Astranis, with a new approach to satellite internet, raises $250 million from BlackRock and others

Astranis, a San Francisco-based company with an alternative approach to providing internet access from satellites, secured new funding to ramp up production.

The company raised $250 million at a $1.4 billion valuation, Astranis CEO John Gedmark told CNBC, in a round led by BlackRock and joined by new investors Baillie Gifford, Fidelity, Koch Strategic Platforms, Monashee Investment Management and Uncorrelated Ventures.

More than a dozen existing investors, including Andreessen Horowitz and Venrock, also contributed. The new round brings Astranis’ total funding to more than $350 million since its founding in 2015.

“This is our growth round. This is what allows us to scale production of our satellite platform. We’ve developed the satellite—we’re building our first [commercial] one as we speak,” Gedmark said.

Astranis’ approach features a small form factor satellite, similar to the spacecraft of SpaceX’s Starlink, combined with proprietary technology and placed in geosynchronous orbit, the operating location of existing players like Viasat.

The company launched a prototype in 2018 and is now finishing work on its first commercial satellite for launch on a SpaceX rocket in the fourth quarter.

The satellite will be positioned above Alaska, where Astranis’ first customer—telecommunications provider Pacific Dataport—will use it to triple the data speeds available to people across the state, with service beginning in first quarter 2022.

“Putting down a focused beam of internet, right on a smaller or medium-sized country area, is just not something that has ever existed before,” Gedmark said.

Astranis has about 120 employees. In addition to production, Gedmark says the capital will help Astranis hire “very substantially.”

“We have seen just overwhelming demand. … We have projects in work in countries all over the globe to bring to bear dedicated satellites for specific customers,” he said.

The company’s technical advisory board, chaired by former NASA administrator Dan Goldin, has also given Astranis “many lifetimes of experience to draw upon” and focus on “what types of technologies really move the needle,” Gedmark said.

Astranis’ satellites, at 350 kilograms, are about the size of a dishwasher. Satellites in geosynchronous orbit are about 22,000 miles away from the planet’s surface—a position which allows the spacecraft to stay above a fixed location, matching the Earth’s rotation.

Gedmark said that traditional geosynchronous satellites are about 20 times larger, cost hundreds of millions of dollars each, and “often take four or five years to build.”

Astranis “had to solve an array of challenges to pack this much punch in a small package,” he said—with surviving the harsh radiation environment of that distant orbit as its biggest hurdle.

Another key element of Astranis’ satellites is software-defined radio technology, which Gedmark noted has been mostly used for U.S. military satellites.

Software-defined radio allows Astranis to digitally tune communication satellites to different frequencies, while traditional satellites “are purely analog” with frequencies “locked in,” he added.

Astranis’ satellites can then be “effectively identical,” but have frequencies dialed in after reaching orbit.

“You can not only make changes on the fly to accommodate for changing market conditions … [but also] add some extra capacity,” Gedmark said.

Gedmark says Astranis has a demand pipeline for “dozens” of satellites, as he sees the world’s “absolutely insatiable” demand for bandwidth as a “trillion-dollar market opportunity.”

Satellite communications is becoming increasingly crowded, especially with multiple projects underway to launch thousands of satellites into low Earth orbit. In addition to SpaceX’s Starlink, which has over 1,300 satellites in orbit, competing global networks include OneWeb, Amazon’s Project Kuiper, Telesat, and Lockheed Martin partner Omnispace.

But Gedmark isn’t worried.

“Astranis, plus all our peers, can put up everything in the sky that we can manage to build and launch—and still not fully solve this problem of getting people broadband internet,” he said.

His company is selling its bandwidth to telecommunications companies and internet service providers. Then, Gedmark said, “it’s up to them how they want to slice and dice that bulk capacity and price it out to their customers.” He said Astranis hasn’t seen its terrestrial partners upsell the service, especially given that, “in some of these countries, there’s only so much that a given consumer is really able or willing to pay.”

“For us to deliver on our mission of getting the next 4 billion people online, we would have to get satellite capacity down to a cost far below where it’s ever been historically,” Gedmark said. “I think, at least in the markets we’re serving, people are very closely aligned to go and make that happen.”

Astranis will use its new capital to expand its manufacturing space to more than 100,000 square feet to accelerate production.

The planned assembly line is key to the company’s goal of speeding up the manufacturing process after its first satellite, which Gedmark said will have taken about a year and a half to build.

“We are very confident we can get that build time down to just a handful of months,” Gedmark said.

While Astranis is launching its first commercial satellite with SpaceX, Gedmark said the company is now talking to “all the major launch providers” about future missions.

“We designed our satellites from day one to be compatible with every major launch vehicle, so we can fly as a rideshare on any of the major rockets that are out there, and some of the newer smaller launchers as well,” he said.

With a number of space companies recently announcing plans to raise capital by going public through SPAC mergers, Gedmark said Astranis did look at SPACs as an option for this round.

A SPAC or special purpose acquisition company is a shell company that raises money from investors via an initial public offering and then uses the capital to buy a private company and take it public, usually within two years.

For now, “raising funding on the private markets in this quantity was the right move,” Gedmark said, but an IPO is still in Astranis’ plans.

“The market is so huge and, in order to fully go after it, we’re going to almost certainly go back to the capital markets,” he said. “Going public is a great way to do that.”