Investors retreated from the space economy last year with private investment tumbling 58 per cent after a record 2021, according to Space Capital, an early stage venture capital provider.
Last year was “the most difficult investment year since the great recession 15 years ago”, according to Chad Anderson, managing partner at Space Capital, which on Thursday produced its quarterly assessment of the sector.
Anderson said there was little immediate prospect of recovery. “Overall, we expect the macro market will continue to disproportionately affect funding for these capital-intensive companies for the foreseeable future,” he told the Financial Times.
Since 2013 some $272.3bn has been invested in the space sector by private investors, with 2021 logging a record $47.4bn. However, last year just $20.1bn was invested in 420 rounds, the lowest volume since 2015, according to Space Capital. SpaceX was the outlier, the report noted, raising $2bn in 2022, its second highest annual fundraising after a $2.6bn call in 2020.
But investors are wary of betting on growth momentum elsewhere in the sector, as the global economy struggles with rising inflation and the threat of recession.
“They are now paying more attention to the fundamentals of their investments, and not just looking at growth,” said Thomas Coudry, analyst at Bryan Garnier. “Profitability now means something again.”
Anderson said many investors had been put off the sector by the performance of companies that had been highly valued at the peak of the space boom in 2021. Several space companies, such as Virgin Galactic, Astra and Spire, went public between 2019 and 2021 via special purpose acquisition companies, or Spacs. They are now trading substantially below their opening prices.
“Impossibly optimistic projections fuelled by hype were funded by investors who did little, if any, diligence in a white hot market,” he said. “The disappointing performance of many Spac companies, like Virgin Galactic, has caused many investors to view space as a higher risk asset class, in line with other speculative technology fields like cryptocurrency and the metaverse.”
This was an inaccurate view of a sector that provided crucial data and connectivity to industry and government, he said.
“Government spending . . . will be even more vital to companies this year amid a choppy economy,” he said. Space was one of the fastest growing areas of spending at the Department of Defense, and the 2023 Space Force budget of $26bn was now larger than Nasa’s at $25bn.
Chinese investors also continued to show strong interest in space infrastructure such as satellites and launch systems. China now accounted for 8 per cent of global infrastructure investment, which last year scored $6.3bn in funding — the third highest on record. “China’s latest focus, Satcom, is expected to further accelerate investments,” Space Capital said.