SpaceX’s Crew Dragon capsule, named Freedom, is seen docked with the International Space Station in May 2023 during the Axiom Ax-2 mission.
NASA
Investment in the space sector, especially from venture capital, is consistently flowing into companies that are pursuing and winning government contracts, according to a report Monday by New York-based Space Capital.
“In this market – 21 months into this liquidity crunch – people are chasing government dollars. They’re more willing to chase government dollars and infrastructure companies have line of sight to a lot of that,” Space Capital managing partner Chad Anderson told CNBC.
The firm’s third quarter report found that space infrastructure companies brought in $1.6 billion of private investment during the third quarter. That brings the sector to $8.4 billion in investment year-to-date, surpassing the total $8.3 billion invested in 2022.
The quarterly Space Capital report divides investment in the industry into three technology categories: infrastructure, distribution and application. Infrastructure includes what would be commonly considered as space companies, such as firms that build rockets and satellites.
Anderson noted that “the infrastructure companies have been pretty resilient through market cycles,” a factor he attributed to “higher competitive moats” such as higher capital needs, longer development timelines and significant intellectual property advantages.
Venture capital accounted for 50% of the third quarter’s investment in space infrastructure, tracking with the historical trend of VCs representing the primary contributors to space investment.
Space Capital highlighted the trend of companies and investors chasing government funds as apparent in sub-sectors within space infrastructure, particularly in emerging markets such as space stations and the moon.
“You look at emerging industries – these are all government-led markets. So it’s actually quite easy to size up the market – you know how many dollars are available, how big the market is currently and how big it’s going to be over the next few years – because you already know what the government budgets are,” Anderson said.
Space Capital found that “the majority of private investment has preferred” space stations among the sector’s emerging markets “when, in actuality, Lunar and Logistics are significantly larger markets.”
“The amount of money that’s going to space stations is chasing a very small amount of government dollars, and the amount of money going into lunar is very small, and it’s chasing a whole lot more government dollars,” Anderson said.