Iain Christie: I am here again with Salar Javid. This is the second article that we have written together, and it is a continuation of our previous one. In that article we talked about the idea that the mining industry has some interesting parallels to the space business. Particularly when it comes to attracting investment to a business that is long-term exploratory and capital intensive.

At the end of the last article, Salar pointed out that the mining industry went through a real sea change in the investment environment due to the Bre-X scandal in 1997. Now, Salar, you are telling me that the extra regulatory attention that Bre-X generated actually improved the investment environment and attracted to investors into the mining sector. Really?

Salar Javid: Indeed, Iain. Bre-X served as a wake-up call for the industry and investors. Before the scandal, mining seemed opaque, like an insider’s game. After Bre-X, frameworks like NI 43-101or S-K 1300 introduced structure and transparency and restored trust. And we all know that trust is essential when asking investors to invest their hard-earned money in any venture, let alone in capital-intensive, high-risk ventures like mining.

This attracted new investors for several reasons. First, the standards ensured reliability. Knowing a company’s claims about reserves or operations are verified by an independent ‘Qualified Person’ changes everything. Investors who once hesitated now had a solid basis for informed decisions. Transparency connected the industry to new capital sources, effectively shifting some due diligence from the investor to that independent qualified person.

Second, it equalized the opportunities. NI 43-101 established uniformity in reporting, allowing investors to more easily compare prospects and grasp the risks and benefits associated with various projects.

This was a pivotal moment for the mining sector, especially for newcomers like institutional investors. They found a dependable framework to rely on, which had a significant impact by attracting a whole new wave of investors. Pension funds, ESG-focused funds, and various institutions that typically engage in thorough due diligence began to take notice. Since these entities are often cautious about risk, the structured disclosures offered them the confidence they needed to explore a sector they might have previously overlooked.

So, yes, while the regulatory burden might have seemed like a challenge at first, it has turned out to be a big win in the end. It didn’t just reassure existing investors — it brought entirely new ones into the fold, transforming the industry into a more attractive and sustainable investment opportunity.

Iain: Well, that certainly sounds like something that the space sector could use. I genuinely believe that the investors that have been attracted to space in the last little while are not the only community that should find opportunities here. But how can we take the mining experience and apply it to space?

Salar: Yes, that is definitely worth a consideration. Although the regulatory framework after Bre-X offered numerous advantages, it also presented challenges — ones that any similar standard for space needs to tackle and navigate. Let me explain.

You have to understand that compliance with a framework is not free. In the mining sector, the implementation of NI 43-101 considerably raised operational expenses, particularly affecting smaller or junior companies. These businesses typically operate on narrow margins and rely heavily on speculative investments. So, the extra financial strain of adhering to stringent reporting standards sometimes resulted in project delays or, in the worst cases, the abandonment of initiatives.

In the space industry, where startups often lead the way in innovation, it’s going to be crucial to establish a framework that balances transparency with affordability to protect that entrepreneurial spirit.

And, of course, it’s no secret that rigid frameworks tend to stifle innovation. NI 43-101 provided structure in mining, but it also led companies to prioritize regulatory compliance over bold approaches to resource discovery and extraction. We want to avoid falling into that trap in space. So, any framework needs to be space-specific, and it needs to emphasize flexibility. It needs to foster innovation while also maintaining investor trust, and it can lead to “well, we did it this way, and it worked, so let’s repeat the same cookie-cutter approach again and apply it to the next one.”

Another concern is that while increased transparency reassures some investors, it doesn’t appeal to everyone. High-risk investors, like venture capitalists, often prioritize potential upside over detailed risk mitigation. The question is: how do we create a standard that attracts both traditional long-term capital and the more speculative funding that drives early-stage innovation? Mining’s post-Bre-X environment leaned heavily toward stability, but space might require a more nuanced approach. We actually see some new mining ventures acting like venture backable startups, and I don’t necessarily think that is a bad thing, however, stabilization needs to be achieved first.

Then there’s the danger of overregulation. In mining, the push for transparency sometimes led to slow project approvals and reduced flexibility in adapting to market conditions. This could be even more detrimental for space, which is an industry still finding its footing and facing rapid technological shifts. Any framework for space needs to avoid the pitfalls of rigidity and ensure companies remain nimble and responsive.

Ultimately, we have to ensure that any standard promotes long-term thinking among companies. In the mining sector, some firms became too fixated on immediate compliance, neglecting strategic growth and exploration. This approach could be especially detrimental in the space industry, where the return on investment (ROI) period is prolonged. A thoughtfully designed framework should steer companies towards establishing sustainable operations without burdening them with excessive short-term commitments.

So, I truly believe in the power of standards to attract investment and foster trust. The lesson we’ve learned from mining is important. The design of those standards is just as crucial as their intent. In the space sector, we need a thoughtful approach that blends transparency and trust investors seek with the flexibility and support that innovators need to flourish. This is our path forward.

Iain: Yes, I can see that. No one ever got to space overnight. Companies need to be patient. But what about investors?  Would you agree that one of the issues regarding space is that the pool of capital is neither wide nor deep at the moment?

From what I see, this is not only happening in space but in the broader deep tech “venture” market as well. Investors, particularly those operating from a venture model seem to be increasingly reluctant to invest beyond the very early stage. I hear stories of companies being unable to generate interest in even late-stage seed funding.  It feels like it is becoming a vicious circle because as investors see late state capital drying up, they don’t see a wide enough pool of investment to believe there will be a market for their shares when they wish to exit, so they become even more focused on short term prospects – which does not attract them to the space sector.

Salar: I agree, Iain, but with some hesitation. One of the challenges for space lies in the fundamental mismatch between the venture capital model and the sector’s realities. Venture investors are accustomed to fast-moving markets, relatively short timeframes for returns, and a clear path to liquidity through acquisitions or public markets. Though I believe VCs have a critical role to play in space, none of these conditions exist at the scale they’re used to.

The pool of capital is indeed both narrow and shallow. Space investors are often specialist individuals or firms with a deep understanding of the technical and market challenges. But this means the capital isn’t as diversified as it needs to be. My current understanding is that if you’re looking to raise a Series B or C round, the options shrink even further, or it tends to favour ventures that have more immediate money-making solutions. The lack of generalist investors with the appetite for the longer timelines and risks in space creates a funding gap, especially in later rounds.

Then there’s the matter of exits, which you’ve addressed well. Venture capitalists rely on liquidity events, yet the space industry lacks a strong ecosystem of secondary buyers and public market interest for these firms. Any secondary activities largely hinge on the initial success and focused interests of a select few. Investors are concerned that even if a company technically succeeds, they may have difficulty selling their shares at a reasonable valuation. This uncertainty in the downstream market creates a bottleneck, and that apprehension flows back into earlier funding rounds, diminishing the overall capital influx into the sector.

Add to this the gradual evolution of space markets, and the alignment certainly feels off. Unlike Software as a Service (SaaS) or e-commerce, where market expansion and customer onboarding occur rapidly, space involves lengthy project timelines, substantial capital expenditure demands, and regulatory complexities. For venture capitalists who are used to rapid growth and swift exits, this scenario can appear quite incompatible.

Optimistically, I believe there is a viable path ahead, but it needs to be collaborative, coordinated and multifaceted. The sector requires a mechanism to enhance investor confidence throughout the entire life cycle. We need frameworks — similar to those developed by mining after Bre-X — that clarify risks and establish a systematic approach to reduce investment risks over time. Concurrently, innovative funding structures are essential. Instruments such as public-private partnerships, Capital Pool Companies (CPCs), well-proven Canadian alternatives for private companies to raise public capital, or even hybrid funding models could bridge gaps in later investment rounds, facilitating a smoother route to liquidity for investors. Consequently, the venture capital model, known for its high-risk, high-reward approach, could evolve into more of a Research and Development fund to initiate a venture, creating a cohesive set of system-based and ecosystem-based solutions. This shift would render these funds more sustainable or evergreen and incorporate a systems thinking and ecosystem perspective.

In essence, we need to redefine what a successful investment looks like in space. It’s not about short-term exits but about building long-term value in an industry that will define humanity’s future – it’s an infrastructure play!  If we can get that message across — and back it up with better risk management and funding mechanisms — I think we’ll start to see the capital pool grow in both width and depth.

Iain: Well, that would be a welcome change. I am looking forward to discussing it in the next installment in this series. Because I think that whole discussion is a whole column all on its own. Can we pick this discussion up in a couple of weeks?

Salar:  Absolutely. What do you think we are going to tackle next, Iain?

Iain: Well, I think it’s time to talk a bit more specifically about how we are going to move the needle as they say. I think we need to talk about who needs to do what and how they can be convinced to do what is necessary. 

One thing is clear to me, with the current trends in investing that I see, the level of activity that is frequently predicted in the space industry is neither likely nor sustainable. We need to talk about concrete initiatives that are going to allow that optimistic future to become reality.