Private Equity Q&A: Bogdan Gogulan, NewSpace Capital

When most think of what they associate with ‘space’, most will mention science fiction entertainment. But science fact is providing investors with a new frontier. Greg Winterton spoke to Bogdan Gogulan, CEO and Managing Partner of NewSpace Capital, to learn more about the opportunity in the space economy.

GW: Bogdan, for those less familiar with Newspace Capital, tell us a little about the firm.

BG: NewSpace Capital is a global private equity firm. We invest in growth-stage companies across the entire space technology ecosystem, where founders and entrepreneurs are currently working to tackle some of the biggest challenges humanity is facing, from the climate crisis to sluggish economic growth. Our team has around 150 years of collective industry experience across space technology and finance; our wider vision is to use investment to clear the way for rapid advances in economic and social development.

GW: The space industry is arguably more than 50 years old, if you factor in efforts by the USA and the USSR to send humans into the cosmos. Why has private capital only recently started to flow into the market?

BG: Historically, space has been the domain of governments, with the USA and the USSR being the most obvious examples, as you say. In the late 80s and 90s, the U.S. and Europe realised that the most exciting advances in technology were taking place in the private sector, and that the latter in general was more efficient and better equipped to innovate and scale relevant space technology and associated services. Private investment is especially necessary to help companies scale and grow to a point where they can meet the needs of commercial users and governments.

GW: What are some of the opportunities in the space investment industry that are yielding returns now, or will in the near future?

BG: The best way to think about space industry investment is that in the future, every company will be a space company because space technology will underpin so much of ordinary life. The space sector now is worth about $447 billion, but Morgan Stanley estimates it to more than double, to $1 trillion, by 2040. That should give some sense of how much of an opportunity it is for investors.

In particular, we see real opportunities in building and manufacturing components, launch services, telecommunication, earth observation, navigation, and emerging segments such as space situational awareness and in-space manufacturing. The supply chain and applications segments of the space tech ecosystem is a huge market in which there are many companies that are both undervalued and under-invested in.

GW: There is an ESG application to investing in the space sector. Tell us more about that.

BG: There’s a really striking statistic on this topic that emerged from research conducted by Globant and Inmarsat. They found that existing and developing satellite technologies could cut a further 18% of total GHG emissions by 2040, and that the world could reach net zero up to 10 years ahead of the 2050 target date if industries made the most of existing and emerging space technologies.

To give you a concrete example of why this is – one of our portfolio companies, Kayrros, uses high-resolution satellite imagery and AI to track climate events such as wildfires, floods and leaks of noxious greenhouse gas emissions. They then provide the insights they draw from the data to companies and governments, so they can take appropriate action to reduce global warming and improve the resilience of infrastructure. That same data can be used to expose ‘greenwashing’ and misreporting.

GW: Lastly, Bogdan, what are some of the more medium-term investment opportunities in this industry? And how long will it realistically be for private capital to be able to not only invest, but make a return in a typical closed-ended fund structure?

BG: Medium term, space-as-a-service, onboard processing, data analytics and space-based cloud services all represent excellent opportunities. Already, we see a lot of M&A activity from strategic as well as financial investors across the industry. As regards IPOs, we expect at least one big space company to go public as early as next year; hopefully others will follow. But it’s important that the companies going public have solid business models and firm financial foundations. That’s a lesson learned from the disastrous special purpose acquisition companies (SPAC) saga, when a number of companies went public far too early, and without an underlying and robust value proposition. In any event, investors in growth funds will see liquidity much earlier than those in the early-stage funds.

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Bogdan Gogulan is CEO and Managing Partner of NewSpace Capital