What are the benefits the Leo satellite segment provides?
One thing is they reduce latency because of their proximity to Earth. So, where latency is concerned, say in autonomy or consumer communications, Leos have a lot of potential benefits versus existing options. Another is earth observation applications. Where satellites are closer to the earth they provide higher resolution. A third thing is cost – they are generally cheaper to build and launch..
And finally, it is changing the way that operators think about technology and the refresh cycles. Operators design satellites knowing they will become obsolete in a few years, but the operators will then replace them with improved satellites with better technology and possibly even a cheaper satellite four or five years down the road.
It is actually a really interesting business model. They are thinking about a graceful sunsetting of an existing platform and then replacing it with a new refreshed version.
How much has Boeing Horizon X Ventures invested in Leo satellite technologies to date?
We do not discuss publicly how much we invest. But what I will say is we have invested in “new space”, or Space 2.0, and we are actively looking at additional investments in the space.
For example, Boeing HorizonX Ventures is averaging about an investment a month right now – we have over 16 investments in our portfolio. Coincidently, our first international investment was a company in Australia called Myriota, which is also a Leo play. Myriota is an internet-of-things (IoT) communications company that is connecting IoT devices directly to Leo satellites.
What we found interesting about their technology was they have very little power requirements, so they can run their system with a modem and everything for over a year on a couple of AA batteries.
It is scalable and, of course, the price point for the technology to the end consumer is very appealing. You cannot have a price point of thousands of dollars per IoT connection. So, very compelling capabilities. In addition, the founders came from the telecoms industry so they really understand how precious spectrum is and how low-cost the communications solution needs to be to get adoption.
What does Boeing HorizonX Ventures find interesting when it invests in emerging companies in this space?
What is interesting in the Leo space is you have a lot of new entrants entering the market, but they are competing against the legacy providers, the medium Earth orbit and geostationary Earth orbit satellite operators in many of the sectors.
When we think about investments, we think about them very much as a VC would. We ask whether the intellectual property is defendable, and what is the quality of the management team, what do the financials look like, and what does the adoption curve look like. Things along those lines. But unlike a VC, because we are a strategic investor, we are also looking at how the product can potentially enhance Boeing’s own products or enable our customers to address some of their own needs.
We like to say we are as much VC as CVC, so we have that financial mindset as well as the strategic mindset about how we invest.
One thing we are seeing in new space startups is – while they are not breaking the laws of physics necessarily – for their business models to be successful it requires a fundamental rethink of the whole solution around the customer.
There is potential increased adoption and downstream risk, and then costs associated all along the value chain. I think some of the startups are maybe not appreciating the amount of redesign effort that is required or the costs, all along the value chain. They might not be thinking about it with a systems engineering or integrator mindset of having to deliver the whole solution to that end customer.
We also look at the broader value chain perspective, and, as you can imagine, as a leading aerospace company, I can provide a holistic perspective in the market and industry. For example, spectrum regulations is a big issue with the Leo constellations. What are the payloads they are going to use and how to integrate that into systems? How are they thinking about the ground segments? Also, how does their solution impact the design of other components in the system, or how customers actually use the solution. Those are the types of things we are looking for when thinking about emerging companies in this space.
So when we are looking at the Leo space, the benefit of working at a company like Boeing is I can pick up a phone and talk to an expert in any of these areas and get a good perspective on the technology, the startup’s overall integration into the broader space ecosystem, and if the management team understands how they fit into the ecosystem.
Do you have any concerns about driving the adoption of Leo technology?
I have seen some naivety from some of the founders, who may be really excited about new space and providing innovative solutions and thinking about the industry differently, but do not necessarily have that broader understanding of the ecosystem.
You also see how some of these companies interact with regulators – one of the areas of debate within the industry is how regulators are going to engage with these new entrants. It is not just the ITU [global regulator the International Telecommunications Union] but it is also the national agencies. With some of these startups you get the impression they are in the mode of “I will just do it and ask for permission later”, and do not necessarily appreciate all the intricacies and nuances – the reasons the regulations are there. So I am concerned this attitude might cause the agencies to be less forward-leaning about engaging the Leo market and the pendulum may go back the other way.
Another thing the Leo industry is concerned about is launch. You hear of delays in Leo satellites getting launched for six or nine months. When you are a startup with limited cash reserves, not getting a launch slot to get their bird up there so you can get the proof of concept started and start making money, this is a problem. You see that reflected in the number of launch companies being formed. They are all trying to address some of those bottlenecks on the launch side.
A third area which comes to mind is how the legacy providers are going to react. We are seeing some really innovative solutions out there, both from legacy providers as well as from startups trying to engage with the legacy providers.
For example, legacy providers are addressing the IoT market. The question is, if some of these legacy providers begin having broader success, will that scare off some investors from making investments in the space?
I would say the fourth concern that comes to mind is the mega-investors. They are creating an environment of haves and have-nots. How does it change the math for investors looking at a particular segment if one of these mega-funds has made a huge investment in one company? Will that scare away competition in that segment?
Are there other technologies you believe could provide similar functionality?
The way I think about the Leo market is we should take it application by application. For example, if you need a wide swath area [the technical term for ground covered] from a sensor then it is hard to beat a satellite-based sensor, but then you are also giving up resolution. This creates that trade-off between having a wide swath of data versus flying a drone close up to get high-resolution data.
Or if we want very low latency, for example, maybe 4G or the emerging 5G solutions will be better than some of the space-age communications solutions for a specific application.
Ultimately, I do not think we should look at whether one solution fits all applications. Rather it is about how each of the Leo solutions fits a particular customer pain point, whether there is a market, and how they fit into the whole ecosystem of delivering the solution.