Space industry investment continues to grow

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WASHINGTON — Nearly a year after the onset of the coronavirus pandemic raised fears of a slowdown in commercial space investment, experts say the industry is, in fact, doing better than ever.

During a panel discussion at the 2021 SmallSat Symposium Feb. 8, analysts, investors and executives said that after a “lot of fear” in the spring of 2020, funding in the space industry, including smallsat constellation companies and small launch vehicle developers, surged in the latter half of the year.

“This year was just a terrific year for many for many of the larger companies in the space sector,” said Mike Collett, founder and managing partner of Promus Ventures. “We are all surprised where we stand with the amount of capital and space sector funding.”

He and other worried last spring there would be a retrenchment as the markets reeled in response to stay-at-home orders and related measures enacted to combat the pandemic. Many investors put plans on hold, seeking to preserve capital amid the uncertainty.

“Back in the April-May timeframe, there was a lot of fear,” said Fred Kennedy, who at that time was a vice president at launch vehicle startup Astra and is now president of in-space transportation company Momentus. “Everything just ground to a halt in that April-May timeframe. It was ugly.”

However, the markets rebounded, even as the pandemic deepened, and funding of space ventures continued. “What’s impressive is how everything rebounded back so quickly,” he said. “I was a little surprised. I figured we’d be in kind of a paralysis for a while, but it did not last.”

“2020 started reasonably fast, paused when COVID started, and then there was a resurgence,” said Carissa Christensen, chief executive of Bryce Space and Technology. A report a year ago by Bryce found there was $5.7 billion of investment in space startups in 2019, breaking the record of $3.5 billion set a year earlier. Christensen said her company is still finalizing the data from 2020, but it’s likely to “hit or break” the 2019 record.

That’s based on funding rounds raised by SpaceX, estimated investment in Blue Origin based on its level of activity, announced rounds of venture funding and mergers with special purpose acquisition companies, or SPACs. “It was a far more robust year that I might have expected had we been having this conversation in March or April,” she said.

Collett said he expects that surge of activity to continue into 2021. “What is surprising to me is the amount of capital available now at prices that are very good,” he said. “Capital has flowed at a pace that I don’t think anybody thought it would have.”

That’s created a window of opportunity for companies to raise large amounts of capital at favorable terms. He said it’s not clear how long that window will remain open, but warned that an increase of interest rates from their current levels near zero could cause capital to move elsewhere. He added he’s concerned about “very frothy valuations” of some startups, which he declined to name. “When you start to see those, and they start lasting, you just have to be careful,” he said.

For now, though, “this is the best fundraising environment I have ever seen on the space side for startups, so you have to take advantage of that.”