Dylan Taylor
Chairman and CEO, Voyager Space Holdings
Space for Humanity www.SpaceForHumanity.org
Denver, Colo.
DYLAN TAYLOR / CO-FOUNDER / SPACE ANGELS AND SPACE FOR HUMANITY
DENVER, COLO. / WWW.SPACEANGELS.COM, WWW.SPACEFORHUMANITY.ORG
Famed venture capitalist Marc Andreessen famously said in 2011 that “software is eating the world.”1 He was referencing the fact that all industries are going through digital transformations and either you are in front of that tidal wave or you will be doomed to be swept away by it. His comments are largely seen as prescient and many traditional industries from automobiles to aircraft engines and of course your local taxi service have been disrupted by software applied to their datasets.
Space is no different of course but what is unique is that space-based data not only is a mechanism to disrupt the space industry, it is in fact that Trojan horse that will allow the entire global economy to be impacted. Why? Because space is less of an industry and more of a “domain” and its impact to all industries will be many trillions of dollars.
To understand better this point, it is best to understand the scope of the problem. The global economy sits at roughly $80 trillion2 and is growing at roughly 5% per year. Within that economy are massive inefficiencies, from scrap in the supply chain, to bottlenecks with transportation, to unforecasted weather changes, to surprises from emergent phenomena we don’t fully understand such as hyperinflation, economic collapse and even chronic unemployment. It is hard to imagine that the global economy couldn’t be made more efficient by 10% or more with better information. This is where the space domain and the data it generates come into play.
EMERGENCE OF THE MEGA DATASET
With an estimated 8,000 small satellites planned for launch in the next 48 months, not only will there be a torrent of space-based data, the data layers will be new and novel. We will have all forms of optical data, synthetic aperture radar (SAR) data, infrared data, space debris data, weather data, etc. With all the various data layers, we will have a true multi-layered, hyperspectral dataset of the earth for the first time.
This will be supplemented by the explosion of earth-based sensors from the Internet of Things (IoT) transformation. This will turn literally every device with a microchip into a potential sensor. These data sources will be supplemented with drone-based data and data generated from “smart” buildings and “smart” city initiatives underway globally. All this will lead to data-sets that will allow for insights we have never been able to create before—the so-called “megaset.” This will truly revolutionize global commerce and its economic impact will be vast.
WHAT IS THE MEGASET WORTH?
If we define the megaset as ubiquitous, persistent, multi-layer, hyperspectral information, then we can ask ourselves, what is that dataset worth?
Taking a step back, if you think about current analogs of companies built on large-scale datasets the most obvious one would be Google. Google has essentially built a $700 billion market capitalization company by organizing, structuring and in some cases creating known terrestrial information. The key words here are “known” and “terrestrial.” In addition to traditional search, Google’s scope ranges from indexing and digitizing books, to indexing and rating restaurants to mapping the world, including real-time traffic data. Google’s market cap went exponential once their data-based investment theses were known.
The megaset is a much larger opportunity. Why? Because of the sheer amount of data and the potential wisdom that can be extracted from that data. With the advent of artificial intelligence (AI) and machine learning (ML), the ability to make predicative observations and have “emergent” knowledge be created from large amounts of unstructured data is more powerful than we have even begun to realize. Very simply, the currency of the global economy going forward is datasets and the earth observation dataset will dwarf by orders of magnitude, in terms of scale and value, the dataset upon which Google has built their business.
The end state, the pot of gold at the end of the rainbow, that the capital sources investing in Earth observation are betting on (and this is why we have seen the many billions of dollars flow into the industry by the venture capital community and why space set a new capital flow record in 2016 from the venture capi- tal community) is actionable data analytics. Think of it as analogous to the early investments in ecommerce, not necessarily knowing which storefront would emerge as the biggest winner but knowing that the opportunity would be a tidal wave of value creation. From this point of view, the interest in small satellites is not only justified, it may be undervaluing the opportunity.
In addition to the huge upside potential, space-based data is relatively capital-efficient, given the magnitude of the value it creates. True, it is capital-intensive to build a constellation and launch it into space, but with those constellations, now subject to Moore’s Law due to the availability of higher launch cadences and lower costs for off-the-shelf electronics as well as launch, the costs are decreasing while the value of the data that they generate is arguably increasing.
“From there, I would expect products and services leveraging space-based data to skyrocket and the value that accrues to the global economy to be profound. This will likely lead to the first multi-trillion dollar market cap company on Earth.”
THE FUTURE STATE
So how is this all likely to play out and what are the opportunities for specialists in the field? If standard industry dynamics hold, there will first be a plethora of constellations for each available data layer (optical, SAR, etc.). We are already seeing the early stages of this with many new company formations in the past 24 months. This will inevitably lead to winners and losers and ultimately consolidation within a data layer, with one large firm emerging for each. From there, I would expect a large data aggregator such as Google, Amazon or Facebook to enter the industry and consolidate the winners of each data layer. Data analytics powerhouses that have AI and ML expertise are likely the ones best positioned to take advantage of the massive potential of the dataset. I would expect all of this to play out in the next 36 to 48 months.
From there, I would expect products and services leveraging space-based data to skyrocket and the value that accrues to the global economy to be pro- found. This will likely lead to the first multi-trillion dollar market cap company on Earth.
The opportunities for those in the space-based data field are expansive. The best bet would be to focus on a specific data layer and ensure absolute mastery in how best to collect, aggregate, and mine that data. The next phase might be more interesting, however, which is to understand better “emergent” knowledge from multiple data layers.
Some examples of this could be global transportation bottlenecks leveraging both optical and SAR, and weather forecasting using space-based data and Earth-based sensors leveraging the IoT. The key focus in all of this will be the predictive nature of the insights. Once space-based data moves from telling us what has happened to telling us what will happen, the value creation will increase by orders of magnitude.
CONCLUSION
Space-based data will revolutionize not only the space industry but the global economy as a whole. Since space is a domain-based investment thesis, venture capitalists are flocking to the industry as they realize a global economy made even moderately more efficient is a multi-trillion dollar opportunity. As data layers become more refined and then hyperspectral, and as large-scale AI and ML technology is leveraged by a large industry consolidator, the benefits of space-based data and its products and services will accelerate dramatically. This will literally transform the earth and may be an even bigger space legacy than global telecommunication.
Endnotes:
1. https://a16z.com/2016/08/20/why-software-is-eating-the-world/
