How to Unlock the Space Economy?

For all its technological marvels, today’s space industry faces an existential problem: it is structurally designed to burn cash, not to create sustainable value. The rush to replicate SpaceX’s vertical integration model has created a sector where companies compete on technological showmanship while neglecting fundamental economics. This is not just unsustainable—it is preventing the space economy from achieving its true potential as a driver of innovation and prosperity on Earth.

In a recent conversation, EnduroSat founder and CEO, Raycho Raychev, sat down with Delian Asparuhov, co-founder of Varda Space Industries and Partner at Founders Fund, to discuss what it truly means to build a valuable enterprise in space. Their dialogue reveals a vision for the industry that challenges conventional wisdom.

The next phase of space development, they argue, requires nothing less than a complete reimagining of how companies organize, compete, and create value. This transformation will be defined by three interconnected shifts: the rise of specialized horizontal players replacing end-to-end manufacturers, the prioritization of Earth-facing applications over internal space services, and a radical reduction in data costs that will democratize access to space data.

Companies that embrace these shifts will thrive. Those that do not, will join the long list of technically brilliant but commercially doomed space ventures of the past.

The early space industry naturally favored vertical integration. When SpaceX began its journey, it had little choice but to build everything in-house.

With something like rocket launch or Starlink, there was nobody for SpaceX to partner with or buy from,” explains Asparuhov. “They had to do it full stack all the way from engine production and development through to the satellite.” 

But as industries mature, vertical integration inevitably gives way to specialized horizontal layers. This transition is now overdue in the space sector, where too many companies try to replicate SpaceX’s model without the resources to succeed.

The Vertical Integration Trap:

• Spreading resources too thin across multiple disciplines
• Building unnecessary manufacturing capacity without market demand
• Competing directly with established players at their own game
• Preventing the development of specialized excellence

“It’s like playing against Real Madrid in the Champions League finals, trying to beat them at their own game with their own strategy,” Raychev observes.

This approach spreads resources too thin and prevents the development of specialized excellence. Particularly troubling is the rush to build manufacturing capacity without corresponding market demand.

“The first thing these companies build is always a factory,” Raychev notes. “And I’m wondering, in normal economic terms, mass manufacturing means millions or billions of pieces. Nobody needs millions of satellites today or in the next ten years.” 

This horizontal transformation will likely reduce today’s dozens of satellite manufacturers to a handful within the decade. The winners will be those who focus on specific layers where they can develop genuine competitive advantages rather than attempting to master every aspect of the value chain.

“I absolutely buy verticalization as a strategy and as a way of thinking, but only wherever your real added value is,” emphasizes Raychev. “You should not verticalize for the sake of verticalization.” 

Vertical integration made sense for early space pioneers with unique visions and massive capital expenditure. For most companies, the path to success lies in becoming exceptional at a specific horizontal layer of the value chain.

The second critical transformation involves rethinking what the space industry fundamentally serves. Currently, too much investment flows into what Asparuhov calls “space for space” companies—ventures selling exclusively to other space companies.

“It becomes this interior economy where it’s all a bunch of space players selling to one another,” Asparuhov warns. “Everybody’s got revenues, but it turns out it’s just musical chairs and there’s no connection to the rest of the economy. So, everybody’s spending each other’s investors’ dollars, but nothing connects.” 

This disconnected bubble becomes dangerously vulnerable when investor enthusiasm wanes. Without ties to terrestrial economic needs, these companies depend entirely on continued capital infusions rather than sustainable revenue streams.

Breaking the Space Bubble:

1. Space for Space: Companies selling to other space companies (components, refueling, orbital transfer services)
2. Space for Earth: Companies using space assets to solve terrestrial problems (communications, Earth observation, navigation)

The alternative is prioritizing “space for Earth” applications that deliver concrete value to non-space industries. These connections to the broader economy provide resilience during investment downturns and create opportunities for genuine scale.

“I’m concerned that if you look at dollars deployed in the two categories, you see sometimes too much focus on space for space,” says Asparuhov. “But the only way the space economy gets big is if it connects more into the Earth-based economy.” 

This shift requires space companies to deeply understand the industries they aim to serve—not just the technologies they deploy. The most successful will likely be those that merge space expertise with domain knowledge in fields like agriculture, insurance, pharmaceuticals, or telecommunications.

Sustainable space companies won’t think of themselves as “space companies” at all, but rather as specialized service providers that happen to use space-based assets as their technological foundation.

The third and perhaps most transformative shift involves fundamentally rethinking the economics of space-derived data. Currently, most space data remains prohibitively expensive, limiting its applications to high-value use cases that can justify the cost. This creates a vicious cycle: high costs restrict market size, which prevents economies of scale, which keeps costs high. Breaking this cycle requires a step-change in economic thinking.

Raychev presents a compelling target: reducing the cost of space data to approximately $1 per gigabyte—a dramatic reduction from current levels that are closer to $3000 per gigabyte. At this price point, entirely new markets emerge as small and medium enterprises can afford to incorporate space data into their operations and products.

Transformative Effects of $1/GB Space Data:

• Opening access to small and medium enterprises
• Enabling new applications beyond high-value niches
• Breaking the dependency on government contracts
• Creating sustainable business models for data providers

“If we take an actual case of $1 per gigabyte of any type of space data—radar, navigation, imagery, earth observation—and it’s more frequent and easily available, I think it’s a game changer for the industry,” Raychev explains. 

This vision directly connects to the previous themes. Achieving such cost reductions requires specialized companies focusing on their areas of greatest expertise, rather than spreading themselves across the entire value chain. It also demands direct Earth applications to generate sustainable revenue beyond investor capital. The challenge becomes particularly acute for constellation operators.

“Every five years you have to replenish your fleet,” Raychev notes. “And if your infrastructure still costs billions that makes gigabytes thousands of dollars instead of $1 or $2 per gigabyte, you have a hard time achieving profitability.” 

This creates dangerous dependencies on “one or two one-off contracts with some agency for strategic reasons,” which “will never make a compelling business case on scalability level.” Making space data affordable isn’t just about market expansion—it is about creating fundamentally sustainable economics for the entire industry. At $1/GB, space data becomes a utility rather than a luxury.

When these three transformations converge—horizontal specialization, Earth-focused applications, and democratized data economics—they create a fundamentally different space economy than the one of today.

This new space economy will be characterized by specialized excellence instead of mediocre integration, industry integration over space exceptionalism, and economic sustainability from day one rather than indefinite cash burn based on future promises.

The Future Space Landscape:

• Consolidation of Infrastructure: A handful of specialized satellite manufacturers in each horizontal layer.
• Earth-Industry Integration: Space capabilities embedded within terrestrial industries
• Data Democratization: Affordable access to space-derived insights
• Sustainable Economics: Business models built on real value, not investor capital

Raychev predicts: “In the next 3 to 5 years, there will be literally two or three major infrastructure builders that just do the job good enough to put any type of sensor to orbit. There will be just a few players that can put to orbit any type of payload or mass required, and the rest of the industry will be pure data services, completely interwoven with data consumer markets.” 

This consolidation creates both threats and opportunities. Companies clinging to the vertical integration model without sufficient scale or capital face existential risks. But those that embrace specialization, focus on Earth-facing applications, and pioneer new economic models can establish dominant positions in their chosen segments.

The space industry stands at a critical juncture between perpetuating unsustainable models and embracing a more mature economic structure. The winners of the next decade will be those who recognize that space is not exempt from fundamental business principles—it’s subject to them more than ever.

This article is based on an episode of The Frame Podcast, hosted by EnduroSat.
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