The rocket science of building a satellite company

Building and launching a satellite only partially involves rocket science, but developing and operating a device orbiting the Earth is nevertheless extremely complex.

From design and engineering to funding and partnerships, getting a satellite company off the ground takes effort from founders with bold ideas, engineers with experience and skill, and funders with deep pockets and sizable ambitions.

The first stage of building a satellite company doesn’t involve specs, design, or funding—it’s simply an idea. Satellite companies like Lynk, which connects satellites to smartphones, and hyperspectral imaging startup Orbital Sidekick spent their early days not poring over blueprints, but working to develop a business case for the market, searching for what Dan Katz, the CEO and co-founder of Orbital Sidekick, told Tech Brew should be a company’s “North Star.”

"It’s not about building a piece of hardware and putting it in space; it’s about building a business solving a customer’s problem,” Charles Miller, co-founder and CEO of Lynk, told Tech Brew. “A lot of space entrepreneurs spend so much time thinking about, ‘Well, I could build X, Y, and Z.’ And they spend a ton of time figuring out the technology and what they can do, but then they fail to find a customer who really cares.”

The right stuff

Once the business case is developed, the strategy comes next: Build the satellites in-house or rely on a third party? What components are necessary to make the satellites functional? Miller said that in Lynk’s case, asking an intern to design certain components was one way to slash costs. The company saved about $95,000 per satellite by designing and building reaction wheels in-house, for example.

Miller said that when building a team, it’s important to “have a mix of both extremely bright and motivated” young, ambitious talent and industry veterans with a wealth of experience.

But those are just the first hurdles. Once a single satellite is built, getting government approval to put it in orbit is no easy task. The US space business is overseen by an alphabet soup of federal agencies, including the FAA, FCC, and NOAA (respectively, the Federal Aviation Administration, the Federal Communications Commission, and the National Oceanic and Atmospheric Administration).

The FAA focuses on the launch side of the business, while the FCC oversees communications in space. The process to get an FCC license to operate in space, which Katz said took Orbital Sidekick two years, consisted of demonstrating to the agency that the constellation would be properly managed and, ultimately, decommissioned.

A company like Orbital Sidekick, which specializes in remote sensing and imagery, is also subject to oversight from NOAA, which ensures that the data being collected is used responsibly and protected through encryption. Katz said getting NOAA approval was a quicker process, taking just a few months.

Selling satellites

When the satellite is ready for launch and the necessary government approvals are secured, the next step is finding a launch partner. Most satellite companies don’t specialize in actually traveling to space, and that leaves them with limited options when it comes to launch. Katz and Miller’s companies both hopped aboard the International Space Station in their initial test phases, but when it came to commercialization, the most affordable and readily available company to work with was SpaceX, specifically its rideshare program.

Even still, one of the biggest challenges in building a space company is securing funding. Persuading investors that the business is solid is no easy task: The companies must try to demonstrate that the business case makes sense and that it’s sustainable beyond the first satellite.

“Any space company is capital-intensive,” Katz told Tech Brew. “You have to be able to show and demonstrate that you’re going to have a pathway to raise considerably more capital down the line to complete your whole vision.”

Katz said that Orbital Sidekick first focused on finding investors with experience in funding and developing space startups before pivoting toward wooing businesses in the energy sector that could directly benefit from the data collected by its hyperspectral imaging satellites. Often, a mix of funding from traditional venture capitalists, corporate VCs, and government contracts is critical to literally getting a satellite off the ground.

Private funding is often a major factor in the success of a space startup, but the government’s hand in funding the space industry is also massive. Orbital Sidekick raised $16 million in Series A funding in 2020 that was matched dollar-for-dollar through an Air Force contract. Government contracts can be a critical part of a constellation’s funding, but Miller emphasized that they shouldn’t be the only source of funding.

“In the long term, you need to have some private investment; that’s fundamental,” he said, adding that those first investments can be supplemented with government funds. “You need to have a story that resonates. The government doesn’t want to be the sole financier of these deals, and...I can’t think of anybody who succeeded [with] a government-only-based business plan. You need to have some private investment. But if you have private investment, you know, the government can supplement it.”

Launching the first satellite into orbit is an accomplishment, but then companies have to tackle the rest of the constellation. When it comes to scale, Katz said that being prepared to expand is critical in moving from just one satellite to a constellation of dozens or, in some cases, thousands.

“You have to have your vision in place before you launch that first proof of concept or prototype satellite and be quite clear about what the exit criteria is, and your what success criteria is for that mission,” Katz said. “Setting clear success criteria for those early missions with the explicit goal of moving to production and commercialization of that system is really important for your investors, your board, your customers, everyone just to really be super aligned on where that’s going. Ideally, you already have everything set up, ready to go, and flip the switch as soon as you meet those success criteria.”