Dreams and money

The aviation and space industry are becoming extremely attractive sectors for private businesses. It seems that in the coming years, it will be small innovative companies that will set global trends in this market. The industry is flooded with new players: according to the research company NewSpace Global, since 2013 the number of startups in the industry has grown almost tenfold - from 120 to more than 1,000. The dreams of young engineers are generously supported by investments. According to the British venture fund Seraphim Capital, in 2018 alone, about $3.3 billion was invested in aerospace startups. And in the period from 2012 to 2017, this industry has raised $10.2 billion, which is three times more than ten years before!

According to Deloitte analyst Erich Fischer, the aerospace industry has practically not evolved over the past 25 years. Every second company in this industry has not changed its strategy or business model and simply ignored the need to adapt to the requirements of the market and to the growing competition. That is why startups have every chance to catch up with the giants. Unlike the state-owned companies or large international corporations, small private companies use different approaches. They strive to reduce the final cost of their products and services in every way in order to make them accessible to a wide range of customers. To do this, they have to work faster, they have to generate more innovations, they have to use cross-sectoral technologies and solutions. For example, it took SpaceX five years and $400 million of investments in order to develop the carrier rocket Falcon 9, while NASA would have spent about $ 1.4 billion for a similar task, as calculated at the agency itself.

Access to the sky

The aerial domain and space have become available to startups when the entry barriers to the industry have been reduced. Over the past decades, technologies and various components have improved and become cheaper. As a result, private non-public companies are now present in almost every segment of the aerospace industry. The most rapidly developing trends in the aerospace industry are unmanned aerial vehicles, satellites, space communication systems, various services for maintaining space and aviation infrastructure, and finally, suborbital tourism.

For example, Chinese startups Space Transportation and Linkspace have recently successfully launched their reusable rockets – a cheap version of Falcon 9. The Swiss company Gamaya is building drones for agriculture and precision farming. The British startup OneWeb is already launching miniature satellites into the low Earth orbit – with its help by 2021 the company intends to provide high-speed Internet access throughout the world. Another British company, Orbex, is preparing the commercial release of its Prime rocket, which is specifically designed to launch ultralight satellites. In 2023, it should put into orbit the nanosatellites of a Swiss startup Astrocast, which plans to deploy a global support network for the Internet of things. The Canadian company LEO will begin to provide a service for monitoring the chemical composition of the earth`s surface, as well as tracking space debris in 2021. There are many such examples, and they all prove that private companies have moved from talk to action, from R & D and prototypes to commercial versions of products and the deployment of services.

Startups are not afraid to experiment, and as a result, new types of transport, new markets, and new categories of consumers are born right in front of our eyes. For example, Dassault Systèmes is working with Slovakian company AeroMobil that collects preorders for a flying car, capable of vertical take-off and landing (the first sample vehicle is expected to be released in 2020). It will be possible to move around in any terrain and in any weather: if the sky is clear, you rise into the air, if there is a thunderstorm, you move along the road. As they say in the company itself, developing such a project required the most, tight cross-sectoral interaction. After all, in order to successfully pass certification, such a flight-and-ground apparatus should meet the requirements of regulators of both industries at once. But the emergence of this type of transportation will give impetus to the development of new related types of business – schools for drivers/pilots, flight-car service workshops and so on.

How do startups manage to compete on equal terms with big companies? The thing is they have exactly the same engineering and marketing tools as the market leaders. Today, startups use all the benefits of cloud computing, computer vision, Big Data, as well as business intelligence and digital IT platforms. For example, the American company Boom Technologies uses the 3DEXPERIENCE platform by Dassault Systèmes to accelerate the design and development of its own Overture airliner, a commercial aircraft achieving the speed of Mach 2.2, which will make supersonic flights ubiquitous and accessible. The same platform is used for ideation, production and certification of Airbus products. At the same time, startups win in terms of flexibility and mobility, the use of agile principles in product development, and the ability to find and occupy new niches in the market. That is the way they get a competitive advantage over large companies.

What’s next?

The prospects are breathtaking, since we are talking about the massive use of the latest aerospace technologies, products and services. According to the Bank of America, by 2040 the volume of the international space market will grow from the current $339 billion to $2.7 trillion. Besides that, there is a huge market of commercial air travel, which, according to Boeing estimates, will reach more than $2 trillion by that time. It is expected that in the coming years, private innovative companies from around the world will join the race.

Of course, market leaders do not intend to give up their positions to new players. They also want to take advantage of the development of innovations by startups - and to achieve that they are creating infrastructure to grow such companies in-house, they acquire the complete teams and the whole technologies from the market, they create corporate venture funds and establish partnerships. For example, Airbus has its own startup accelerator, Airbus Bizlab, which has helped 72 external and 54 internal projects over the four years. Dassault Systèmes has its own international 3DEXPERIENCE Lab that helps startups develop the new concepts of next-generation air transport. Part of this project is the Xsun startup, which is developing new types of long-range unmanned aerial vehicles powered by solar energy. The company of the same “nest” – Zero 2 Infinity – is building an inexpensive and environmentally friendly platform for launching small-sized satellites using stratospheric balloons. In 2017, Boeing launched its HorizonX venture capital arm, which tracks promising ideas and invests in them. Northrop Grumman, Lockheed Martin and Raytheon work closely with satellite startups – for example, Lockheed Martin has a stake in Terran Orbital, which offers satellite surveillance services to various government departments. This means that the number of startups and the rate of innovation will only grow.

However, the risks for such startups are also high – higher than in many traditional industries. Large test costs make mistakes too expensive. The dreams of the rapid introduction of new technologies and products to the market are confronted by high demands and time-consuming certification processes. In this sense, the use of integrated digital solutions can substantially facilitate the life of innovative companies. In essence the Dassault Systèmes’ 3DEXPERIENCE platform offers new ways for ideation, design, manufacturing, testing, certification and operation. This platform automates many routine operations, reducing time for projects. As a result, startups can accelerate their programs and be the first to bring their prototypes to market. The evidence from the practice shows that investments in digitalization pay off rather soon, in 6-18 months. Such solutions help startups to survive and become successful in this quite challenging market. Since to achieve these goals they need to carefully and efficiently manage resources, carefully choose partners, not only raise money, but also gain the knowledge and experience from experienced mentors, and, if possible, optimize all their business processes