Investors Believe the Space Industry Will Continue to See Growth in 2019
Although there is some apprehension regarding parts of the commercial space industry, as well as worry over a lack of returns, most investors still believe that funding for space ventures will continue to grow in the near future.
Representatives of numerous venture capital (VC) and other financial firms, which have invested in smallsat and other space startups said, during the SmallSat Symposium session, that money would continue to be investedinto these kinds of companies in 2019.
Seraphim Capital, which is a VC firm that invests in the space industry conducted a study which found a 30% growth in space investments in 2018, totalling $3.25 billion. At the conference on Feb. 6, Mark Boggett, the chief executive of Seraphim Capital said he believes that momentum is going to continue because there are so many different space-related activities happening in 2019, so he feels the outlook is positive.
During a different panel on finance that was held on Feb. 5, all members agreed that industry funding would rise this year. For instance, Shahin Farshchi, a partner at Lux Capital believes that there will be a continued trend towards more investments at higher valuations, especially in “breakaway” companies from all sectors of the market and not just related to space.
However, some such as Tess Hatch, an investor at Bessemer Venture Partners, are not so positive. During a finance workshop at the conference on Feb. 4, Hatch said she foresees an enormous crash in the 3rd of 4th quarter of 2019. Thus, Hatch is encouraging all of her companies to take additional capital now to cover at least the next two years as she feels it will become much harder to raise money in 2020.
Moreover, Hatch stated that the crash would not only affect the space industry but would impact any company looking for funding from VC firms, due to a general economic slump. She said she feels that any start-up backed by VCs will face issues.
However, not every investor agreed with Hatch’s predictions. For example, Farshchi countered that one should not be raising capital out of fear that money will dry up in the future. Farshchi remarked that there was lots of capital available during the last recession and as long as you have a great company you should not worry about finding investors to back it.
Nevertheless, Farshchi said that although there is still lots of early-stage funding for startups, and money for large companies in the later stages, it’s companies in the middle that could get be affected.
One issue is the lack of exits, which is how investors get a return on their investment. An exit means the sale of a company or an initial public offering of stock. However, there have hardly been any large exits of space startups recently.
Boggett said he felt that the major problem for new space companies is that none of them are showing strong growth in revenue and it’s impossible to have a good exit without that revenue growth. However, Boggett believes we’re only a year or two away before we start to see stronger revenue growth and better exits. Now it is a question of if investors will be patient enough to wait for that revenue growth.
Investors will also be watching existing companies as they scale. For example, during a panel, they discussed OneWeb, a broadband satellite company launching its first satellites later in February. Some fear that OneWeb’s failure, or delays to other large ventures, could put overall space investment at risk.
Chris Boshuizen, the operating partner at Data Collective VC, said he is a little bit concerned that if at some point one of these large companies fails it could cause the whole industry to unravel, especially in areas such as small launch vehicles.
However, Rob Coneybeer, managing director of Shasta Ventures. Pointed out that capital markets, in general, are formed around psychology and expectations. He added that he would bet over 50% of people who understand the space industry believe OneWeb is going to fail.
Regardless, any issues that OneWeb or other large ventures come across are unlikely to affect investment in 2019, according to Boggett, it might only become a problem in 2020.
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