News Update

Space startup funding cut in half in 2022 as investors gravitate to safer ventures

• ByStartupStory     |    January 21, 2023

Investments in space businesses have more than halved to US$21.9 billion in 2022 as venture capitalists seek safer havens in the face of a bleak economic outlook, according to VC company Space Capital, which predicts further pain for the sector this year. 

Last year, the roughest season for space entrepreneurs since the 2008 economic crisis, witnessed a steep reversal from a record 2021 with US$45.7 billion in funding. 

“As the economy recovered from the COVID pandemic, central banks unleashed the fastest rate hike cycle since 1988. Market momentum hit the brakes and asset prices fell across the board,” Space Capital said in its quarterly report.

According to the report, the challenging climate has driven major space enterprises to pursue proven business models, revenue, and government contracts.

“Companies that serve US government and defence needs are best positioned to maintain growth and profitability over the next year,” Managing Partner Chad Anderson told Reuters.

Companies that use satellite-based analytics, imagery, and data have recently gained attention, particularly in the wake of Russia’s invasion of Ukraine and geopolitical concerns between China and the US. For instance, satellite imaging company Maxar Technologies was purchased by private equity firm Advent International in December for US$4 billion. 

Private businesses in the sector have also profited, bringing in a total of US$2.5 billion in investments in the fourth quarter, which is almost half the amount for the entire industry.

However, startups creating space hardware have not been as fortunate since their capital-intensive business models turned off investors, according to analysts. 

However, because they have access to a regular income stream in the challenging environment, companies that are exposed to government contracts are considered as more resilient.

“There has been greater investor interest surrounding anything associated with government smallsat manufacturing, as it is generally viewed that the defense budget should be more recession-resilient,” Canaccord Genuity analyst Austin Moeller said.

 

Follow Startup Story