle.
BlackSky, Spaceflight Industries and you announced $150 million in new financing for the BlackSky project, bringing total Spaceflight funding to $200 million. You are one-half of the latest $150 million?
Roughly half of the overall investment of $150 million, yes.
What does that investment get you?
First, we have become a large minority shareholder of the company. There is no majority shareholder.
We believe this company has huge growth potential, and the final valuation reflects that. The idea is to take market share from DigitalGlobe and Airbus, which together account for around 90 percent of today’s commercial Earth observation market.
Spaceflight always thought they would rely on an outside supplier. In our agreement, the BlackSky satellites will be built by a 50-50 TAS-Spaceflight joint venture called LeoStella. The CEO will be a U.S. citizen.
Being involved in building the 60 satellites for BlackSky is the second interest we have in this.
The first 20 will be financed by this latest funding round, including the launches. The remaining 40 will be financed by BlackSky, from revenue generated by the first 20.
Revisiting any point on the globe 50 times per day is key to this and makes it absolutely necessary to launch the 40 remaining satellites. The first 20 we’ll do in 2019. Spaceflight has already started the first four. The objective for LeoStella is to get to a production rate of two per month.
We need to launch the follow-on batch of 20 satellites by 2020. Then we do 20 per year, followed by refurbishment.
They’ll orbit at around 450 km. What is their operational lifespan?
Around three years.
Is one-meter resolution sharp enough to succeed in the market in the 2020s?
There are not many companies who have this kind of constellation.
But can you take market share from DigitalGlobe or Airbus, which have or will have multiple 30-cm-resolution satellites by then, with a one-meter system?
There are lots of different uses for Earth observation data. I have seen the specifications of certain contracts and the U.S. government does not always specify 30 centimeters. For these applications, one-meter resolution is sufficient. Beyond hat, the BlackSky platform is fed by other satellites that have higher resolution, sharper than one meter, including France’s Pleiades [whose imagery is commercialized by Airbus]. And they purchase that on the market today.
Anyone can buy this data.
Yes, but the real strength of BlackSky is the constellation with high revisit, not high resolution. Few companies can offer that. This does not exclude the possibility of improving the performance of the constellation in the future.
I want to stress the importance of the BlackSky platform. I have seen it in action. What they can do with it is impressive.
You mean extract data from a broad set of sensors to create products?
Yes, and fuse data from different sensors — satellites, drones, ground radars, social media and so on — and develop specific applications for different markets, such as agriculture. It’s an impressive demonstration of Big Data applications. There are also military applications for this over sensitive zones.
The biggest value of this company is its platform, and that is what most impressed us about the partnership. They have been working for five years on the platform, with 150 engineers outside Washington.
Planet is offering global revisit, daily, and they are launching new satellites all the time.
My understanding is that the issue with Planet is that they made a mistake on resolution — 3.5 meters doesn’t much interest people today.
They did buy SkyBox, which has higher resolution.
Yes they did, but they have a large constellation of satellites with performance that in my view does not correspond to where the market is.
Some say that about BlackSky, that a one-meter-resolution constellation will be outdated by the mid-2020s.
We’ll see about that, and by that time we might have evolved to something sharper than one meter. In any event, the jewel in the crown of BlackSky is the platform and Thales Group will do all it can to improve the performance of the platform.
Thales’s purchase of Guavus is mainly used for telecom right now but the company plans to use it for all six of its verticals. Discussions are under way between Guavus and BlackSky to find synergies.
[Thales Group purchased Big Data analytics and processing company Guavus in 2017 for $215 million — seven times Guavus’s projected 2017 revenue. Thales said its aeronautics, space, rail signaling, defense and security businesses would all benefit. Guavus is based in California, with offices in Canada and India.]
Thales has an enormous effort under way in digitalization, with a digital factory in Paris and an AI center in Montreal. We will make sure the BlackSky platform remains the most effective in the market.
There are several companies with their own geospatial data platforms. They don’t think they need to build their own satellites.
These companies will nonetheless need to invest in evolutions of their platforms. I am not sure all of those you mention are going to survive. I am familiar with just about all of them. As good as they are, their platforms will need investment to remain relevant. I am not sure they all have the means to do that. Some are going to die from a lack of cash.
In my view, DigitalGlobe and Airbus will remain the largest competitors to BlackSky. They have 90% of the market today and they are not going to lose that overnight.
Especially given the U.S. government contract that DigitalGlobe has, which expires in 2020 after 10 years and which DigitalGlobe will fight to renew.
The U.S. Defense Department has indicated that it is open to changing the way it does business. I don’t know a single customer, anywhere in the world, that likes to have a supplier in a monopoly position.
But you won’t equal DigitalGlobe’s capacity in 2020, not given what they have and what they’re investing in now.
No one is forecasting taking 50% of their market by 2020.
The platform is part of the LeoStella assets, or does that remain with BlackSky?
BlackSky. We invested in Spaceflight, and under that they purchased BlackSky that had this platform, so we are also now an investor in the platform.
Beyond that we are targeting the U.S. and global markets for satellites of this size — between 50 kilograms and 300 kilograms. These are not nanosats. And they could be for all kinds of applications. So it will evolve inside LeoStella and will not be limited to production. It will include an engineering team to work on evolutions of the satellites. There’s just one restriction: We will not sell satellites that compete with BlackSky.
For TAS, this is the first time we have a real industrial installation in the United States, and we hope to make it the nucleus of something larger.
The U.S. Defense Department’s budget for the next two years features a big increase in space systems spending. What are you doing to capture some of it?
Our division in Turin, Italy, does a certain number of things with the U.S government.
That’s civil, not military.
Yes, civil. We think much of the market in the U.S. is only addressable if you are actually in the U.S. So this is our first step and we’ll try to build something.
Secondly, yes we are looking at the military market and it is large, but we remain a European company. We are not looking at the U.S. military market as a first priority. If we did this it would have to be through a proxy, and LeoStella could devote part of itself to a proxy but let’s be realistic: LeoStella today is a company with just 100 people.
So this is an initial footprint in the U.S. The institutional market is very interesting, but we are looking at the civil side as a priority, not the military side.
The Spaceflight/BlackSky investment also gives TAS an entry into the very small satellite market, where satellites cost several million euros. That’s not the usual price for a TAS satellite.
The LeoStella design is a Spaceflight’s?
Yes, and it’s really ingenious. They have people with lots of experience in different places and who wanted to finish their careers at a startup. It’s an interesting mix of people. For us the interest is to learn a bit about the supply chain and learn what could be manufactured for a small amount of money. Our people in Cannes will be traveling back and forth to look at this.
The BlackSky shareholding is not just from TAS, but also from your Space Alliance partner, space-services provider Telespazio.
Yes. That relates to the commercialization of the BlackSky services, with Telespazio having co-exclusive rights over European territory. Only BlackSky and Telespazio will be selling in Europe. One European nation, which had already signed a distribution agreement with BlackSky, will be excluded from this.
So in the United States and Europe, BlackSky and Telespazio will commercialize the service. For the rest of the world, Thales and Leonardo will provide access to just about all of the military agencies and aid BlackSky there. And then there is the civil market, for agriculture and oil and gas and so on.
That’s a lot of synergies in addition to the cash we bring, which is of course important.
For the broader market, this agreement shows that two large groups, Thales and Leonardo, have a real an interest in this smallsat sector.
In our view, anyone who wants to be a leader in the Earth observation business around 2025 will need three things:
First, you need satellites with very, very high resolution. Second, you need a constellation offering high rates of revisit. Our competitors are not investing in this. Third, you need a platform for data analysis and market applications.
With this acquisition, we now have two of the three. And for the third — very high-resolution satellites — we are working in Cannes on our own products.