NEW YORK — Newstartups hoping to make their mark on the space industry still face high entrybarriers just to cover their initial costs, investors said Wednesday.
The highcost and risks associated with newcommercial ventures, as well as the bureaucratic government hoops they haveto jump through, provide substantial barriers for nascent companies aiming forspace, experts said during the 2008 Space Business Forum here presented by theSpace Foundation, a non-profit advocacy organization.
Accordingto the foundation?s Space Report 2008, thespace industry generated about $251 billion in revenue worldwide in 2007,an 11 percent increase from $225 billion in 2006. About 69 percent of that 2007revenue was the result of commercial activity, according to the report.
?Ifanything, the market is a little bit hesitant,? said Thomas Watts, managingdirector for equity research for the investment firm Cowen & Company, LLC. Whileinvestors might be open to established private firms going public today, newcompanies may not be so lucky. ?Investors are open to it, but at the same time,I think there?s a wait and see attitude to new ventures,? he said.
Highoperations costs remain a major barrier, investors said. That is particularlytrue at the start when major investment in basic launch or spacecraftdevelopment infrastructure is required before returns can be seen.
?There?ssome parts of the business, on the operations side, where you?re talking aboutsignificant investments of capital up front,? said Hugh Evans, a partner withVeritas Capital, an investment firm, adding that there will always be interestin affordable launch providers. ?Some of the trends we find attractive areobviously the declining costs of being able to launch satellites.?
NewtGingrich, chairman of the Gingrich Group and a former speaker of the U.S. Houseof Representatives, said the bureaucratic red tape inherent in approving spaceassets for flight — particularly at NASA — is a major obstacle for newcomers tospace industry.
?We need afundamental, real change in how we?re approaching space,? Gingrich said. ?Weneed a change that allows Americans to participate, not just bureaucrats.?
Gingrichsaid the risk-adverse focus of NASA and space-oriented government offices hasstymied progress in bothcommercial and government-sponsored exploration efforts.
?We haveadopted an insane model of being so risk averse that we spend so much time andmoney on avoiding error that we avoid achievement,? Gingrich said, noting thatif the country today tolerated risk as well as it did in the first 25 years ofaviation, ?we would have a colony on Mars by now.?
Gingrichsaid tax-free cash prizes formajor accomplishments, like a $1 billion purse for the ability to repeatedlylaunch and land a recoverable orbital spacecraft, could do wonders for spurringprivate innovation. If the prizes are set to be budgeted only in the year theyare won, rather than set aside for years until a winner comes forward, then itmight be more palatable for lawmakers, he added.
?I ampassionately committed to prizes,? Gingrich said. ?The great power of prizes issimple; they allow anybody anywhere who?s competent to try and solve aproblem.?
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