Israel’s satellite startups play up resilient industry in face of SpaceX Falcon 9 explosion

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Two weeks ago, a Falcon 9 rocket manufactured and operated by SpaceX exploded during an ignition test. In the weeks since, the headlines have not seemed to get better for the company as Elon Musk has described the explosion and ensuing investigation as the most difficult period yet in the company’s history. Facebook (Co-)Founder and CEO Mark Zuckerberg has reportedly been extremely agitated about losing the satellite they had leased to bring web access to rural Africa.

But lost in this discussion internationally has been the tremendous impact the event will have on Spacecom, the Israeli company that manufactured the Amos-6 satellite. Its loss might also create communications disruptions in Israel. Spacecom was already under pressure after its Amos-5 satellite, launched at the beginning of the decade, unexpectedly stopped working last year. With comm satellite Amos-2 nearing the end of its life, that means Israel may soon be reliant on a single major communications satellite, the Amos-3, until alternative solutions can be found.

All this has created anxiety for some observers and there are hints of it with people intimate with Israel’s space industry. That might go double for the country’s few startups in the vertical. One of them, Spacepharma, has felt the pressure because of earlier delays in SpaceX’s cargo launches. Geektime asked CEO Ido Perel if the explosion frightened him.

“First of all of course, it’s probably quite similar in the big companies, but that’s how it goes,” he told us, with some vexation evident in his answer. You see, Spacepharma has a unique nanosat that includes a small lab for biology experiments, built for customers interested in going tests in space’s microgravitational environment. That lab was supposed to be in the sky by last December, and now they expect a second major delay. “You have frustrated customers. We’ve been frustrated with them for a long time because of these launches. I think it hurts the entire, let’s say, reliability of the entire industry.”

Saddling the loss as a satellite startup

SpaceCom successfully launches the Amos-2 communications satellite on December 27, 2003 from the Cosmodrome Baikonur, Kazakhstan (Photo by Maxim Marmur/Spacecom/Getty Images Israel)
SpaceCom successfully launches the Amos-2 communications satellite on December 27, 2003 from the Cosmodrome Baikonur, Kazakhstan (Photo by Maxim Marmur/Spacecom/Getty Images Israel)

While the irritation might be similar between bigger and smaller space companies, these kind of incidents might partially explain why there are fewer startups in the space space (finally got to say it). Investment can be intensive and ROI becomes a little more unpredictable with the wrong kind of weather, even further volatile once you worry your invaluable cargo might be destroyed in the occasional but steady rate of accidents in the industry.

“As a startup you’re very focused on your goals, timeline, your burn rate and know how much you have in the bank,” explains Perel. “You see the money going down and see these launches as revenue creators or milestones for additional investment, and of course once something like this is delayed it can put organizations into pressure. We’re lucky with our investors they’re understanding but of course it can be an issue. It happened once, twice; who knows if it happens again.”

Entire experiments are miniaturized to fit on chips merely centimeters in area (image: SpacePharma)
Entire experiments are miniaturized to fit on chips merely centimeters in area (image: SpacePharma)

“Of course you have your investors coming and asking, ‘Why did this happen?’ but they know you’re building your plan, meeting your deadline and have your backup plan. It’s force du jour, it’s out of our hands.”

Others in Israel think you need to be ready to saddle those risks if you pick this business. Daniel K. Rockberger is the COO at SkyFi, a company planning an array of nano communication satellites, definitely a disruptive approach to what the Amos-6 brings to the table. Besides saying he isn’t concerned about how this might affect smaller startups, “These things are usually taken into consideration with any space project. That’s what the insurance companies are for. Have a backup satellite just in case. It’s a dangerous business. You spend more money on these securities.”

Spacecom will manage to recoup most of the estimated $200 million it spent on constructing the Amos-6, thanks in large part to $173 million plus interest insurance arrangement from Israel Aerospace Industries, which should amount to $205 million according to Reuters. That hasn’t stopped Spacecom’s leadership from saying SpaceX “owes” their company a free launch, which itself is reportedly worth $50 million. So while the bits and parts seem to totally insured, the suggestion the company might have to pursue legal action to get that flight hints at the terms of the agreement with SpaceX either not guaranteeing one in the event of an accident, or the company lacking insurance to cover such an event.

SkyFi would deploy 60 nanosatellites around the world to enable global communications coverage with adjustable signal relays (screenshot, YouTube)
SkyFi would deploy 60 nanosatellites around the world to enable global communications coverage with adjustable signal relays (screenshot, YouTube)

“First of all, what’s nice is I think we’re the first cubesat that also has mission insurance, [which is] something our customers like,” Perel tells Geektime, something he says very few companies actually provide in terms of space insurance (gosh that sounds like the most underwhelming space-related industry ever). One of them, Willis, is just one of the companies insuring Spacepharma. The companies in the game have adapted to the new economy, now launching smaller satellites for SMEs as well. But as Perel implied, few cube satellite or nanosatellite companies are getting mission insurance. According to SkyFi COO Daniel K. Rockberger, next to none of them are getting insurance at all.

“Nanosatellites normally are not insured. It’s cheaper to take the risk and then build another one. It depends on how much you are investing, and to have the parts ready if you need another satellite.”

Israel’s space industry is too big to fail on one launch

Reports in the wake of the blast talked about the misfortunes experienced by SpaceCom, including the likely now delayed sale of the company to China’s Xinwei group for $285 million. But they have insurance money in hand and many players in industry and government have incentive to make sure an Amos-7 is put together as quickly as possible. So, is the panic justified?

“I don’t think so,” Rockberger iterated to Geektime. “I don’t think the problem is because of one failure of a launch but the general space policy and what Israel needs, where we invest and how we invest. There’s not enough money going in anywhere. One failure isn’t going to destroy the industry for sure. Israel has so many abilities, but we’re not living up to our abilities and we could be much bigger player in the world.”

A SpaceX Falcon 9 rocket on its seventh official Commercial Resupply (CRS) mission to the orbiting International Space Station explodes on Sunday, June 28, 2015, after launching from Launch Complex 40 at the Cape Canaveral Air Force Station in Florida. (Red Huber/Orlando Sentinel/TNS via Getty Images Israel)
A SpaceX Falcon 9 rocket on its seventh official Commercial Resupply (CRS) mission to the orbiting International Space Station explodes on Sunday, June 28, 2015, after launching from Launch Complex 40 at the Cape Canaveral Air Force Station in Florida. (Red Huber/Orlando Sentinel/TNS via Getty Images Israel)

Perel’s Spacepharma also has a backup plan, with a second satellite ready to go up by the end of the year if things got too hot under the collar within the eight weeks prior to launch. Well, the explosion occurred six weeks out from a launch around Halloween from Vandenberg Air Force Base in Florida. The backup isn’t a SpaceX launch.

“I think on the one hand the country does invest funds, not as much as everybody would like to see but Israel understands it’s an important industry and it’s a state of the art industry. Once you demonstrate your capabilities there, it demonstrates how good and great you are,” Perel explained to Geektime. He believes the event will have some difficult repercussions on Israel’s growing space sector, something that he thinks is unavoidable with such a huge event occurring to such a young industry. “I think it will [impact]. It’s a very big bump in the road. Of course it hurts IAI where they build the satellites and SpaceCom. Smaller companies are hurt by this sort of thing as fewer vendors are launching. The government is showing their support, but if there is a time for government to step up it’s now.”

When asked if it was protocol to put cargo on a rocket while still testing it prior to launch, Perel said he wasn’t completely familiar with SpaceX’s procedures, but did not signal that it was unusual. That being said, his company assumed right up until the last minute anything could go wrong, which it did. With Plan B ready to go, it seems like the right lesson other aspiring nanosatellite startups should take from the Falcon 9 debacle.

“We were waiting until the last minute, approximately eight weeks prior to launch and that’s when we would load the materials and ship it to the launch site. We’ve already done that with SpaceX, but we’re going to use the backup for the first one [through another launch service provider] and the SpaceX for other customers.”

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