Private investment in space companies hit $1.9 billion in the first quarter, according to a report on Wednesday by New York-based firm Space Capital.
“The trend towards larger late-stage deals continued in Q1, with the top 10 rounds accounting for 77% of total investment,” Space Capital managing partner Chad Anderson wrote in the report.
“At the early-stage, we’re seeing larger deal sizes at higher valuations and looser terms as VCs push to deploy the historical amounts of capital they raised in 2020,” he noted.
The quarterly Space Capital report divides investment in the industry into three technology categories.
The first, infrastructure, includes what many would consider space companies, such as firms that build rockets and satellites.
The other two categories are application and distribution. The former includes space-dependent services, like ride hailing or navigation, while the latter represents terrestrial-based technologies that connect to space-based networks.
In total, Space Capital tracks 1,480 companies with $186.7 billion in cumulative global equity investment since 2012 across its three categories.
The broad analysis of the space economy reflects Anderson’s underlying thesis, and a phrase—increasingly repeated in the industry—he coined to represent it: “In the same way that every company today is a technology company, every company of tomorrow will be a space company.”
Space infrastructure ‘very likely’ to break above $10 billion this year
The bulk of the investment in the space infrastructure segment went to rocket builders and satellite companies, with $1.1 billion and $900 million, respectively.
SpaceX’s $850 million raise and OneWeb’s $400 million financing were two “mega-rounds” leading the segment, Space Capital highlighted, followed by the raises of unicorns ABL Space and Axiom Space.
Anderson thinks it’s “very likely” that space infrastructure investment exceeds $10 billion this year, which would top 2020’s record $8.9 billion.
The satellite broadband communications efforts of OneWeb, Amazon, and Telesat are expected to raise additional capital “throughout the rest of this year,” Anderson said.
He noted that Jeff Bezos hasn’t yet “put any new cash into Blue Origin so far,” and Elon Musk’s “SpaceX is going to meet additional capital as they continue to push on their big initiatives, Starlink and Starship.”
Anderson also said that investments in satellite companies, which make up about half of the deal activity in space infrastructure since 2012, directly affect the applications layer of companies that Space Capital tracks.
“It’s all of the data that’s coming off the satellites driving that $150 billion [total equity investment since 2012] in applications,” Anderson said.
More space SPACs expected
Space Capital is tracking eight space deals with SPACs, or special purpose acquisition companies, that are expected to close and “more exits are on the way,” the report said.
Seven of these companies are in the space infrastructure segment and, in all, the close of the SPACs will add nearly $3 billion in cash to company balance sheets.
A SPAC or special purpose acquisition company is a shell company that raises money from investors via an initial public offering and then uses the capital to buy a private company and take it public, usually within two years.
“We welcome the access to additional capital that SPACs offer for infrastructure companies, but are cautious that valuations and growth targets may be out of reach for companies that don’t have a defensible data angle,” Space Capital said.
A defensible data angle means a company is offering a service beyond launching rockets to orbit, Anderson said. He gave Rocket Lab, which is merging with SPAC Vector Acquisition, as an example. Last year, the company expanded its business into spacecraft system services.
“We’ve seen SpaceX again leading in this way. They’re a launch business first, but the main driver of their valuation is their satellite communications services business [called Starlink], and so many other things that they’re doing,” Anderson said.
The PIPEs, or private investments in public equity, of these SPACs are going to also boost the second quarter’s investment totals, which Anderson says “is going to be massive.”
He believes there are three companies “that are highly likely” to announce SPAC mergers in the coming months, and expects about a dozen space SPAC deals in total for the year.
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