Why investors are increasingly flocking to this happening space

M. Ramesh | | Updated on: Sep 07, 2019
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Volumes are big, scaling up is easy and there is no tech or market risk

On Thursday, a Japanese company called ALE announced the raising of $11 million from a Hong Kong-based investor, taking the total funding secured by the company to $26 million. ALE is into a rather unconventional business — it promises to create a meteor shower in the sky for you, either for celebration or advertisement. The business is unusual, yet investors have been willing to take a bet on it.

‘Space’ has been a sweet-spot for investors globally in the last few years. A good example of a company that has attracted funding is Rocket Lab, which makes small rockets. It has, in the last few years, secured $288 million from big names in the venture funding industry, such as Khosla Ventures and Bessemer (see interview).

And now, it is beginning to happen in India. Just days ago, a Mumbai-based start-up called Kawa Space, which is into building satellites, secured a million dollars of funding from Speciale Invest, a venture fund, and from Vijay Shekar Sharma, the Paytm founder. Kawa’s is a more regular business — it has an order from ISRO to make many satellites.

Careful study

For Speciale Invest, Kawa was the third investment in this sphere. Its earlier bets included Agnikul Cosmos, a Chennai-based start-up that wants to make small rockets, and Astrogate of Bengaluru, which intends to provide optical communications between satellites and earth. Even though there have been very few space investments in India, the investor community in the country is looking at it very carefully.

That was evident at a meeting of space start-ups and investors organised by the Chennai chapter of The Indus Enterpreneurs (TiE). The reason for heightened investor interest was summed by CK Ranganathan, Chairman and Managing Director of CavinKare, who said: “There is a lot of money to be made where the road is less travelled.”

As many as nine start-ups made presentations at the meet, pitching for funding — each with an interesting idea.

Mumbai-based Manastu Space has developed, with the help of IIT-Bombay, a hydrogen peroxide-based rocket propulsion system which, according to the company, is a third lighter, 40 times less toxic and 25 per cent more efficient than the conventional hydrazine-based liquid fuels.

Bellatrix of Bengaluru is working on developing an electric propulsion system to manoeuvre satellites in space. The company also plans to build rockets.

Hyderabad-headquartered NoPo Nanotechnologies is working on building material made with carbon nanotubes, which it will produce. This material, for making rockets, will be extremely light and 10 times stronger than steel.

Another company, Fabheads, makes 3D printed continuous fibre-reinforced parts that can be used in rockets. These start-ups have disruptive ideas, and are taking unconventional routes.

Not rocket science

That is what makes investing in space start-ups worthwhile. But, for investors, there are other advantages, too. For example, the volumes are bigger and it is easier to scale up, according to Vishesh Rajaram of Special Invest. A $10-million investment is par for the course in the space business.

But what about the risks? Risks, if any, are lesser in space, because there is no technology or market risk. There are only operational risks, just like any other sector. Notably, all the space start-ups in India are supported by the best of the brains in the business, mostly retired ISRO scientists.

Speaking at the TiE event, Prof Ashok Jhunjhunwala of IIT-Madras observed that space technology is “not as complex as it was 25 years ago, and we have very, very bright youngsters (as start-up entrepreneurs).”

As for returns, that they will be “very high” is almost a cinch, says Rajaram.

Start-ups on the road less travelled

Published on September 08, 2019

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