The startup world is a cruel one. The statistics make it clear – 90% of startups die prematurely. When it comes to hardware startups, the rate is even higher. With high entry barriers, high R&D risks, and long product development cycle, the aerospace industry is especially tough one to get through. The probability of success for NewSpace companies seems to be quite low, it seems.
Yet, the governments and corporations are motivated to foster the growth of innovative small & medium enterprises (SMEs) in such specific domain as aerospace. The first ones are motivated to increase national technological capacities and spur economic growth. The second ones are willing to be competitive and embrace technological innovation originated outside of the organization.
Startups are more dynamic at developing new, disruptive products. Their growth and agility led to the emergence of a specific type of development institutions – accelerators.
Accelerators aim at supporting companies by initial investment, mentorship, access to infrastructure, access to the network of partners, public and government relations. Accelerators may be a public or a private infrastructure, have a general profile, focus on a particular niche or even specific narrow aerospace scope with correspondent differences in the set of tools provided to young businesses.
This article aims at reviewing certain accelerator programs suitable for aerospace startups, both hardware, and software, upstream and downstream oriented, in so helping you to choose the best form of support that a young company can get.
Starburst Accelerator is certainly worth noting in a first place as it focuses directly on accelerating young aerospace companies in such domains as space hardware, space applications, drones, aircraft maintenance, repair & overhaul, new materials, sensors and telecom hardware, Big Data, AI, and Cybersecurity. Headquartered in Paris, it has branch offices in Munich, Los-Angeles, and Singapore. Starburst organizes the free pitch-sessions for startups all around the world – from Brazil to Canada. It mostly focuses on startups on later stages, with a ready prototype of the product, but may consider other stages as well.
Starburst business model is based on fees paid by corporate partners. The startups pay the success fee on sales generated for startups and money raised. Accelerator doesn’t hold any share of the accelerated companies. However, in 2016 Starburst founded its own $200M venture fund with Leonie Hill Capital. Starburst Ventures will aim to back about 35 startups over the next three years. It will typically write checks of $3 million to $5 million for Series A stage deals, reserving capital for larger follow-on rounds as well.
Starburst Accelerator positions itself as an entity scouting for startups and facilitating connections between startups and its major industry partners. The core of acceleration program is based on quality networking & calibrated business meetings. The set of benefits provided by Starburst includes office, helping in seed-investment attraction through business angels, VCs and business partners, strategic consulting, mentorship, access to the ecosystem of startups and industrial partners.
Airbus BizLab is a good example of the aerospace-focused corporate accelerator. It is important to note that, since Airbus Group is going through the reorganization process, hence the place and functions of BizLab as Airbus unit may be the subject to significant change, depending on its place in a corporate hierarchy.
Airbus BizLab acts globally and conducts acceleration sessions in Toulouse, Hamburg, and Bangalore. During the 6-month program, start-ups gain access to a large number of Airbus coaches, technical and business experts, and mentors in various domains, and participate in a Demo Day with Airbus decision makers, venture capitalists, Airbus customers, and partners. The partners include Microsoft Ventures, I-Lab, Orange Fab, Club Open Innovation, The Bridge by Coca-Cola, Beta-I and more.
Since BizLab is a corporate accelerator, access to the program is naturally free for startups. Airbus BizLab does not get equity in startups, with investments being handled by Airbus Group Ventures – another Airbus Group division. However, Airbus may hold some rights on foreground IP of accelerated startup.
BizLab acceleration program is segmented into 3 loops with concrete deliverables expected at the end of each one, where startups build the MVP, test it and based on customers feedbacks pivot or continue.
BizLab focuses strongly on building up an innovative ecosystem around Airbus Group, supporting the internal initiatives of Airbus workers as well as external startups. It has a pretty wide scope of support: in addition to aerospace, its data analytics, autonomy, Unmanned Aerial Vehicle (UAV), Urban Air Mobility, Electrification, Robotics, 3d Printing, IoT, Smart city, Cybersecurity, VR, AR, Satellite imagery, and Blockchain – everything that may be applied to diversification of Airbus business and tackles new challenges of digitalization. Bizlab focuses on early-stage projects and offers a cash funding option of 10,000€ for all startups, paid out immediately after a successful start of the acceleration program.
500 Startups, Y Combinator, Starta…
Another kind of accelerator, suitable for an aerospace startup is the accelerator operating on general acceleration models like 500 Startups, Y Combinator or Starta. Thwe good news is – the hype around NewSpace made general profile accelerators susceptible to applications from aerospace companies. In this kind of accelerators the startup gets the initial funding for project implementation in exchange for the company share, i.e. accelerator invests into the promising projects. Plus, it provides the young teams with office space, organizes meetings, provides expert and mentoring support. The accelerator is a commercial enterprise, so it earns the money in all the ways possible, including acceleration fee, payment for office rent etc – yes, it’s far from a charity organization.
The example of a more focused accelerator is Lemnos Labs, which nurtured Spire Global. Lemnos is an early-stage venture fund focused on hardware and the growing software ecosystem surrounding the hardware renaissance. Headquartered in San-Francisco, this hardware accelerator invests $250K – $1M in exchange for 10% of the company.
The focus, besides aerospace, includes robotics, IoT, agriculture, but hardware only. Lemnos provides coworking space for 5-14 months period while the maximum duration of the acceleration is not determined. Acceleration program is not formalized and includes the typical set of features (i.e. mentorship, expert support etc). Lemnos also builds its own ecosystem to support the companies after the end of the program. It works with 10-12 companies per year with more than 20 projects supported to date.
ESA Business Incubation Centres
There is also a number of public efforts aimed at promoting entrepreneurship in the space domain. The efforts may be on the level of states or even on the international level. The good example of a comprehensive public initiative is ESA’s Business Incubation Centres (BICs) initiated by ESA’s Technology Transfer Programme Office (TTPO), which helps entrepreneurs to turn space-related business ideas into commercial companies providing technical expertise and business development support.
There are 18 business incubation centers all over Europe, many of them are tied to existing ESA facilities. The idea behind BICs is to commercialize space technology by promoting the technological spin-off’s rather than to foster the growth of new rocket and satellite startups. The BIC focuses on the following criteria – idea must be based on space-related technology, expertise and/or application and target the non-space market. Two other eligibility criteria: the company must not be older than five years and has to be located at and managed from preferred ESA BIC. The participation in the program is free of charge.
BICs are conducting their activities in cooperation with the partners’ network depending on the profile of each center. The initiative provides support to more than 130 companies every year in Europe, and more than 400 start-ups companies have received support to date. Yet, the startups are never about upstream space – BIC’s companies are mostly focusing on developing space applications, space data-driven value-added products etc.
National programs for aerospace startups
There are analogs of ESA BICs on a national level such as UK Satellite Applications Catapult. This UK government initiative is far more complex than a typical accelerator. It includes the scientific research, education, SME support with a wide variety of tools and doesn’t proclaim itself as an aerospace accelerator, while certainly performing some of the typical accelerator functions. Some other examples of aerospace-focused accelerators operating in certain countries include Canadian Max-Q, Australian Delta-V, and Russian Skolkovo Foundation Space Cluster. The last one is certainly worth noting as an effort to commercialize the government-driven Russian space industry. In doing so, Skolkovo provides non-dilutive funding, access to infrastructure and different services, from IP-protection to collective use centers. The acceleration in Russia mainly includes contacting the startups to government or quasi-government entities, which is not easy for startups alone.
Specific accelerators for aerospace startups are more common in Europe. In the US aerospace startups tend to participate in commercial accelerators like Starta, 500 Startups, Lemnos Labs). Aerospace accelerators usually work globally, searching for startups in every promising region of the world: from India to Canada – the number of aerospace startups is significantly lower compared to IT-ecosystems, so they have to act globally in order to form the pipeline.
Curiously enough, most notable aerospace accelerators (Starburst Accelerator and Airbus BizLab) are working on the side of major industry players, rather than startups. The startups have to consider this while dealing with this type of accelerator. It is important to understand that accelerator is always pursuing its own goals, rather than yours – whether it’s goal of building up national technological capabilities and economic growth or getting profit. The goal of a startup is to understand how to benefit from it.
Specialized accelerators usually don’t use common accelerator business model of possessing the shares of accelerated companies. They are either having the public funding or being paid for technology scouting, i.e. finding promising projects for strategic investments by major players.
Public funded accelerators, such as ESA incubators network and Satellite Applications Catapult might be a good choice for early-stage company unwilling to sell its share to the investor. They tend to support a larger variety of projects based on more formal selection criteria. The infrastructure of public support of aerospace startups is well developed in Europe – there are national and international institutions aimed at developing European ecosystem of NewSpace companies.
Yet, one more outcome is that sometimes you don’t have to search for focused aerospace accelerator – you can just apply to one with a more general profile. All the hype, created by NewSpace champions, SpaceX, Planet etc, was beneficial for aerospace startups, as even the private accelerators began to consider these companies for acceleration program and investment. Space, drones, IoT/AI/BigData driven satellite applications have become quite trendy in recent years – you can find them in the portfolio of 500 Startups, Y Combinator, TechStars. That’s why if you aim at entering US market, it might be more useful to try the general profile accelerator program.
In the end, the choice is always on you – whether you go for a public, corporate, or private accelerator program, general or niche-specific one. I hope this article gave you some insights on the possibilities of gaining support for aerospace startups.