19. Spire: Launching Crowdfunding Beyond Earth
Peter Platzer was always attracted toward Science and education. He received training at CERN and Max Planck Institute, and dreamt of a day when everyone would be able to have access to space. Attending Singularity University’s inaugural Executive Program in 2009 was the final cue. The high-energy physicist-turned-finance guy finally propelled himself to pursue his true passion of commercial space exploration. With this idea in mind, he graduated from the International Space University’s master’s program, and received internship experience at NASA Ames’ Space Portal. In 2012, along with Joel Spark and Jeroen Cappaert (space engineers), Peter found Nanosatisfi, the first remote-sensing platform intended to deliver distinctive data multiple times per hour from anywhere on earth. They deployed Ardusat,1 the world’s first crowdfunded satellite the same year. The purpose of the launch was to serve a platform for meeting the crucial need for applied STEM education, and to make space exploration available to everyone.
1The name “Ardusat” is a portmanteau of the words “Arduino” (an electronic platform on which Ardusat is based) and “Satellite.”
After fulfilling its initial purpose, i.e., covering the shared mission of Ardusat, Nanosatisfi expanded its satellite network. The business branched into two distinct and dynamic areas. Nanosatisfi went ahead and hired a professional in educational technology sector to become a stand-alone company. It developed its own customer base and industry connections. The close collaboration with the Ardusat team however, is still ongoing.
WOW: Satellites for Mr. and Mrs. Brown
Soon, Nanosatisfi realized the importance of a name that would be more illustrative of its vision and customer base. “Spire” has expanded fast since then and is aspiring to be the most powerful remote-sensing platform in the world. It has received investments from companies like Emerge, Mitsui & Co. Global Investment, Qihoo 360 Technology, Moose Capital, and RRE Ventures. Currently it has offices in San Francisco and Singapore.
WOW: How Did Spire Launch Itself into the Space?
Spire moves in par with the current market trend where big, costly, single-use traditional technologies are substituted with smaller, cheaper, multi-use standardized technologies. Within 2 years of its launch, Spire has put four satellites in their orbits. However, Spire would not call itself a satellite company, but rather a satellite-powered data company. The satellites are not considered the main focus, but rather as enablers for procurement of space-based data for solving problems. The approach is similar to that of Skybox Imaging, which uses satellites to procure imagery.
The company focuses on designing hardware and software simultaneously, in an integrated way. This approach facilitates the fast pace of Spire’s development by accelerating the building of additional sensors and satellites. These multi-sensor satellites, which range from 1U to 3U, are built with Commercial Off-The-Shelf (COTS) components for reducing costs. Multiple sensors collect various types of information for customers in 12 verticals across North America, Europe, and Asia. It has ties with a number of launch providers and has purchased numerous launch slots for achieving its several missions. Spire plans to launch 20 nanosatellites (“small enough to fit into one’s palms and weighing less than a bottle of wine”) by the end of 2015.
SO WHAT Makes Spire a Positive Outlier?
Is smaller better? The Spire satellites come with a range of technologies like sensors, antennas, and infrared cameras. As Spire satellites are much smaller than conventional ones, they require smaller rockets only. A normal size rocket can pack more satellites too. This makes the cost of each launch hundred times lesser. Numerous satellites also give constant coverage by providing better “temporal resolution.” As a single spacecraft has a limited time window to capture information for an area before it moves out of range, the constellation of small satellites provides better data than a single, big one. Big satellites also have a big development time and life cycle (5 to 15 years). As nanosatellites are less costly, the life cycle can be reduced (2 years), after which the old satellites burn up in the atmosphere. Then new ones with better hardware can be launched. This iteration cycle is similar to that seen in the software industry.
Spire as a Data Company
Spire aspires to provide better data on areas like maritime insurance, fishing, global trade, weather, piracy, among others, using its satellite technology. For example, the data type—automatic identification system (AIS) assists in tracking ships, measuring weather, etc. Using similar relevant data, Spire could provide data solutions to several problems which require space-based data (see Table 19.1). Spire monitors three-fourths of the earth’s circumference, previously neglected by traditional remote sensing, with the help of these satellites. The monitoring of oceans by the nanosatellites, for instance, checks piracy and illegal overfishing. It also provides more rapid revisit times than other satellite-based data systems.
Table 19.1 Some Areas Where Spire Offers Its Services and the Respective Issues Addressed in Each Area, Compiled from Company Website
Spire as a Business
Spire team takes pride in having a global outlook. The team competence and the relationship with customers are well developed for a new company. The company has expanded to Singapore. The economic potential, engineering-inclined education, the political attitude toward space race, and the support from Economic Development Board of Singapore were factors which drove Spire to choose Singapore. This expansion opens up possibilities for Spire’s future success in Asia, a zone that is not currently the focus of most space companies.
Spire as an Employer
In Spire, the employees are encouraged to innovate, rather than invent. They are motivated to find smart ways to make use of proven technologies, so as to create new results. The employees do not receive any performance review and neither is there a hierarchical organizational chart. The whole organization functions around the notion of spending time in activities they enjoy. Peter assures that this will bring career success. To supplement this employee-centric corporate culture, Spire offers year-around career coaching, career tests on long-term career goals and aspirations (to ensure job-employee match), and quarterly career progression discussions. These strategies are based on the trends noticed in larger, successful companies in various industries.
Spire When Compared to Similar Companies
When compared to traditional satellite companies, Spire satellites provide a myriad of space-related data, more frequently. Traditional satellites update the AIS roughly four times a day. Spire, meanwhile, tracks AIS data every minute and updates it several times a day. This makes activities like route management and traffic management more effective. By monitoring areas which do not have traditional satellite coverage, Spire increases the coverage and consistency of data services provided. It collects weather information at 100 times more frequent and accurate rate than traditional companies. Even when compared to land-based radar systems, Spire has a competitive advantage because it does not face data loss due to the curvature of earth. It thus has the potential to disrupt legacy platforms set by traditional companies.
Space industry as a whole has been dominated by government for a long time. Spire is one of the pioneers in changing this trend. With the increasing number of niche satellite networks, the customers would soon outspend and move beyond government in the near future itself. Another area in which Spire differs from traditional, governmental companies is in its business model. Traditional companies have their businesses structured around unique needs of government and universities. Companies like Spire are more flexible in the kind of services they provide. The expenses involved (hardware, software, and operation) are quite low as well. Where traditional aerospace project spend hundreds of millions of dollars, Spire spends mere thousands.
The Space industry is an oligopoly with a few companies controlling most of the global market share. Economies of scale and scope act as natural barriers to new companies trying to enter this market. Being disruptively innovative like Spire is one of the very few ways a new company could enter the market. The brilliance of the Spire business model is that its strategies cannot be adopted effortlessly by the incumbents. Doing so would impair the latter’s existing business and damage existing strategies. On the other hand, they cannot choose to ignore Spire model either. Not adapting to the current market trend would cause loss of market share.
When compared to adjacent companies like DigitalGlobe, the difference of Spire lies in its crowdsourcing model. Also, the focus of the former is mainly on the coverage of the United States and Western Europe. Spire covers Asia also, making its services more wide-reaching. When compared to satellite-imagery companies, Spire stands out by providing data services, instead of imagery. Many other firms are also working toward making the access to space more conceivable to common men. Some examples are Virgin Galactic, Generation Orbit, Interorbital Systems, Rocket Lab, Garvey Spacecraft Corp., and XCOR Aerospace. However, most of this activity is seen in the area of rocket launchers, not satellites.
Challenges
The main challenge that Spire faces is, like other outlier companies, its competitors. For instance, big player DigitalGlobe provides services similar to Spire, along with images. It also has the most sophisticated and swift high-resolution earth imaging satellites that are capable of collecting over 1 billion km2 of imagery per year. It even provides intraday revisits around the globe, like Spire. What is more, DigitalGlobe analyzes the information available in the form of images and provide meaning to them. For example, WorldView-3, the fifth satellite from DigitalGlobe, could analyze the composition of clouds and gases and determine whether there is drought in a particular area. Furthermore, it can map food shortages that could be caused due to this drought. Spire is yet to start providing analytics for the data it delivers. DigitalGlobe also offers its best, most secure and fastest “Direct Access Program” for its defense, intelligence, and commercial customers around the world.
Likewise, PlanetLabs also provides comprehensive global coverage similar to that of Spire. It even has launched five satellites already (compared to four by Spire). It also provides services for businesses as well as developers. The options for collaboration range from being full-fledged PlanetLabs customers or partners, to integrating PlanetLabs datasets into products. Dauriageo, on the other hand, provides not only its own constellation of satellites, but also a platform for other satellite operators to guarantee data (satellite imagery and derived data layers) with a higher resolution, coverage, and novelty. Skybox imaging, recently acquired by Google, combines scalable computing and analytics to find answers to the world’s most important geospatial problems.
Another apprehension is regarding Spire products (satellites). Apart from the differences in technology base, development timelines, and launch flexibility Spire satellites also have major physical differences when compared to conventional, big satellites. Most of the nanosatellites cannot be maneuvered further after they are launched. This creates problems at the regulatory level as most of the laws in the area were made with traditional satellites in mind. The areas where this is a concern include state responsibility, liability caused by damage, space debris mitigation, and remediation and so on. Of course, with the gaining popularity and demand for nanosatellites, it is not impossible to amend the laws so as to include the newcomers or even create new laws specifically for them.
Outlook
The vision behind Spire allows people to aim at stars. The developments in technology helped Spire maintain a lean profile. Most importantly, Spire brought space to the people. Commercial customers and venture capitalists already appreciate the magnitude of Spire. With market analyses (by SpaceWorks Enterprises Inc.) showing that commercial customers are likely to dominate the business from 2014 onward, Spire’s business is sure to skyrocket.
From the Perspective of Eric Nowak, Professor of Financial Management and Accounting, Università della Svizzera italiana, and Swiss Finance Institute
SPIRE—Crowdfunding as a Success Factor to Shake Up a Sleeping Market
Spire is a high-tech start-up company combining Big Data (software) with nanotechnology satellites (hardware). Start-ups combining innovative data-driven solutions with a hardware component are currently belonging to the hottest sought-after “unicorns” (potentially billion dollar market value companies) in Silicon Valley. Spire is intruding a market—satellites to remote-sensing data about weather and other areas—which in the past, due to its huge initial investment costs to transport satellites with rockets into the stratosphere, used to be dominated by Governments and state-owned companies. Only recently private companies have begun to actively compete in the business of space missiles and rocket launches (e.g., Space-X, Virgin Galactic). Spire is promising to provide these satellite data services more frequently, with more variants, with higher coverage, but albeit with less potential for data loss, and more cost-efficient.
Another intriguing novelty is that beyond regular venture capital financing rounds, Spire has “crowdfunded” a satellite to launch into space. This is a very clever strategy, because we know that crowdfunding works particularly well for high-risk projects, which can mobilize potential investors also emotionally and not just for financial considerations. For satellites or anything connected to space aviation this is certainly the case as there is a gap to be filled by the current lack of ambitious NASA programs, so the crowdfunding of satellite rocket launches can be expected to be successful in the future.
Spire belongs to the “small is better” movement where nanotechnology and the power of connected crowds together challenge established industry players. The company is located in two of the most innovative technology and finance clusters on Earth, the San Francisco Bay area and the Asian market and technology hub Singapore. Furthermore, it is a small high-tech start-up company breaking into the domain of previously Government-owned and very large companies which have more financial resources but are also much less flexible to adapt their business models to rapidly changing environments.
Another domain where Spire has definitely broken industry rules is with respect to its human capital management. The company needs talented people in the most-demanded sectors of the Silicon Valley economy. This is a challenging task for every high-tech start-up. Spire manages this in an innovative fashion by having an extremely selective hiring process where they accept less than 3 percent of applicants but then on the other hand offering the few selected employees a unique challenging and creative working environment. The CEO and founder of the company, Peter Platzer, a physicist who turned into a classical business entrepreneur, offers every employee personal coaching until he or she is fully satisfied with his or her job task. Furthermore, Platzer promises that no employee hired will ever be fired for economic reasons, so everyone has an implicit job guarantee.
Of course, this particular human capital approach to compete in the War for talent is also sort of a future challenge. First, it is very unlikely that Spire will be able to continue this policy with respect to its employees into the future for good. At some point in the future, financial necessities and economic reality might impose to restructure the workforce. Second, while growing in size and number of employees the CEO will not be able to coach every single employee. Access to top talent in data sciences and engineering is key to the future success of Spire so the company will have to stay innovative in order not to face a lack in this area.
Another potential risk in the future is the dependence on crowdfunding. While this works very well with highly innovative projects with a limited financing need, once the company and its services are more established, it will face a higher need for investment capital to be financed while at the same time potential technology enthusiastic investors might prefer to crowdfinance the next big idea and not yet another satellite for weather forecasts. So at some vintage point the company will have to rethink and redesign its financing model. Of course, should the company stay on a successful growth path, it will be easy to convince venture capital funds, strategic investors from the same industry, or shareholders in an Initial Public Offering to finance the growth of Spire. So that is a risk and an opportunity at the same time.
Nevertheless, the strategy of crowdfunding “small is beautiful” high-tech start-ups combining data-technology and hardware will continue to be successful in the future. The investment sizes are manageable and therefore so are the risks. The emotional component for investors in these areas will make it easy for innovative entrepreneurs to generate enough attention in order to attract funds.
The change brought upon by Spire and similar companies is already on the way driving established businesses out of business thereby exercising creative destruction in markets, which have been rigid for years because of government regulation and artificial barriers to entry. In this way Spire reminds me a lot of Uber, another recent unicorn company which is shaking up a formerly sleeping and rigid hence highly regulated market. Similar to Spire, while operating in completely different area, Uber is combining software data (remote location information transmitted through smartphones) with a hardware component (cars to transport people) and is extremely successful in a market which was characterized by state-regulated barriers of entry (licensed taxi transportation). So while this analogy is maybe not intuitive at first sight, Spire could become the “Uber of Space” and given the recent financing round valuations of Uber (around 40 billion USD) Spire could be doomed for a similar level of success.