MapBrief™

It’s a question as old as capitalism itself: does Supply create its own Demand?

With Serious Money flooding the Earth Observation sector–Billionaire money, Former Treasury Secretary/ Wall Street money, etc.–the industry is SPAC’d up and hurling satellites and sensors (optical, radar, hyperspectral, you name it) into orbit at a dizzying rate.

But what if the engineering virtuosity required to successfully launch a satellite and successfully collect sensor data is not the most difficult problem to be solved? What if finding product-market fit for the resolution/sensor-type/temporal-cadence of your pixels is the greater challenge? What if with every successful launch and funding round it’s becoming a little more obvious that Earth Observation’s challenge isn’t Supply, it’s Demand?

Because while the Customer of First Resort–Big Government (specifically the defense and intel sectors)–is happy to do its part and even nurture new entrants by spreading its bets, it can’t support everyone’s heady revenue projections based on the premium incumbent pricing of the past. Recent entrants speak optimistically about segments such as Agriculture, Insurance, et cetera and imply an impressively diversified revenue base. To those of us who have watched the big incumbents (Maxar and Airbus) try and grow a variety of verticals over the past two decades with modest results, projections of ravenous commercial growth over, say, the next five years seem a little too frothy.

None of which would be particularly interesting if it wasn’t for the proclivity of Hot Money to head for the exits at the merest whiff of less-than-outsized returns. Everyone says the right things about Space being “a long term play” yet the sell-offs in the wake of a quarterly earnings announcement tell a familiar short-term story.

That the successful launching of faster/better/cheaper earth observation satellites is now regarded as commonplace is a massive engineering achievement justly celebrated. But that very success has spawned a whole different set of formidable challenges: somehow jump-starting real, tangible commercial demand that will satisfy the aggressive expectations of capital markets. Maybe there’s a megatrend that will arrive just in time–climate action, catch-all ESG initiatives, or who knows, the hasty construction of Metaverses(!) What’s for certain though is that Supply is not waiting on Demand.

And a reckoning is coming sooner, not later.

— Brian Timoney