Space Technology Startups' Ambitions Face Limits as VC Backers Turn to Safer Bets Amid Economic Turmoil

Venture capital backers are evaluating strategies after decades-high inflation, rapidly rising interest rates and the Ukraine war roiled global financial markets.

By Reuters | Updated: 19 October 2022 11:45 IST

Space Technology Startups' Ambitions Face Limits as VC Backers Turn to Safer Bets Amid Economic Turmoil

Photo Credit: Flickr/ Judy Schmidt

Many investors who explored aerospace last year have backed away

Highlights

Investments in space technology have fallen by 80 percent
The broader market has seen a decline of 31 percent
VC backers are refocusing on enterprise software-as-a-service

Space technology startups are being forced to limit their sky-high ambitions, as their venture-capital backers turn to safer bets due to the current economic turmoil, VC firm Space Capital said. Decades-high inflation, rapidly rising interest rates and the Ukraine war have roiled global financial markets, forcing investors to evaluate their investment strategies and focus on companies with viable products in the market.

Investments in space technology companies, which collect, process and analyze space-related data, have fallen 80 percent in the third quarter to about $1 billion (roughly Rs. 8,200 crore) from nearly $5 billion (roughly Rs. 41,200 core) in the year-earlier period, Space Capital said in a report.

"Venture Capitalists are refocusing on enterprise software-as-a-service companies and away from deep tech companies that provide solutions based on engineering innovation," New York-based Space Capital said.

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VC investment volume in space companies fell 44 percent, compared with a broader market decline of 31 percent, it added.

VC firms "are looking to reduce their exposure to capital intensive companies with low or long-term profitability models," Space Capital's managing partner, Chad Anderson, told Reuters.

"This is why space's infrastructure layer will be the hardest hit during the economic downturn."

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The downbeat sentiment has also hit publicly traded "new space" companies such as Rocket Lab USA, Astra Space, Spire Global, and Satellogic, whose shares have fallen between 49 percent and 92 percent.

Many investors who explored aerospace last year have backed away, said William Kowalski, co-founder of Atomos Space, which makes spacecraft that help satellites maneuver in space.

"Fundraising has been challenging, but it has allowed more capital efficient companies to stand out," he said.

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