Commercial space is the new frontier of business opportunity, and Canada has a front-row seat thanks to changes in how businesses finance space ventures — and get their products and services above Earth's atmosphere.

Launching rockets and sending stuff into orbit isn't as hard as it used to be. Compared to just a decade ago, rockets are more powerful and can even land themselves, which lowers the cost of shipping satellites to space. These powerful boosters can carry dozens of passenger machines at a time, as satellites grow smaller by the year. Capital investment is also being spurred in space; in 2021 alone there was a reported US$10 billion put into the industry via public and private markets, according to McKinsey.

Riches are also possible by piggybacking on the direction of the government, which is firmly pointed to Earth observation and the moon right now. A Canadian Space Agency astronaut will fly around the moon as soon as 2024. That human opportunity is thanks to Canada's many industrial-backed contributions to NASA's Artemis program and lunar research — including a new Canadarm3 robotic arm and a science-packed microrover.

While private space flight has recently suffered setbacks — including the explosion of the world's largest rocket and the disappearance of a Japanese lunar rover — space opportunities are dizzying, which might make it hard for a young business to focus on the best principles to return value to their investors. That's where programs like the Creative Destruction Lab (CDL) —  a seed-stage accelerator founded at the Rotman School of Management, and which now operates at a dozen universities across the globe — come in. Through its space stream, the CDL pairs entrepreneurs with seasoned businesspeople and angel investors to help businesses scale. CDL especially focuses on science and tech, looking for lucrative opportunities to raise capital and to swiftly mature emerging design ideas into commercial products.

How's it going so far? Just ask Araz Feyzi, who came into contact with none other than Canadian astronaut Chris Hadfield by participating in the CDL’s program in Toronto. Hadfield, along with "the rest of the folks who shaped the space industry," helped Feyzi and his company better target a multi-billion market.

Satellites are flying to space so quickly that there's a big traffic problem coming, as more machines in orbit means more potential for collision. Between 2010 and 2021 the number of active satellites increased fivefold to 5,000, according to statistics from Harvard-Smithsonian space tracker Jonathan McDowell — and that's not including the number of dead satellites or smaller debris bits up there. With this in mind, Feyzi's Kayhan Space — based in the active space community of Boulder, Colorado — detects potential space smashups before they happen, along with a maneuver plan to move the satellite out of the way.

"By automating that process, we're reducing the response time. We reduce the risk because we are not relying on humans to not notice or miss a higher-risk event," Feyzi says.  

While it sounds like Star Wars tech today, already revenues are flowing to the startup: thanks in part to CDL mentorship, Kayhan has raised two private rounds of funding totaling US$4.4 million. Alongside this came a big deal it clinched in November 2022 when it partnered with the more mature, L.A.-based Morpheus Space for a "one-click" collision avoidance system it can sell as a product now to raise valuable revenues. Potential customers likely include defense agencies and government departments that strive to share their findings with private industry to keep orbit as clean as possible.

'How do you keep money to stay alive?'

First founded in 2012, CDL seeks to merge sound science with prudent business practice. Everything about the program is strategic, the locations of its programs, the highly experienced mentors it attracts from industry and venture capital firms, and the nineteen high-growth streams it offers (such as space, blockchain, and artificial intelligence).

"The main thing we work on is how do you keep money to stay alive without wasting your time," says Kevin Bryan, an associate professor at Rotman and the academic director of partnerships for the CDL, noting the accelerator shows participants how to avoid distracting — albeit lucrative —  consulting opportunities in favor of wise investments to scale up their business.

Bryan runs the space entrepreneurship stream at CDL alongside counterparts at Georgia Tech University and the HEC Paris business school, bringing in international expertise to every mentorship session. The stream launched in 2018 amid overall industry growth — including numerous private companies seeking to lower the cost of sending items to orbit. 

Today, "the cost of putting something in space is orders of magnitude lower than it was 10 years ago," he says. 

The economics are staggering. In a 2023 piece in the Rotman Management Magazine, professors Mara Lederman, Ajay Agarwal, Joshua Gans and Avi Goldfarb as well as astronaut and CDL advisor Hadfield note that shipping a kilogram to space took $20,000 of funding in the 1970s and is tenfold less today at $2,000, assuming constant dollars across 50 years.

That metric may drop again to just $20 a kilogram if promises from California’s SpaceX's Starship spaceship program is able to take flight for deep space shipments, which would open up the solar system to potential Mars missions. Starship is a large, early-stage spacecraft that may one day bring shipments to the moon and Mars. Though the craft exploded on its inaugural launch, scientist hailed the test as a success. Indeed, Starship is tasked with putting NASA astronauts on the moon in the coming decade — though as it hasn't yet flown any space mission, it's hard to say yet whether that cost savings is possible.

The article's authors offer a warning about cost savings based on centuries of economic theory: SpaceX has a monopoly on much of the launching business and is seeking to expand that to human passengers as well. Should that happen — and space agencies and private companies alike rely on Starship — the old supply-and-demand equation could incite SpaceX to markup its costs at sizable margins and still sell out its launches. This move that would benefit SpaceX, but hurt other companies that would need to lower their costs to compete, potentially providing fewer funds for development besides the billionaire-funded SpaceX (which is owned by Elon Musk, one of the richest men in the world).

"Without some way to guarantee prices will stay reasonable, the potential of low-cost access may go unexploited and new investment and business activity will be limited," the authors warn. But there is hope in leaning on experience, as CDL participants do, as long as "savvy investors and entrepreneurs" keep their eyes on the competition.

The danger is such knowledge needs to stay current, Bryan says: "If you think about the rise of the Internet, it would be very difficult for Blockbuster to become Netflix, for kind of obvious reasons. Their entire executive team was a bunch of retail people.

"Space is a long-run kind of a project," Bryan adds, pointing to the years or decades of tech development that often goes into a viable business idea. Even SpaceX didn't ink a NASA deal until 2014, when the California company was more than a decade old.

CDL's space stream, however, "decreases the scope" of the profit problem by bringing in people with closely related industry experience, Bryan says. Even in the high-flying field of space, the mentors are highly critical about what will return money quickly.

"The mentors are all space nerds — they like space," he says. "But they're not going to give you $5 million to mine an asteroid."

The talent gap

While space struggles with growing pains, another vector of the problem is attracting talent: The Space Foundation — a non-profit that analyzes the space industry based in Colorado Springs — offered a report in October that noted a crucial role in recruiting "a steady supply of talent to fill an ever-growing variety of roles," in the words of its CEO, Tom Zelibor.

But there doesn't seem room to fill them, as industry employment growth was just 2 per cent despite high demand. Even with worries of an economic downturn, government spending in the United States is way up from 2021 — almost 18 per cent — to nearly US$60 billion (CAD$82 billion), the report notes. Product spends are also rising, particularly in satellite television and Earth observation. But how to fill positions to serve these markets is a critical problem.

The United States is taking the talent problem so seriously that Vice-President Kamala Harris signed off on an initiative to train community college students as welders, machinists, inspectors, non-destructive testers and other needed support roles to keep rockets flying and spacecraft soaring. Diversity is foremost in thinking, with women, Indigenous and Black Americans among the populations targeted in the industry "roadmap" backed by big players like Jeff Bezos-founded Blue Origin, long-time space and defence supplier Northrop Grumman, and Musk's SpaceX.

To be sure, space could encounter headwinds as the larger economy faces a possible recession in 2023, but historically both the United States and Canada governments spend on space as a form of infrastructure during tougher times.

In Canada, that 2008-2010 recession-era thinking paid off recently — the Stephen Harper government's spending on lunar rovers created several prototypes. Those prototypes will inform the design of a new Canadensys-built CAD$43 million microrover slated to roam the moon in 2026.

That government also ordered Brampton, Ont.-based MDA to keep its Canadarm tech in Canada, and not to sell it off to the United States for short-term profit. Keeping that expertise in-country eventually led to the billion-scale stake for MDA to build Canadarm3 aboard a NASA lunar station in the 2020s, which has already spurred at least two sales of spinoff technology to private companies.

On the smaller scale, several CDL companies emerged and thrived following the 2020 recession. An example is Colorado’s Lunar Outpost, which just announced in December 2022 its goal to land the first rover on the lunar south pole in 2024 and which has a larger goal to create moon technology to keep missions warm and running during long, lunar nights. Or take Ottawa-based Mission Control Space Services, which has won numerous Canadian Space Agency and defence government contracts in recent years. Its most recent was in November: a US$230,000 Department of National Defence contract for military science and research.

Their examples serve as luminaries for more recent graduates of the CDL program — like Ottawa’s Obruta Space Solutions. The company has its own idea for how to deal with satellites cluttering up the environment around Earth: it plans to create a servicing spacecraft system that could dock with old satellites autonomously. Just like a mechanic on Earth, these satellites could perform refueling or other basic services, but without humans on board.

With literal rocket science built into the business plan, Obruta CEO Kevin Stadnyk says the mentorship at CDL helped him and his business partners gained clarity on a big decision they were trying to make. They had already spent a year developing the core technology and talking to customers, but something was missing: "It wasn't taking off as much as we wanted."

The company is still young and not able to release all details yet of what it did during the 2021 session, but essentially it completed a pivot in the close quarters of CDL. "The company, the product offering, and the target customer — that was all part of the pivot," chief technology officer Kirk Hovell added.

Both Stadnyk and Hovell say that the great value from CDL was the long-term commitment of the mentors, who continue to be close, informal advisors of Obruta more than a year after they finished their program. CDL's program also has ripple effects of engagement from potential customers who bank on the program's reputation in giving startups a chance.

"The credibility of the company — just going through the program — it gives companies a stamp of approval and vets them to the global audience," Stadnyk says. "That has also been very helpful in raising future capital, and in talking with other customers — being able to say that we are a CDL alumni company has definitely helped our position."

The results speak for themselves — customers have signed letters of intent for the technology already, and that's enough to bring Obruta to a planned demonstration mission in space near the end of 2023. Obruta is also readying for its first venture round after getting fundraising from family and friends — a typical path for young companies like it.

Space is growing quickly, but this new frontier will require sound business practice to be sustainable. Canada's investment in space is at its highest point in many years, and to stay competitive in the fast-evolving market, companies and the government alike will need to keep their eyes open for opportunities as the space economy soars in the 2020s and beyond.