Mark Boggett
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Despite a challenging economic period in 2022, this year’s investment into the space tech sector has continued to show signs of recovery. Space tech has showcased a remarkable resilience amid macroeconomic uncertainty, bucking trends in the broader venture capital tech market. Approximately $4.8 billion was invested into the space tech industry by the end of Q3, with growth-stage investment activity increasing.
M&A activity in the space sector is also on the rise, with the surge in deal volume for 2023 primarily propelled by well-capitalized NewSpace acquirers, alongside the introduction of significant private equity investors to the sector.
In 2023, mainstream news covered historic space industry events like the India’s Chandrayaan-3 moon landing, the advancements of SpaceX’s Starship, billion-dollar mergers and acquisitions from companies such as Maxar, Viasat and Inmarsat. Sovereign nations and private companies’ desire to develop their own space capabilities has become of utmost importance, increasingly as the global geopolitical environment has escalated.
Countries across the world realize that now is the time when the future of the space economy will be decided and are acting to stake their place and build up their strength and position in the global space race.
Huge technological developments have continued, with new sectors developing space solutions to help tackle some of humanity’s greatest problems on Earth. Advancements in sectors such as life sciences and material sciences are a potential gold mine for new classes of drugs, and novel materials developed in space could have a transformational impact on verticals like pharmaceuticals, telecoms, and microelectronics.
The transformational progress we have witnessed in 2023 has laid the groundwork for some exciting developments we can expect to see in 2024:
- Global governments to bolster their independent space capabilities
The worsening geopolitical environment has turbocharged the desire of governments around the world to develop their own space capabilities. We predict that this push for ever greater space sovereignty — be it in sending astronauts into space, procuring dedicated satellite constellations, or fostering domestic launch capabilities — will be one of the defining trends of 2024. The efforts of rival nations to establish a position of dominance in space will also see geopolitical tensions extending into orbit, creating a new domain of “astro politics” that will likely be played out on the front pages of newspapers throughout the year.
- NewSpace market soaring to unprecedented heights
The steadfast commitment of the Department of Defense (DoD) to “buy what we can build and build what we must” will likely have a profound influence in 2024. We anticipate a surge in contract awards reflecting the strategic imperative to harness cutting-edge technologies and innovations from agile and pioneering NewSpace companies with the DoD playing a pivotal role. These DoD contracts will stimulate a cascading effect throughout the broader space tech market.
The increased investment and recognition from a key governmental player will likely attract additional private and institutional investors, fostering an environment conducive to sustained growth and innovation within the sector.
- Further M&A consolidation, public markets to remain muted
Anticipating robust activity in mergers and acquisitions (M&A) throughout 2024, we foresee a continuation of strategic moves from incumbents, New Space leaders, and private equity players. The satcoms sector is poised for further consolidation as operators proactively fortify their defenses against the looming threats posed by the “mega constellations” of Starlink, OneWeb, and Amazon Kuiper. Expectations of consolidation extend into the earth observation sector, driven by dual forces — a growing desire among government customers for multimodal imaging/data fusion and the imperative for operators that went public through ill-fated SPAC mergers to sustain and amplify revenue growth. The persistent price dislocation of publicly traded space stocks is likely to attract private equity buyers seeking potential price arbitrage opportunities, with an eye on privatizing some of these companies. While a certain degree of positive sentiment is anticipated to return to public markets, we do not foresee favorable conditions for space companies seeking to go public, barring the potential IPO of Starlink.
- Sentiment in the space sector tied to milestones achieved by SpaceX
Next year is poised to be a pivotal year, where SpaceX’s performance will act as the barometer for the entire space investment landscape. The spotlight will shine particularly bright on the much-anticipated Starship launch, with its success being a potential catalyst to galvanize and elevate investor optimism to new heights. Adding another layer of intrigue to the financial landscape is the prospect of Starlink, SpaceX’s satellite internet venture, going public. The mere contemplation of an initial public offering for Starlink has the potential to be nothing short of transformational for the space sector. Should this come to fruition, it could reshape the investment landscape, creating new opportunities and avenues for both institutional and retail investors. As such, SpaceX will play a major role in shaping the trajectory of investor enthusiasm or caution in the ever-evolving space industry.
- The moon continues to be an important steppingstone to gain insights and access to our solar system.
We have witnessed four countries successfully achieving a moon landing to date — the United States, Russia, China and now India. In 2024, we will see the next giant leap into a commercial lunar market. It seems Japan will be hot on the heels in 2024, and we predict a successful mission for Artemis II, with NASA astronauts circling the moon but not landing on the lunar south pole until 2025. Crucially, the Artemis program is a government funded, commercially driven mission with NASA awarding contracts with established industry players like Lockheed Martin and with NewSpace giants like SpaceX, Blue Origin, and Firefly. They are also fostering the market much newer startups like Astrobotics, Intuitive Machines, and Zeno Power. We predict these companies will use the initial government support to launch commercially driven missions, opening up the moon for commercial activity.
- Regulatory momentum to propel disclosure using Earth observation data
The surge in regulatory measures aimed at enhancing climate disclosure is poised to act as a catalyst, propelling the Earth observation market forward. In 2023, California became the first U.S. state to enact mandatory climate emissions disclosure rules. As governments and regulatory bodies intensify their focus on environmental transparency and sustainability reporting, businesses and organizations are compelled to adopt data from advanced Earth observation satellites. Consequently, this regulatory momentum is expected to ignite unprecedented growth in the market, fostering the development and deployment of cutting-edge technologies that facilitate more accurate, independent, globally comparable metrics for monitoring our planet’s vital signs. As the regulatory landscape evolves, so too will the Earth observation market, playing an important role in advancing our collective efforts toward a more sustainable and environmentally conscious future.
- Return-to-Earth capabilities will start to unlock next phase of space sector’s growth
Just as the low-cost launch has reshaped the space sector over the last decade, we anticipate that the advent of low-cost, frequent return-to-Earth capabilities will have a similar impact over the next decade. We predict that 2024 will see successful maiden missions for a number of pioneering companies that are developing their own capabilities for returning material from space. This, in turn, will start to unlock the colossal potential of point-to-point delivery and space-based manufacturing.
- Microgravity gold rush for advancements in life sciences and material sciences
The microgravity realm of space isn’t just a scientific curiosity — it’s a potential gold mine for groundbreaking advancements in life sciences and material sciences. New classes of drugs and novel materials developed in space could have a transformational impact on areas as diverse as pharmaceuticals, telecoms and microelectronics. We predict that 2024 will be the year we start to see microgravity R&D move out of the lab and off the International Space Station. We also anticipate seeing several companies making progress toward small-scale production of materials formulated in space, including on free-flying platforms designed for in-space R&D and manufacturing.
- VC investment in space tech will continue its rebound
We foresee a sustained trajectory of recovery in VC investment levels over the upcoming quarters, buoyed by an overall improvement in market conditions. We predict that 2024 will be another year of record numbers of space tech companies being funded, with both early- and growth-stage investment activity increasing. While the United States is poised to maintain its dominance in terms of total investment dollars, we forecast a significant uptick in investment levels within the United Kingdom, Europe, and Japan. This surge is expected to be catalyzed by strategic initiatives from respective governments, underscoring a global expansion and diversification of venture capital interest and commitment in the space tech sector.
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