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With £40bn for the taking, SMEs are venturing into space

The UK plans to capture 10% of the global space market and tech startups are being targeted for investment

The UK has big ambitions for its space sector. The Space Innovation and Growth Strategy, has set a goal of capturing 10% of the global space market by 2030 (up from about 6.5% in 2010, when the plan was published). That amount would represent about £40bn of space-related revenues. The plan relies on the growth of small businesses in the sector.

Matt Perkins, who was the chairman of the UKspace (the space trade association) between 2013 and 2014 and now represents its SME forum, says: “We have a relatively small number of very big players in the UK who are involved in space, and we need to get a few more to be able to achieve the growth targets that we’ve identified.” As such, tech startups (both in and outside of the space sector ie technical businesses whose expertise could be applied to the industry) are being targeted with investment.

Most recently, the UK Space Agency awarded a business group in Durham £50,000 to set up a space technology incubator. Business Durham, which promotes economic development on behalf of Durham county council, will be overseeing the incubator in North East Technology Park (NETPark). Simon Goon, Business Durham’s managing director, says the area has proven its expertise in the space industry by nurturing a cluster of around 30 space-related startups. “They’re not all traditional space companies, some are more general tech companies,” he adds.

Oxfordshire is another region of growing activity in the space sector. Space technology business Oxford Space Systems, has shown the potential for attracting backers in the area. It launched in January 2014 after receiving £150,000 investment from Innovate UK, (the UK’s innovation agency) conditional on raising matched funding. It obtained this by winning another £500,000 from Longwall Ventures, a venture capital firm.

Mike Lawton, founder and CEO, a serial entrepreneur who previously worked in the biofuels and food and drinks industries, says of space tech: “I’m attracted to the sector because I think it’s a bit of a wild west at the moment: there’s a lot of unchartered territory.”

Oxford Space Systems’ equipment is used in satellites, it includes antennas for data communication and boom systems – which allow tech (such as a magnetometer for measuring the potential for earthquakes) to be extended outside the satellite and into space at various distances. These sensitive measuring instruments need to be pushed out into ‘clean’ space and away from the noisy electrical environment of the spacecraft. Oxford Space Systems is part of a wave of companies that are fuelling a revolution in the sector, called ‘New Space’.

These new space tech companies are building smaller satellite systems, often using off-the-shelf components, which are far cheaper to make than previous systems. This has made using satellite technology more accessible for a range of organisations, from energy companies to agriculture businesses.

Glasgow is another thriving area for space tech. It hosted the first UK Space Conference in 2013 and the University of Glasgow helped to develop the LISA Pathfinder – a vital piece of equipment used in a recent European Space Agency project.

With access to highly trained engineers – there is a high proportion of graduates and post graduates with experience relevant to the industry in Glasgow – and capital, the city also attracts space entrepreneurs. In 2005, Craig Clark set up satellite manufacturer Clyde Space in the city. He used the proceeds of a house sale and investment from friends and family (in 2010 the business also received funding from private equity firms Nevis Capital and Coralinn). Clyde Space’s satellites are called cubesats, which are about the size of a loaf of bread.

Clark says: “If you go back 10 years and there was an entrepreneur who wanted to start a space data company, they would need to raise hundreds of millions of dollars, whereas you can now have the same entrepreneur, the same idea for data, and you only need to raise maybe $20m-$30m (£14m – £21m).” Clyde Space’s turnover for this financial year (2015/2016) is expected to be about £5 million, a £2 million growth on the previous year.

Manufacturing satellites and other hardware is termed the ‘upstream’ side of the space industry. However, the majority of growth is expected to come from the ‘downstream’ side: creating applications using data collected from space to provide information to customers.

One business exploiting the growing demand for satellite data is Earth-i, based in Guildford, Surrey, which went into business last September, backed by private equity funding. Earth-i collects data from three high definition earth imaging satellites that Surrey Satellite Technology Limited (SSTL), a satellite manufacturer, launched last year.

The cameras on the satellites take pictures and store these as data onboard the satellites. When the satellites next pass over a ground station – a satellite dish on earth – they transmit the data to that dish. Earth-i analyses the data and then extracts specific information requested by clients. These clients include analysis firms like Rezatec, which requires the data for use in agricultural and environmental monitoring. A farmer might want them to track the health of vegetation, to see where fertiliser should be applied, for example.

Steve Young, Earth-i’s, director of sales and business development, says it’s a good time to be working in the UK space industry. “We’ve stepped into the opportunity gap, underpinned by support from government and the growing demand for satellite derived information and services worldwide.”

With the proven demand and earning potential for space-related tech, funding opportunities are on the rise. Seraphim Capital, a UK-based venture capital firm, is preparing to launch the world’s first venture fund focused on the space sector of £83m. It will be backed by capital from seven large players in the industry, as well as the British Business Bank, and supported by the UK Space Agency and the European Space Agency.

Mark Boggett, managing director at Seraphim Capital, says: “You can build a global company [in the sector] focused on a particular vertical [such as agriculture or security] for a relatively low amount of equity – that’s really attractive to venture capitalists.”

The space sector is reaching a tipping point where the market understands the potential for smaller satellites, says Brian Aitken, a partner at Nevis Capital, one of the investors in Clyde Space. “[The combination of] technical expertise, UK government support for export and the growth rate of the market should create a healthy environment for UK companies to flourish.”