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10th May 2022

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Investors join space race with record funding

Commercial space ventures are drawing record levels of funding as investors rush to tap into the market unleashed by Elon Musk’s SpaceX, whose reusable rockets have slashed the costs of reaching beyond Earth’s atmosphere.

Total venture capital investment in the field increased by 95 per cent to $8.7bn in the 12 months to the end of March, according to the Seraphim SpaceTech index, a quarterly tracker of funding deals in the sector. 

The increase was boosted by the combined $4.2bn raised by SpaceX and OneWeb, the low Earth orbit constellation rescued by the UK government and India’s Bharti last November. Excluding these outliers, and deals to finance drone and flying taxi-related businesses, private funding for commercial space ventures jumped by 52 per cent to $4.1bn. 

“We believe we are at a watershed moment,” said James Bruegger, chief investment officer of Seraphim Capital, a dedicated space tech fund. “It is incredible that since Covid hit, private finance into space has doubled. It is an astonishing level of investment and an indication that private capital markets do understand space.”

Space-based businesses are also finding ready public funds from investors in special purpose acquisition companies, known as Spacs. In the 12 months to March 31, 11 space Spacs have been announced, pledging investment of more than $7bn into the sector and giving companies such as Rocket Labs, the New Zealand launch company, and Spire Global, the space data group, multibillion-dollar valuations. 

Mark Boggett, Seraphim chief executive, said Spacs offered space companies the long-term capital they needed to grow. It was a sign that there was “a lot more confidence from growth investors. The prices paid by Spacs are equivalent to non-Spac transactions,” he said.

However, many space start-ups have yet to prove they can operate profitable businesses, and some critics recall the high-profile collapses of companies such as Iridium, GlobalStar and Teledesic two decades ago. Even OneWeb was forced into Chapter 11 protection last year, after it ran out of cash to fund its ambitious plan to launch a mega-constellation delivering high-speed, low-latency internet services from low Earth orbit.

But the economics of space are changing rapidly because of smaller, cheaper satellites and the SpaceX reusable rocket. According to Nasa, launch costs that had held steady over 30 years between 1970 and 2000 had by 2018 fallen by a factor of seven because of the development of SpaceX’s Falcon 9. 

This has prompted a rush to launch satellites beaming services from orbit — from Earth observation systems to mega-constellations aiming to deliver internet from space. Roughly 90 mega-constellations have been announced globally, including several in China.

OneWeb received a substantial boost this week when fixed-satellite operator Eutelsat announced that it would pay $550m for a 24 per cent stake in the satellite broadband provider.

Seraphim predicts that venture funding for space start-ups will double in the first half of 2021 against the first half of 2020. This could include further funding for OneWeb. 

Among those that found new investors in the first quarter were ABL Space Systems, the rocket launch company which clinched funding of $170m in the first quarter, and Axiom Space, a logistics company which raised $130m. 

Some 68 deals closed in the first quarter, up from 62 in the last quarter of 2020, and the highest level since the tracker was launched in 2018.

2021-04-29 10:00:09


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