How the asteroid-mining bubble burst

In the best of worlds, Chris Lewicki and Peter Diamandis might have changed the course of human civilization. Their startup, Planetary Resources, was launched in 2012 with the modest dream of mining asteroids for minerals, metals, water, and other valuables. The founders’ résumés and connections gave the zany idea institutional legitimacy: Lewicki had worked on major NASA missions such as the Mars Spirit and Opportunity rovers, and Diamandis was a well-known space--tourism booster. Together with a third partner, Eric Anderson, Planetary Resources had raised $50 million by 2016, of which $21 million came from big-name investors including Google’s Eric Schmidt and filmmaker James Cameron.

Before long, a competitor called Deep Space Industries (DSI) appeared on the scene. It raised much less cash: just $3.5 million, supplemented by some government contracts. But it had its own high-profile backers, pie-in-the-sky goals, and a particularly evangelical board member named Rick Tumlinson, who made the rounds at conferences pitching the company’s vision. “Crazy ideas: that’s what moves culture forward,” he said at a 2017 event in New York. “Nothing says this is impossible except our own belief systems.”

It was sci-fi come to life—and everybody loved it.

“Space mining could become a real thing!” headlines squealed. Amazon CEO Jeff Bezos began speaking of a future in which all heavy industry took place not on Earth, but above it. NASA funded asteroid-mining research; the Colorado School of Mines offered an asteroid-mining degree program; Senator Ted Cruz predicted that Earth’s first trillionaire would be made in space.

“There was a lot of excitement and tangible feeling around all of these things that we’ve been dreaming about,” says Chad Anderson (no relation to Eric), the CEO of Space Angels, a venture capital fund that invests in space-related companies.

Also crucial to the money-making opportunities was the burgeoning commercial space sector’s lobbying, which shepherded the SPACE Act through Congress in 2015. This not--uncontroversial bill included a “finders, keepers” rule whereby private American companies would have all rights to the bounty they extracted from celestial bodies, no questions asked. (Before that, property rights and mining concessions in space, which belongs to no country, were not a given.)

That, in turn, would make it possible to work toward a goal that Eric Anderson predicted could be reached by the mid-2020s: extracting ice from asteroids near Earth and selling it in space as a propellant for other missions. Water can be broken into hydrogen and oxygen to make combustible fuel, or—as in DSI’s technology—just heated up and expelled as a jet of steam.

“Both companies believed one of the early products would be propellant itself—that is, water,” says Grant Bonin, the former chief technology officer of Deep Space Industries. “What DSI had been doing is developing propulsion systems to run on water. And everyone who buys one is creating an ecosystem of users now that can be fueled by resources of the future.”

By the spring of 2017, Planetary Resources was operating a lab in a warehouse in Redmond, Washington, decorated with NASA paraphernalia and vintage pinball machines. Engineers tinkered with small cube satellites behind thick glass walls, crafting plans to launch prospecting machines. Luxembourg had given the company a multimillion-dollar grant to open a European office. Japan, Scotland, and the United Arab Emirates announced their own asteroid-mining laws or investments.

The stars had burned through their red tape. The heavens were ready for Silicon Valley.

Then things started going south. Last summer, Planetary failed to raise the money it was counting on. Key staffers, including Peter Marquez, the firm’s policy guy in Washington, had already jumped ship. “We were all frustrated about the revenue prospects, and the business model wasn’t working out the way we’d hoped,” recalls Marquez, who now works for a Washington, DC, advisory shop called Andart Global.

“There was more of a focus on the religion of space than the business of space,” Marquez adds. “There’s the religious [segment] of space people who believe that almost like manifest destiny, we’re supposed to be exploring the solar system—and if we believe hard enough, it’ll happen. But the pragmatists were saying there’s no customer base for asteroid mining in the next 12 to 15 years.”

Amid rumors that it was auctioning off its gear, Planetary Resources was acquired last year by ConsenSys, a blockchain software company based in Brooklyn that develops decentralized platforms for signing documents, selling electricity, and managing real estate transactions, among other things. Anderson Tan, an early investor in Planetary Resources, was baffled by the acquisition—and he’s the kind of blockchain guy who promotes other blockchain guys’ blockchain ventures on LinkedIn. “I honestly have no idea … I was shocked. I think they wanted to acquire the equipment and assets,” he says. “For what? I’m not so sure.”

DSI, in turn, was acquired by an aeronautics company named Bradford Space. These acquisitions aren’t taking the companies anywhere. “They’re gone; they’re done. They don’t exist,” says Chad Anderson.

What went wrong? Predictably, ex--employees and investors tell slightly different stories.

Bonin blames DSI’s demise on investors’ unwillingness to take long-term risks. “We had a plan that would take off after a certain point, and we didn’t get to that point,” he explains. “And we were only $10 million away from hitting that point, but our planning was decades long, and a VC fund’s life cycle is one decade long. They’re incompatible.” Meagan Crawford, who worked with Bonin and is now starting her own venture capital fund for commercial space startups, concurs: “A traditional VC time line is 10 years, when they have to give money back to investors, so in seven years they want to exit. A 15-year business plan isn’t going to fit in.”

On the money side, the story is a little less forgiving. “They did not deliver on their promises to investors,” says Chad Anderson, whose Space Angels invested in PR. “Both companies were really good at storytelling and marketing and facilitating this momentum around a vision that their technology never really substantiated.” He adds, “I think that these weren’t the right teams to do it.”

There were also bigger structural obstacles—such as, in former employees’ telling, the lack of any infrastructure for an asteroid--mining industry. That put investors off, too: “If you mine an asteroid, mostly likely you’ll [have to] send it to the moon to process it. It wouldn’t be processed on Earth, because the cost would be tremendous,” says Anderson Tan. “So then it’s like a chicken-and-egg problem: do we mine first and then develop a moon base, or invest in building up the moon and then go to asteroid mining?”

Finally, asteroid miners had to compete for funding with a proliferating number of other space-related ventures. Between 2009—“the dawn of the entrepreneurial space age”—and today, “we’ve gone from a world with maybe a dozen privately funded space companies serving one client, the government, to one with more than 400 companies worth millions of bucks,” Chad Anderson says. So if commercial space startups seemed like an out-there proposition in 2012, by 2018 VCs who wanted space in their portfolios could have their pick of companies with better short-term prospects: telecom startups selling internet access, for instance, or firms analyzing the much-more-accessible moon.

“The bottom line is that space is hard,” says Henry Hertzfeld, the director of the Space Policy Institute at George Washington University. (Hertzfeld advised Planetary Resources on legal matters; the space world, on Earth, is still very small.) “It’s risky, it’s expensive; lots of high up-front costs. And you need money. You can get just so much money for so long.”

To succeed, says Hertzfeld, the companies would have needed to make a profit from other uses of their technology—such as DSI’s water propulsion system, which could be used in satellites, and PR’s hyperspectral sensors, which it built to analyze the composition of asteroids but can also be put to work surveying the Earth. “But they didn’t generate the revenues,” he says, “and there’s a limited amount of time for a company to exist without a profit.” 

According to Space Angels, $1.7 billion in equity capital poured into space companies in the first quarter of 2019, nearly twice as much as in the last quarter of last year. Of that, 79% went toward satellite businesses and 14% to logistical operations, like rocket launches. The fund’s own interests mirror these trends.

“The commercial space industry is maturing to the point where it’s more serious now,” says Peter Ward, the author of The Consequential Frontier, a forthcoming book about the privatization of space. “Some of the people I talked to now see asteroid mining as a bit of a joke.”

In spite of these failures, former asteroid miners sound remarkably chipper about their prospects—and humanity’s interstellar future. Asteroid mining was a gateway drug for high hopes and big dreams.

Tamara Alvarez, a doctoral student at the New School in New York who has attended space conferences around the world, says that the rhetoric around space mining maps perfectly onto older frontier tropes. “The mining thing resonated with a lot of people because of the gold rush narrative. There’s something unconscious there that they tapped into,” she says.

Similarly, though neither asteroids nor 19th-century California actually created many overnight billionaires, they did create frameworks for how an economy based on a particular resource would function. “There wasn’t all the gold in California, but it brought an infrastructure that people made money off of,” says Alvarez. “Services, fishing—all this grew out of ambitions for gold. With asteroids, it’s the same thing: when you get the idea that there’s all the gold or whatever you need waiting for you, the infrastructure gets built too.”

The asteroid miners seem to have thought of it that way. “I think when DSI and PR got started, the headlines all said asteroid-mining [companies] were like [traditional] mining companies,” says Grant Bonin. “But internally we’d joke: We’re not miners yet. We’re the pickax and shovel or Levi’s jeans of space. We’re the creators of tools that were brought into existence that would support the vision, but also help a lot of other people to do a lot more.”

Equally significant is that the prospect of asteroid mining pushed governments to think about property rights in space. “The horizon for asteroid mining is still a couple of decades off, but I do think we’re going to do Mars missions, and we’ll need resources in space,” says Marquez. “And thanks to asteroid mining, the policy framework’s been established.”

For now, DSI and PR face uncertain futures. None of the space workers interviewed for this article had a clue what a blockchain company like ConsenSys was doing with asteroid prospecting tools. In November the company told journalist Jeff Foust of SpaceNews that PR’s “deep space capabilities” would “help humanity craft new societal rule systems through automated trust and guaranteed execution,” whatever that means. A spokeswoman has since said the company “is taking a new form and is less focused on asteroid mining.”

But Bonin says many of his DSI colleagues quickly found work elsewhere. And engineers laid off from PR have banded together to start a company called First Mode, which builds hardware that can operate in harsh environments both on Earth and above it; the company, according to its founders, is already profitable.

So the asteroid-mining industry may have collapsed for now, but its players are still hard at work. “When we reflect back [to] 2012 when these two companies came into existence, and think about how they were trying to crack that nut for seven years, one of the really cool things from my standpoint is these have gone into different companies,” says Bonin. “Part of me is sad when these things break up, but we’ve seeded the industry with true believers who care about a human future in space to benefit of all humankind.”

Atossa Araxa Abrahamian is a journalist based in New York.

This story originally confused the University of Colorado and the Colorado School of Mines. Apologies to all Buffaloes and Orediggers.