Seraphim Capital sees multi-decade space opportunities

Seraphim Capital's successful Initial Public Offering (IPO) which saw the company raise US $247 million this past summer, is the first step in their plan to profit from “multi-decade growth.” Readers of SpaceQ — along with most other space-focused publications — are aware of the boom in the space business right now. Thanks to revolutionary changes in low Earth orbit, space launch capacity at the hands of companies like SpaceX and Rocket Lab, there’s been a boom in private companies that are looking to take advantage of lowering launch prices. In turn, there’s been a growing number of investors who are looking to put capital into space companies. And while Elon Musk’s wildly popular SpaceX continues to attract intense investor interest, it remains privately held. Even with its $100-billion valuation, few investors can buy into SpaceX, so they’re looking elsewhere to invest in space. The UK’s Seraphim Capital may be one of the first companies to really take advantage of the space boom. Headed by Seraphim CEO Mark Boggett, it describes itself as being “the world’s first dedicated venture fund” for space startups. The company was founded in 2006. It includes the Seraphim Space Fund, Seraphim’s “Space Camp” accelerator, Seraphim Angels, and Seraphim Co-Investment, which together cover everything from seed funding to Series B and beyond. This summer, Seraphim launched the IPO of the Seraphim Space Investment Trust, which allowed retail investors to buy their way into Seraphim on the London Stock Exchange. The IPO successfully raised £178.4 million (US $247M) which the company will be using to acquire stakes in four new space-tech businesses by the end of the year. Seraphim has transferred (or is in the process of transferring) most of their portfolio from the Space Fund to the new Investment Trust. Four companies have been left in the care of the Fund, as they (according to Seraphim) have “transactions underway” that may affect the share price. (Two are involved in potential SPAC mergers, two are involved in unspecified “pre-IPO” activity.) The Fund (and, now, the Trust) has stakes in a wide variety of companies spanning everything from Earth observation, to communications, to drone tech, and even data centre technology. And on first glance, it seems eclectic. While Seraphim’s “information from above” mantra helps to somewhat explain their investment in drones, one has to ask: why data centres? In a conversation with SpaceQ, Mark Boggett explained their investment strategy. Talking with Boggett makes it quickly apparent how excited he is to be in this space. He expounded at great length about the technologies of companies like D-Orbit and LeoLabs. He spoke about how LeoLabs can identify objects “the size of a 2p (two pence) piece (coin)” and create a database of space objects and space junk, and how D-Orbit will be indispensable in both quickly putting satellites into their proper orbits, moving them, and de-orbiting satellites at end of life. He describes space as “a multi-trillion dollar opportunity in the next five or ten years,” and believes that these companies, along with other Seraphim investments like Spire and the SAR (Synthetic Aperture Radar)company ICEYE, will be critical parts of this coming economy. He said that this digital infrastructure will be “applicable to every vertical you can think of.” But that’s just the start. Boggett went on to say that Seraphim sees this as the first of three “multi-trillion dollar opportunities” in the coming years. This first wave of space expansion that we’re seeing now will be followed by a second wave a decade later, and another a decade after that. Hence the “multi-decade growth.” The second wave, in Boggett’s mind, will feature the movement of digital and manufacturing infrastructure into space to reduce its climate impact. Boggett said that one of Seraphim’s positions is that “the next step is to have data centres in space ... they’re hugely polluting on the ground, more than the airline industry, and it’s getting worse.” It’s the major reason Seraphim is investing in data centre companies like Bamboo. Boggett said that orbital data centres could use the sun for energy and use the cold of space itself for cooling, and that moving them into space would be “really impactful for our planet.” Boggett said that the third phase will be where “in-space activity really starts to become impactful.” Once the Lunar and Mars economies really come online, he points to orbital solar farms, space agriculture, and both cislunar and interplanetary travel as key parts of the space economy. He said that these things are coming, without a doubt, and that it really comes down to “how much it costs to send a kilo into space, which is going down year over year.” He didn’t point to any specific companies in the current portfolio that are related to this phase. Boggett said that Seraphim is still only “scratching the surface,” however, and still identifying category leaders. As the Seraphim Trust is looking to acquire more space-related companies after its IPO, it may well be that they will be related to this third phase. Finally, we asked about the unique challenges facing a space-focused investor. “Space is hard,” was Boggett’s response. Many of the companies Seraphim invests in are looking to adapt terrestrial technology for space. That can make it an “order of magnitude cheaper,” Boggett said, but “there’s a lot of risk with that.” It’s also not easy to create new markets. What’s made the current industry different is their tolerance for failure and willingness to iterate. In the past “they wanted satellites that worked for a ten or fifteen year period,” while newer companies — due, in part, to cheaper launch costs and the shorter life of LEO SmallSat's — are willing to launch “many, many satellites until they know it’s working.” He’s been “impressed by how quickly these companies can address these issues and move forward,” while potentially racking up valuable patents on their solutions. The Seraphim Space Investment Trust is listed on the London Stock Exchange under the name SSIT.L and the stock is up 26% year to date trading at around £126 today.