Space Capital has published its Q2 2023 Space Investment Quarterly report which they say show “signs of stabilization in Q2 despite sluggish deal activity and poor exit conditions.”
It’s been clear for some time that those companies who took the shortcut of going public though the Special Purpose Acquisition Company (SPAC) process have failed to perform for investors. This year, only World View has announced it was go public through a SPAC with Leo Holdings Corp. II.
We’re also seeing an uptick in consolidation as mergers and acquisitions “heat up.” Much of this is happening south of the border and isn’t being evidenced yet in Canada.
In it’s introduction, Space Capital states that “Using the Gartner Hype Cycle as a guide, it’s now clear that 2021 was the ‘peak of inflated expectations’ with large financings in Launch, speculative investments in Emerging Industries, mega rounds by crossover investors in Location-based Services, and a crescendo of disappointing SPACs.”
With respect to Q2 being sluggish, the report states “Still, excluding the Maxar take-private transaction, Q2 was the lowest quarter for private market investment in the Space Economy since 2015 due to a lack of large late-stage rounds – just six companies raised more than $100M.”
One new ‘hyped’ element nearly reaching its crescendo, is AI. On this the report states that “recent advancements in Artificial Intelligence are enhancing the capabilities of companies across the Space Economy. As a horizontal technology, AI cuts across everything including nextgen manufacturing and supply chain management, satellite design and operations, deeper and more actionable intelligence, SatCom network management, and more. Funding to AI companies remains strong in 2023, driving growth in an otherwise tepid market. AI use cases in the Space Economy are nothing new, particularly within GEOINT.”
And as part of their conclusion they say “the era of free money is over and companies are beginning to adapt to this new normal. The reset in the financial markets has brought about healthier market dynamics, enabling disciplined investors to identify opportunities and invest in high- quality companies at lower valuations.”
Key highlights of the report include:
- With another $6.0B invested in 91 companies in Q2, total equity investment across the Space Economy has now reached $280.5B into 1,779 unique companies since 2014.
- VC continues to be the largest source of capital for space companies in 2023, with $2.7B invested in 145 companies, accounting for 33% of the total investment and 81% of the rounds.
- Early stage rounds are increasing; companies outside of just SpaceX are executing; funding to AI companies remains strong; and the talent market is resetting (further evidence that things are stabilizing).