There was $2.2 billion invested in space companies in the first three months of 2023, which means a 53 percent decline from the previous quarter and the lowest quarter for space investment since 2015.
Space Capital’s report, coming on the heels of a Chapter 11 filing from Richard Branson’s Virgin Orbit, tracked 89 companies active in the sector.
“Of the 100+ launch companies that collectively raised $27 billion over the last decade, there are currently only two that are operational: SpaceX and Rocket Lab,” the report said, adding that there was a visible “dichotomy between the winners and everyone else” in the rocket manufacturing sector.
Over the past decade, there was $272.2 billion invested in 1,746 companies in the space industry, led by the United States.
The United States had 46 percent of the total amount, or $126 billion. Second was China, with 29 percent or $79 billion. Third was Singapore with 5 percent, or $14 billion, and fourth was the UK with 4 percent of the total $272.2 billion.
The risk threshold of investing in space companies was much higher earlier, but given recent market uncertainty, investors may not be as risk-loving and space being a nascent sector, many are dialing back, Deutsche Bank analyst Edison Yu said.
However, Space Capital added that companies in emerging industries, like those associated with the National Aeronautics and Space Administration’s Artemis mission to the Moon, are seeing increased interest.
“From the public institutional investment side, there is not really much interest in the lunar economy … that said, personally, based on my conversations with companies, I believe there is actually a lot of potential in the lunar economy,” Yu said.
SpaceX and the US Space Industry
A unit of Saudi Arabia’s investment fund and an Abu Dhabi-based company are planning to invest in a multibillion-dollar funding round for Elon Musk-led SpaceX, The Information reported on Wednesday, citing people familiar with the discussions.The funding round is expected to value the rocket maker at about $140 billion, the report added.
SpaceX raised $2 billion in 2022 and $2.6 billion in 2020, according to Space Capital.
Demand for sending satellites into space remains strong, but U.S. rocket startups are taking drastic measures to survive a tight funding environment where fears have been exacerbated by the bankruptcy of Virgin Orbit.
The industry faces an interesting dichotomy. Demand has surged from launching a few satellites on small rockets to launching swarms of satellites at once using bigger rockets, even as investors shy away from the sector in search of safer bets.
As the cost of capital rises with the Federal Reserve’s interest rate hikes, investors are less incentivized to fund capital-intensive projects that do not have a clear revenue stream or path to profitability, leaving many space startups scrambling for funds.
“I’ve never raised capital in a harder market than the one we’re in right now,” Firefly Aerospace CEO Bill Weber said. “The ‘I’ word and the ‘R’ word—recession and inflation—make the investment market conservative and a little more cautious.”
