New research from Space Capital, based in New York, found that private investment in the space economy fell by 58% in 2022 compared to the previous year due to the impact of macroeconomic pressures on private and public industries.
While it seems like 2023 will be a challenging year for startups again, research from Space Capital forecasts that the sector will benefit from the external challenges faced by businesses, TechCrunch reported.
Investment in New Businesses Will Continue at a High Level
In the analysis, Space Capital managing partner Chad Anderson predicts that funding will remain robust for startups with product market fit, excellent unit economics, and strong leadership but that values will be closer to historical norms.
"We believe that less speculation will result in fewer competitors and a larger talent pool that will make the next two years an attractive time to start and invest in space tech companies," Anderson added.
SpaceX was the year's undisputed victor, bringing in $2 billion despite a generally negative market condition. It is the company's second-largest yearly raise since its 2002 debut.
Importantly, other round winners are aiming squarely at the military industry. Among them are Slingshot Aerospace, which raised $41 million in a Series A round; Shield AI, which raised $225 million in a Series E round; and Anduril, a military technology company that raised $1.5 billion in a Series E round.
Last Year's Investment Performance Was Dismal
Investments in early-stage firms fell by just 4% from the previous year, whereas the more cautious climate had a far larger effect on late- and growth-stage businesses. There was a 30% drop from the previous year to 2022 in the total number of rounds.
Although last year was a poor one overall, investment activity picked up significantly in the final three months. This quarter alone accounted for $2.6 billion in transactions, or 63% of the total for the year.
As previously reported, 46% of all space company private investments occurred in the United States. With a 29% share, China is in the second position.
The Chinese government is spending more and more money on space infrastructure like rockets and the tools needed to construct and manage satellites and other space-based assets.
The paper also examines up-and-coming businesses, such as private space stations, in-orbit services, and mining. Investment in these sectors declined by 63%.
The fourth quarter of 2022 funding rounds was dominated by seed and earliest-stage investments, indicating that the sector is still in its infancy.
There are a total of 1,791 firms in the space industry that Space Capital monitors. It is estimated that $273.3 billion in private equity has been invested in these businesses during the last decade.
