Earth observation (EO) is one of the fastest growing segments of NewSpace. Three major players in the industry (Blacksky, Satellogic, and Planet) have taken advantage of the market’s space enthusiasm and have made plans to go public via SPAC in 2021, opening up their investor presentations and market estimates for public review (and criticism). Blacksky has since then completed its merger, now trading on the NYSE under BKSY ticker.
The SPAC Picture
Blacksky was the first firm to begin its SPAC journey, announcing plans in Feb 2021. Its investor presentation estimated a total addressable market (TAM) of $40 B, and they further identified six target verticals, each worth $2-4B TAM, with an annual growth rate (CAGR) of 32-35%.
Unlike its competitors that announced SPAC mergers later in the year, BlackSky benefits from vertical integration (via their 50% ownership of smallsat manufacturer LeoStella, and geospatial data analysis platform Spectra). By comparison, Satellogic and Planet focus more exclusively on procuring satellite imagery. Planet, with the largest existing EO constellation, has a greater presence in the B2B space, whereas Satellogic is still building out its space infrastructure and plans a more B2G focus.
With the two additional SPAC filings in July, we see an increase in the projected market for Earth Observation. Planet’s presentation estimates the total market at $129B, while Satellogic goes further and puts the value at $140B. Planet’s breakdown of the market goes beyond Satellite Data Services, while Satellogic does not provide a breakdown of its estimate. That said, both companies are operating fundamentally in the same market and providing directly competing services.
Following the completion of its merger in September, BlackSky published an updated investor slide deck from 9/21 - also showing the same 40B TAM. All of the revenue estimates remained the same as in the Feb projections except 2021 projected revenue which decreased from 46 to 40M (a nearly 15% decrease, perhaps as a result of losing two satellites during a launch earlier in the year).
Hold the enthusiasm?
As we discussed in our SPAC article, the SPAC process takes advantage of an SEC rule that, perhaps, allows firms to paint a somewhat rosier picture of the future than in a traditional IPO.
Pierre Lionnet, managing director of Eurospace, dug into the Satellogic SPAC presentation, comparing it that of BlackSky, and criticized the significant jump in market size that occured over only six months. Market research firms also had a more narrow sizing of the EO market (Mordor - 2.7B, GIA - 3.7B, PWC - 5.3B). PWC projected the highest CAGR of 20%+, which would put the TAM at around 13B by 2025.
Overall
What this comes down to is that EO is a sector in the early stages of development, and as any developing sector, it is highly volatile - subject both to rapid expansion and the possibility of over-optimism. Space Investment Quarterly (a NewSpace report published by Space Capital) has emphasized in each of the last few quarters that compared to other NewSpace sectors, Earth Observation has had far more activity in terms of funding rounds, vs investment $ amount, “indicating a nascent sector with more early-stage activity.”
Update 1/9/2022: In a recent podcast interview, Marc Bell quotes a commercial TAM for EO of $35B over the next five years, not including government contracts. This is more in line with BlackSky’s projections than Planet or Satellogic. Marc is the CEO of Terran Orbital, the most recent EO firm to pursue a SPAC merger.