UrtheCast Looks Skyward

UrtheCast’s camera | BCBusiness
UrtheCast successfully mounted its two cameras on the International Space Station in January.

UrtheCast founders see unlimited commercial potential in streaming images from space

From his office tucked under the Vancouver Convention Centre overlooking Coal Harbour, Wade Larson pauses every time a seaplane takes off from the water behind him. Slightly fidgety, dressed in slacks and a frayed button-up, the former Canadian Space Agency bureaucrat is an unlikely entrepreneur. Nevertheless, it was Wade who stumbled upon a $100-million idea that just might disrupt business models that have defined the aerospace industry for decades.

Wade, along with his brother Scott and a team of venture backers, are the founders of UrtheCast Corp., the Vancouver company that last year launched a pair of cameras into space with the aim of selling streaming imagery to state agencies and commercial users.

Today the company has 65 employees, a market capitalization above $150 million and offices in Washington, D.C.; St. Louis; San Francisco; and Moscow.

The idea was born five years ago, when Wade, then a VP of business development at MacDonald, Dettwiler and Associates Ltd., told his brother Scott that he had been presented with an opportunity by RSC Energia, the main contractor to Roscosmos, the Russian space agency. Earlier that year, Wade and George Tyc, a long-time product director at MDA, had gone to Moscow for a meeting with a Russian rocket-maker to discuss plans to build an advanced radar payload for the International Space Station. Wade saw difficulties with the proposal, and countered with the idea of installing an optical camera that would stream live footage of Earth to the Internet. “The Russians loved it,” says Wade.

The outcome would eventually be a sweetheart deal around which UrtheCast was built: RSC Energia would launch, install and maintain UrtheCast’s cameras, effectively for free. In exchange UrtheCast would give Energia exclusive access to images of Russia. The agreement is worth about $100 million to UrtheCast, estimates Eyal Ofir, an analyst at Clarus Securities Inc. in Toronto, who follows UrtheCast.

Wade pursued the idea as an internal project at MDA, but it became apparent to him and his employer that it wasn’t a good fit for the company. So Wade approached his brother Scott, then a merchant banker with about a decade’s experience in boutique corporate finance. Following his involvement with several unsuccessful Internet ventures, Scott had spent five years at Vancouver-based Devante Capital, and then Cambio Merchant Capital, a small merchant bank, orchestrating recapitalizations and corporate restructurings. “He came to me and said, ‘MDA is in the process of passing on this. Do you want it?’” recalls Scott.

In December 2010, Scott incorporated Earth Video Camera Inc., raising half a million dollars from angel investors in Alberta and B.C. By February 2011, EVC had a $4.2-million contract with MDA, which would supply the back end of the system. (George Tyc was Scott’s supplier at MDA; his brother Wade was firewalled off from the venture.) By June 2011 the company had entered a contract with Rutherford Appleton Laboratories, the U.K. scientific research lab that would build the cameras. Over the next year, Scott would raise $11 million in venture capital.

By mid-2012 it became apparent to Scott that the company needed more money than it could raise from private funds; he had yet to cover the cost of the $17 million in hardware the company had ordered from MDA and a British government laboratory. By August, he began looking at the opportunity to take the company public through a reverse takeover, and in March 2013, he found the shell that he and his partners would fold EVC into: Longford Energy Inc., a company with $23 million in assets that had prospected energy projects in Iraq’s Kurdish region in a previous life.

The RTO was completed in June last year and after changing its name to UrtheCast, the company began trading on the TSX under the symbol UR, raising $34.4 million in the process. In July, Wade, who by then had left MDA, signed on as president and chief operating officer. The stock followed a roller coaster ride in the months after its June listing, hitting a low of $1.25 in August, then more than doubling by the time its cameras were installed in the space station in January this year.

UrtheCast is entering a market with huge growth potential, according to analyst Eyal Ofir. Market research firm Euroconsult estimates that in 2012 sales of earth observation data totalled $1.5 billion, driven by demand for earth observation imagery in Latin America, Asia and the Middle East by defence agencies, natural resources companies and government agencies.

By the time cosmonauts installed the cameras on the exterior of the Russian pod of the space station, UrtheCast had signed data distribution agreements potentially worth at least $21 million a year, pending the final step of actually turning the cameras on and transmitting images to Earth. Wade expects that to come in the second quarter of this year, after the cameras are calibrated and focused. Ofir forecasts revenues of $48.5 million by 2015, or as much as $75 to $125 million.

Those optimistic projections, however, may be just the beginning. UrtheCast’s video footage will be streamed, for free at first, over the Internet. The company plans to monetize its web platform in the long term, which has attracted tens of thousands of beta users, largely in the Bay Area, according to Wade, but its lower costs are allowing startups to look at extraterrestrial ventures. “The costs of the cameras and data storage are coming down,” says Wade. “It’s the start of something.”