\Deeptech Analysis/

Spain’s space balloon race turns ugly

A dispute has emerged between two Spanish startups emerging as potential leaders in space balloon tourism.

By Maija Palmer

Many people dream of going into space, but the $250,000 price tag for a Virgin Galactic flight and the risks associated with riding a rocket blast can be off-putting.

Luckily, there may be a more accessible way to experience space — a gentle 2-hour helium balloon ascent to 36km above the Earth, where you can already see the blue marble curvature of the Earth and enter the inky blackness of space.

Two Spanish companies are emerging as potential leaders in space balloon tourism, but an ugly dispute has emerged between them, with the founder of one accusing the founder of the other of copying his idea.

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Zero 2 Infinity, a Barcelona-based space balloon startup founded in 2009, has found itself in competition with EOS X Space, a company that is headed by the man who just last year had been helping Zero 2 Infinity raise a VC funding round.

Jose Mariano Lopez Urdiales, an MIT-trained aeronautics engineer who founded Zero 2 Infinity 11 years ago, says Kemel Kharbachi, the now CEO of EOS X Space, worked closely with the company to raise a €1m investment for Zero 2 Infinity. But the funding deal never happened.

Instead, Kharbachi, whose previous experience has focused on tourism and catering, has emerged to build his own rival space balloon business.

How it began

In 2012 the space balloon idea gained some traction when Austrian daredevil Felix Baumgartner ascended to the stratosphere in a helium balloon, jumped and became the first person to break the speed of sound in freefall.

But decades before this, Lopez Urdiales grew up helping his father, an astrophysicist, float helium balloons to the edge of space to test scientific equipment ahead of space missions.

“I remember talking to my father about going into space and what people would want to do when they were there. You’d want to look out the window and see the Earth. For that going to about 30-40 km is enough and you can do it in a balloon. That’s where this idea for the company was born,” says Lopez Urdiales.

Granted 36km above sea level is not “officially” space — which is defined as either 80km or 100km above sea level, depending on whether you are Nasa or the Fédération Aéronautique Internationale. But beyond 30km the sky takes on the blackness of space and the Earth’s curvature becomes visible. It has most of the elements of the “space experience”.

Lopez Urdiales worked on the space balloon concept for 18 years, and founded Zero 2 Infinity in 2009, starting with sending up equipment such as space cameras and satellites into the stratosphere to test them for companies like Airbus. High altitude balloons are commonly used for this — Loon, which spun out of Google’s parent company Alphabet, for example, uses stratospheric balloons to bring internet connectivity to difficult-to-connect parts of the world.

“The plan was always to send people to space, as soon as we could do it safely,” Lopez Urdiales told Sifted.

Commercial passenger flights to the edge of space could be available as early as 2024, says Carlos Mira, president of Arthur D Little Spain, the management consultancy — and with a slightly more pocket-friendly price tag of around $100,000.

Space tourism could be about to become big business. Despite its eye-watering price, Virgin Galactic has a waiting list of 8,000 already, and countries like Saudi Arabia have been planning to build space tourism centres. Saudi Arabia’s Public Investment Fund invested $1bn in Virgin Galactic, before the murder of Saudi journalist Jamal Khashoggi in 2018 caused Richard Branson to cancel the deal. Space balloons could be another way to go.

An investment that never materialised

Zero 2 Infinity had grown slowly mainly through bootstrapping, but in 2018 Kharbachi, an entrepreneur who runs an investment company called Agora Next, offered to help Lopez Urdiales raise a VC funding round. This was to be used to launch Zero 2 Infinity’s Bloon business for human space balloon flights.

Kharbachi signed a contract (seen by Sifted) that would give him 10% of any funding raised. It included an agreement to keep confidential the documentation he saw from Zero 2 Infinity, and to not “accept similar assignments that could collide with the interests of Z2I”.

“I spent a lot of time with him, educating him about the business, teaching him how to answer questions from potential investors,” says Lopez Urdiales.

Social media posts from this time in 2019 show Kharbachi promoting the Zero 2 Infinity project in the media and at various conferences.

 

In due course, it was planned that Kharbachi’s company Agora Next would invest €1m in Zero 2 Infinity. This was short of the €10m that Zero 2 Infinity had been seeking, but Lopez Urdiales considered it a good starting point.

Ultimately, however, no money was transferred, Lopez Urdiales says, leaving Zero 2 Infinity with a gaping hole in its finances.

A new company appears

Just as Zero 2 Infinity was starting to regroup from this setback, EOS X Space appeared, headed by Kharbachi, promising space balloon flights.

 

Kharbachi, whose previous ventures appear to have been mainly focused on the catering and hotel business, has hired Arthur D Little to help manage the project. This includes hiring a team of ex-Airbus engineers and putting together the ecosystem of suppliers to provide the various equipment needed, such as the balloons to lift the capsule and the parachutes to bring it back down again.

Arthur D Little’s Mira told Sifted he was not aware of anything in the previous history between Kharbachi and Zero 2 Infinity that would prevent Kharbachi from starting this new company. He said the consultancy was working with EOS X Space simply as a development partner. EOS X Space was handling the fundraising for the project and was paying Arthur D Little a consultancy fee and a success fee for the project.

Mira added that there had been no infringement of a non-disclosure agreement that Arthur D Little had signed with Zero 2 Infinity last year.

“During our +130 years as management consultants, we have signed thousands of NDAs and we are very careful of respecting our obligations, as we are doing in this case,” he told Sifted.

Kharbachi initially directed Arthur D Little to speak to Sifted on his behalf. He later separately contacted Sifted to say:  “We are already aware of the various accusations that Zero 2 Infinity is making against the EOS X Project and its partners in different forums. We can assure you that such accusations are absolutely inappropriate and unfounded and that none of the partners in the EOS X Project have committed any unlawful action against Zero 2 Infinity’s interests.”

Mira told Sifted Arthur D Little had explored the idea of working with Zero 2 Infinity, but nothing had materialised, in part because of Zero 2 Infinity’s lack of funds.

“There are many other companies that do space balloons. The concept is not unique. The point is not the vision, but executing it, making it credible for investors and bringing together an ecosystem to build it,” Mira said.

Among other things, Mira said, Arthur D Little had begun negotiations with the European Union Aviation Safety Agency (EASA) about getting a certification for human space balloon flights. Given that this is a new category of travel, the process is likely to be complex.

“You won’t get a certification if you are a startup in a garage. You need to certify that the company has the processes in place, that you have the muscle that SpaceX or Virgin Galactic has,” Mira told Sifted.

Lopez Urdiales said any suggestion that Zero 2 Infinity could not negotiate with EASA was unfounded. He said he had personally met with EASA on several occasions, and the company has published papers on the feasibility of certifying space balloon flight.

In fact there is a regulatory pathway for certifying space balloon flights as gas balloons and gliders with special conditions. The problem is that getting the certification is likely to require €2.5m and 18 months of work, he says. Hence the need to raise funding.

A legal fight ahead?

Lopez Urdiales wouldn’t be the first founder to be out-competed in his own original idea. The history of startups is littered with examples of original ideas that were developed more successfully by others.

Lopez Urdiales is taking legal advice on whether he can pursue any claim through the courts. Any court case will take time, however, which is not a luxury startups in a fast-moving sector have.

Zero 2 Infinity still has business flying things into the edge of space, and is continuing to talk to investors about raising the fund to help it transition to flying people as well.

With a high number of sunny days, Spain has the potential to become one of the hubs for space tourism. Space balloon flights require clear skies and little wind that are common in the country. And it is possible there is room for several space companies in the market.

But this dispute feels an ignominious way to start.

“This is a new technology and makes space much more accessible for people who would not otherwise be able to see the planet. It really worries me because [this dispute] could be a great danger to that ambition,” said Valentin de Torres-Solanot, one of the investors backing Zero 2 Infinity. “I am worried… that this will create distrust in the entire sector.”

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