19. March 2018

aerospace startups

Director of Corporate Affairs and Public Relations of German Orbital Systems Ivan Kosenkov for Arctic Startup

Startup world is cruel one. The statistics is clear enough – 90% of startups die prematurely. The rate is even higher for hardware startups. Not to mention that aerospace industry is even more specific with high entry barriers, high R&D risks, and long product development cycle – the probability to succeed for NewSpace companies seems to be quite low.

Yet, the governments and corporations are motivated to foster the growth of innovative small & medium enterprises (SMEs) in such specific domain as aerospace. For the first ones the motivation is to increase national technological capacities and spur economic growth. The second ones are willing to remain competitive, which means in the current situation embracing technological innovations originated outside of the organization. Startups are more dynamic at developing new, disruptive products. The other business idea, which lies in a core of commercial accelerators – buying a share of young company in exchange for certain services, making an exit later, when the company price is booming.

The institualization of these intentions, having the growth of young startup as a common outcome led to the emergence of specific type of development institutions: accelerators. This development infrastructure in general aims at supporting companies by initial investment, mentorship, infrastructure access, access to the network of partners, PR and GR. The accelerators may be public or private infrastructure can act in the interest of corporations, startups or its own, can have general profile, software/hardware profile or even specific narrow aerospace scope with correspondent differences in the set of tools provided to young businesses.

This article aims at reviewing certain accelerators programs suitable for aerospace startups, both hardware and software, upstream and downstream oriented. Of course, providing the exhaustive list of accelerators suitable for NewSpace companies is uneasy task: that is why here we analyzed most typical forms of startup accelerators, thus helping to choose the proper form of support that the young company can get.

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Starburst Accelerator

Starburst Accelerator is certainly worth noting in a first place as it focuses directly on accelerating young aerospace companies in such domains as space hardware, space applications, drones, aircraft maintenance, repair & overhaul, new materials, sensors and telecom hardware, Big data, AI and Cybersecurity. Headquartered in Paris, it has branch offices in Munich, Los-Angeles, Singapore. Starburst organizes the pitch-sessions for startups all around the world – from Brazil to Canada. The participation in pitch-sessions is free for startups: stakeholders for those are the major industry partners of Starburst, considering it as technology scouting platform. Indeed, Starburst Accelerator positions itself as an entity scouting ideal startups, making preselection and facilitating connections between startups and its major industry partners.

Starburst Accelerator business model is based on fees paid by corporate partners. The startups pay the success fee on sales generated for startups and money raised. Starburst Accelerator doesn’t hold any share of the accelerated companies. However, in 2016 Starburst founded its own $200M venture fund with Leonie Hill Capital. Starburst Ventures will aim to back about 35 startups over three years. It will typically write checks of $3 million to $5 million for Series A stage deals, reserving capital for larger follow on rounds as well.

Set of benefits provided by Starburst includes office, helping in seed-investment attraction through business angels, VCs and BPis, strategic consulting, mentorship, access to the ecosystem of startups and industrial partners. The core of acceleration program is based on qualified & calibrated business meetings.

Starburst focuses on startups on later stages, with ready prototype of the product, however it considers the other stages as well. It is quite useful for aerospace startups to apply to one of Starburst Accelerator pitches at least to get the free professional feedback on product.

Airbus BizLab

Airbus BizLab is a good example of aerospace focused corporate accelerator. We have to note, though, that currently Airbus Group is under reorganization which means, that the place and functions of BizLab as Airbus unit may be the subject to significant change, depending on its place in corporate hierarchy.

Airbus BizLab acts globally and conducts acceleration sessions in Toulouse, Hamburg and Bengaluru. During the last Bengaluru event, our partner-company – Earth 2 Orbit was selected for acceleration by BizLab. During 6-month acceleration program start-ups gain access to a large number of Airbus coaches, technical and business experts and mentors in various domains, free hosting, and a Demo Day with Airbus decision makers, venture capitalists, Airbus customers and partners. The partners include Microsoft Ventures, I-Lab, Orange Fab, Club Open Innovation, The Bridge by Coca-Cola, Beta-I etc.

The access to acceleration program is free which is logical for corporate accelerator – the main company benefits from innovative solutions, created by startups involved into Airbus corporate ecosystem, rather than from participation fees, startup shares etc. Regarding entry into equity of startup – it’s not the scope of Airbus BizLab but this could be addressed through Airbus Group Ventures – another Airbus Group division. However, Airbus may hold some rights on foreground IP of accelerated startup.

BizLab acceleration program is based on the lean startup methodology and articulated around 3 pillars:
– Customer desirability (market study & benchmark, value proposition, customer experimentation…)
– Solution feasibility (proof of concept, product functionalities definition, MVP…)
– Business viability (business model, risk assesment, cost benefit analysis…)

The program is segmented into 3 loops with concrete deliverables expected at the end of each one, where startups build the MVP, test it and based on customers feedbacks pivot or continue.
BizLab focuses strongly on building up an innovative ecosystem around Airbus Group, supporting the internal initiatives of Airbus workers as well as external startups. It has a pretty wide scope of support: in addition to aerospace, it’s data analytics, autonomy, Unmanned Aerial Vehicle (UAV), Urban Air Mobility, Electrification, Robotics, 3d Printing, IoT, Smart city, Cybersecurity, VR, AR, Satellite imagery, and Blockchain – everything that may be applied to diversifying Airbus business tackling new challenges of digitalization. BizLab focuses on early-stage projects and offers a cash funding option of 10,000€ for all Start-ups, paid out immediately after successful start of the acceleration program. The accelerator is highly recommended to startups planning its development in cooperation with strategic investor.

Accelerator and Entrepreneurship

Another kind of accelerator, suitable for aerospace startup is the accelerator operating on general acceleration model like 500 Startups, Y Combinator or Starta. Young entrepreneur could easily apply for getting into one. Good news – the hype around NewSpace made general profile accelerators susceptible for application from aerospace companies. The main idea for such kind of accelerator – the startup gets the initial funding for project implementation in exchange for the company share, i.e. accelerator invests into the promising projects. Plus, it provides the young teams with office space, organizes meetings, provides expert and mentoring support. The accelerator is a commercial enterprise, so it earns the money in all the ways possible, including acceleration fee, payment for office rent etc – yes, it’s far from charity organization.

The example of more focused accelerator is Lemnos Labs, which nurtured Spire Global. Lemnos is an early-stage venture fund focused on hardware and the growing software ecosystem surrounding the hardware renaissance. Headquartered in San-Francisco, this hardware accelerator invests $250K – $1M in exchange of 10% of company. The focus, besides aerospace, includes robotics, IoT, agriculture – hardware only. Lemnos provides office, coworking for 5-14 months period (while the maximum duration of the acceleration is not determined). Acceleration program is not formalized and includes the typical set of features (i.e. mentorship, expert support etc). Lemnos also tries to build up its own ecosystem, which is typical for commercial accelerator, with less formal approach, supporting the companies even after the end of the program. It works with 10-12 companies per year with more than 20 projects supported to date.

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There is also a number of public efforts aimed at promoting entrepreneurship in space domain. The efforts may be on the level of states or even on the international level. The good example of comprehensive public initiative is ESA’s Business Incubation Centres (BICs) initiated by ESA’s Technology Transfer Programme Office (TTPO), work to inspire entrepreneurs to turn space-connected business ideas into commercial companies, and provide technical expertise and business-development support.

There is actually 16 business incubation centers all over Europe. It’s visible, though, that the centers locations are tied to existing ESA facilities. The idea behind BICs is to commercialize the space technologies by promoting the technology spin-off rather than to foster the growth of new rocket and satellite startups: the focus of BIC – idea must be based on space-related technology, expertise and/or application and target the non-space market. Two other eligibility criteria: the company must not be older than five years and has to be located at and managed from preferred ESA BIC.

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BICs are conducting their activities in cooperation with the partners network depending on profile of each center, which depends in its turn on profile of ESA facilities nearby.

The initiative provides support to more than 130 companies every year in Europe, and more than 400 start-ups companies have received support to date. Yet, the startups are never about upstream space hardware – there are companies developing space applications, space data driven value added products etc.

The building of CubeSatc

The participation in program is free, which is natural – the technologies being transferred to private sector were already paid by European taxpayers – that is also the reason behind the focus of the programme – justify the public expenses for ESA space program by showing that in longer term space technologies are beneficial for wide public.

There are analogues of ESA BICs on a national level such as UK Satellite Applications Catapult. This UK government initiative is far more complex, than the normal typical accelerator. It includes into its scope the scientific research, education, SME support with wide variety of tools and doesn’t proclaim itself as aerospace accelerator while certainly performing some of the typical accelerator functions. Some other examples of aerospace focused accelerators operating in certain countries include Canadian Max-Q, Australian Delta-V and Russian Skolkovo Foundation Space Cluster. The last one is certainly worth noting as an effort to commercialize the government driven Russian space industry. In doing so, Skolkovo provides non-dilutive funding, access to infrastructure and different services, from IP-protection to collective use centers. The acceleration in Russia mainly includes contacting the startups to government or quasi-government entities, which is not easy for startups alone.

Conclusions

Specific accelerators for aerospace startups are more common in Europe. In US aerospace startups tend to participate more universal commercial accelerators (Starta, 500 Startups, Lemnos Labs). Aerospace accelerators usually work globally, searching for startups in every promising region of the world: from India to Canada – the number of aerospace startups is significantly lower compared to IT-ecosystems, so they have to act globally in order to form the pipeline.

hubble telescope

Curiously enough, most notable aerospace accelerators (Starburst Accelarator and Airbus BizLab) are working on the side of major industry players, rather than on startups. The startups have to consider this while dealing with this type of accelerator. It is important to understand that accelerator is always pursuing its own goals, rather than yours – whether it’s goal of building up national technological capabilities and economic growth or getting profit. The goal of startup is to understand, how to benefit from it.

Specialized accelerators usually don’t use common accelerator business model of possessing the shares of accelerated companies. They are either having public funding, either being paid for technology scouting, i.e. finding promising projects for strategic investments by major players.

Public funded accelerators, such as ESA incubators network and Satellite Applications Catapult might be a good choice for early stage company unwilling to sell its share to investor. They tend to support larger variety of projects based on more formal selection criteria. The infrastructure of public support of aerospace startups is well developed in Europe – there are national and international institutions aimed at developing European ecosystem of NewSpace companies.

Yet, one more outcome is that sometimes you don’t have to search for focused aerospace accelerator – you can just apply to one with more general profile. All the hype, created by NewSpace champions (SpaceX, Planet etc), was beneficial for aerospace startups, as even the private accelerators began to consider these companies for acceleration program and investment. Space, drones, IoT/AI/BigData driven satellite applications have become quite trendy in recent years – you can find them in portfolio of 500 Startups, Y Combinator, Techstars. That’s why if you aim at entering US market, it might be more useful to try the general profile accelerator program.

In the end, the choice is always up to entrepreneur – to use or not to use public, corporate or private, specific or general accelerator program. However, we hope that our article gave you some insights on the possibilities of gaining support for aerospace startup.

As a recap, please take a look at this table.

Name Location Services Focus Stage Fee Funding Equity
General profile accelerator USA typically office space, meetings, expert and mentoring support, ecosystem benefits general early yes yes yes
Starburst Accelerator Paris, Munich, Los-Angeles, Singapore office, helping in seed-investment attraction through business angels, VCs and BPis, strategic consulting, mentorship, access to the ecosystem of startups and industrial partners. Main value – qualified & calibrated business meetings space hardware, space applications, drones, aircraft maintenance, repair & overhaul, new materials, sensors and telecom hardware, Big data, AI and Cybersecurity later stages, with ready prototype of the product Success fee No No
Airbus BizLab Toulouse, Hamburg and Bengaluru access to a large number of Airbus coaches, technical and business experts and mentors in various domains, free hosting, and a Demo Day with Airbus decision makers, venture capitalists, Airbus customers and partners aerospace, data analytics, autonomy, Unmanned Aerial Vehicle (UAV), Urban Air Mobility, Electrification, Robotics, 3d Printing, IoT, Smart city, Cybersecurity, VR, AR, Satellite imagery, and Blockchain early No Yes No
ESA BIC All over Europe: 16 centers business start-up support and technical expertise idea based on space-related technology, expertise and/or application and targeting the non-space market early no Yes No
UK Satellite Applications Catapult Harwell, UK state-of-the-art facilities, expertise and an accessible collaborative environment Satellite applications in various domains From stage of idea No No, but helps to find it No
Max-Q Toronto, Canada Office space, mentoring, business development assistance, access to industry experts, legal help, exposure to public and potential investors Space Data Applications applications in the areas of Earth Observation, Geo Analytics, Big Data, Geomatics, Wearables or Biomedicine working prototype and a plan to market No No, but helps to find it No
Delta-V Sydney, Australia Advisory, networking, Remote sensing, small satellite technology, autonomous robotics, big data, hyperspectral imaging, inSAR N/A N/A No N/A
Skolkovo Space Cluster Moscow, Russia Office space, grant support, acceleration, advisory, networking, soft-landing, mentorship Space hardware, satellite applications, UAV, aviation, new materials, Industry 4.0 From early stage to product No Yes No