Why space startups should be careful about (and sometimes avoid) foreign entanglements

RBC Signals makes use of satellite ground stations across the globe. (RBC Signals Graphic)

Warnings about the potential perils of foreign alliances go back to George Washington’s Farewell Address — but in the Space Age, the issues surrounding international relations are much more nuanced.

At least that’s the view from Christopher Richins, the founder and CEO of Redmond, Wash.-based RBC Signals.

RBC Signals acts as a broker for global satellite connectivity services, and counts the U.S. government among its customers. But because RBC’s business model relies on partnerships with satellite ground stations around the world, RBC has to work with countries that the U.S. government views as rivals on the space frontier — specifically, Russia and China.

“You don’t have to have the U.S. government as a customer,” Richins told GeekWire. “But if you do intend to at some point, being mindful of things like cybersecurity and management structure, knowing your customers and knowing your investors — all of those things will serve you well in removing some of the potential barriers to entry for getting those opportunities.”

The troubles encountered by Momentus Space, one of RBC Signals’ customers, serve as a cautionary tale. The space-tug startup’s planned merger with a blank-check company, Stable Road Acquisition Corp., has been held up because of U.S. government concerns about Momentus’ Russian co-founders. Moreover, Momentus’ plans for its first launch have been stymied by the Federal Aviation Administration for similar reasons.

Foreign entanglements can bedevil well-established companies like Virgin Galactic as well: Several years ago, the space company founded by British billionaire Richard Branson had to win a licensing exemption from the State Department to fly non-U.S. citizens on its SpaceShipTwo space plane. Even after that exemption was granted, a controversy came up over selling tickets to Chinese citizens.

Mindful of such concerns, Richins said RBC Signals has been treading carefully over the six years of its existence.

RBC Signals’ origins reflect the complexities involved in creating a space startup with international reach. The company got its start in 2015 with a Russian native, Olga Gershenzon, serving as Richins’ co-founder and chief strategy officer.

Gershenzon and her husband, Vladimir, also co-founded a Russian company called Scanex, which processes satellite data and distributes Earth imagery. Scanex has business ties with the likes of Airbus and the U.S. Geological Survey, but in 2018, a couple of the company’s investors were named in news stories about Russian influence operations that targeted the National Rifle Association.

Olga Gershenzon’s LinkedIn page indicates that she left RBC Signals in 2017, and that the couple sold off nearly all of their stake in Scanex before RBC was founded. “Olga hasn’t been associated with RBC for several years, and I’m not aware of any connection with any of that NRA stuff,” Richins said. “This is actually the first time I’m hearing about anything between Scanex and that.”

Richins said RBC puts a lot of effort into heading off foreign entanglements.

“RBC Signals is a multinational company,” he said, “but we are structured in a way that allows us to have U.S. operations that are basically completely operated by U.S. personnel only, and then we’ve got a separate part of the company that is more global in nature.”

Cybersecurity is a special concern.

“All of our customer data is protected according to cybersecurity standards in the industry, and our customers choose where they bring their data down,” Richins said. “They want to be selective about where their information lands, and so we’re able to accommodate that because of the global nature of our network.”

Foreign investment is another issue that requires close attention. Past investors in RBC Signals have included China’s Baidu Ventures, Mexico’s MxSpace and venture capitalists from Singapore and the Middle East. More recently, RBC Signals reported a $1.2 million financing round, with some investments from non-U.S. backers.

Richins said such transactions have to be structured to satisfy the requirements laid out by the Committee on Foreign Investment in the United States, or CFIUS.

“We converted debt to equity with special attention to terms that keep us within CFIUS safe-harbor requirements,” Richins explained in an email. “CFIUS has concerns that range from ownership percentage to information rights, etc. We were not a concern before the most recent investment, and we are not a concern after the most recent investment, but issues such as these must be taken into consideration when structuring such an investment.”

Looking ahead, Richins noted that the U.S. government helped commercial space companies become more competitive in international markets several years ago by easing trade restrictions.

“I think there’s going to be a continued refinement of policy, to protect the national security and the national interest of the U.S., while hopefully preserving our ability to lead in the global space economy,” he said. “I think that’s a pendulum swing.”

Richins just hopes the pendulum won’t swing back too far.

“I hope that we will continue to be leaders,” he said, “and that our regulatory policies will continue to support a good and healthy market for U.S. services abroad.”

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