Seraphim Space, the Global Investment Company, has published its Seraphim Space Q3 investment report which details the changing investment landscape for the sector.

After a difficult few years with investment falling since 2021, this quarter reveals that the sector has turned a corner with investment levels beginning to rise again.

Below details some key global investment points as well as a breakdown of the UK market which has seen a particular strong quarter.

The Global Space investment sector has turned a corner:

• Investment into SpaceTech for the third quarter continues to show signals of recovery. While the number of deals remained largely in line with the previous quarter, total global investment has recorded a 39 per cent increase over the previous quarter – ($1.6 billion was invested in Q3 compared to $1.16 billion in Q2).
• There was a considerable shift in the distribution of investment between early-stage and late-stage deals. Q3 saw 82 per cent of investment into late-stage businesses, as opposed to Q2 with 63 per cent. This shift was in large part spurred on by the return of large investments seen by companies such as Axiom, Sierra and MapBox within the quarter.
• The return of growth rounds is significant, as large growth rounds were largely absent through the economic uncertainty in 2022. The return of growth deals suggests renewed investor confidence in the sector, with the introduction of well-known private equity investors, such as KKR, Advent and Blackrock, entering the sector to build their SpaceTech exposure.

M&A set for a record year

• M&A within SpaceTech is also at all-time highs. The deal volume is largely being driven by well-capitalised New Space acquirers. 2023 is on track to be a record-breaking NewSpace M&A year, with 21 deals completed already versus 22 in 2022. Recent high-profile deals include Eutelsat’s merger with OneWeb, and multiple private equity backed acquisitions of New Space companies. SpaceTech deal numbers in the twelve months to Q3 2023 were up 45 per cent year-on-year, versus the broader market where M&A deals of venture-backed startups globally decreased by 31 per cent compared to the previous year.

Strong growth for seed funding

• From a sector breakdown, Build products – companies which launch vehicles and satellites to provide services to consumers from Space – saw the largest number of deals within the period, with a high proportion of early-stage deals, for businesses developing novel satellites, propulsion systems and satellite subsystems.
• The Product category emerged as another standout sector, drawing in 25 per cent of the total investment for the quarter. Investors have demonstrated a keen interest in using SaaS and software enterprises that can help leverage space and satellite-derived data. These businesses develop products tailored to terrestrial business use cases as well as everyday consumer needs, enabling them to tap into vast terrestrial markets. This underscores the significant growth potential and revenue opportunities that are inherent within the Product sector.
• Seed-stage funding has continued to increase in 2023, representing 10 per cent of all investment in the quarter. Similarly, Series C has tripled in the period thanks to the rapid rise of investment in Product and Build products.

UK Space Sector records strongest quarter in Europe

• This quarter, the UK was the success story of Europe, having almost doubled the total amount invested year on year to $326 million. Overall, UK investment increased by 22 per cent in Q3 compared to Q2.
• In the UK, the Product and Build sectors recorded the largest growth within the period. This was driven by growth stage investment in climate-related Product companies, and on the Build side through support for satellite companies such as Open Cosmos (which also plays to the climate theme through novel Earth Observation).
• The growth in the number of Seed deals in the UK indicates new businesses being founded in the UK space sector. Series A deals have continued to demonstrate strong strong growth, especially in the downstream market – specialising in satellite wireless technology – with notable fundraises including Fatmap and Sofant.
• In the UK, investment into Series C funding rounds increased by 70 per cent. This mimics the broader trend seen in the US and Asia, where Series C investment rapidly accelerated year on year.
• UK deal numbers have grown after a decline in the previous 12-month period. This is likely due to UK investors having pulled back earlier than other geographies as the market downturn began at the start of 2022 but is a clear signal of a return of investor interest into the space sector driven by investment in Product companies, which were also the key driver during the UK’s strong investment years 2020 and 2021.

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Tags: satellite, seraphim, Space