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Space is a relatively niche area of tech investing in the best of times, but COVID-19 has redrawn the landscape. What do investors who are active in this sector think about what’s changed, what hasn’t and what’s coming in the future?
We caught up with nine top investors in the space market to collect their thoughts on what’s going on right now in the industry, what red flags there are to watch out for and what opportunities they see for new and existing space startups. On the whole, the group sounds fairly optimistic about the sector and its potential, with a particular interest in tapping early into whatever becomes the next GPS (or the evolution of GPS itself), space-based observation, and the analysis, distribution and management of data collected by existing space-based infrastructure. Our respondents include:
- Chad Anderson, Managing Partner, Space Capital
- Ethan Batraski, Partner, Venrock
- Will Porteous, General Partner and COO, RRE Ventures
- Shahin Farshchi, Partner, Lux Capital
- Tess Hatch, Vice President, Bessemer Venture Partners
- Matt Kozlov, Managing Director, Techstars Starburst
- Rayfe Gaspar-Asaoka, Principal, Canaan Partners
- Rob Coneybeer, Managing Director and co-founder, Shasta Ventures
- Dylan Taylor, Chairman and CEO, Voyager Space Holdings
Three key takeaways
Space-based technologies make big, lasting impacts
One oft-cited space-based technology that has generated truly astronomical amounts of revenue, infrastructure development and the development of entire industries is GPS. It’s clear from speaking to many of these investors that VCs hope to predict when the next GPS-type transformational technology will arrive.
Defense spending isn’t going anywhere
While COVID-19 is having an impact and investors are providing sensible advice about doing what you can to minimize burn rates and conserve cash, many also point to continued spending from government and defense sources. As a result, sources of both revenue and prerevenue funding for select space companies are not as likely to feel the full impact of a sustained economic downturn.
Sensors, data access and security offer opportunities
One major development in space over the last decade is the feasibility of launching and operating small satellites. These have brought the cost of access to space way down and equipping them with new and more powerful sensors can open up entirely new lines of business. Likewise, taking all the data collected by existing Earth observation, weather and other types of orbital spacecraft and making that accessible and valuable to all kinds of industries is a huge opportunity. Finally, investors see a lot of upside in the still relatively nascent cybersecurity market for space-based assets, including satellites.
Chad Anderson, Space Capital
What trends are you most excited about in space tech from an investing perspective?
Space-based technologies are the building blocks of innovation. In fact, GPS is a space-based technology that has generated trillions of dollars of economic value and some of the largest venture outcomes in history.
We believe that the history of GPS provides us with a framework for understanding how space-based technology has become a platform for innovation on a global scale. Specifically, the development of technology layers on top of space-based infrastructure and the distribution of data for mass adoption, which unlocks thousands of unique applications. From an investing perspective, we are most excited about unlocking the value in space technology stacks such as GPS, geospatial intelligence and communications.
How much time are you spending on space tech right now? Is the market underheated, overheated or just right?
We are a sector-focused fund, as we have been since our founding. So, I spend 100% of my time focused on the space economy. We are active and well-established, having made 50 investments into 30 space portfolio companies. What I can tell you from our experience is that this market is just getting started.
Participation in the space economy has grown exponentially over the past 15 years, with hundreds of new companies, thousands of new employees and millions of new investors participating. Cumulatively, there has now been $109.2B of equity investment into 822 unique companies in the space economy since 2004.
And now, the FAMGA companies all have existing and/or emerging efforts to get in on the action. For example, Amazon has launched AGS (Amazon Ground Services) and has plans to launch a constellation of thousands of satellites. Google has bought and sold space infrastructure assets in an effort to bolster their Maps offering. With video and images making up the vast majority of internet traffic, and much of that data expected to come from space in the future, cloud providers are eager to get that data piped into their storage and offer add-on services. Their involvement will serve as yet another catalyst for growth in this sector.