Creating conditions for space startups to thrive

Have you ever heard of an innovation eco-system and wondered what it is and why it’s needed? Aren’t entrepreneurs self-made? We asked Jens Lundström, member of the RIT steering committee, about his experience to find out the some of impact of nearly ten years’ efforts to create ideal conditions for new space-related products, services and companies to thrive.

Hi Jens Lundström, tell us a bit about yourself. 

I’m the CEO of Arctic Business, northern Sweden’s startup incubator and national coordinator of the space incubator ESA BIC Sweden. Our mission is to scale, ie build new innovative, sustainable startups – especially those that have the need and ability to work and grow on an international market. I’m also a member of the RIT steering committee.

What’s your relationship to space?

We strive for being really good in northern Sweden’s areas of excellence, and space is one of them. Having a project like RIT to drive innovation within a dedicated industry, in this case space, is great. I wish there were opportunities to do similar things in other important industries such as mining and metals, forestry and energy.

I wish there were opportunities to do similar things in other important industries such as mining and metals, forestry and energy.

What is the best thing about scaling up space companies? 

It is an industry that is moving from being static with a state monopoly to being commercially entrepreneurial and Sweden has a good situation. The space sector has previously been a rather static industry – there was a small group of players doing business with each other and things didn’t move very fast. Now we are in a shift where the space industry tomorrow will not look like it did yesterday. It is exciting to see a new sector emerge, opening up to new companies, talent, investment and skills. Sweden has a great opportunity – we are punching well above our weight class and have the components to meet what is happening in the sector: We have a functioning innovation system of international level, we have researchers and students as well as an established aerospace industry.

What determines how successful countries are at building competitive space companies?

Countries that are good at venture capital can develop startups the fastest.

We have great talent, a good legal and innovation system in Sweden, but countries like France, England and Germany produce more startups across all sectors because the venture capital market is larger.

However, compared to the US, Europe is 10 years behind in terms of risk-taking and maturity. SpaceX has been around for over 20 years and we have similar companies that have only been around for a few years. Looking at the global space market, the US accounts for about 50%, followed by Europe and Asia with 25% each. Of the US space market, half of the money is from government and defense, and the other half is private industries. This means that the private sector in US alone is larger than the entire European space industry.

What trends do you see among Swedish space startups?

We see a lot of companies working upstream, delivering products and services to the space industry, or downstream that utilize data collected from space, or that take inventions from space to other industries. Historically, we have seen plenty of downstream companies based on the use of, for example, satellite navigation systems or imaging data, but now, as it is becoming less costly to send systems into space and investors are more willing to take risks, we are starting to see more upstream. My estimate is that today, there is one upstream to every for downstream startups. In a few years that distribution will be closer to 50/50.

There is a perception that entrepreneurs are self-made. What does the innovation system, or the journey from idea to product in the market, actually look like? 

We often meet either students, researchers who have developed new technologies that they want to be utilized by society or businesses, or a person from the industry who has a problem they want to solve. In short, you either have the problem or the solution, but typically not both at the start. At such early stages, you need support to develop your idea further before it is ready for an incubator. This involves providing support with, for example, workshops, market validation, coaching, etc. Once you have started a business, you can apply to an incubator, which provides funding and mentoring to develop the business for a couple of years.

Is there a need for innovation system specifically for the space sector?

Given the transformation of the space sector and the speed of development, new innovations are competing on an international level for talent, money and customers from day 0. You can’t really speak of a regional or national Swedish space market – possibly a European one, but foremost a global one. In order to make real impact and take advantage of the competitive advantages we have in northern Sweden, we therefore need an innovation support system of actors who are specialized and focused on the space sector.

How has the funding and collaboration in the RIT project impacted the innovation support system?

In 2016, Arctic Business, with the support of the Swedish National Space Agency (sv. Rymdstyrelsen), launched a national startup incubator dedicated to space through ESA BIC Sweden. Here the European Space Agency (ESA) allocates funding and resources to its member countries scale start-up companies with support from Vinnova also in Sweden. Since launching ESA-BIC Sweden, we have supported around 40 Swedish space startups with funding, exclusive networks within ESA and of course business advice. The nodes are located in four locations in Sweden and the main operations are run at Arctic Business and have been run as part of the RIT project.

Through RIT and ESA-BIC we can support the ideas at a much earlier stage and bring them in much earlier

Normally, you are only ready to enter an incubator when the company starts to approach having a well-developed technical solution that is packaged in a product with certain characteristics and there are a handful of customers who want to buy the product. But through RIT and ESA-BIC we can support the ideas at a much earlier stage and bring them in much earlier than in the regular incubator activities. In addition, we can find synergies with other actors, such as regional funding support, funds, venture capital companies or like Arctic Ventures, which is constantly looking for promising innovations – there is a lot of interest in space.

What challenges does northern Sweden face in attracting and building more space companies?

We have many advantages that I have already mentioned, but to attract international talent and startups that want to work here, we need to create a more attractive place to establish themselves with everything from Science Parks, easy access to test labs, capital and everything else, especially to Kiruna. The biggest challenge is that we as a region must become more known internationally, we simply have to sell northern Sweden under a common brand. Also, space needs to be higher on the political agenda – more should be written about the space sector and how this can benefit many sectors in all of Sweden.

What is your vision for Norrbotten’s space sector in 10 years? Give us some future scenarios!

“Space Investment Day has grown over ten years into a record-breaking conference that attracts more capital owners, talent and companies every year from all over Europe.”

“Northern Sweden is seen as Europe’s resource for dealing with space and security and Sweden launches its own satellites from here every year.”

“Luleå University of Technology has a record number of space master student, there is an opportunity to study Industrial Economics (MBA) with space focus and every year students launches satellites as part of their educations.”

Read more about the Innovation Support in RIT here.