Private Space Industries: why the US has the lead and the EU will not catch up any time soon.

A number of pretty futuristic enterprises is starting to populate the landscape of commercial space industries. The nature of their business proposal varies: some of them are building private launching capability in a more or less innovative fashion (see for example SpaceX , Sierra Nevada Corporation , or Orbital Sciences). Some others are working on expanding capabilities for orbital habitable surfaces developing relatively cheap private space stations (this is the case of BigelowAerospace ) or creating space-based 0-gravity Manufacturing (MadeInSpace ). Others have a more futuristic and (risky) approach, proposing to mine Asteroids for industrial purpose ( Planetary Resources. And Deep Space Industries ) or even the Moon (Schackleton Energy  ).

The companies in this necessarily short and definitively non-exhaustive list differ in many ways: some of them have a rather credible business model while others have a nearly sci-fi approach; some of them are backed by huge private capitals, while others rely on smaller investors; and so on. All of them, however, share a common characteristic: they are based in the US and they have no plans to expand their activity to Europe. Europe has, as well, a space industry sector. Nothing to do, however, with the previously listed companies. Europe’s industrial sector is composed by mature companies, often divisions of traditional aerospace and defence big players. They operate in the well known mature and relatively boring sector of satellite building, traditional launching propulsion, communication and information systems. With few amazing exceptions (see, for example, the extremely promising Reaction Engines ) there is no such thing as a vital and extremely innovative space start-up sector. No European asteroid mining companies, for example.

The big question is, naturally: why? Few reasons, all very terrestrial, can be easily individuated.

• Lack of intensive public procurement- No matter how much we are enthusiastic about space things, there is not yet such a thing as a true space economy. This means that the market, especially when it comes to relatively new technologies, is still dominated by public procurement. And no matter how much we like Europe: ESA is not, and will not be anytime soon, something similar to NASA. And will not have the same economic strength and expertise. In addition, also military procurement plays a role: in the US, the Pentagon and the Darpa agency are important contractors which may be interested in any advance in space technology; in Europe, there is no unified military body able to cluster the resources required for projects of this scale; the separate military agencies and ministries of the soon-28 member states often do not have sufficient resources, or they waste them doubling or tripling capacity existing elsewhere for lack of coordination. Creating and financing 28 different armies, each of them with a marine, an aviation, special corps, etc., leaves few resources for innovative space programmes with military applications.
• Lack in technology transfers to private enterprises- One of the leading phenomena driving the space start up renaissance in the US is the transfer of technology from NASA to its private partners. Over time, NASA has developed an impressive number of valuable knowledge and technology on space matters, and is now transferring some of that capital to private companies in the (so far, successful) attempt to curb down private space flight costs. Differently from NASA, again, ESA has not yet a multi-decade long history of deep space exploration, technology leadership, and valuable projects developed conceptually but never realized. Therefore, there is little knowledge and little technology that ESA would be able to transfer, in case, to private partners. This, of course, assuming that private partners with sufficient credibility and know-how would eventually show up.
• Lack in huge capitals concentrated in the hands of innovative enterprise leaders- Private spaceflight is a particular economic activity: it requires important capital endowments, especially during the particularly long phases of technology development and adaptation. Also, such activities require a very long term vision, as decades may pass before the company starts to generate any profit on normal bases. This implies that investment plans need to be extremely long, and huge capitals are required in the early phases. Those capitals, in addition, need to be concentrated in the hands of people with sufficient propensity to risk and interest in space activity; a less than common characteristic. It is definitively not a case that some of the most innovative and visionary space start ups have very close ties with internet services giants: these companies have accumulated enormous resources in the last few years, available now in the hands of people sufficiently young and sufficiently innovative and risk oriented to think about how to make profit from the space. For example, Planetary Resources is financed by the co-chair of Google, Larry Page;  Deep Space Industries by Amazon founders; and SpaceX, the most advanced private lifter, is financed by Eleon Musk, founder of Paypal. This is anthropologically interesting: these people have made astonishing fortunes from the immaterial web, a rather futuristic technology few years ago. And now they are planning to invest that money in the next human frontier, the space.

Unfortunately for us, however, Europe has few of such fortunes. Even fewer if we consider only capital concentrated in the hands of relatively young people. European private space start-ups find in this a competitiveness gap: they are obliged to finance themselves in the capital markets, thus needing to provide extremely sustainable business models, low risk, and relatively short term returns. In other words, European companies are not allowed to follow dreams: they are not wealthy enough to do so.

• Lack in risky and forward-looking venture capital funds- What to do when huge private capitals in the hands of adventurous young entrepreneurs are not available? Usually, financial markets may fill the gap, even if not for free. Companies without huge capitals’ backstop, in the US, may still try to raise funds thanks to risky and forward looking venture capital funds: there are several of them in the US (like this), specialized in collecting money from investors with a high sense of risk and profit. These funds tend to invest in companies with bright perspectives in the long term and solid business models; technology, here, is the key asset to receive venture capitals’ backstop. But if you fulfil these characteristics, nothing prevents you to develop your space company- of course, at your risk.
  Such a strategy would be, naturally, much more difficult in the European Union. Venture capitalism is much less developed in the old continent, and it has been heavily hit by the financial crisis. In addition, the never-ending euro crisis has dramatically lowered the available capitals for such adventures, sharply increasing risk-aversion behavior as well. After all, if you really like to bet hard, Greek bonds provide higher pay-offs in shorter term than mining asteroids.

Any hope for the Old Continent?– Well, life does not begin nor ends in space. In such a dramatic period for Europe, space is not a priority for Europeans. Even if the continent misses the opportunity to develop a truly commercial space sector now, future possibilities will be open. Especially when commercial space access will be available at reduced cost. Still, there is no hope that Europe will compete to open the way to the space economy: all the odds are against it. We might start to make profits in the space too, sooner or later; but anyway after our American cousins will have opened the way long before.