Regulations and access to capital continue to hinder Europe’s smallsat industry

AMSTERDAM — Burdensome regulations and limited access to capital continue to drag on Europe’s smallsat sector despite proposed new legislation and an influx of defense spending.

During a panel at the SmallSat Europe conference May 26, industry and government officials said long-running concerns about fragmented markets and bureaucracy continue to challenge Europe even as companies and markets elsewhere grow.

Europe remains a good place to start space companies, argued Marino Fragnito, senior vice president for sales and market at Thales Alenia Space. “Europe is very strong at developing new products,” he said, citing benefits like access to grants for technology development. “They’re easily incubated in Europe, maybe even easier than in the U.S.”

The problem, he said, is trying to grow those companies. “When you need to scale these companies, it is impossible to find private money in Europe. Impossible.”

When companies turn to institutional lenders, finalizing a deal can take a long time. “When you need money to grow a company, you cannot wait a year to close a round,” he said, causing companies to look elsewhere for funding. “The only way is to go to the U.S.”

“Europe has a lot of catching up to do, but American investors are looking to Europe because there has been great technology incubated here,” said Noel Rimalovski, managing partner at GH Partners.

European funding for the sector grew 25% year over year, said Marco Villa, chief executive of Canopy Aerospace and Defense. However, in other countries funding grew by more than 100%. “Even if you’re growing, you’re losing market share,” he said.

He contrasted Europe with India and Japan, two countries whose space industries had been suffering some of the same issues as Europe. “They had to make a radical change, and they did that change,” he said, increasing access to capital along with a different “mentality” toward the industry. “They are growing incredibly nicely right now.”

A factor in the lack of private investment in the European space industry is fragmentation of policies and laws among nations. Fragnito noted that a European company selling a satellite to a customer in another European nation still needs to obtain an export license.

Industry had hoped that the European Union Space Act would address that fragmentation by harmonizing space laws among EU member states and creating a single market. But companies are skeptical that the current draft of the act can achieve those ends.

“The idea of having a single European approach to things is good,” said Chiara Manfletti, chief executive of Neuraspace. “The way it is implemented on paper today? No.”

One issue she raised is that it could take companies up to a year to get a license under the proposed act. “To me, 12 months is ancient history,” she said. “When I read that document, nothing in it gave me the sense of enabling a future which understands risk, understands speed.”

Europe’s space industry may benefit from a surge in defense spending, but industry officials said that money also brings challenges, among them fears that defense agencies will stick to traditional, slow procurement processes.

Without a change in procurement rules that emphasize speed, “there is a big block that will not allow things to change,” Villa said.

“It’s key to underpinning everything that’s happening in Europe,” said Stewart Marsh, head of satellite and space at Cambridge Consultants. “Things have got to change to move faster.”