Japan is pouring billions into its space industry while simultaneously loosening restrictions on military equipment exports. Those two things are not connected by accident - and one small company from Sapporo is positioning itself right now exactly where they meet.

Letara, a startup that grew out of Hokkaido University, has raised 2.6 billion yen, around 16 million dollars (14.7 million euros). Until now it worked on hybrid thrusters for small satellites. With the new money, the plan is different: large rocket systems for space, defence and security applications.

"With this round we are going beyond proving that the thruster works in space," says Shota Hirai, co-chief executive of the company. "We plan to explore a much broader set of applications in both the space and the defence and security domains."

The round was led by Headline Asia, JIC Venture Growth Investment and Incubate Fund. Among the investors are strategic names too - Toyoda Gosei, a supplier from the Toyota group, and Frontier Innovations, a fund backed by the Japanese space agency JAXA. When a state space agency buys into a private rocket firm that talks openly about the defence market, that is not a financial investment, it is industrial policy.

Why a hybrid engine rather than a conventional one

Letara's technology keeps the solid fuel separate from the liquid oxidiser needed for combustion. Instead of expensive paraffin wax, it uses cheap and readily available materials - plastic and rubber. The firm has its own manufacturing process that mixes, shapes and compresses those materials so they ignite reliably and burn evenly.

The problems hybrid engines historically failed to solve are three: sufficient thrust, sustained performance and combustion control. Letara claims to solve all three. Whether that is really so will be shown by the next test - an in-orbit firing with a foreign partner, which the company considers a key step towards commercialisation.

The market driving all of this is projected to grow from 848 million dollars in 2024 to 2.6 billion dollars by 2032. Growth of around 15 per cent a year. That is a figure that attracts capital - and it explains why Letara is not alone on the field.

The competition is long and international: Japan's Interstellar Technologies, China's Galactic Energy, South Korea's InnoSpace, Singapore's Equatorial Space. From Europe - the German startup HyImpulse. From Australia - Gilmour Space. All working on the same technology, all looking at the same growing budget.

What is worth noticing from a Balkan perspective is not the rocket, but the structure behind it. The idea originated in a university laboratory in 2020, spun out of the faculty as a company, took on a state fund as an investor and today holds orders from private firms and from the Japanese government - which, incidentally, did not disclose what those contracts are worth.

That is a chain from campus to state order that took five years. How many such chains exist in this region - and what is missing for them to exist?