Space economy venture-capital (VC) investments rose 17% year-on-year to $3 billion across 103 companies in the third quarter (Q3) of 2023, according to a new report from seed-stage VC firm Space Capital.
In the first nine months of the year, space VC investments totaled $11.6 billion in 289 companies.
Though the broader venture environment has been bleak this year amid high interest rates that have caused investors to rethink inflated valuations, combined with a lack of attractive exit opportunities, Space Capital has found three indications that the situation in its markets is improving.
First, 103 rounds closed in Q3, the highest in five quarters. Second, 24% of global space deals in the year to date have been Series A, compared to 12% of all global venture deals, “demonstrating that space companies are able to secure funding at a higher rate when they hit early milestones,” the report says.
Third, space infrastructure investment already has surpassed the total for the 2022 fiscal year. While noting that historically defense tech has not been a favored industry among VCs, Space Capital says given tough market conditions, “we are seeing more companies chasing government dollars—and more investors willing to fund them. This may help to explain the record amounts of investment in space infrastructure.”
At the same, early-stage rounds made up 61% of the total in the third quarter and 73% of all equity rounds, “signaling a healthy top-of-funnel,”—a reference to investor interest in nascent space companies—Space Capital says. Space manufacturing garnered the most early-stage funding, followed by small satellite manufacturing, small launch and geospatial intelligence.
The top 10 deals in Q3 totaled $1.1 billion, dominated by the U.S. with five companies and China with three. Japan and the UK each had one company in the Top 10.
However, Japan and the UK are not among the top five countries receiving the most overall space investment. That list comprises the U.S. and China as well as Singapore, France and India, with the latter ascendant following the unprecedented landing of its Chandrayaan-3 spacecraft on the Moon’s south pole in August.
“That achievement (which upstaged the U.S., China and Russia) is an example of why space investors are now piling into countries like India, those with relatively nascent space agencies that have either been rebooted or newly established,” capital markets data provider Pitchbook says in a Sept. 26 report.
“The success of the Chandrayaan-3 mission strongly reenforces India as a leading space-faring nation,” Vishesh Rajaram, managing partner of early-stage VC firm Speciale Invest, tells India’s The Hindu in an Aug. 30 report.
India has a young but vibrant space startup ecosystem in which funding has been growing exponentially. Data from Bengalaru-based research firm Tracxn show funding for India’s space startups surged to $112 million in 2022 from $28 million in 2020, with $63 million raised this year as of August. India’s average deal size in space tech investments has jumped to $15 million this year from $2.8 million in 2020.
Investor appetite for Indian space startups remains strong. On Oct. 17, Agnikul, which develops small-lift launch vehicles, announced it had secured a $26.7 million investment it will use to begin commercial launches using its customizable satellite rocket.
