Why Earth Observation Companies Fail

Key Takeaways

• Capital intensity and technical risks often outpace the slow revenue growth of many startups.
• Heavy reliance on government anchor contracts creates significant vulnerability for commercial satellite operators.
• Success requires moving beyond raw imagery to provide integrated, actionable data for specific industries.

High-Stakes Gambling

The commercial Earth observation sector is often described as a field of high-stakes gambling where the chips are satellites and the house is the global economy. While the idea of watching the planet in real-time or tracking illegal fishing from space sounds like a guaranteed success, the reality of the business is far more punishing. Dozens of companies have entered this market with grand visions only to vanish into bankruptcy or be absorbed by rivals at a fraction of their peak valuation. It’s a industry where technical brilliance isn’t always enough to overcome the gravity of financial reality.

Companies in this space face a unique set of hurdles that don’t exist in traditional software or manufacturing. A single launch failure can wipe out years of work and millions of dollars in a matter of seconds. Even when satellites reach orbit successfully, the cost of maintaining a constellation is relentless. Ground stations must be paid for, data must be processed, and most importantly, customers must be convinced that a satellite photo is worth a premium price. When these factors don’t align, even the most promising ventures can fall.

The Fragility of the Anchor Tenant Model

One of the most common reasons for failure in the industry is a over-reliance on a single large customer, usually a national government. In the United States, the National Geospatial-Intelligence Agency (NGA) and the National Reconnaissance Office (NRO) act as the primary buyers of commercial imagery. These agencies provide what’s known as “anchor” contracts, which give companies the steady cash flow needed to pay off their massive debts. However, these contracts are a double-edged sword.

When a company loses a major government contract, there’s often no commercial market large enough to catch the fall. This was the case for GeoEye , which once stood as a titan of the industry. In the early 2010s, GeoEye and its rival DigitalGlobe were locked in a fierce competition for the NGA’s “EnhancedView” contract. The contract was worth billions, and the winner would effectively control the American commercial imagery market.

When the government faced budget cuts, it decided it couldn’t support two separate companies. DigitalGlobesecured the lion’s share of the funding, leaving GeoEye in a precarious position. With a new satellite, GeoEye-2 , under construction and no clear path to revenue, the company was forced into a merger with its rival in 2013. While it wasn’t a bankruptcy in the traditional sense, it was a failure of the business as an independent entity. The lesson was clear: if you live by the government contract, you can die by it too.

Technical Failure and Financial Exhaustion

Even if a company manages to diversify its customer base, it still has to deal with the harsh environment of space. Satellites are complex machines that can’t be repaired once they’re in orbit. If a component fails or a software glitch disables a spacecraft, the company loses a revenue-generating asset that may have cost tens of millions to build and launch.

Kleos Space serves as a recent example of how technical issues can spiral into financial collapse. Based in Luxembourg, the company focused on radio frequency monitoring – a specialized type of Earth observation that detects signals from ships and other sources. By 2023 the company ran out of cash. It had struggled with satellite development problems that led to the write-off of several units. When a critical loan from a financier fell through, the board realized it couldn’t meet its financial commitments and filed for bankruptcy.

The failure of Kleos Space highlights the “funding gap” that many space startups face. It takes years to build a constellation and start generating meaningful revenue. If investors lose confidence during that development phase – whether due to technical delays or a cooling economy – the company’s “runway” disappears. In a capital-intensive industry, there’s very little room for error.

The Struggle to Commercialize the Data

A recurring theme in the history of failed Earth observation firms is the belief that “if you build it, they will come.” Many founders assumed that if they provided high-resolution imagery, the commercial world would naturally find a use for it. They focused on the “how” of taking pictures rather than the “why” of purchasing them.

UrtheCast , a Canadian firm that once had the ambitious goal of streaming live video from the International Space Station , found this out the hard way. The company spent heavily to acquire Deimos Imaging and develop its own advanced constellations, UrtheDaily and OptiSAR . Despite the technical novelty of its offerings, UrtheCast struggled to turn a profit and became burdened by debt. It eventually filed for creditor protection in 2020.

The fundamental problem wasn’t a lack of data, but a lack of integration. Commercial customers in agriculture, insurance, or finance don’t want to look at raw satellite photos. They want to know how many acres of corn are flooded or whether a parking lot at a retail store is full. They want answers, not pixels. Companies that fail to build the software layer required to provide those answers often find themselves with a very expensive product that nobody knows how to use.

Pivots That Didn’t Pan Out

Sometimes a company starts with one mission and tries to use Earth observation as a survival strategy when the original plan fails. Planetary Resources is perhaps the most famous example of this. Founded with the goal of mining asteroids, the company boasted high-profile investors like Larry Page and Eric Schmidt .

As the reality of asteroid mining proved to be decades away, the company attempted to pivot to Earth observation. It planned to launch the Ceres constellation, which would use infrared sensors to track water and oil resources on Earth. However, the pivot came too late. By 2018, the company had run out of money and was unable to secure a new funding round. Its assets were eventually sold to a blockchain company, effectively ending its run as a space venture.

This type of failure is often linked to “mission creep.” By trying to do too many things at once – or by switching focuses mid-stream – companies burn through their capital without ever perfecting a single product. In the space industry, where development cycles are measured in years, a lack of focus is often fatal.

The Shadow of Free Data

Another significant hurdle for commercial providers is the existence of free, high-quality data from government programs. NASA and the U.S. Geological Survey (USGS) operate the Landsat program, while the European Space Agency (ESA) manages the Sentinel satellites under the Copernicus program. These satellites provide a wealth of information for free to anyone with an internet connection.

While commercial companies often provide higher resolution or more frequent visits than these government programs, they’re still competing with “free.” If a farmer can get “good enough” data from Sentinel-2 to manage their crops, they’re unlikely to pay a startup for slightly better data. This forced commercial companies to specialize in areas that government satellites don’t cover, such as very high-resolution imaging or specific sensor types like Synthetic Aperture Radar (SAR) .

Companies like RapidEye found themselves in this trap. RapidEye launched a five-satellite constellation in 2008 with the hope of dominating the agricultural market. However, the company struggled with debt and couldn’t generate enough revenue to stay independent. It filed for bankruptcy protection in 2011 and was eventually acquired by Planet Labs . The “good enough” nature of free data remains a constant pressure on the margins of every commercial operator.

The Consolidation Wave

In many cases, failure doesn’t result in a company simply disappearing. Instead, it leads to consolidation. Stronger companies with better business models or deeper pockets wait for their competitors to stumble and then buy their assets for pennies on the dollar.

Planet Labs has been a master of this strategy. In addition to acquiring RapidEye , they also purchased Terra Bella (formerly Skybox Imaging ) from Google in 2017. Skybox Imaging had been a darling of the Silicon Valley space scene, but after Google bought them for $500 million, the tech giant realized that operating a satellite constellation was outside its core competency. Google effectively gave up on the hardware side of space and sold the satellites to Planet Labs in exchange for an equity stake and a data purchase agreement.

This trend suggests that the Earth observation market is naturally tending toward an oligopoly. A few large players – such as Maxar Technologies , Planet Labs , and BlackSky – now dominate the landscape. For new startups, the barrier to entry is higher than ever, as they must compete not just with government programs, but with established giants who have already mastered the difficult process of satellite operations and data distribution.

Launch Risks and the Window of Opportunity

Even with a perfect business plan and a functional satellite, a company can be brought down by the vehicle it chooses to get to space. In 2023, the failure of Virgin Orbit sent shockwaves through the industry. While Virgin Orbit was primarily a launch provider, its bankruptcy resulted in the loss of several Earth observation payloads and removed a unique launch option that many small satellite companies were counting on.

Launch failures create more than just financial losses; they create delays. In the tech world, a six-month delay is a nuisance. In the space industry, a six-month delay might mean your competitor launches their constellation first, secures the available government contracts, and leaves you with a useless satellite sitting in a cleanroom. For many startups, the window of opportunity is narrow, and a single rocket anomaly can slam it shut forever.

The situation hasn’t improved much in early 2026. While launch frequency has increased, the industry still deals with technical setbacks. The ISRO PSLV-C62 failure in January 2026, for instance, reminded everyone that even reliable workhorses can have bad days. When a startup loses its primary asset during launch, it rarely has the capital to build a replacement and wait for another flight.

Summary

The history of Earth observation is a testament to both human ingenuity and the unforgiving nature of the marketplace. Companies fail when they underestimate the capital requirements of space, over-rely on fickle government customers, or fail to bridge the gap between technical data and practical business solutions. As the industry moves forward, the survivors will likely be those who treat space not as a destination, but as a source of intelligence that must be seamlessly integrated into the systems that run our world. While the stars may be the goal, the bottom line is what keeps the lights on.

Appendix: Top 10 Questions Answered in This Article

Why did GeoEye merge with DigitalGlobe?

GeoEye was forced into a merger after losing a critical billion-dollar contract from the National Geospatial-Intelligence Agency . The U.S. government decided it could only support one major high-resolution imagery provider due to budget constraints, leaving GeoEye without enough revenue to survive independently. This merger created what is now known as Maxar Technologies .

What happened to the company UrtheCast?

UrtheCast filed for creditor protection in 2020 after struggling to manage its massive debt and failing to commercialize its live video and imaging services. Despite its innovative plan to stream Earth imagery from the International Space Station , it couldn’t generate sufficient revenue to sustain its operations. Its core assets were eventually acquired and restructured into a new entity called EarthDaily Analytics.

Why is it difficult for startups to compete with government programs like Landsat?

Government programs like Landsat and Copernicus provide high-quality Earth observation data for free, which sets a high bar for commercial companies. Startups must offer significantly higher resolution, faster revisit times, or specialized sensors like radar to justify their costs to potential customers. Many companies have failed because their “paid” data wasn’t perceived as enough of an improvement over the “free” alternatives.

What led to the bankruptcy of Kleos Space in 2023?

Kleos Space collapsed due to a combination of technical failures and financial exhaustion. Several of its radio-frequency monitoring satellites suffered issues in orbit, leading to asset write-offs that spooked investors. When a vital loan was canceled, the company ran out of the cash necessary to continue its constellation rollout.

Why did Google sell Skybox Imaging to Planet Labs?

Google sold Skybox Imaging (renamed Terra Bella ) because it realized that building and maintaining satellite hardware was far outside its core business of software and data. While Google wanted the imagery for its maps, it found it more efficient to buy that data from a dedicated space company like Planet Labs . The sale allowed Google to exit the “space hardware” business while still securing the information it needed.

How does launch risk affect the survival of small satellite companies?

A single launch failure can be a terminal event for a startup because it destroys their primary revenue-generating asset and causes massive delays. Even if insured, the loss of time allows competitors to capture the market or secure limited government funding. In an industry where “first-mover advantage” is vital, a rocket failure often exhausts a company’s remaining capital before they can try again.

What is the “anchor tenant” model in Earth observation?

The anchor tenant model refers to a business strategy where a company relies on one or two large government contracts to provide the majority of its revenue. This steady income allows the company to build expensive satellites and infrastructure. However, if the government cancels the contract or chooses a competitor, the company often faces immediate financial ruin because the commercial market isn’t yet large enough to support it.

Why did Planetary Resources fail to achieve its goals?

Planetary Resources failed because its original goal of asteroid mining was too far in the future to be profitable, and its pivot to Earth observation was too late. The company struggled with “delayed investments” and couldn’t secure the funding needed to launch its planned Ceres constellation. Its inability to focus on a near-term profitable product led to its eventual acquisition by a blockchain firm.

What is the main reason commercial customers are slow to buy satellite imagery?

Most commercial customers find raw imagery difficult to use because it requires specialized software and expertise to extract useful information. Companies that only sell pictures often fail because they aren’t solving a specific business problem, such as predicting crop yields or monitoring supply chains. The most successful firms are those that provide “actionable insights” rather than just data.

How has consolidation changed the Earth observation industry?

Consolidation has moved the industry away from a crowded field of startups toward a market dominated by a few large entities. Larger companies like Planet Labs and Maxar Technologies have acquired the assets and technology of failed rivals, allowing them to offer more diverse services. This has made it much harder for new entrants to compete, as they lack the scale and established customer relationships of the “big players.”

Appendix: Top 10 Frequently Searched Questions Answered in This Article

What is the purpose of a government anchor contract in space?

The purpose of a government anchor contract is to provide a reliable source of revenue that allows a space company to secure loans and invest in expensive technology. These contracts act as a guarantee that the government will buy a certain amount of data or services over a long period. Without this financial foundation, most private companies would find the cost of building a satellite constellation to be prohibitively high.

How long does it take for a satellite company to become profitable?

It typically takes five to ten years for a satellite company to become profitable, as they must first spend hundreds of millions of dollars on research, development, and launch. During this period, they are entirely dependent on venture capital or government grants. Many companies fail during this “valley of death” because they run out of cash before their constellation is fully operational.

What are the benefits of using Synthetic Aperture Radar (SAR) over optical imagery?

Synthetic Aperture Radar (SAR) can see through clouds, smoke, and darkness, which is a major advantage over traditional optical cameras. This makes it much more reliable for monitoring things like oil spills, floods, or military movements in any weather conditions. Because of this reliability, SAR data often commands a higher price in the commercial and defense markets.

What is the difference between a CubeSat and a traditional imaging satellite?

A CubeSat is a miniaturized satellite that is much cheaper and faster to build than traditional large satellites. However, CubeSats usually have a shorter lifespan and lower-quality sensors. While traditional satellites like those operated by Maxar Technologies provide extremely high resolution, CubeSat constellations like those from Planet Labs focus on taking pictures of the whole Earth every single day.

Why did Virgin Orbit go out of business?

Virgin Orbit went out of business after a high-profile launch failure in early 2023 led to a collapse in investor confidence. The company was already burning through cash at a high rate and couldn’t secure the new funding needed to continue operations. Its bankruptcy left many Earth observation customers looking for new ways to get their satellites into orbit.

What is the role of the NGA in the commercial space industry?

The National Geospatial-Intelligence Agency (NGA) is the primary customer for American commercial satellite imagery. It buys vast amounts of data to support military operations, disaster relief, and national security monitoring. By acting as a major buyer, the NGA effectively decides which commercial companies will be financially successful in the United States.

How much does it cost to launch a small Earth observation satellite?

The cost to launch a small satellite can range from $1 million to over $10 million, depending on the weight of the satellite and the type of rocket used. This does not include the cost of building the satellite itself, which can be millions more. Because launch costs are so high, many companies choose to “rideshare,” where multiple satellites are launched on a single rocket to save money.

What is “shutter control” and how does it affect satellite companies?

Shutter control is a legal power that a government can use to prevent a commercial satellite company from taking pictures of a specific area during a conflict or national emergency. While it is rarely used, the threat of shutter control can make international customers nervous about relying on a company based in a different country. This creates a “sovereignty” issue where nations prefer to have their own satellites rather than buying from a foreign provider.

What is the “Dead Internet Theory” in the context of satellite data?

In the context of satellite data, this refers to the risk of “model collapse” where AI systems begin training on data that was itself generated or altered by other AI. If the Earth observation industry becomes flooded with AI-enhanced “fake” imagery, it could become impossible to verify what is actually happening on the ground. This makes maintaining the “ground truth” of raw satellite data more important than ever.

How do satellite companies make money besides selling pictures?

Many companies now make more money from “geo-analytics” than from selling raw imagery. They use AI to automatically count cars in retail lots, track the height of piles of iron ore at ports, or monitor the health of forests. By selling these specific data points to hedge funds or environmental agencies, they can charge a premium for the “answers” they provide.