Thread by @EggPlatypus

1/ DD on BlackSky - $SFTW $BSKY

Any thoughts from @JonahLupton, @saxena_puru, @PoundingDaTable, @AnthonyOhayon, @mukund, @Soumyazen, @GetBenchmarkCo, @skaushi, @InvestorWisdom, @Beth_Kindig?

2/ Thesis: BlackSky is a disruptive, vert integ biz model that removes the barriers-to-entry hist present in the util of sat imgry, which in the past has severely limitd util and applic in the priv sector.

3/ BlackSky reduces the cost of img acquis by 90% comp to exist comp and their Spectra SaaS works to democratize access to petabyte-scale imgry and AI/ML analytics.

4/ Longer-term, sat imgry will be in use across all major industries including ag, sec, mining, and insurnc, offering an absolutely massive TAM.
My background: Research scientist using remote sensing (satellite observations) and machine learning.

5/ Disclosure: Positions in warrants and shares. Not a financial advisor and this is not financial advice.

6/ What is BlackSky? BlackSky is a geospatial intel co born as 1/3 primary biz servs w/in parent co Spaceflight Industries, other two services being (1) excess capac “rideshare” business, sold off in Feb 2020, and (2) LeoStella, a joint venture that manufactures smallsats.

7/ BlackSky has a vert integ biz model that starts with the manuf of the actual sats themselves and finishes with an AI/ML-driven data analytics product. Lets work our way from start to finish.

8/ Business Model Part 1 - Sat dev and launch
BlackSky builds smallsats, via their 50% stake in LeoStella, which they then launch into low earth orbit via outside co.

9/ Currently, 5 sats in orbit and another 16 in prod with plans to be in orbit by EOY 2021, + another 4 spare sats ready to deploy. The primary comp., Maxar, outsources sat manuf while Airbus builds their own sats.
What about costs?

10/ BlackSky sats are MUCH less exp to dev and deploy than the lrg comp. For ex, Maxar’s prev prog cost $850 million and was lost in 2019 due to tech fail. Their newest prog has an estimated cost of $600m to build and launch the 6 sats ($100m each).

11/ The other comp, Airbus, is launching the first two sats in their 4-sat const. in 2021 at a cost of $232m, avg $58m/sat. BlackSky Pathfinder-1 sat cost just $10m. Boils down to monthly cost of imagery for BlackSky is 90% less than Maxar and Airbus.

12/ This means cheaper and faster (1) tech updates, (2) sat replcmnt, (3) pricing.

13/ Business Model Part 2 - Sat imgry and comp.
This is where the debate over the imgry itself comes in. The main comp are Maxar and Airbus, both of which are moving towards sats with 30cm and 50cm res, resp. BlackSky’s imgry from the prev gen sats are just 100cm.

14/ Is this a problem? No. Bc smallsats are so quickly prod and BlackSky owns the manuf., successive gens are becom. more advcnd. For ex, the cur Gen-3 sats host 50cm res as well as short-wave IR readings, prov night-vision imgry and smoke/haze cut-through.

15/ The best comp against BlackSky are other priv cos working to scale up large-count nano, micro, and smallsat const, such as Planet (closest comp, imo), Satellogic, and ICEYE.

16/ Honestly, if any of these were to go public via SPAC I’d be as excited to jump in on them as I am on BlackSky. See substack post for more detailed writeup on these.

17/ Business Model Part 3 - Cloud-based analytics via ML/AI
Let me explain to you how working with sat imgry used to go: you access a server, you pull ind imgs to your mach., and you proc them. If working on the scale of 1 sqkm, no big deal.

18/ But if working over lrgr areas, such as cities, states, province, etc. all of a sudden data size is TB-PB. Data is too lg to pull, proc times obscene (days,wks,mos). Google Earth Engine changed the game in research by prov. data and libr to work on their cloud system.

19/ Hard to overstate the import of this, and it’s one of the reasons I’m so bullish on BlackSky.
BlackSky is also a data analytics co. Before now, if a co wanted to utilize sat imgs, they would need a team with geosp, cloud, ML, and AI exp.

20/ What diffs BlackSky from the comp is their SaaS product Spectra.

21/ Spectra allows clients to access imgs on-dem with built-in AI/ML, streamline a mtn of ext data, ability to access/purch addtl pub or prop datasets, task the satellites, etc. Case-in-point, job listings on the BlackSky site are conc on cloud, software, and ML/AI positions.

22/ Engnrs are working over at LeoStella, leaving BlackSky to focus on growing rev and building out their SaaS. Imp., the CEO Brian O’Toole is frmr founder/CEO of OpenWhere, purchased by BlackSky 2016, which dev’ed a web-scale sat img platform.

23/ So BlackSky, then led by founder Jason Andrews, purch OpenWhere and handed over position of CEO to now-former CEO of OpenWhere. Strong statement that they are focus not just on imgs itself but also on the access of that data.

24/ Given this, I believe BlackSky begs comparison with name-brand grwth cos like $SNOW and $PLTR. Through $SNOW, a co can util cloud storage/access serv. wout a full team. Through $PLTR, a co can util AI/ML without a team of exp statists.

25/ Through BlackSky, a comp can util massive prop and pub sat imgs through built-in AI/ML without a team of geosp, cloud, software eng., and stat experts.

26/ This is why slides 29-30 in the invstr pres compare BlackSky with both space tech cos (eg $NPA, $SRAC, $MAXR.) as well data analytics cos (eg $ESTC, $DDOG, $PLTR.)
Economics
2020A Revenue= $22 million
2025E Revenue = $546 million (tenuous, as per the SPAC way)

27/ Mrgn on imgs = 90% (accounts for 64% of revenue)
Mrgn on Saas product = 60% (accounts for 30% of revenue)
Exist. prtnrs (mostly gov): NRO, NGIA, IARPA, USAF, USArmy
BlackSky EV/CY’22E = 9.7x.

28/ Comp against SRAC/Momentus at 27x, Snowflake at 54x, Palantir at 44x, MongoDB at 27x, Elastic at 17x.
Misc thoughts:
BlackSky is a strng targ for $ARKX fund. I also think that $ARKW should be cons a targ as well, given data focus of BlackSky.

29/ This isn’t to say that Ark purch are a reason to buy, but they give buyers more conf in early-stage co like this. That, comb with exist invstmnt from Thiel, Hedosophia, Tiger Global, make for a solid found of invstrs.

30/ Conclusion: BlackSky offers disrupt tech, in terms of (a) hardware - sats, (b) data - imgry, and (c) analytics - Spectra SaaS. All this built into a vert integ biz that ylds costs at a frac of their comps but maintain a much more vers, innov, and adaptbl const of sats.

31/ Sats are built in-house, imgry is comp in qual with $MAXR and Airbus but with much grtr abil to impr with new tech due to sig lwr cost & time for constr of new sats, and Spectra SaaS allows cos to util advncd proc and AI/ML on-demand wout need for add’l employees.

32/ Existing nanosat and microsat priv comp are out there, but funds raised from merger with SFTW will provide BlackSky with an almost unparalleled opp to achieve first-mover adv.

33/ Check out more detailed writeup with refs here:

platypusegg.substack.com/p/blacksky-sft…