Remote sensing: Catalysing terrestrial sustainable transitions from space

Our conscious mind can only process 50 bits per second, whilst impressive, it makes it challenging if not  impossible to make well-informed decisions on a day-to-day basis, let alone on complex topics such as solutions for environmental or people related challenges. For rational decision making, we need to collect, label and analyze all relevant data points. That is why - at 4impact - we invest in innovative software solutions that process up to thousands of megabits per second to ultimately bridge this gap in the human conscious mind and drive rational and impactful decision-making. 

Now let’s zoom out by at least 150 km into the Thermosphere and above. Because of the massive scale of contemporary problems, global decision makers need to collect data points from all parts of the world - also the parts in which technology is not (fully) embedded yet. Remote sensing is a key enabler to reach these remote areas as well as to zoom out on the better known regions and catalyse change with a birds-eye view. At 4impact, we strongly believe in the power of geospatial data as it is one of our three main technology focus areas to enable a positive impact. Two of our portfolio companies in this segment are Satelligence and Solar Monkey, detailed further down in this article.

Currently, 6,718 operational satellites are orbiting our planet. Whereas the majority is used for communication service, over 20% is used for remote sensing; including Earth and in-space observation and navigation. 

The value chain of the remote sensing industry can be split into two main segments: up- and midstream versus downstream. In the operating stack of spacetech, the up- and midstream part of the sector is mainly concerned with building and launching hardware for data acquisition as satellites, but also aerial sensors and LiDAR-systems. Today’s most advanced private satellites are able to capture data with a spatial resolution of <30cm making it possible to acquire extremely detailed information, such as the number of young trees in a semi-open area or the number of umbrellas on a beach. These hardware devices enable players in the downstream segment to extract the raw data and transform it into something more valuable. 

The downstream part of the sector leverages the hardware devices by creating software solutions that extract, structure data into multiple layers of representation or convert data from one or multiple sources, to useful insights or applications - using other technologies such as AI like ML - either earth or in-space observation and navigation data.

Traditionally, satellite data was expensive and therefore - in useful amounts - only available for large corporations and governments with enough cash on hand. However, in the last two decades, sources have been opening up to the wider public enabling smaller players to leverage real-time geospatial data with minimal capital on hand. Startups tend to acquire this data from free open sources or APIs, for example from the Sentinel-2 satellites through ESAs Copernicus Open Access Hub which is one of the most popular sources among European startups due to its usability and relatively high spatial resolution of 10m-60m. The low-entry barrier acquisition of high-quality data in this industry equalizes accessibility for early-stage ventures on the input side and helps them to scale more easily which then again creates a substantial commercial opportunity and a strong investment case from a venture capital perspective. With a current market size of €19.6bn and an estimated CAGR of 20%, the software solutions downstream form a bundle of promising technologies.

The operating stack of the downstream part can be divided into two segments, respectively data dissemination and intelligence. Market players in the data dissemination segment build the - mostly vertically agnostic - APIs that enable companies in the intelligence domain to convert the now structured data into a product for the end-users:

• Analytics & Insights: companies that use remote sensing data to provide useful information to help solving vertically specific or agnostic issues (IaaS/AaaS).

• Application: companies that are vertically specific and develop software that solves a vertical-specific problem immediately, using remote sensing data (SaaS). 

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European supernovas: which early-stage tech4good innovators are driving sustainable transitions from space?

4impact conducted a landscape analysis of the remote sensing industry, analyzing over 170 early-stage impact startups in Western and Northern Europe (Pre-Seed to Series A+). We observed that a minor 4% of the impact players are active in the dissemination vertical. Respectively, 42% and 19% of the companies provide insights and analytics, and 35% develop embedded applications. 

In the geospatial industry, predominantly, environment-related goals are served, such as our portfolio companies:

Satelligence leverages AI and satellite data to monitor deforestation risk throughout international supply chains. Satelligence currently covers 155+ million square kilometers of natural habitat for leading  organizations, also helping them calculate their Scope 3 emissions and carbon footprints, and comply with sustainability regulations.

‍Solar Monkey has incorporated remote sensing technology into their planning tool for solar panel installers. With the use of satellite data, Solar Monkey is able to determine and calculate the installation opportunities on roofs in urban spaces and to optimize the productivity of panels with shadow and position analysis. 

Other impact-driven applications in the environmental space include carbon credit MRVs, smart city mapping or crop health monitoring. 

A small percentage (~4%) is contributing to health & wellbeing goals such as nowcasting air quality or UV radiation or by developing interactive maps for visually impaired people. About 2% of the analyzed companies build remote sensing applications to work towards financial inclusion by bridging the climate-based insurance gap with fair index-insurance or enabling microfinance with geographical risk analysis in underserved societies.

In the figure below, we have listed the market segments as a percentage of total startups as well as a selection of the players active in each segment.

*Other minor industry applications include, among others, health, wellbeing, defense and national intelligence, in-space operations, mining and waste management. 

New moons, first quarters and full moons: industry trends & adoption

Based on adoption cycles - taking into account the degree of commercial interest, the adoption of the application in the total value chain, and the total amount of investment in R&D and marketing - it is possible to differentiate three innovation stages and to identify the right investing strategies and opportunities in the different application segments within the remote sensing industry.

Stage 1 innovations

Early-stage innovators dominate this segment. An investment in a stage-1 remote sensing venture is typically based on broader market beliefs rather than current commercial adaptiveness with the corresponding risk-reward profile. Examples of ventures in this stage include those active in the built environment, energy and logistics space.

Stage 2 & 3 innovations

Ventures in this stage differentiate themselves in either strategic or technological moats and are likely to be or to become part of a red ocean. AgTech-, InsurTech- and ESG-solutions are typically found in this stage and compete with non-geospatial, mature solutions such as local ground sensors and consulting.

Stage 4 & 5 innovations

This stage includes the traditional applications for weather prediction, mapping and defense practices that are fully adopted in the value chain, serving the largest customers in the sector such as national defense and intelligence departments.  Investments in stage 4 or 5 startups will be typically based on technology due diligence to assess future exit readiness for consolidation within one of the big technology or metrology conglomerates or (semi-)governmental organizations.

Source: TerraWatch Space Insights (2023)

Venture space: ecosystem & deal environment

Venture capital funds make up approximately 80% of all capital inflows in the broader spacetech industry globally. Over the past seven years, 1,200 deals have been closed by venture capital funds globally of which software companies had the biggest share of 30% in the total number of deals. As a consequence, total investments in space have been growing with an impressive CAGR of 21% over the past decade. For very early-stage startups, the European Space Agency is the leading institution providing Incubation Programs and zero-equity funding from €60k to €2 million. 

The majority of the software startups in the remote sensing space exit through a strategic acquisition. Recent reports show that over 300 - complete or partial - acquisitions have been done by strategic buyers in the past ten years. Some of the most active corporate investors in the European market are shown in the figure, including the number of deals done from 2001 onwards. 

Private equity funds show a growing interest in downstream spacetech companies and were responsible for 62 exits in the last seven years with a current number of 43 funds that are actively buying out firms in the broader space industry.

4impact views

We need remote sensing, because the complexity of contemporary problems needs a birds-eye view. Therefore, we believe the market opportunity is immense. There is a great variety of sectors that are in need of geospatial solutions in order to move towards a more sustainable or inclusive world. In combination with strong market statistics and a growing deal environment, we believe that the downstream part of the spacetech sector offers a great opportunity for ventures to create a business model with a high interaction between real impact and strong financials. 

Reach out to us if you are an entrepreneur in North Western Europe solving for environmental or people related solutions using software based on spacetech. Ad astra.