Russian space startups: prospects on international market
Private cosmonautics also exists in Russia, although not in the form of companies of the level of Elon Musk's SpaceX. A number of startups in this field have operated in the country for decades, some with the participation of Roscosmos, some exclusively as private companies. Artur Safiulin, columnist for Realnoe Vremya and economist with many years of banking experience, talks about the most remarkable companies in this field and their prospects: if in Western countries the market for private space exploration has long been divided, then in developing countries that are just planning their first space programmes they can fit in well.
Today, I would like to talk about Russian private space exploration. Yes, there is such thing, no matter how paradoxical it may sound, given the degree of nationalisation of everything in the country's economy, where the main force is the state and state-owned companies, and budget expenditures in all areas are the locomotives of development. It looks sad, the results will be judged by our descendants, who will surely wonder — how our generations allowed the state to crush the private economy and deprive the entrepreneurial free initiative of the opportunity to work miracles. Russian private space field is based solely on enthusiasts who are fascinated by space itself, not the opportunity to make a fortune on it. Let's analyse them.
In general, this industry is not so profitable — for example, the marginality of satellite construction for the customer is only 5-7%. Development and investment involves a long time. Attracting investment is the main problem of companies in the sector. Problems with clear planning of the exit from investments inhibits investors, such projects are mainly engaged in the so-called business angels, people who have made a fortune and want to play Elon Musk.
Attracting Western investors in the current conditions is problematic — the country is under sanctions. Any team that gets such funding immediately moves abroad. Besides, there are difficulties with the acquisition of microchips adapted for use in space abroad, which is subject to a ban.
International experience shows that private space exploration can develop only with the support of the state. In the early 2000s, the United States, so unloved by us, adopted a number of bills that facilitated access to the market for private companies and made it possible to work for state orders. Space X and other companies appeared thanks to these measures. Elon Musk was given access to the engine developed in the 1960s, which he upgraded to Merlin. Besides, it was possible to use spaceports and test stands, and to hire NASA employees.
Examples of Russian companies
This project aimed to develop Taimyr ultralight rocket for launching small spacecraft weighing up to 180 kg. The company's plans included a number of missiles and modules. The company conducted fire tests of liquid rocket engine and tested the control system in real flight. The core funding was from a private investor, after whose withdrawal the project was put on pause, and the company is now just trying to survive, but is not closed down.
This project is much more successful, partly because of its focus on space instrument engineering. Azmerit develops a line of low-cost, moderate-precision star trackers for nano-and microsatellites. The company was created in 2012 by enthusiastic engineers with a small infusion of capital. Due to the lack of funding in the proper amount, the first sample of the star tracker MZD AZDK-1 was launched only in 2020, having passed verification tests in situ and ground tests, while their direct Canadian competitor did it in two years. As mentioned earlier, the main problem of the private space industry is financing. Our engineers have some good ideas, and everyone is talking about it. The racker from Azmerit turned out to be cheaper and with decent accuracy, weight-and-dimensional characteristics.
Azmerit was saved by the state's participation in the project — since 2016, the company has actively cooperated with the state holding RKS (Russian Space Systems, which unites precision instrument engineering enterprises). The holding company and Skolkovo Foundation acted as investors of the project. In 2017, RKS Holding acquired a 33,4% stake in Azmerit PLC. This was the first precedent of Roscosmos investing in private space exploration. As they noted in Azmerit, startups can compete with large agencies only in the field of microsatellites, where they develop faster, and it is more convenient for Roscosmos to order the so-called “cubesats” on the side, test them in operation, and study the risks of technologies before launching its line. But the development of heavy-weight missiles, manned ships — this is already a cost of hundreds of millions of dollars, which private owners can not afford, if you are not a billionaire like Musk.
In the summer of 2020, this company was allowed to compete for the creation of the medium-class rocket Soyuz-7 (Amur) on methane fuel. The contest was won by a more familiar contractor — Progress missile space centre, but the participation itself is already very significant, in my opinion. The company was established in 2014 as part of Skolkovo Foundation, to develop rocket and space technology and provide services for tourist suborbital flights on a reusable rocket. For the launches, it was planned to create a private spaceport in Nizhny Novgorod Oblast.
In April 2021, it was reported that the company was on the verge of closure and 50 design engineers would either lose their jobs or go under the wing of Roscosmos. The reasons were insurmountable difficulties in coordinating the requirements for the cosmodrome project with the local authorities and the inability to obtain from the ministry of defence the necessary regulatory documentation for the design of a suborbital tourist rocket.
The latest private project to create an ultralight launch vehicle. The project is funded by a group of private investors in the amount of $50 million. The 20-metre launch vehicle weighing 13 tonnes will be able to place up to 250 kilogrammes of cargo into orbit. The first commercial launches are scheduled for 2024. The main niche will be the delivery of small satellites to orbit for IT companies. The plans also include the construction of two spaceports — Europe (Dagestan) and Asia in the Far East.
Government support and the need to facilitate regulation of the industry
The sad fate of startups, especially in the construction of launch vehicles (missiles), is explained by barriers to pre-flight procedures. For example, to put a product on board of Roscosmos, it is necessary to have a fully Russian component base, the rules of military acceptance apply, and it is necessary to pass the 60-year cycle of ground tests. As an experiment, in my opinion, it is necessary to allow private manufacturers to decide for themselves how many tests are necessary before the rocket takes off.
It is very difficult to resolve the issue of where to carry out test launches of private missiles. According to the law, the launch of missiles in the Russian Federation is possible only from the landfills of the ministry of defence, which are regime facilities, where they are not allowed just like that. Kosmokurs company, faced with this problem, wanted to build its own spaceport, but Nizhny Novgorod officials were confused by the company's request to coordinate the construction — no one understood what rules regulated such construction, because no one had done this before. There are no norms in nature.
Some progress in regulatory regulation is already being observed. In particular, it is easier to obtain a license to work in space — startups in the early stages of development do not need to get it.
The decisive document may be the law on business activity in space, which was prepared in the Federation Council and sent to the government in March 2021. If it is adopted, the very concept of space business will be enshrined in our legislation for the first time. In addition to the most fundamental law, it is necessary to look at other nuances — by-laws, regulatory and technical documentation, certification conditions. It is necessary to provide full access to them for private producers, at least.
In 2020, the NTI (National Technology Initiative) and Roscosmos began discussing the Private Space roadmap. The task is to provide a new legislative framework for the structure of space industry. Roscosmos is ready to give access to its technologies, using the experience of Rosatom.
And of course, the key issue remains the financing of private space exploration — without the participation of the state in the form of access to the state order, we will not have a repeat of success stories, as in the United States. In my opinion, it is worth a try, it will not get worse for sure. Roscosmos can concentrate on global projects and programmes, and give small parts of the programmes to private owners. For example, the creation of an experimental rocket will cost a private owner about 3 billion rubles, three times cheaper than the product of Roscosmos. In the case of a state order, the financing will follow automatically, there is plenty of private money in the country.
The direct participation of Roscosmos in the capital of private companies is also a good option: in addition to the share in the already mentioned Azmerit, there is a successful experience of participation in the companies Geoscan Technologies for small satellites, Fifth Generation experimental design bureau, and Digital Solutions scientific and production enterprise for on-board equipment and electronics.
Prospects in international market
Unfortunately, even with the support of the state, Russian startups will not have the opportunity to claim any significant market share, since it has long been divided among other players. Satellite services play an increasingly important role in life, and a vast market is emerging around them, which has stimulated the rapid development of space technologies over the past 15 years. To be honest, we are a little late for entering.
International sales of our private companies can be counted on the fingers of one hand — Azmerit sold 5 trackers to South Korea, Sputnix (for the production of satellites) signed contracts with customers in Tunisia, Kazakhstan, Myanmar. Due to geopolitical difficulties, the markets of Europe and North America are closed to us. Our niche may be countries that have no experience in space and would like to learn. The main competitive advantage is the low price of products — due to the weak ruble and low wages.
A little bit about the figures of global industry. The global space industry totalled $385 billion in 2020. By 2040, it is projected to grow to $1,1 trillion. But of this large total pie, the “real” cosmonautics does not account for so much: $4 billion — the production of spacecraft, $1,7 billion — launch market, $3 billion — ground receiving stations, $13 billion — the services of satellite providers.
There are now about one and a half hundred startups in the world that are engaged in the development of launch vehicles. Private space exploration has left the confines of Silicon Valley and is going all over the world. In China, after the opening of the space sector for businesses in 2014, 80 such companies have emerged. Satellite production remains the most popular and financially intensive business.
In addition, private space exploration is driven forward by the prospects of participation in global interplanetary expeditions, which are engaged in by major players. For example, if it is possible to establish industrial development of resources on the Moon, then the space industry will be covered by the second “gold rush”. Let's hope that we will see Russian names in the ranks of the new companies-leaders of private space exploration.