Investments in the US space industry have hit an 8-year low, with funding dropping 53% to $2.2 billion in the first quarter of 2023. This is according to a report by venture capital (VC) firm Space Capital, which highlighted the challenging market conditions and high-interest rates as contributing factors.
Vulnerable Companies Amid Funding Drop
The drastic reduction in funding has left many space companies in a vulnerable state. In addition, the recent failure of Silicon Valley Bank, a top provider of venture debt, has added to the challenge. Space Capital’s report, which tracked 89 companies in the sector, suggests that the decline in funding is the lowest the industry has seen since 2015.
Winners and Losers in the Rocket Manufacturing Sector
Space Capital’s report also highlighted the stark “dichotomy between the winners and everyone else” in the rocket manufacturing sector. Of the 100+ launch companies that collectively raised $27 billion over the last decade, only two are currently operational: SpaceX and Rocket Lab.
Higher Risk Threshold for Space Company Investments
According to Edison Yu, an analyst at Deutsche Bank, the risk threshold for investing in space companies was much higher in the past. However, given the current market uncertainty, investors may not be as willing to take risks. Furthermore, as the space sector is still in its infancy, many are choosing to dial back their investments.
Increased Interest in Emerging Industries
Despite the challenges faced by the space industry, Space Capital noted an increased interest in emerging industries associated with the National Aeronautics and Space Administration’s Artemis mission to the Moon. This could suggest that investors are looking towards new areas of growth in the sector.
The drop in funding for the US space industry is a cause for concern, particularly for vulnerable companies in the sector. However, there may still be opportunities for growth in emerging industries, and investors could consider taking a closer look at these areas.