European space businesses lack the funds to fly

The space industry is set to play a major role in helping the European Union meet ambitious climate, digital and sustainability goals.

A lack of accessible financing options is holding European space startups back as supply shortages and price rises risk derailing the industry’s post-pandemic recovery, warns a white paper from the Access Space Alliance (ASA) small satellite industry group.

The European Union has been making more funding available for the sector, recently approving its space program’s largest-ever budget of €14.88 billion ($17.3 billion) for 2021-2027.

However, ASA founder and board member Betty Bonnardel said European space startups face many challenges in securing public and private investments, which are still larger in the U.S. and other markets outside Europe.

“The funding itself is one thing — increasing funding is important, but beyond that you need to facilitate the access to that funding for the small companies,” Bonnardel said in an interview.

“If you have a small startup that has to really scour through a lot of programs to be able to fund, or apply for a funding scheme where the chances of success are extremely low, it makes their life very difficult because it’s not time effective and it creates an extra risk. It’s about finding the right balance.”

Among its recommendations, ASA’s white paper suggests following an approach taken in the U.S. to set up a website that grants access to all European public funding instruments, including from the European Union and European Space Agency.

More innovative financing models are also needed to synchronize the timing and scope of investments between public and private entities, added Bonnardel.

Space startups in Europe often lack the customer contracts they need to sustain their businesses until they can generate revenues, the white paper notes.

Early commitments from potential government customers can provide an essential bridge between research and sales for startups.

But there is a dearth of space public-private partnerships (PPPs) and mechanisms enabling public bodies to act as anchor customers in Europe, according to the white paper.

Existing support mechanisms also tend to focus on short-term goals for growth.

“There are little synergies in terms of public and private instruments, civil and defense, space and non-space sectors and virtually no synchronization in terms of the timing of such investments,” the white paper adds.

According to Bonnardel, more synergistic PPPs would help stimulate investor demand and accelerate these companies by distributing risk more effectively, while also playing to Europe’s strengths.

“In such a large continent, where you have this open market, there is also an opportunity to get a lot of government customers,” she said.

Low success rates for public support programs in Europe risk undermining the legitimacy of these projects, however, discouraging new applications.

The last advanced grant success rate in Europe’s Horizon 2020 research and innovation program was around 8%, according to the white paper, while the success rate under the European Innovation Council (EIC) 2021 accelerator program is less than 3%.

Even still, ASA believes government support remains vitally important for the space ecosystem, which it says supports about 10% of Europe’s gross domestic product, as the pandemic disrupts supply chains and hike up raw material costs.

“It may be the only option to avoid irreparable damages,” the white paper warns. spacenews.com