The year 2022 posed economic challenges, but investment in the space tech sector has shown resilience and signs of recovery. Despite uncertainty in the broader venture capital tech market, space tech continues to thrive with approximately $4.8 billion invested by the end of Q3 and growth-stage investments on the rise.
M&A activity in the space sector is also increasing, fueled by well-capitalized NewSpace companies and private equity firms entering the market. In 2023, notable events like India’s Chandrayaan-3 moon landing and SpaceX’s Starship advancements were covered by mainstream news, along with billion-dollar mergers and acquisitions from Maxar, Viasat, and Inmarsat. The desire of sovereign nations and private companies to develop their own space capabilities has become crucial, especially in the face of heightening global geopolitical tensions.
Countries around the world are vying for a position in the global space race, recognizing the decisive impact of the space economy on their futures. As a result, the year 2023 witnessed significant technological breakthroughs, with new sectors emerging to tackle some of humanity’s greatest challenges on Earth. Life sciences and material sciences have proven particularly promising, potentially revolutionizing industries like pharmaceuticals, telecoms, and microelectronics.
The Transformative Progress of 2023 and What to Expect in 2024
The developments of 2023 have laid the groundwork for some exciting developments anticipated in the year 2024. Here are some key predictions:
- Global governments will bolster their independent space capabilities, driven by the worsening geopolitical environment. This push for greater space sovereignty, whether through sending astronauts into space, obtaining dedicated satellite constellations, or developing domestic launch capabilities, will be a defining trend of 2024. As rival nations strive for dominance in space, tensions are expected to extend into orbit, creating a new domain of “astro politics” that will likely make headlines.
- The NewSpace market will soar to unprecedented heights, aided by the Department of Defense’s commitment to “buy what we can build and build what we must.” We can expect a surge in contract awards as the DoD takes a more active role in harnessing cutting-edge technologies and innovations from agile and pioneering NewSpace companies. This will have a cascading effect on the broader space tech market, attracting more private and institutional investors and promoting continued growth and innovation in the sector.
- Further consolidation in the M&A market is anticipated, with strategic moves from incumbents, NewSpace leaders, and private equity players. The satellite communications sector is expected to undergo further consolidation as operators work to defend against emerging threats from “mega constellations” like Starlink, OneWeb, and Amazon Kuiper. Additionally, consolidation is also predicted in the earth observation sector, driven by a growing demand for multimodal imaging and data fusion by government customers and the need for operators that went public through SPAC mergers to maintain and increase revenue growth. The persistent undervaluation of publicly traded space stocks is likely to attract private equity buyers seeking potential pricing opportunities, potentially leading to the privatization of some companies. While some positive sentiment may return to the public markets, it is unlikely to be a favorable time for space companies seeking to go public, with the exception of a potential IPO for Starlink.
- Sentiment in the space sector will be closely tied to the milestones achieved by SpaceX. Next year marks a crucial period where the success of SpaceX’s operations will set the tone for the entire space investment landscape. The debut of the highly anticipated Starship launch will be particularly significant, potentially catalyzing and elevating investor confidence to new levels. Compounding this financial landscape is the possibility of SpaceX’s satellite internet venture, Starlink, going public. Even the mere consideration of an IPO for Starlink could drastically reshape the investment landscape, creating new opportunities for institutional and retail investors. Therefore, SpaceX’s performance will greatly influence investor enthusiasm or caution in the ever-changing space industry.
- The moon will continue to play a crucial role as a stepping-stone for gaining insights and access to our solar system. Currently, four countries have successfully landed on the moon – the United States, Russia, China, and India. In 2024, we can expect the next major leap into a commercial lunar market. Japan is expected to join the ranks of these countries, with a successful mission in 2024. The United States also plans to make progress with Artemis II, with NASA astronauts circling the moon, and potentially landing on the lunar south pole in 2025. Importantly, the Artemis program is a commercially driven, government-funded mission, with NASA awarding contracts to established industry players like Lockheed Martin, as well as NewSpace giants such as SpaceX, Blue Origin, and Firefly. This also opens up opportunities for newer startups like Astrobotics, Intuitive Machines, and Zeno Power, who may utilize initial government support to launch commercially driven missions and expand commercial activity on the moon.
- The regulatory push for disclosure using Earth observation data is expected to pick up momentum. In 2023, California became the first U.S. state to mandate climate emissions disclosure rules. As governments and regulatory bodies ramp up efforts to enhance environmental transparency and sustainability reporting, businesses and organizations are increasingly turning to advanced Earth observation satellites for data. As a result, this regulatory momentum is anticipated to drive significant growth in the market, encouraging the development and deployment of cutting-edge technologies to monitor our planet’s vital signs more accurately and independently. As the regulatory landscape evolves, so too will the Earth observation market, playing a key role in advancing our collective efforts towards a more sustainable and environmentally conscious future.
- The advent of low-cost, frequent return-to-Earth capabilities will catalyze the next phase of growth in the space sector, similar to how affordable launch options have transformed the industry over the last decade. 2024 is expected to see the successful maiden missions of several pioneering companies developing their own return-to-Earth capabilities, unlocking the vast potential of point-to-point delivery and space-based manufacturing.
- The microgravity realm of space holds immense potential for advancements in life sciences and material sciences. With new classes of drugs and novel materials developed in microgravity, industries like pharmaceuticals, telecoms, and microelectronics could see transformative breakthroughs. In 2024, we can foresee microgravity R&D moving beyond just the laboratory and off the International Space Station. Additionally, we anticipate progress from companies towards 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 is expected to continue its rebound, driven by an overall improvement in market conditions. We can predict another record-breaking year in terms of the number of space tech companies funded, with both early- and growth-stage investment activity on the rise. While the United States will likely maintain its dominance in terms of total investment dollars, we also expect significant increases in investments from the United Kingdom, Europe, and Japan. This surge will likely be fueled by strategic initiatives from respective governments, highlighting the global diversification and expansion of venture capital interest in the space tech sector.
Remember to always keep an eye on the future as we transform and pioneer further into the vast expanse of space, continuously striving for greater understanding and advancement.
