Startups Enter the Stratosphere as HAPS Market Grows

Following decades of research and development, High-Altitude Platform Systems, or HAPS, are emerging as viable solutions for connectivity and remote sensing. As HAPS technology matures, many promising startups are entering the market. RAIN’s Nexus Data Lab calculates that the total number of HAPS projects in active development increased from 4 in 2013 to 23 in 2021. Eight of the companies (42 per cent) entering the market were startups.

Many startups joined the HAPS market even as several big players withdrew, such as Facebook and Google. Google’s parent company Alphabet announced the winding down of its Project Loon in 2018, while Facebook cancelled its HAPS projects in 2014. The HAPS market also grapples with competition from increasingly cost-effective satellite solutions, such as Starlink. Despite this, major telecommunications companies, such as SoftBank and Deutsche Telekom, have continued investing in the sector as they recognise the potential of HAPS to complement satellites and ground infrastructure.

Visualisation of HAPS platform projects growth between 2013 and 2022
So who are the startups in the HAPS market? And what can they leverage to succeed? The technology of HAPS is dual-use, which means it can be used for commercial and military purposes. Providing low-cost connectivity and remote sensing are the two main areas of focus for startups. Several startups received backing from defence and telecommunications companies as well as venture capital funds.

The US-Spanish startup Skydweller Aero received funding from Leonardo, an Italian defence contractor, and Palantir Technologies, a defense-oriented data analytics company. Skydweller develops a large fixed-wing solar-powered HAPS capable of autonomous flight. The partnership with Palantir will provide Skydweller with advanced automatic target recognition capabilities, which the military can use. The company has a $5 million contract with the US Navy to further develop and test the platform. Skydweller raised $40 million in VC funding.

The Indian startup NewSpace Research & Technologies is another well-funded HAPS developer focused on the defence market. The company, which also develops drone swarms, has a partnership with Hindustan Aeronautics Limited (HAL) and a contract with India’s Ministry of Defense to develop its HAPS platform. NewSpace recently raised $21 million in a round led by Pavestone Technology Fund.

While startups are actively promoting their HAPS for the defence market, others are focused on the commercial market. For example, the New Mexico based company Sceye is developing a high-altitude airship for internet connectivity and remote sensing. It raised $50 million in funding through a Series B round in August 2021. 

The UK-based Stratospheric Platforms is another startup in the HAPS market focused on commercial internet connectivity. Backed by Deutsche Telekom, Stratospheric Platforms builds hydrogen-powered HAPS. By using hydrogen instead of solar power (like most competitors), the platform can carry a sizable 4G/5G antenna to provide connectivity over large distances. Hydrogen is also a key priority in the net-zero strategy of the UK government. The company completed a successful 5G trial in Saudi Arabia, providing connectivity over 450 kilometres of land.

RAIN Takeaway

Whether they are focused on commercial connectivity, defence applications, or both, HAPS startups have one thing in common: they see an enormous opportunity for HAPS to bridge the gap between satellites, lower flying aircraft and ground infrastructure. With the global rollout of 5G and 6G and the increasing need for low-cost persistent surveillance, the HAPS market will likely become even more attractive for startups and investors. HAPS remains a high risk, high-return market, but it is a bet that VC investors and telecommunications companies are willing to make.

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