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Written by: Seraphim Space
Global Investment within the Space sector has equalled 2022 despite challenging market conditions throughout last year, new research can reveal.
While the general VC investment saw a 35 per cent drop in investment between 2022 and 2023, SpaceTech substantially outperformed. Despite a slow start to 2023, the year culminated with a total annual investment of $6.9bn, in line with 2022.
The final quarter of the year was the most active, with $2.2 billion invested across 128 deals, up from $1.6bn in the third quarter, marking the highest number of recorded deals in a single quarter since reporting first began. These transactions signify an all-time high in activity for both late-stage investing, with the resurgence of growth rounds, and early-stage, indicating a substantial pipeline of new opportunities within the NewSpace economy.
All of the largest rounds for the quarter were concentrated in capital-intensive businesses, which own or operate assets in space. Businesses with capital-light models have, in many cases, strategically avoided seeking growth capital on less favourable terms, while capital-intensive ventures are returning to the capital markets since they more immediately require funding to achieve scale. Firefly Aerospace raised the largest round for the quarter, at $300m. The round demonstrated that strong businesses raising from a position of strength continue to succeed in raising large investment rounds.
Series C deals have tripled in the last year, showing the highest increase by stage, with a record $1.7billion invested. It is expected that several businesses will return to the market after holding off on fundraisers in the past two years. Overall, there was an increase in the number of deals across every stage except Series A, which remained the same as in 2022. The Seed stage continues to show strong and continuous year-over-year growth, which is a very positive sign when compared to significantly reduced fundraising in general VC. It is promising to see early-stage SpaceTech businesses continue to emerge and secure funding despite high-interest rates and a general VC pullback.
A significant driver of this global success is the recent influx of investments from significant Japanese investors such as Mitsui, Mitsubishi, and Toyota, which have injected capital into major growth rounds for startups such as Firefly, Astroscale, and Stoke Space. This signals a strong confidence in the sector's future, with these strategic investments by Japanese firms reflecting a growing global interest in space tech across the Asian market. Although the US remains the preferred choice for investment, regions like Asia are showing steady and robust growth in maintaining second place. Around 40 per cent of the investment was primarily focused on early-stage companies with smaller funding rounds. In the later stage, the largest funding round in Asia was $154m.
Data also highlights that the “Beyond Earth” sector – focused on developing infrastructure for space such as lunar landers or space stations - has seen dramatic growth as both Government funding and global investors begin to focus on solutions and technologies to develop their space capabilities. The efforts of rival nations to establish a position of dominance in space will also see geopolitical tensions extending into orbit, creating a new domain of “space politics”. Another standout sector for investment was “Collect“, attracting $1.8bn of investment with SpaceX as the major contributor.
This year was a record-breaking year for SpaceTech M&A with 30 transactions completed versus 22 last year. This year saw several strategic moves made by larger players in private equity, such as Advent’s acquisition of Maxar and KKR’s take private of satellite manufacturer OHB. BAE acquiring Ball Aerospace was a major acquisition, which saw further consolidation across the industry.
Maureen Haverty, Principal Investor for Seraphim Space, said: “Despite an increasingly challenging economic period, investment into the space tech sector across has continued to show great robustness and strong signs of recovery in the last year. While the venture capital market has struggled globally, Space tech is bucking trends with sustained levels of high investment. What’s even more promising is the growing number of institutional and private equity funds now contributing to growth-stage investment activity and participating in larger rounds. The renewed investment focus from Governments around the world, a burgeoning private equity market and a surge in M&A activity means 2024 is on track for a strong year of investment.”