Kleos Space Luxembourg: A Space-powered Data Business

Andy Bowyer (Credit: Luxembourg Space Agency)

Andy Bowyer, CEO and Founder of Kleos Space Luxembourg, shines a light on dark activity at sea.

Luxembourg Space Agency Q&A

Can you tell a little bit about how you ended up in the space industry?

Well, I think you can do lots of things in your life if you have a skill. An engineering skill, or a commercial skill, a marketing skill, finance, or what have you.

The important thing, however, is the context you’re working in. The work is the same, whether you’re engineering in a nuclear substation, or an automotive company. The engineering is very similar to space engineering in a lot of senses, but the context is different, and the parameters are different.

And I think that’s what gets you up in the morning, what gets you interested, it’s that context.

And what interests me is space. That’s what gets me up in the morning and really incentivizes me to go out to work and make a difference to things.

It’s important for you to make a difference too?

The other aspect that has always followed me throughout my work, is not doing space just for its own sake.

At Magna Parva, the UK company that I co-founded with Miles Ashcroft, we’ve worked a lot in space exploration and planetary science missions, where we have been doing things like looking for life on Mars. The kind of things which perhaps don’t have much relevance to the person on the street, and were difficult to justify in terms of spending taxpayers’ money. I’ve therefore always keen on asking, “Well, how do we use this for other purposes?”

The technology you’re developing for these highly technical missions?

Yes. So, if we’re developing a technology for doing x, how do we use it on the ground for y purposes? Or, the other way around, sometimes. If you’re developing things on the ground, how can you use those for space, to reduce the cost of space?  So, this kind of concept of spinning technologies in and out has always been hugely interesting to me in terms of a commercial sense.

With LSA support we are developing some really excting technology that will manufacture large structures in Space, this is key for our long term technology roadmap but also has many potential applications outside of ours that we can progress. This is great example of taking ‘ground’ based tech and ‘spinning’ it into the Space industry to solve a problem.

You’re using taxpayer money for the big investment. How would you pay that taxpayer back? And that’s always been very important to me.
And we pay the taxpayer back by having a commercial business that creates a product that you then can resell into lots of different organizations. 

Could you give us an example?

We worked on the Mars drill. For more years than I care to remember, we worked on this particular drill. We were only ever going to sell one of those things. That’s not, in its own right, a business.

However, we took the technology that we developed for that drill and we used it to reduce the weight of beverage cans.

To make soda cans lighter, the cans themselves?

That’s right. In tin cans, or aluminum cans, as the case may be. And we worked on that with the world’s biggest can maker, Ball Corporation.
That’s a joint venture and it has a whole load of IP, which is space spin-off, used in traditional applications. You make a small differences to each beverage can, and that saves an awful lot of money.

How do you come up with the ideas for repurposing space technologies?

Well, that takes quite a lot of lateral thinking, and that’s what I’ve always enjoyed about this particular job. That is, asking, ‘How do we reduce the overall cost of space exploration?’

We all want to do this, to cut the costs, because it’s fun and noble engineering and very exciting. But what else can we do with it? How else can we apply it? That’s one of the things that attracted me to work in Luxembourg. In a sense, there is a commercial reality to Luxembourg. There is a commerciality to everything that has to be done here.

Could you outline what Kleos does, here in Luxembourg?

Kleos is another example, it’s a spin-out of space technology.

At Magna Parva, in the UK, we focused on science and exploration missions. Delivering one-off things, whether it’s hardware or software. We developed some intellectual property, developed some capacity, both in space manufacturing technologies, and also radio frequency interferometry. We use interferometry to geolocate radio transmissions. And we developed a capability around that, that was commercial, that was beyond the project that we were working on.

So you set up Kleos to explore the commercial possibilities of your geolocation technology?

So, what we are doing is, we’re providing a commercial dataset, outside of government assets, which enhances some government capability, but nothing that’s available commercially.

We’re providing the ability to identify areas of activity, in the maritime domain initially, that are currently unseen.

Sounds like it could be very useful for spotting pirates and smugglers. That type of thing.

Well, we have close partners here in Luxembourg that focus on Automatic Identification System (AIS) products, for instance. So that is identifying the presence of legitimate activity at sea. When those AIS transmissions get turned off, that’s a way of identifying somebody who’s perhaps doing something else. But then, there’s also a whole lot of dark traffic. That is, the ships that never had AIS on in the first place.

If you’re an illegal fisherman, you’re not going to ever broadcast where you are because you don’t want people to know, but you are coordinating your activity using VHF transmissions. That’s what we’re identifying and locating.

You’re finding activity that does not want to be found?

We’re identifying dark activity. We’re not seeing what they’re doing, to be clear. We are geolocating radio transmissions. That’s what we’re doing.

Then the customer that we’re selling that data to is able to apply that into different marketplaces, and for different applications. And we’re linking that into the applications we’re keen on solving, which would tend to be societal, environmental, or ecological.

What kind of things exactly?

That would be things like illegal fishing, human trafficking and maritime security. So anti-piracy type activities. We work with our customers too, work on those applications. But we’re not selling the knowledge that there’s an illegal fisherman here. We’re not able to make a judgment as to what a person is doing. They could just be a rowboat out for a day’s fun.

The satellites you’ve developed to collect this data, they’re ready to go?

Those satellites are boxed, they’re done.

And their launch is imminent?

Not as immenent as we had planned for, our launch provider RocketLab unfortunately had to move our launch back. But we’ve literally been working weekends, all night, everybody. Getting the satellites prepared and ready to go. And then everything moves for things outside of our control.

Getting into space isn’t like getting on the bus, is it?

This kind of thing does remind you how complex it is putting things into space.  And actually, I think people for a little while, started to think their access to space has been commoditized a bit. It’s not. Rocket Lab is a very well-polished, professional organization. And that gives a sense that this is essentially a train, or a plane that you’re booking. But not at all, it’s really complicated. And there are challenges and the Vega launch failure obviously does further emphasize this. It’s a very, very expensive, very challenging business. And I think as much as I’m frustrated, that we’ve all been in positions where challenges happen at times, delays happen.

In case of such a delay, what do you do?

We’re using the time to work on our next generation of satellites. All the design work is going on right now. Increasing our capabilities, leads to increased revenues.

And as soon as the satellites are up and functioning, how long will it take before you can use the first data for offerings to your clients?

Well, it depends on the client actually. There are some customers which are more like partners than customers. They are happy to buy very early data sets from us, and be involved in the feedback loop with regard to, “How accurate is this?” And, “How do we improve this over a period of time?”

Particularly in the case of some of our larger partners that have signed up, it’s really about getting these guys to work with us in those early few weeks, so that we can come together with a product which they understand and trust. That doesn’t happen on day one of the product’s release, clearly. It’s something that we have to develop with them.

And in the right place too? Which is Luxembourg for Kleos. Was that an easy decision for you?

That was one of the other question when setting Kleos up: where do we put this business model? How do we raise investment?

We worked through a lot of different options. One of them was Luxembourg, and for positive, good reasons, that’s where we ended up. And it really kicked off our success over the last 12 to 18 months.

You moved here from the UK, bringing your family with you. Is that right?

Yes, it was a big decision. But, I thought, “Well, if we’re going to do this, I’m going to set this up properly.” The staff are going to be based in Luxembourg. I’ll move me and I’ll move my family and that’s where we’re going to be for a period of time. And we’ll do it, we’ll jump in with both feet.

And so there were a lot of considerations, which weren’t necessarily business-related. That was when I started to look at Luxembourg in the whole.

Is there somewhere I can bring my family to?

Is this somewhere they’re going to be happy?

Is this somewhere my wife’s going to be happy? And my children?

Is there an education system I can work with?

And then you work through all those things and actually start to scratch behind the surface a little bit, and you see Luxembourg is clearly one of the best places in the world to raise a family. It’s fantastic.

You mentioned raising funding, is there a coastal defence angle behind your decision to list Kleos on the Australian stock exchange?

Well, the Australian stock exchange is one of the few stock exchanges around the world that will allow pre-revenue companies to IPO, which obviously we were pre-revenue. That somewhat limited in the exchanges we could look at.

And, if you look at the ASX in terms of how they support, from a shareholder perspective, micro-cap and small cap companies. There’s a lot of volume, there’s a lot of financial liquidity in the marketplace and on the ASX.

That’s very useful for a growing company because the IPO is one thing, but as we continue to grow, launch more satellites, deliver more revenue, we will want to access more capital.

So, it wasn’t so much on day one, what does the ASX deliver? But over the next 12 months to 24 months, how can being on that market help us? And then, from a shareholder perspective, shareholder engagement, explaining the story is relatively straightforward. Within Australia, people understand coastal problems.

They understand environmental challenges, with people and illegal fishing, or smuggling. And they know that they’re vastly unprotected in those particular areas. It’s in the news every day in Australia.

So, they understand there’s a marketplace, people buy the information, we’re going to provide.

And then you also went on to Dual Listing on the Frankfurt Stock Exchange?

Yeah. So, being listed in Australia is great, but we’re not an Australian company. We are listed in Australia, but we’re a Luxembourg entity.
So, what we’re going to do is engage European investors and show that there’s an opportunity here.

Is it more difficult where people are less aware of maritime issues?

You need to spend time educating people as to what we’re doing, informing people, bring them up to speed and getting them to understand the business. De-risking the business.

Going back to the data itself. Do you have some sense of just how dark our oceans are? How much shady activity is going on out there?

Yeah, there’s estimates by various Naval sources which suggests that about 68, 69% of maritime activity known, legitimate traffic. The rest of the maritime activity is unknown. That’s what they’ve observed on a daily basis.

Everybody knows about the shipping routes for legitimate shipping, but there are ‘bad guy shipping routes’ as well.

They’re moving drugs, or moving people from South America to West Africa, through the Cape Verde Islands. That’s how the drugs then run up to Europe.

There must be a lot of interest in tracking that sort of activity.

Being able to identify that sort of activity is very important, particularly for developing nations. It’s less important for Luxembourg, clearly. But for the developing nations, especially around Africa where there are illegal fishermen coming into their waterways, stealing their fish, removes their livelihood and their ability to support their families.

But there’s no way for these developing nations to police their coastline. They haven’t got maritime patrol aircraft, they haven’t got aircraft, or coast guards that they can patrol these things. They can’t afford it.

It’s great to be able to help with such pressing issues, but is this enough to overcome investors’ fear that Space is inherently risky? In other words, why should investors actually look at investing in companies like Kleos?

Well, one of the things I’ve always been quite clear on, from an investor perspective, is that we’re essentially not a space company. We’re space-powered and space-enabled.

We own our own space assets, but we’re a data company. We’re delivering data as a service and as overly quoted, “Data is the new oil,” apparently. But what’s meant by that is that there are certain parts of the world that require more and more data. And the more data you deliver, the more valuable it is to them over a period of time. So, this is more about persuading people of the value of our data products. And then, explaining that how we collect our data is quite unique because it’s done from space, it’s not done from balloons, or planes, or searching the Internet. It’s a space-powered business.

Then there are certain investors who are obviously interested more in the space aspect of what we do – the space geek type investor. With them, we are able to talk much more clearly about what we’re doing and engage people in that story. But, I think even though even in the case of an investor who’s only interested in the fact we’ve got a data product, they do begin to engage with the story that actually, well this is quite exciting. It’s from space, that’s quite cool.

And so they get to see that whole point that, in a lot of senses, we’re similar to other data service companies or software as a service companies where we require infrastructure. It just happens to be our infrastructure’s in space, rather than in the cloud, or sat in a warehouse, or something. Our infrastructure is very physical and 500 kilometers away.

So what will be the next steps for Kleos, once the satellites are launched and things are going well? You mentioned earlier that you’re already working on the next generation of products?

We’re always working two or three steps down the road in terms of where we are because the timescales are relatively long to get satellites built and launched. So yes, we’re developing a few different things. We’re developing different data products. We’re investigating the ways we use our data, to make a higher value product. We’re also working on improving the satellites. In terms of the next generation, we’re looking at how we collect more data in different areas as well, and how we manage that process. How we improve upon our hardware, our infrastructure and keep upgrading? We have a step-by-step approach to developing the Rolls Royce of satellites. They’re a few years away, but we will get there.

And from a business perspective?

We have various different growth paths. We can grow through launching more satellites, collecting more data. We can also grow through looking at different parts of the spectrum, opening up different markets outside of maritime. Land, or spectrum monitoring type applications for government organizations. Or, air applications, where we geolocate in the air. And finally, we can grow the business by increasing the value of our data product, working towards a data fusion. We’re working on all of these angles. But, I often say to our customers, “We are customer-need-driven.” Unless there’s a need, we’re not going to develop the technology. We need that constant feedback loop with our customer base.