Satellite Imagery Startup EOI Space Has Crossed the Valley of Death by Flying Low

When it received an AFWERX award to develop small, low-flying imagery satellites in 2020, Earth Observant, now known as EOI Space, had a handful of people convinced it could bust into to the satellite imagery market. Now the startup has convinced Japanese IT giant, NTT DATA, it can provide near real-time ultra-high resolution imagery from the not-so-high ground.

Two weeks ago, EOI Space announced a distribution agreement with NTT DATA, bringing richly-detailed pictures from the company’s constellation of Very Low Earth Orbit (VLEOLEO
) optical imaging satellites to customers in the Japanese market. “Customers” is essentially a euphemism for defense and security end-users of the Japanese government, the second largest consumer of commercial imagery for national defense and security purposes after the U.S. government.

Initially valued at $70 million, the deal is not only a financial shot in the arm for EOI Space but important validation of its product and strategy by a respected multi-national acting on behalf of one of America’s most important Allies. Combined with crucial capital from investors convinced by the potential of EOI Space’s VLEO constellation, the contract has transported the low-flying company across the so-called Valley of Death to foothills it stands a good chance of climbing.

EOI Space’s business model capitalizes on a technology idea that’s been discussed for a decade but not heretofore realized – sending a mass of small imaging satellites up to relatively low altitudes.

Stingray

The crux of EOI’s story when I first covered it in 2020 was its attractiveness to the U.S. Air Force based on its plans to build a small-sat network in VLEO. Satellites which fly in low Earth orbit (LEO) typically ascend to an altitude of 500 kilometers (310 miles) or higher above earth. EOI proposed flying its birds at about 250 km (155 miles), an altitude more or less in Earth’s atmosphere.

The strategy comes with some downsides like aerodynamic drag, the effects of solar winds and strong gravitational pull which are significant enough to make a spacecraft’s orbit decay in less than five years, requiring changes in traditional designs. But there are also real advantages.

Flying at lower altitude generally improves the resolution of optical sensors, radiometric performance (infrared/microwave sensors) and geospatial accuracy. Orbiting low will allow Stingray satellites to capture near real-time 15 cm high-resolution imagery. That’s an order of magnitude better than the larger, higher-flying optical satellites of leading commercial imagery providers Maxar and Airbus which snap photos at a maximum 30 cm resolution.

In addition to very high resolution, AFWERX saw potential in the distributed resilience of a low flying satellite constellation. The proximity afforded by VLEO can reduce required payload size (optical, radar or communications) requirements and thus cost.

Each Stingray will be on the large side for a small sat, weighing in at approximately 330 kilos (728 lbs). The spacecraft body or “bus” will be two meters (6.5 ft.) long and with its solar panels deployed, around four meters in length. At that, they’re far smaller and less expensive than most optical imaging satellites. Their design – for a five-year lifespan at a 250 km altitude – offers flexibility to replenish the constellation on short time cycles with new sensors or other capabilities and their low altitude/small size makes de-orbiting them easier.

The first of the up to 60 Stingrays EOI plans to establish its constellation will launch in January 2024 as part of a SpaceX rideshare mission on one of the company’s Falcon 9 rockets. The Stingray will deploy from the Falcon at approximately 500 km and work its way down to its VLEO orbit. When it gets there, it will fly with a standard four-band multi-spectral (near infrared) optical sensor from an outside provider which EOI will integrate with its bus.

As Stingrays progressively launch and join the constellation (as many as six may be in VLEO by the end of 2024), EOI plans to integrate its own optical payload as well as a linked GPU (graphics processing unit) compute cluster and its own propulsion system. “For us, it’s key that over time we become as vertically integrated as possible,” EOI co-founder and chief revenue officer, Paul Smith, says. “That way, we avoid lead times. Right now, there are year to year-and-a-half lead times for components that really set you back. We want to avoid that.”

EOI’s sats will also avoid the delays in image delivery that come with ground processing stations by carrying out a considerable amount of image processing (raw optical image data needs to be processed and formatted for use) onboard each Stingray using edge computing methods rather than simply sending raw data to a ground station.

“Our goal is to have [the imagery data] skip the traditional ground station processing stacks,” Smith said in 2020. “We knew it was important, we didn’t know how important. But after talking to the Air Force and Army it became pretty clear that getting the data faster is their fundamental desire. It’s something they’re looking for all of us out there in space to do.”

By virtue of its VLEO orbit, the Stingray constellation ticks another box – flying below the increasingly high-traffic, space-junk infested LEO neighborhood above 500 km. In 2021, Peter Beck, the CEO of launch services startup, of Rocket Lab, affirmed that the overwhelming numbers of objects in LEO are making it increasingly difficult to find a clear path for rockets to launch new satellites. The rockets “have to try and weave their way up in between these [satellite] constellations,” Beck told CNN, referring to SpaceX’s Starlink satellites.

The appeal of a resilient, low flying constellation capable of taking detailed pictures and sending them quickly, directly to customers was something EOI’s founders put their chips on when they founded the company in 2017.

Crossing the Valley

“We’ve come a long way since 2020,” Smith says. “We got the grant from AFWERX and did all the work that was proscribed, learning a lot about our bus design and optical payload.”

The SBIR (DoD Small Business Innovation Research) funding allowed the startup’s three co-founders to transition to working on the enterprise full time, the sort of small business evolution that AFWERX and its out-going director, Col. Nathan Diller, have tried to incubate repeatedly since 2019.

Smith says the award was key not only in furthering research but in giving Earth Observant CEO and co-founder Christopher Thein, the breathing space to concentrate on securing Series A funding from an angel investor. The company subsequently established its headquarters in Louisville, CO, a suburb north of Denver noted for its concentration of young aerospace companies and a resident pool of talent. EOI hired over 50 people, solidified its design and acquired a launch slot with SpaceX.

What is often overlooked in the now familiar “Valley of Death” (the defense-aerospace startup journey from initial R&D to landing an eventual government contract) discussion is the potential leg-up that SBIR/STTR grants give nascent firms in attracting private capital. For EOI, the $15 million investment provided by its angel was crucial to advancing the business far enough to attract NTT DATA.

“I don’t know that we would have gotten that A-round, those angel investors if it hadn’t been for that U.S. government contract,” Thein, acknowledges. “I don’t know if we’d have gotten the deal with NTT without both of those previous things.”

Thein actually made an aborted start at establishing a VLEO satellite imagery company a decade ago, but the timing wasn’t yet propitious. “Even within the lifetime of this company [EOI] what I noticed was that, especially within the U.S. government, there was a feeling that this wasn’t possible to pull off. Now you’re seeing multiple programs pop-up doing this exact thing. There’s been a mind-shift in accepting this as a way forward.”

There may be no better support for Thein’s observation than the recent establishment of SpaceX’ new national security business unit called Starshield. Though details of what is reportedly a defense-focused launch and earth observation constellation business are limited, Elon Musk’s new subsidiary says it will initially focus on developing Earth imaging sensors and satellites. If the Starshield constellation joins EOI Space’s Stingrays in VLEO, it won’t be a surprise.

In agreeing to do business with a small American firm, NTT DATA likely recognized the shift in perception of VLEO satellite networks and an opportunity to get in on the ground floor. The $70 million figure in NTT’s press release represents its estimation of the value of sales of the imagery it will receive from EOI as part of an exclusive $8 million pre-data buy for the Japanese market through 2028.

In addition to sales exclusivity, the deal gives NTT assured access to tasking Stingray sats. Smith explains that other imagery provider networks are sometimes diverted from commercial tasking in the region because of its strategic importance and the quick information that governments (U.S./Allies) may require in what he calls a “tough neighborhood”. Tasking priority was a major driver of the deal and tacit acknowledgement of the value that EOI’s 15 cm data will have.

The contract also represents acceptable, even desirable international investment in an arena in which the U.S. government is particularly sensitive to foreign money. NTT had enough confidence in EOI Space to take a minor equity stake (approximately 3 percent) representing another $2 million in investment in the latter.

EOI’s founders resisted the temptation to take Russian or other foreign funding as they crossed the Valley of Death for patriotic and sound long term business reasons. That may have required them to work harder but it sets the stage for a future in which EOI hopes the U.S. intel and defense establishment will be a major customer.

EOI has made an effort to circumvent foreign ownership investment issues with what it calls its Global Alliance program, essentially a pre-data buy preferred-customer program with some of the features of the NTT deal which could generate the cashflow it needs to accelerate its expansion without handing equity to offshore entities.

The Future View from Above

Chris Thein reminded me that despite slow changes in the satellite imagery market, it remains dominated by nation states whose defense and intelligence demand constitutes 55% of the market with rest being a mix of commercial, emergency response, scientific and other customers.

Airbus and Maxar dominate the defense imaging market with over a 50% share. “They don’t have the most satellites up,” Thein says, “they have the highest resolution satellites up.” The war in Ukraine has shown governments and ordinary people the power of imagery he adds, underlining the potential demand for EOI’s 15 cm capability.

While Airbus and Maxar have the most sophisticated and agile imaging satellites aloft at present, they are also the most expensive. EOI’s strategy is different. Rather than leveraging a few very costly, very capable sats, it will take advantage of less exquisite, less maneuverable birds concentrated in low synchronous orbits of varied inclination offering different vantage points and increased revisit rates.

“An individual Maxar or Airbus satellite can do area-mapping for example much more robustly than [a Stingray] can,” Smith says. “But we’re not trying to do that all with one bird. We can use the power of many satellites in a constellation to cover the same areas more efficiently.”

EOI will pursue an imagery as-a-service model. The lower projected overall cost of its constellation likely implies lower imagery costs with better resolution than its competitors. The nature of its individual small sats also gives it a scaling advantage. Smith estimates their cost is approximately 10% of their competitors’ advanced higher flying spacecraft.

That makes the capitalization mountain that EOI Space needs to climb less steep than its peers. It also appeals to the government Smith affirms.

“We know they’re very interested in what we’re doing. They’ve been supportive and we’re hoping at some point here to get some steady contracts. We’re not a kid anymore. We’re more of a teenager ready to get the car keys.”

That’ll be evident when Stingrays get to space Smith adds, a physical and psychological signal of progress. “Government typically doesn’t have as much to talk to you about until you’re in space. Then it’s a different game.”

The same applies to potential commercial clients who may ask for a variety of services beyond optical imaging ranging from commodity trading to public safety and energy infrastructure monitoring. EOI has looked at extending its Stingray capabilities to integrate thermal, radar and other sensors, likely provided by outside makers. But Smith emphasizes that the company will remain squarely focused on optical payloads for the foreseeable future.

Stingray edge computing algorithms may be of interest to customers as may the constellation’s ability to “tip and cue” other on-orbit systems, processing and sending their data directly to clients.

But the company’s co-founders say they don’t want to get ahead of their initial vision yet. In fact, it’s a good time for startups like EOI to simply take advantage of the commoditization of launch that SpaceX has made possible. Without such lowered cost, a lot of innovation would still be buried.

“I’m optimistic about where we are right now,” Smith says. “We’re on the right balance of cutting edge and stable technology.