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ESPI seeks new ways to finance Space activity

March 9, 2024

The European Space Policy Initiative (ESPI), in a major report, says that an increasing number of startups are unable to progress to subsequent funding rounds despite the overall growth in sector investment.

ESPI pointed to potential challenges in the scalability and sustainability of these startups, and asked for both public and private sectors, which entity or asset class can fill in these developing funding gaps?

The report highlights the ‘capital flight’ over the past couple of years (down 68 per cent in 2023, and 27 per cent in 2022) and cites dramatically increased interest borrowing rates as one of the main reasons. “Rising interest rates are prompting a shift to safer financial assets, with venture capital and private equity sectors experiencing capital outflows and a more cautious investment approach,” says ESPI, adding “more than 50 per cent of Venture Capital sources surveyed by the EIF have a negative outlook on raising over the next 12 months.”

ESPI said the European space sector stands at a crossroads shaped by evolving economic and financial landscapes. Over the last two decades, the sector has witnessed a shift from traditional government-heavy investments to a more dynamic ecosystem increasingly complemented by private equity, venture capital, and other diverse financial instruments.

“These changes, influenced by global macroeconomic conditions and policy shifts, have not only redefined investment strategies but also posed new challenges and opportunities for space ventures. From the impact of monetary policies on high-risk investments to the roles played by space agencies and other public institutions in fostering innovation, this report offers a comprehensive overview of the financial underpinnings that drive the development of the European space sector,” said ESPI’s report.

The ESPI report examines alternative financial mechanisms and vehicles, beyond venture capital and established public programmes, laying out a roadmap of strategic recommendations to navigate the complexities of this evolving sector.

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