COLORADO SPRINGS — Investment activity is picking up again for young space companies as growth-stage capital returns following market uncertainty in 2022, according to investors on an April 18 Space Symposium panel.
The “space industry is thriving at the moment,” Seraphim Space CEO Mark Boggett said, pointing to the venture capital firm’s research showing a record 25 growth rounds in the three months to the end of March.
However, he said these growth rounds — Series B, Series C, Series D, and beyond — remain smaller in value than previously seen in the industry.
When excluding mega-deals, Seraphim data shows the average growth-stage round size was $38 million in the first quarter of 2023, compared with north of $60 million as recently as the second quarter of 2022.
While Boggett said the volume of new companies coming to the space industry is increasing quarter-on-quarter despite challenging macroeconomic conditions, “the one area where we have a weakness in this market is around growth capital.”
It’s an area that suffered a “setback during the course of the last 12-18 months,” he said, as public investors that were becoming more interested in space as a growth market lost out amid the hype surrounding a spate of companies that went public via merging with a SPAC, or special purpose acquisition company.
The poor share performance of these high-profile space companies is also dragging on the valuations of other companies in the industry.
Space companies are not being treated differently than “deep tech” firms that also went public via a SPAC, Boggett said, but the sector has seen a “huge amount of interest that has now gone wrong to some extent.
“And what we now have to do is we’ve got to rebuild the confidence of these growth stage investors to bring them back into the market,” he added, “so that these companies that are being created, that provide all of these amazing capabilities, are going to be able to grow and scale and thrive.”
Boggett said he is confident the industry will get there, not least because of the huge defense budgets across the world that he expects will drive significant revenues through many of these businesses.
“It’s the revenues and the growth in those revenues that are going to attract the growth investors,” he said, adding that sovereign investors and climate-focused funds are also becoming an increasingly important source of capital for space companies.
Pete Cannito, CEO of space infrastructure conglomerate Redwire, which has shares currently trading at around $3 after going public via a SPAC merger in 2021 at $10, stressed the need for investors to understand that investing in space “is a long game.”
“It’s been a very dynamic couple of years,” Cannito said, “but this is not a declining market. Space is more important than ever, in the civil domain, in the national security domain, and in a commercial domain.”
The space economy is also rapidly maturing, said Laurence Vigeant-Langlois, a managing director at private equity firm AE Industrial Partners, which she said will increasingly attract more institutional investors.