Go big or go home

Republic Capital
7 min readJul 14, 2023

Once the sole domain of government agencies, space is rapidly transitioning into a commercialized marketplace. SpaceX’s ambitious launch schedule — on track for about 90 launches in 2023 — serves as a potent symbol of this new era, with rockets transporting satellite payloads into orbit on a nearly bi-weekly basis. As SpaceX continues to pioneer strategies that dramatically reduce launch costs, the price tag of space-based operations has descended towards affordability. The cost to deploy a kilogram payload into low Earth orbit (LEO) has fallen 95% over the past two decades. The newfound feasibility of these ventures enables satellite operators and manufacturers to innovate at an unprecedented scale, unlocking a wealth of opportunities for value creation.

Satellites have transformed from science-first novelties into invaluable tools for industries across the public and private sectors by bridging gaps in broadband to connect those without Internet access, offering detailed observations of Earth to predict greenhouse gas emissions, and providing space situational awareness to help deter war. Many of these tasks are done today using smallsats — compact, fridge-sized systems that orbit in LEO. In reflection of this increased dependency, the number of satellites in orbit today has skyrocketed to nearly 10,000, with ~2,700 being added last year alone. Experts predict that this number will continue to grow exponentially, with forecasts indicating nearly 60,000 active satellites by 2030 as more companies seize the opportunity to participate in the new space economy.

Yet, as the industry matures, so too does the technology driving it. The previous decade bore witness to a trend towards miniaturization, with small, cost-effective satellites becoming the norm. However, the tide is beginning to turn as we expect satellites to expand in size once again. We are moving from a mass constrained world and into a mass abundant one. To capitalize on the burgeoning business of space, satellite manufacturers must embrace a simple mantra: Go big or go home — literally.

Source: DALL·E 2

Why start small?

The push towards smaller satellites unsurprisingly has its roots in the staggering costs associated with space missions. Historically, the design and manufacture of satellites were both time-consuming and resource-intensive thanks to high-touch specifications and exotic supply chains. This means that each satellite is bespoke and designed for a specific customer’s payload. Large satellites used in civilian applications, such as weather monitoring, cost nearly $300M, while military satellites with sensitive payloads could cost an additional $100M. One-ton payload satellites still cost somewhere in the realm of $150M+ from reputable prime bus manufacturers. Costs can quickly climb with more complicated mission requirements. Some buses in this class include: Airbus’ Eurostar Series, Boeing’s 702, Lockheed Martin’s AS2100, and Maxar’s SSL-1300. Many of these satellites have heritage dating back to the 1980s and 1990s, highlighting their reliability, but antiquated design and fabrication process.

Inmarsat’s Sentinel-1 (2013) Cost €600M and Weighs Over 6 Tons | Source: Skybrokers

Adding to this cost was the exorbitant price of space launches, where every extra kilogram sent to orbit translated into tens of thousands of dollars in additional costs. United Launch Alliance charged the US government (and thereby the US taxpayer) $380M per launch less than a decade ago. These prohibitive expenses necessitated the development of leaner, lighter satellite systems.

To tackle this initial cost issue, manufacturers embarked on a journey towards miniaturization, creating a new generation of more compact, cost-effective satellites. This strategy not only brought down the cost of individual satellites but also allowed multiple units to be launched simultaneously via a service known as ridesharing, further optimizing launch costs. SpaceX’s Falcon 9 has brought total launch cost down to a more affordable $67M per launch today with customers charged on a per kilogram basis with online purchase available.

Smallsats, satellites with a mass of less than 500 kilograms, and cubesats, a type of modularized smallsat, became popular for their cost-effectiveness, quick turnaround times, and their ability to host a variety of instruments despite their small size. Thus, as microprocessors shrunk and solar panels became more efficient, more performance could be generated with less, and smallsats came into vogue.

Rendering of Planet Smallsats in LEO | Source: Financial Times

Many companies, such as Earth observation giants Planet and BlackSky, developed successful business models utilizing smallsats. This was what we consider to be the first generation of new satellite companies. They were characterized by their ability to scale down and adapt to the technology limitations of the time to provide a gross profitable service. The early LEO mega-constellations, such as SpaceX’s Starlink, also adopted these smaller satellites and demonstrated the scalable validity of such an approach. By opting for a smaller, mass-producible satellite design, SpaceX is able to deploy hundreds of its vertically integrated satellites at once, creating a web of connectivity across the globe.

However, while the miniaturization trend serves an important purpose, it also has its limitations. The industry is now beginning to transition to a second new satellite generation, one defined by upsizing and fueled by the emerging opportunities and needs of our rapidly evolving space economy.

Size matters… and bigger is better

The consensus opinion in the space industry right now is that smallsats will be the defining satellite of the next decade and beyond. This line of thinking is flawed in that it holds all other innovation constant. We have strong conviction that large satellites will begin to replace smallsats.

SpaceX’s Starship is moving towards full commercial operations after its semi-successful orbital flight test in April. With the development of the heavy-lift launch vehicle, access to space will become dramatically cheaper. Starship removes mass as a constraint — with targeted launch costs as low as $100/kg to LEO vs. ~$3,000/kg to LEO today via the Falcon 9 — to become 30x more efficient. That’s not to mention the other commercial launch providers working towards heavy-lift vehicles, like Blue Origin’s New Glenn and Relativity Space’s Terran-R. As more providers come to market and compete with one another, launch costs will continue to fall, further incentivizing satellite manufacturers to go bigger. Because of this and increased payload capacity, non-government entities will be able to launch larger satellites and infrastructure into LEO and beyond, cheaper and more often.

Therefore, with mass no longer acting as the bottleneck factor, what looks “optimal” rapidly changes. Legacy large satellite bus manufacturers have historically relied on space-grade electronics, complex internal components, expensive energy systems, and composite structures. Now, satellite manufacturers can turn their attention towards commercial off-the-shelf components that may be heavier, but are also better performing and up to 10x more cost effective. For example, rather than buying lower-performance radiation-hardened electronics (few large transistors), payload manufacturers will have the option to opt for cutting-edge terrestrial chips (many small transistors) covered in heavy aluminum shielding. As costs drop and the need for mass considerations dissipate, customers will optimize for large, high-performance satellites.

Large satellites and improving technology also open up new domains, previously inaccessible to traditional systems. Satellites in Very Low Earth Orbit (VLEO) operate at an altitude under 450 km. The primary challenge is the increased atmospheric drag experienced at these lower altitudes, which can shorten a satellite’s operational lifespan due to orbital decay. Larger satellites, however, with their more substantial mass and enhanced propulsion systems, can counteract this decay more effectively, making them well-suited for VLEO operations. This ability to orbit in VLEO offers distinct advantages, such as improved resolution for Earth observation satellites due to their proximity to the planet. Furthermore, communication satellites in VLEO can offer lower latency, thus providing faster data transmission, which is critical for applications such as real-time remote sensing and broadband services. Thus, larger satellites not only enable, but also capitalize on the opportunities presented by the VLEO environment.

Placing our bets

The shift to large satellites is an underinvested thesis. The technologies and economics to make large satellites a venture-backable sub-vertical did not exist only a few years ago. As such, many space investments of the past decade have been allocated towards smallsat companies with the goals of creating LEO constellations. We believe that the next wave of satellite winners will be largesat developers, and we’ve allocated accordingly.

K2 Space aims to reset the large satellite category by delivering a platform with the power, mass and volume of today’s exquisite satellites at the per unit cost of today’s small satellites. To do this, it is redesigning the satellite from the reaction wheel up, taking advantage of the mass allowance provided by launch vehicles like Falcon 9 and Starship. K2 Space intends to be the platform for the next generation of space development, serving customers across Science (NASA), National Security, and Commercial (telecom) use cases. Republic Capital co-led the company’s seed round alongside First Round Capital in early 2023.

Albedo, another Republic Capital portfolio company, is developing VLEO satellites that are to capture satellite imagery at a resolution 9x higher and thermal imagery at a resolution 300x higher than anything on the market today. Albedo is capable of such resolution due to its large, proprietary satellites which are designed to fly very close to the Earth. Republic Capital invested in the company’s Series A, led by Breakthrough Energy.

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Republic Capital

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