Start your own satellite IoT business for under $5M down
One of the reasons for a flood of IoT (Internet of Things) entrants into the New Space world is the low cost of entry. A cursory review of shiny new companies with a satellite IoT play reveals a very simple business plan--
- Raise up to $5 million
- Build and launch a couple cubesats
- Offer a starting level of service to sign initial customers
- Take initial customer list + successful launch of one or more cubesats to go raise another round of funding
- Launch more cubesats to increase service level, then add more customers
If you have the right engineering team and/or subcontract out a build of a 3U (10 cm x 10 cm x 30 cm) cubesat, a simple communications relay can be be built for $500,000 or less. Getting the cubesat into orbit will cost around another $300,000 to get a slot as a secondary payload or onto a larger "rideshare" of many smaller satellites.
Building two satellites takes the total investment up to $1.8 million. You always build two and put them into orbit on separate launches because stuff happens. Launches get delayed, your satellite may not come out of the dispenser, or the launch may blow up. (It happens, most recently to Telesat's first pathfinder LEO broadband satellite earlier this year).
Two satellites in proper orbits means you can visit everywhere and anywhere on the Earth twice a day. For a number of IoT applications, picking up small amounts of data every 12 hours is more than sufficient, assuming the customer isn't looking for real time alerts or tracking.
Some money also needs to be spent on developing ground equipment to monitor the satellites in orbit, plus radio and silicon -- the actual "IoT" part -- to send and (optionally, depending on business model) receive data. Depending on gizmos and function, research, development, and alpha production of hardware could cost $200,000 or less.
The other $3 million (or less) can be used to pay employees, go to conferences, find customers, and start talking to venture firms about raising another round of money. A follow-up round will be in the neighborhood of $40 million to $50 million, depending on the number of additional small satellites the IoT needs and actual cashflow coming in from paying customers.
The magic number for a full scale IoT constellation seems to be in the neighborhood of 100 or more satellites. More satellites mean more frequent service windows to send and receive data, plus the ability to relay data between satellites to a ground station for real-time or near real-time reporting.
Businesses loves a returning customer that buys more, be it buying paper towels at Costco or putting things into orbit. Cost per satellite should go down since you are buying in bulk and running a production line, so there are purchase and time efficiencies in cranking out satellites in lots or waves or flocks. Putting satellites into orbit will also cost less since you are buying in bulk and making a commitment across one or more launches and/or launching multiple satellites per launch.
As the IoT satellite company grows and customers come on board, cash flow should increase and needs to increase enough to keep the doors open, pay off investors if needed/desired, and to launch more small satellites. A sustainable satellite IoT business will depend upon how often replacement satellites are needed and the necessary number of satellites in orbit for a service customers will pay for.
Depending on design and how high of an orbit a satellite is in, a cubesat may last for up to 3 years or so. Lower orbits mean faster re-entry and burn-up into the atmosphere, while relatively higher orbits mean more radiation exposure. But sooner or later, the humble 3U cubesat will need replacement. Successful IoT companies will find the right balance of having enough hardware in orbit to sustain a paying customer base and being able to launch replacement satellites as needed.
