Many emerging technology sectors have seen funding slow over the past few quarters, but space tech is not one of them.
Investors poured more than $4.6 billion into space travel, satellite and aerospace startups worldwide last year, according to Crunchbase data, with mega-funding rounds going to companies developing everything from satellite networks to space stations.
Space infrastructure is the hottest sector, according to Chad Anderson, managing partner at early-stage investment firm Space Capital, who calculates that total investment last year was second only to the peak for 2021. He attributes the enthusiasm to broader bullish views on defense technology and the government-funded sector.
“In this tight revenue market, everyone is chasing government money,” Anderson said, noting that “governments continue to spend regardless of market cycles.”
Using data from Crunchbase, we charted investments in specific space categories over the past five calendar years.
Looking at the chart, it’s worth noting that while 2023 is down year over year, this is primarily due to two large funding rounds in 2022 that don’t clearly fit into the space startup category. One is SpaceX, which is 22 years old so can’t really be called a startup, and the other is Anduril Industries, a defense unicorn that isn’t primarily focused on space tech but received funding to deploy software in space surveillance systems.
In contrast, nearly all of the largest space funding rounds in 2023 went to companies in the Series A to Series D stages focused on the space sector.
Super giant space bullet
The lineup also includes some pretty big funding rounds. Some notable ones include:
Axiom Space, a Houston-based startup building a commercial space station, raised $350 million in funding in August. The company also has a long-term contract with NASA worth $1.26 billion to provide “exploration extravehicular activity services” and spacesuits for use on the moon and other space missions. Sierra Space of Louisville, Colorado, raised $290 million in Series B funding in September, valuing the company at $5.3 billion. Sierra said it is developing the first commercial space station and is converting its Dream Chaser spaceplane to be used for NASA cargo resupply flights to the International Space Station. Astranis, a San Francisco startup building a satellite network to provide internet access to remote locations, secured a $200 million venture round in April at a valuation of $1.6 billion. Germany-based Isar Aerospace, a launch services provider for small and medium-sized satellites, secured $168 million in Series C funding in March.
The common thread among these well-funded startups is that they are all making infrastructure investments, which goes against the stereotype that startup investors are infrastructure-hating people.
One reason is that the cost of launching satellites has fallen dramatically over the past decade or so, making it economically attractive to startup backers. Another is the enduring success of SpaceX, which was recently valued at about $180 billion, proving that big payoffs can be had.
But where is the app?
While funding for space infrastructure has been strong, applications that use satellite data haven’t garnered much interest from startup investors recently, Anderson said.
But this sector isn’t necessarily reflected in Crunchbase data, where many power users of satellite data aren’t classified as space tech companies — for example, Uber and Yelp, both of which rely heavily on satellite-enabled GPS data for their apps, aren’t listed as space companies.
But Anderson argues that to understand the entire space economy, one must look at the value created by all businesses that use satellite information, including GPS, which he claims generates trillions of dollars in economic value.
Looking ahead, Anderson is optimistic that the stagnant app economy startup sector will thrive as satellite-based information streams mature. He’s particularly enthusiastic about geospatial satellite information, a technology that has applications in a variety of fields, including insurance, climate change modeling and crop management.
A start, not an end
One thing we don’t see much of in the space sector these days is egress.
A weak M&A environment combined with a quiet IPO market means startups and their backers are probably not thinking much about near-term returns on their investments, but for now, at least, venture capitalists seem intent on continuing to provide funding to space startups as they embark on the next phase of their business plans.
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Illustration: Dom Guzman
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