Written By Dylan Ketcham & Adam Yankelevits
At Moderne Ventures, we take a generalist approach to vertical investing, and often look outside of our industries (real estate, hospitality, home services, insurance, financial services, and ESG) to find technologies and solutions that can be applicable within them. In this article, we break down an investment theme we’re currently exploring: SpaceTech. Know any Founders or companies in this space? Email deals@moderneventures.com.
As our partners continue to innovate and adapt new technologies, SpaceTech - including earth observation and geospatial analytics - are becoming increasingly important to consider.
From the launch of the first commercial satellite in 1962 to SpaceX Falcon 9’s record-setting launch of 143 satellites at once in 2021, the geospatial industry has come a long way. With more than 5,000 operational satellites in orbit, geospatial analytics has become critical for industries spanning cartography, defense, and even hedge funds. Historically, SpaceTech has had far reaching impacts in commonplace industries: radio, TV, and internet. Today, earth observation and analytics are expanding to new areas, including the built world.
Large corporations continue to adopt geospatial analytics into their operations for many reasons. First, the underlying technology—hardware and software—has advanced significantly. Within the past 5 years, companies like Capella Space, ICEYE, PredaSAR, and Umbra have launched lighter and less expensive synthetic aperture radar (SAR) satellites that provide higher fidelity and increased reliability. Second, there are over 1,000 Earth observation satellites in orbit, proliferating data. Third, advances in machine learning (ML) and artificial intelligence (AI) have propelled the capabilities of computer vision to parse and analyze image-based data. These advances drive innovation that has a material impact on the way we see and occupy the world around us.
APPLICATIONS AND IMPACTS
City Planning, Infrastructure, and Development
Starting at the 30,000-foot view (or more like the 118M-foot view) – city planners, real estate developers, and infrastructure and utilities companies have many uses for earth observation data. Municipalities are partnering with companies like Rezatec to leverage satellite images to monitor the health of dams, pipelines, and forests. Qii.AI applies similar computer vision technology for inspection, but uses drone footage instead, allowing it to work with bridges, power plants, and other hard-to-view or hard-to-reach places. Developers can use satellite images to improve estimates of the value of the land they hope to build on, and brokers can use satellite data forecast market trends for commercial leases. These are just a handful of the current use cases we’ve seen in this area and there are more emerging daily.
Building Emissions & ESG
Another area with significant adoption and disruption is ESG. Buildings account for 40% of global energy consumption, and pressure from consumers and governments is helping to reduce that. Companies like GHGSat and Thalo Labs provide businesses with emissions monitoring and actionable insights to measure and reduce their carbon footprint. Additionally, corporations aiming to lower their emissions by purchasing carbon credits may need to improve disclosures as the SEC finalizes policy changes to transparentize the amount of carbon being offset from these credits, and the source of the credit. Genvision and Gaia AI are two startups using AI and geospatial and ground-level imaging to audit offsets and calculate the carbon value of projects.
Another area in ESG that building owners and operators are exploring is reducing heat leakage. By using thermal sensors, companies like SatelliteVu (which also builds its own satellites) and Albedo can pinpoint how energy efficient a building is and suggest ways to prevent waste. As society continues to push for more environmentally conscious actions, real estate players will expand ESG investment, including solutions leveraging earth observation technologies.
Climate Risk and Insurance
Climate change has emerged as one of the most significant threats to our planet in recent years. Storms have increased in severity and frequency, contributing to adverse consequences on the environment and the global economy. Among the many sectors affected by climate change, the insurance industry finds itself at the forefront, grappling with the wide-ranging implications of these risks. In 2022, there were 18 separate billion-dollar climate disasters in the US, causing an estimated $125 - $220 billion of damage according to the National Oceanic and Atmospheric Administration. AON, a global commercial insurance provider, reported a $171 billion gap in climate insurance globally. To solve this problem, insurers are incorporating more data into actuarial models to account for climate change.
Companies like Climavision and One Concern use a mixture of satellite data, radar and drone images to create models that predict severe weather events and their potential impacts. Other startups, like Near Space Labs and Urban Sky, have built balloon-based aerial imaging to capture proprietary data for climate risk models for insurers. On the pure insurance-side of things, Mitiga Solutions, Arturo and TensorFlight developed AI algorithms to aid in underwriting.
DRONES VS. SATELLITES
Earth observation data can come from many sources. Two of the more common areas we have explored are drones (fixed wing, rotary wing, or balloon) and satellites. Each has their advantages and drawbacks.
Drones offer greater flexibility. They can be deployed quickly and easily for fast and specific data collection, they can capture closer (and therefore higher-resolution) imagery from aerial shots with different angles, capture hard-to-reach areas such as the sides of buildings or the underside of bridges, and their sensors and cameras can be swapped out for specific data collection and analyses.
However, drones have some limitations. They have a more limited coverage area, only capture point-in-time data for each time they are deployed, and are subject to regulations, limiting their use in certain areas or applications.
SmartRoof uses drones and AI to provide roof inspections, detect damages, and get accurate estimates for replacement or repair costs. Kestrix uses drone-captured thermal images to build 3D digital clones of houses for use in retrofit planning to reduce carbon emissions from heat leakage.
Satellites, on the other hand, can cover vast areas, making them ideal for large-scale projects; they continuously orbit the Earth, tracking changes and identifying trends over time; and they are always in flight and able to capture data: newer satellites, such as those with SAR imaging, can “see” through clouds and storms.
Satellites have their own drawbacks. Once launched, satellite cameras cannot be changed depending on the analysis required. They also cannot achieve the same level of resolution as drone imagery due to higher altitudes and the presence of the atmosphere.
While each has their advantage, it is our belief that—due to diminishing space payload costs, improvements in imaging technology, and increasing availability of geospatial data—the market will increasingly leverage satellites as sources of data for advanced analytics. In the short term, drones are viable for uses that may be cost prohibitive for satellites like higher resolutions and more specific data.
AI AND ML
AI is the buzzword of the day and while it’s nothing new, it is rapidly improving in terms of capabilities, speed, and accessibility. By incorporating AI and ML technologies with earth observation data, organizations can extract more value and make better-informed decisions. Image recognition and classification models can make predictions, allowing businesses to take proactive measures and make more strategic decisions. Furthermore, AI and ML technologies improve the integration of data from multiple sources, such as drones, ground, and satellite images, or data collected from different satellite constellations. As AI and ML advance, they will improve the capabilities of earth observation data capture and analysis.
RISKS
While we believe these rapid advancements in earth observation and the resulting data will have a massive impact on the future of our world, there are several risks to the sector. Continuously evolving technology poses a threat that existing satellites may become obsolete. Geospatial data collection may be subject to various regulations surrounding privacy, data security, and airspace restrictions for drones and satellites. The ever-changing regulatory environment poses risks to investors across the sector. However, perhaps the two largest risks in this space are competition and market adoption. Winners will (a) need to build moats, especially as computer vision and ML algorithms become more commonplace, and (b) need to create significant value – and communicate it well to customers – to accelerate adoption.
INVESTMENT OPPORTUNITIES IN SPACETECH
SpaceTech is paving the way for significant impact on the built world. As costs are reduced, data is proliferated, and complex ML models are deployed, Earth Observation is becoming more conventional as a tool for analysis. In our industries, product-market fit is being found in insurance, climate risk, and ESG. We’re excited to learn about new advances in this arena, and work with high-caliber entrepreneurs changing the way we see the world. If you’re an entrepreneur building in this space – or know someone who is – contact deals@moderneventures.com to connect with our team.