Gains and Pains of Being Space Entrepreneur in Europe

    To Berlinner, Walter Ballheimer – space has no borders for imagination. After spending years on space satellites within university projects, his company grew into a revenue funded business. What does it take to start a space startups? Is there funding? Is now the time? We talk to Walter Ballheimer, new space entrepreneur, CEO and co-founder of German Orbital Systems to find out.

    Rain and pain

    Being one of the most active space countries in Europe, Germany happens to also be a good place for building satellites. Due to the country’s existing industrial expertise, it is well positioned in the European newspace. Nearly half of the European experiments conducted on ISS come from Germany. Space activities have become a continuous priority in the German federal research budgets, which provide new opportunities for exciting projects. However when it comes to funding and growth, like everywhere else, when it comes to space – everything is not as easy as it seems.

    “Germany is one of the largest contributors to the European Space Agency. At the same time getting funding for a German startup from the Agency is extremely complicated. The whole process is overloaded with paperwork and takes months. Eventually, we have to hire a dedicated person and the chance of getting funding is only 10%. Even if you get money from the Agency you will need to play according to their rules, and their rules are not the same as the rules of the free market.” – comments Ballheimer.

    Sure, there is a possibility to go to private investors or to the banks. Yet, despite the diverse startup ecosystem, German space as an industry remains very traditional. There are hardly any investors from other industries ready to opt-in into such a high capital endeavour. It is not the same as in the US, where new space investors are not afraid to invest initially their own capital and to later attract additional financing sources. Whilst venture capital companies are highly committed in the US, little of this commitment is noticed here in Europe. While, for the German banks, space means long development and project cycles, and thus are fraught with risk.

    “In the US you can get funded only with an idea and a prototype. We have a real product, real customers, talented team and zero venture capital money. Not because we are not looking for it, but because there are not too many investors in Europe who understand the industry and are ready to bet their money on it.”

    Focus on customers

    Since raising funding seemed like a complicated and very demanding deal, Ballheimer decided he would rather focus on making revenue and on being the best partner for his customers.

    One of German Orbital Systems customers is ECM Space Technologies, the company focusing on launch services for small satellites on the Soyuz launch vehicle. Started as a spin-out from the Technical University of Berlin, it is now one of the major players on the market. German Orbital Systems also works with and is looking to expand to other markets.

    “European space market is quite weak. There is no real demand for the services because many industries do not realise yet how they can benefit from space technology.”

    German Orbital System started from the Technical University of Berlin, where Walter Ballheimer and his co-founder Dmitriy Bogdanov were researching small satellites. The first client came from Kazakhstan. The client approached the University to build a satellite kit for them. The team started to work on the satellite but very quickly encountered a lot of problems and bureaucracy from the university side. Upon careful consideration the decision was made, – step back from the academia and start a company to deliver turnkey satellite solutions. That is how German Orbital Systems was born.

    Today Walter’s scientists design satellites and satellite mission based on clients’ individual needs, be it remote sensing, communication or scientific experiments. His team consists of 10 people, mostly engineers in the field of aerospace and electronics. All tasks not related to tech, including business development, marketing and PR fall on the shoulders of co-founders, who too came from aerospace engineering and satellite technology. Yet, things are going well. “Marketing is not rocket science” – smiles Ballheimer. “Plus the team is really driven by what they are doing.”

    Perfect time to be a space startup in Europe.

    “Cubesat development started in early 2000-s. It is a very young industry. Some 15 years ago the first cubesat standard was proposed, and today we already speak about the large IoT constellations and factories building satellites on a daily basis. Nobody knows how it will unfold in the next 10, 20, 50 years but in space everything is possible. That’s why working there feels right.”

    Europe is a fast follower when it comes to space. Readiness of European VCs to invest in new space is far behind than their peers in the US. But the good news is that in the next couple of years things will change. If you start today and manage to position yourself as a trusted partner, in the next couple of years you will be the industry leader. One of the Silicon Valley new space unicorns Planet Labs opened up an office in Berlin recently. This fact indicates well that new space is coming and there will be a point when investors will turn their heads on it.

    Read the article in the latest issue of CoFounder magazine.