Space is Now a Generally Accepted Venture Investment Theme

General Industry Trends
April 18, 2019
Author
Chad Anderson
April 18, 2019
Author
Chad Anderson

Venture capital investment in Space is now a generally accepted investment theme, so to better understand these dynamics, we created a special VC infographic in our year-end Q4 2018 Space Investment Quarterly. It is important to note that our definition of VC excludes corporate venture funds and fund-of-funds making direct investments. Based on this definition, our research shows that between 2009-2018, venture capital funds invested $4.2B into space companies, with 70% of that capital deployed in just the last three years. In 2018 alone, 114 VC funds made their first space investment, bringing the total number of VCs with a Space investment to 534. These funds have primarily invested in Series A and B rounds, focused on the Satellites and Launch industries. Space investments are particularly common among top-tier firms, as our analysis reveals that 41% of the Top 100 firms ((determined by fund size, excluding corporate venture funds and sector-specific funds) now have one or more space investments.

To get a better sense of why these generalist venture capital funds see opportunity in the Space economy, we spoke with some of our co-investors including Rob Coneybeer, Founder and Managing Director of Shasta Ventures; Steve Jurvetson, Managing Director and Founder of Future Ventures; Deepak Kamra, General Partner at Canaan Partners; and Will Porteous, General Partner and COO at RRE Ventures. Our key takeaways from these conversations are:

Venture Capital Activity 2009-2018

Venture Capital Investment by Round Over Time

Since 2009, venture capital firms have invested $4.2B into space companies. VC interest in Space has hit an inflection point in the last three years, with 70% of capital being deployed from 2016-2018. During this period, investment has been concentrated at the Series A and Series B rounds, accounting for 60% of total capital deployed.


Why did you initially invest in Space and why do you continue to do so?

Rob Coneybeer (RC): Shasta is investing in space because we view it as one of the key next-generation platform opportunities after the smartphone. It’s a largely overlooked, huge market opportunity that has billions of dollars coming from a few key customers over the coming decade: governments and the large communications constellation operators (including Amazon which just announced their own massive constellation). These customers will need new satellite component technologies and lots of launch and in-space propulsion capacity.


Steve Jurvetson (SJ): Quite simply, it’s my job to make money through VC investments and make the world a better place while we’re at it.

On the investment side, I have followed a simple rule for the past 24 years as a venture capitalist—I invest in companies that are unlike anything I have seen before, yet adjacent to an area of prior expertise. And like most VCs, I also look for inspirational leaders, a motivational mission, and a large market size. So, you can imagine why I was smitten with SpaceX when we first invested, back before they had put a satellite in orbit. I had a prepared mind as a long-standing space geek—launching my own supersonic rockets for 16 years, flying in zero gravity, supporting space philanthropies like B612 and a lunar non-profit (still in stealth), and turning the office into a veritable space museum full of rocket engines and a piece of every Lunar Module from Apollo 10 to 17.

As for making the world a better place, democratizing and easing the access to space benefits many other businesses, and Planet is a great example of a beneficiary—better Earth observation allows us to be better stewards of this planet. Every entrepreneur seeks to change the world. But why stop there? There are other worlds out there, beyond the frontiers of the imagination.


Deepak Kamra (DK): At Canaan, we try to take advantage of technology disruptions that can enable growth in large markets. We think the space market is currently undergoing such a disruption. The availability of smaller and cheaper satellites and launch vehicles, coupled with newer, cheaper data and distribution platforms is expanding the New Space market significantly. A commonly used analogy is one of PC’s and smartphones disrupting minis and mainframes, creating markets that few could have imagined earlier. Today’s new space markets are growing fastest for commercial applications which previously did not have access to affordable imagery, communications, and other types of data from space.


Will Porteous (WP): We believe satellites represent one of the last corners of the computing industry that has not yet been transformed by the power of open interfaces, standard architectures, and software-defined capabilities. The precedents from the mainstream computing and networking industry suggest this transformation will unlock tremendous value and create an insertion point for several important new independent companies.



Venture Capital Investment Allocation by Stage and Industry

Space Angels data shows that the number of venture rounds at Growth and Late Stages are concentrated within the Satellites (63%) and Launch (28%) industries. However, at the Early Stage (Pre/Seed, Series A), we see a much greater diversity of industries represented. We believe this dynamic shows that as the Satellites and Launch Industries mature and VC portfolio companies graduate, VCs are expanding their space exposure to include other industries.


Are you considering investment opportunities outside of the Launch and Satellites industries?

RC: As a firm, space opportunities are only a small segment of our overall portfolio. Within the space category, we have made significant investments in propulsion (Vector for launch, and Accion Systems for in-space propulsion), and smaller seed investments in constellation technologies (Spire, Analytical Space, and SpeQtral). Going forward, we see three major areas of opportunity: remote sensing, communications, and manufacturing. In-space manufacturing is nascent but we think that manufacturing special high-value items is intriguing, as well as methods of building large structures in orbit, which can’t fit inside launch fairings. Space tourism will probably become a significant category but we think that’s a really tough area for startups to address due to the extreme challenges of human-rated spacecraft (and thus high capital intensity).


DK: We are focused today on markets that will benefit from the availability of cheap, near real-time data from space. Certain areas such as imagery, IoT communications, and launch appear over-invested but falling prices will benefit many players through market growth. Marketplaces (like an API marketplace) will allow companies to consume and use the data created by satellites in real time. There could be new information products, platforms, and analytics companies to help develop.

We are also exploring terrestrial operational businesses as satellite constellations grow exponentially, such as new software platforms to help manage the operations of the second wave of smallsats.



Venture Capital Investment Rounds by Industry and Sector

Since 2009, VC firms have participated in 455 investment rounds; 114 (25%) occurred in 2018 alone. Of the total, 355 (74%) rounds were in the Satellites industry, of which 180 rounds (54%) were in the Earth Observation sector, with the other 175 (46%) split amongst Manufacturing & Components, Operations & Ground Segment, Communications, and Positioning, Navigation, & Timing (PNT). The Launch industry accounted for 72 rounds (16%) of total VC investment, with 60 rounds (83%) going to the Small Launch sector. Just 48 investment rounds (11%) went to emerging industries like Industrials, Logistics, and Planetary Markets.


What is your thesis for Earth Observation and Data Analytics?  

WP: We believe EO is an ideal market to prove the viability of the trends described above. Our data analytics thesis is predicated on choosing sectors (e.g. SAR [synthetic aperture radar]) in which there is an abundance of available data and capacity.



Venture Capital Investment Amount by Industry and Sector

Consistent with the overall flow of capital into the space economy, VCs have focused primarily on the Satellites and Launch industries. However, venture funds appear more overweight in Satellites. Since 2009, investment into the Satellites industry represents 57% of total capital deployed by VCs, compared to 46% of total capital deployed by all investor types.

Of the $2.4B deployed by VCs into the Satellites industry, $0.9B (40%) has gone to companies in the Earth Observation sector. We suspect this sector is more palatable to generalist VCs because, compared to Launch companies, they are relatively less capital intensive and the path to revenue is shorter. Pure-play Earth Observation Analytics companies have been particularly attractive to VCs for their hardware-free, SaaS business models.

The $1.5B of investment into the Launch industry is almost entirely concentrated in Small and Heavy Launch, with 97% deployed between the two sectors. With SpaceX dominating Heavy Launch in terms of total capacity, new entrants in Small Launch, like Vector and Rocket Lab, have attracted venture capital investment for their flexible and frequent launch business models, benefiting from the growing smallsat market.

What are the key milestones you are looking for to sustain your space investment thesis?

SJ: I continue to focus on organic growth from customer cash flows. These flows have been quite healthy at SpaceX and Planet, and the broadband data business, which will be commencing soon, is the largest business opportunity I have ever seen. Now that the U.S. and China have a new space race to the Moon underway, there will be multiple approaches seen to establish a permanent lunar presence in the next five years, and from years of preparatory analysis, we figure that it will cost less than $5B, all in, for an agile, commercial, new space approach to moon base alpha. The future is quite bright indeed!


RC: For Shasta to continue investing in space in the coming years, we’ll want to see some significant successful space startup exits. There haven’t been many to date. We will also want to see real progress with at least a few mega-constellation operators actually building, launching, and successfully operating their systems. Once that starts to happen, and the economics prove out, there will be wave after wave of constellation upgrades which will drive demand for other supporting space technologies.


DK: We look to revenue growth as the best milestone for creating long term viable companies. For the New Space companies we invest in, government and civil revenues are important to start off with, but ultimately we believe the more important growth milestones are for commercial revenues. Most commercial revenues in this market today are tiny today compared to their eventual potential. Beyond that, there needs to be a robust market for exits like IPOs and acquisitions to continue to fuel our investment strategies. Other than Skybox, there have been few notable acquisitions in the New Space market to date, but many venture-backed companies will test the exit market over the next 5 to 10 years.


WP: Continued progress moving innovative capabilities from Earth into space, scaling revenue and a clear path to profitability.


Venture capital investment in Space is now a generally accepted investment theme, so to better understand these dynamics, we created a special VC infographic in our year-end Q4 2018 Space Investment Quarterly. It is important to note that our definition of VC excludes corporate venture funds and fund-of-funds making direct investments. Based on this definition, our research shows that between 2009-2018, venture capital funds invested $4.2B into space companies, with 70% of that capital deployed in just the last three years. In 2018 alone, 114 VC funds made their first space investment, bringing the total number of VCs with a Space investment to 534. These funds have primarily invested in Series A and B rounds, focused on the Satellites and Launch industries. Space investments are particularly common among top-tier firms, as our analysis reveals that 41% of the Top 100 firms ((determined by fund size, excluding corporate venture funds and sector-specific funds) now have one or more space investments.

To get a better sense of why these generalist venture capital funds see opportunity in the Space economy, we spoke with some of our co-investors including Rob Coneybeer, Founder and Managing Director of Shasta Ventures; Steve Jurvetson, Managing Director and Founder of Future Ventures; Deepak Kamra, General Partner at Canaan Partners; and Will Porteous, General Partner and COO at RRE Ventures. Our key takeaways from these conversations are:

  • Space is a largely overlooked, huge market opportunity with billions of dollars of revenue expected over the coming decade
  • While there are still opportunities in the Launch and Satellites industries, opportunities in new industries are materializing as the Space economy matures
  • To sustain their space investment thesis, VC investors are looking for commercial milestones: organic growth from customer cash flows and profitability. Most commercial revenues in this market today are tiny today compared to their potential

Venture Capital Activity 2009-2018

Venture Capital Investment by Round Over Time

Since 2009, venture capital firms have invested $4.2B into space companies. VC interest in Space has hit an inflection point in the last three years, with 70% of capital being deployed from 2016-2018. During this period, investment has been concentrated at the Series A and Series B rounds, accounting for 60% of total capital deployed.


Why did you initially invest in Space and why do you continue to do so?

Rob Coneybeer (RC): Shasta is investing in space because we view it as one of the key next-generation platform opportunities after the smartphone. It’s a largely overlooked, huge market opportunity that has billions of dollars coming from a few key customers over the coming decade: governments and the large communications constellation operators (including Amazon which just announced their own massive constellation). These customers will need new satellite component technologies and lots of launch and in-space propulsion capacity.


Steve Jurvetson (SJ): Quite simply, it’s my job to make money through VC investments and make the world a better place while we’re at it.

On the investment side, I have followed a simple rule for the past 24 years as a venture capitalist—I invest in companies that are unlike anything I have seen before, yet adjacent to an area of prior expertise. And like most VCs, I also look for inspirational leaders, a motivational mission, and a large market size. So, you can imagine why I was smitten with SpaceX when we first invested, back before they had put a satellite in orbit. I had a prepared mind as a long-standing space geek—launching my own supersonic rockets for 16 years, flying in zero gravity, supporting space philanthropies like B612 and a lunar non-profit (still in stealth), and turning the office into a veritable space museum full of rocket engines and a piece of every Lunar Module from Apollo 10 to 17.

As for making the world a better place, democratizing and easing the access to space benefits many other businesses, and Planet is a great example of a beneficiary—better Earth observation allows us to be better stewards of this planet. Every entrepreneur seeks to change the world. But why stop there? There are other worlds out there, beyond the frontiers of the imagination.


Deepak Kamra (DK): At Canaan, we try to take advantage of technology disruptions that can enable growth in large markets. We think the space market is currently undergoing such a disruption. The availability of smaller and cheaper satellites and launch vehicles, coupled with newer, cheaper data and distribution platforms is expanding the New Space market significantly. A commonly used analogy is one of PC’s and smartphones disrupting minis and mainframes, creating markets that few could have imagined earlier. Today’s new space markets are growing fastest for commercial applications which previously did not have access to affordable imagery, communications, and other types of data from space.


Will Porteous (WP): We believe satellites represent one of the last corners of the computing industry that has not yet been transformed by the power of open interfaces, standard architectures, and software-defined capabilities. The precedents from the mainstream computing and networking industry suggest this transformation will unlock tremendous value and create an insertion point for several important new independent companies.



Venture Capital Investment Allocation by Stage and Industry

Space Angels data shows that the number of venture rounds at Growth and Late Stages are concentrated within the Satellites (63%) and Launch (28%) industries. However, at the Early Stage (Pre/Seed, Series A), we see a much greater diversity of industries represented. We believe this dynamic shows that as the Satellites and Launch Industries mature and VC portfolio companies graduate, VCs are expanding their space exposure to include other industries.


Are you considering investment opportunities outside of the Launch and Satellites industries?

RC: As a firm, space opportunities are only a small segment of our overall portfolio. Within the space category, we have made significant investments in propulsion (Vector for launch, and Accion Systems for in-space propulsion), and smaller seed investments in constellation technologies (Spire, Analytical Space, and SpeQtral). Going forward, we see three major areas of opportunity: remote sensing, communications, and manufacturing. In-space manufacturing is nascent but we think that manufacturing special high-value items is intriguing, as well as methods of building large structures in orbit, which can’t fit inside launch fairings. Space tourism will probably become a significant category but we think that’s a really tough area for startups to address due to the extreme challenges of human-rated spacecraft (and thus high capital intensity).


DK: We are focused today on markets that will benefit from the availability of cheap, near real-time data from space. Certain areas such as imagery, IoT communications, and launch appear over-invested but falling prices will benefit many players through market growth. Marketplaces (like an API marketplace) will allow companies to consume and use the data created by satellites in real time. There could be new information products, platforms, and analytics companies to help develop.

We are also exploring terrestrial operational businesses as satellite constellations grow exponentially, such as new software platforms to help manage the operations of the second wave of smallsats.



Venture Capital Investment Rounds by Industry and Sector

Since 2009, VC firms have participated in 455 investment rounds; 114 (25%) occurred in 2018 alone. Of the total, 355 (74%) rounds were in the Satellites industry, of which 180 rounds (54%) were in the Earth Observation sector, with the other 175 (46%) split amongst Manufacturing & Components, Operations & Ground Segment, Communications, and Positioning, Navigation, & Timing (PNT). The Launch industry accounted for 72 rounds (16%) of total VC investment, with 60 rounds (83%) going to the Small Launch sector. Just 48 investment rounds (11%) went to emerging industries like Industrials, Logistics, and Planetary Markets.


What is your thesis for Earth Observation and Data Analytics?  

WP: We believe EO is an ideal market to prove the viability of the trends described above. Our data analytics thesis is predicated on choosing sectors (e.g. SAR [synthetic aperture radar]) in which there is an abundance of available data and capacity.



Venture Capital Investment Amount by Industry and Sector

Consistent with the overall flow of capital into the space economy, VCs have focused primarily on the Satellites and Launch industries. However, venture funds appear more overweight in Satellites. Since 2009, investment into the Satellites industry represents 57% of total capital deployed by VCs, compared to 46% of total capital deployed by all investor types.

Of the $2.4B deployed by VCs into the Satellites industry, $0.9B (40%) has gone to companies in the Earth Observation sector. We suspect this sector is more palatable to generalist VCs because, compared to Launch companies, they are relatively less capital intensive and the path to revenue is shorter. Pure-play Earth Observation Analytics companies have been particularly attractive to VCs for their hardware-free, SaaS business models.

The $1.5B of investment into the Launch industry is almost entirely concentrated in Small and Heavy Launch, with 97% deployed between the two sectors. With SpaceX dominating Heavy Launch in terms of total capacity, new entrants in Small Launch, like Vector and Rocket Lab, have attracted venture capital investment for their flexible and frequent launch business models, benefiting from the growing smallsat market.

What are the key milestones you are looking for to sustain your space investment thesis?

SJ: I continue to focus on organic growth from customer cash flows. These flows have been quite healthy at SpaceX and Planet, and the broadband data business, which will be commencing soon, is the largest business opportunity I have ever seen. Now that the U.S. and China have a new space race to the Moon underway, there will be multiple approaches seen to establish a permanent lunar presence in the next five years, and from years of preparatory analysis, we figure that it will cost less than $5B, all in, for an agile, commercial, new space approach to moon base alpha. The future is quite bright indeed!


RC: For Shasta to continue investing in space in the coming years, we’ll want to see some significant successful space startup exits. There haven’t been many to date. We will also want to see real progress with at least a few mega-constellation operators actually building, launching, and successfully operating their systems. Once that starts to happen, and the economics prove out, there will be wave after wave of constellation upgrades which will drive demand for other supporting space technologies.


DK: We look to revenue growth as the best milestone for creating long term viable companies. For the New Space companies we invest in, government and civil revenues are important to start off with, but ultimately we believe the more important growth milestones are for commercial revenues. Most commercial revenues in this market today are tiny today compared to their eventual potential. Beyond that, there needs to be a robust market for exits like IPOs and acquisitions to continue to fuel our investment strategies. Other than Skybox, there have been few notable acquisitions in the New Space market to date, but many venture-backed companies will test the exit market over the next 5 to 10 years.


WP: Continued progress moving innovative capabilities from Earth into space, scaling revenue and a clear path to profitability.


Venture capital investment in Space is now a generally accepted investment theme, so to better understand these dynamics, we created a special VC infographic in our year-end Q4 2018 Space Investment Quarterly. It is important to note that our definition of VC excludes corporate venture funds and fund-of-funds making direct investments. Based on this definition, our research shows that between 2009-2018, venture capital funds invested $4.2B into space companies, with 70% of that capital deployed in just the last three years. In 2018 alone, 114 VC funds made their first space investment, bringing the total number of VCs with a Space investment to 534. These funds have primarily invested in Series A and B rounds, focused on the Satellites and Launch industries. Space investments are particularly common among top-tier firms, as our analysis reveals that 41% of the Top 100 firms ((determined by fund size, excluding corporate venture funds and sector-specific funds) now have one or more space investments.

To get a better sense of why these generalist venture capital funds see opportunity in the Space economy, we spoke with some of our co-investors including Rob Coneybeer, Founder and Managing Director of Shasta Ventures; Steve Jurvetson, Managing Director and Founder of Future Ventures; Deepak Kamra, General Partner at Canaan Partners; and Will Porteous, General Partner and COO at RRE Ventures. Our key takeaways from these conversations are:

  • Space is a largely overlooked, huge market opportunity with billions of dollars of revenue expected over the coming decade
  • While there are still opportunities in the Launch and Satellites industries, opportunities in new industries are materializing as the Space economy matures
  • To sustain their space investment thesis, VC investors are looking for commercial milestones: organic growth from customer cash flows and profitability. Most commercial revenues in this market today are tiny today compared to their potential

Venture Capital Activity 2009-2018

Venture Capital Investment by Round Over Time

Since 2009, venture capital firms have invested $4.2B into space companies. VC interest in Space has hit an inflection point in the last three years, with 70% of capital being deployed from 2016-2018. During this period, investment has been concentrated at the Series A and Series B rounds, accounting for 60% of total capital deployed.


Why did you initially invest in Space and why do you continue to do so?

Rob Coneybeer (RC): Shasta is investing in space because we view it as one of the key next-generation platform opportunities after the smartphone. It’s a largely overlooked, huge market opportunity that has billions of dollars coming from a few key customers over the coming decade: governments and the large communications constellation operators (including Amazon which just announced their own massive constellation). These customers will need new satellite component technologies and lots of launch and in-space propulsion capacity.


Steve Jurvetson (SJ): Quite simply, it’s my job to make money through VC investments and make the world a better place while we’re at it.

On the investment side, I have followed a simple rule for the past 24 years as a venture capitalist—I invest in companies that are unlike anything I have seen before, yet adjacent to an area of prior expertise. And like most VCs, I also look for inspirational leaders, a motivational mission, and a large market size. So, you can imagine why I was smitten with SpaceX when we first invested, back before they had put a satellite in orbit. I had a prepared mind as a long-standing space geek—launching my own supersonic rockets for 16 years, flying in zero gravity, supporting space philanthropies like B612 and a lunar non-profit (still in stealth), and turning the office into a veritable space museum full of rocket engines and a piece of every Lunar Module from Apollo 10 to 17.

As for making the world a better place, democratizing and easing the access to space benefits many other businesses, and Planet is a great example of a beneficiary—better Earth observation allows us to be better stewards of this planet. Every entrepreneur seeks to change the world. But why stop there? There are other worlds out there, beyond the frontiers of the imagination.


Deepak Kamra (DK): At Canaan, we try to take advantage of technology disruptions that can enable growth in large markets. We think the space market is currently undergoing such a disruption. The availability of smaller and cheaper satellites and launch vehicles, coupled with newer, cheaper data and distribution platforms is expanding the New Space market significantly. A commonly used analogy is one of PC’s and smartphones disrupting minis and mainframes, creating markets that few could have imagined earlier. Today’s new space markets are growing fastest for commercial applications which previously did not have access to affordable imagery, communications, and other types of data from space.


Will Porteous (WP): We believe satellites represent one of the last corners of the computing industry that has not yet been transformed by the power of open interfaces, standard architectures, and software-defined capabilities. The precedents from the mainstream computing and networking industry suggest this transformation will unlock tremendous value and create an insertion point for several important new independent companies.



Venture Capital Investment Allocation by Stage and Industry

Space Angels data shows that the number of venture rounds at Growth and Late Stages are concentrated within the Satellites (63%) and Launch (28%) industries. However, at the Early Stage (Pre/Seed, Series A), we see a much greater diversity of industries represented. We believe this dynamic shows that as the Satellites and Launch Industries mature and VC portfolio companies graduate, VCs are expanding their space exposure to include other industries.


Are you considering investment opportunities outside of the Launch and Satellites industries?

RC: As a firm, space opportunities are only a small segment of our overall portfolio. Within the space category, we have made significant investments in propulsion (Vector for launch, and Accion Systems for in-space propulsion), and smaller seed investments in constellation technologies (Spire, Analytical Space, and SpeQtral). Going forward, we see three major areas of opportunity: remote sensing, communications, and manufacturing. In-space manufacturing is nascent but we think that manufacturing special high-value items is intriguing, as well as methods of building large structures in orbit, which can’t fit inside launch fairings. Space tourism will probably become a significant category but we think that’s a really tough area for startups to address due to the extreme challenges of human-rated spacecraft (and thus high capital intensity).


DK: We are focused today on markets that will benefit from the availability of cheap, near real-time data from space. Certain areas such as imagery, IoT communications, and launch appear over-invested but falling prices will benefit many players through market growth. Marketplaces (like an API marketplace) will allow companies to consume and use the data created by satellites in real time. There could be new information products, platforms, and analytics companies to help develop.

We are also exploring terrestrial operational businesses as satellite constellations grow exponentially, such as new software platforms to help manage the operations of the second wave of smallsats.



Venture Capital Investment Rounds by Industry and Sector

Since 2009, VC firms have participated in 455 investment rounds; 114 (25%) occurred in 2018 alone. Of the total, 355 (74%) rounds were in the Satellites industry, of which 180 rounds (54%) were in the Earth Observation sector, with the other 175 (46%) split amongst Manufacturing & Components, Operations & Ground Segment, Communications, and Positioning, Navigation, & Timing (PNT). The Launch industry accounted for 72 rounds (16%) of total VC investment, with 60 rounds (83%) going to the Small Launch sector. Just 48 investment rounds (11%) went to emerging industries like Industrials, Logistics, and Planetary Markets.


What is your thesis for Earth Observation and Data Analytics?  

WP: We believe EO is an ideal market to prove the viability of the trends described above. Our data analytics thesis is predicated on choosing sectors (e.g. SAR [synthetic aperture radar]) in which there is an abundance of available data and capacity.



Venture Capital Investment Amount by Industry and Sector

Consistent with the overall flow of capital into the space economy, VCs have focused primarily on the Satellites and Launch industries. However, venture funds appear more overweight in Satellites. Since 2009, investment into the Satellites industry represents 57% of total capital deployed by VCs, compared to 46% of total capital deployed by all investor types.

Of the $2.4B deployed by VCs into the Satellites industry, $0.9B (40%) has gone to companies in the Earth Observation sector. We suspect this sector is more palatable to generalist VCs because, compared to Launch companies, they are relatively less capital intensive and the path to revenue is shorter. Pure-play Earth Observation Analytics companies have been particularly attractive to VCs for their hardware-free, SaaS business models.

The $1.5B of investment into the Launch industry is almost entirely concentrated in Small and Heavy Launch, with 97% deployed between the two sectors. With SpaceX dominating Heavy Launch in terms of total capacity, new entrants in Small Launch, like Vector and Rocket Lab, have attracted venture capital investment for their flexible and frequent launch business models, benefiting from the growing smallsat market.

What are the key milestones you are looking for to sustain your space investment thesis?

SJ: I continue to focus on organic growth from customer cash flows. These flows have been quite healthy at SpaceX and Planet, and the broadband data business, which will be commencing soon, is the largest business opportunity I have ever seen. Now that the U.S. and China have a new space race to the Moon underway, there will be multiple approaches seen to establish a permanent lunar presence in the next five years, and from years of preparatory analysis, we figure that it will cost less than $5B, all in, for an agile, commercial, new space approach to moon base alpha. The future is quite bright indeed!


RC: For Shasta to continue investing in space in the coming years, we’ll want to see some significant successful space startup exits. There haven’t been many to date. We will also want to see real progress with at least a few mega-constellation operators actually building, launching, and successfully operating their systems. Once that starts to happen, and the economics prove out, there will be wave after wave of constellation upgrades which will drive demand for other supporting space technologies.


DK: We look to revenue growth as the best milestone for creating long term viable companies. For the New Space companies we invest in, government and civil revenues are important to start off with, but ultimately we believe the more important growth milestones are for commercial revenues. Most commercial revenues in this market today are tiny today compared to their eventual potential. Beyond that, there needs to be a robust market for exits like IPOs and acquisitions to continue to fuel our investment strategies. Other than Skybox, there have been few notable acquisitions in the New Space market to date, but many venture-backed companies will test the exit market over the next 5 to 10 years.


WP: Continued progress moving innovative capabilities from Earth into space, scaling revenue and a clear path to profitability.


Venture capital investment in Space is now a generally accepted investment theme, so to better understand these dynamics, we created a special VC infographic in our year-end Q4 2018 Space Investment Quarterly. It is important to note that our definition of VC excludes corporate venture funds and fund-of-funds making direct investments. Based on this definition, our research shows that between 2009-2018, venture capital funds invested $4.2B into space companies, with 70% of that capital deployed in just the last three years. In 2018 alone, 114 VC funds made their first space investment, bringing the total number of VCs with a Space investment to 534. These funds have primarily invested in Series A and B rounds, focused on the Satellites and Launch industries. Space investments are particularly common among top-tier firms, as our analysis reveals that 41% of the Top 100 firms ((determined by fund size, excluding corporate venture funds and sector-specific funds) now have one or more space investments.

To get a better sense of why these generalist venture capital funds see opportunity in the Space economy, we spoke with some of our co-investors including Rob Coneybeer, Founder and Managing Director of Shasta Ventures; Steve Jurvetson, Managing Director and Founder of Future Ventures; Deepak Kamra, General Partner at Canaan Partners; and Will Porteous, General Partner and COO at RRE Ventures. Our key takeaways from these conversations are:

  • Space is a largely overlooked, huge market opportunity with billions of dollars of revenue expected over the coming decade
  • While there are still opportunities in the Launch and Satellites industries, opportunities in new industries are materializing as the Space economy matures
  • To sustain their space investment thesis, VC investors are looking for commercial milestones: organic growth from customer cash flows and profitability. Most commercial revenues in this market today are tiny today compared to their potential

Venture Capital Activity 2009-2018

Venture Capital Investment by Round Over Time

Since 2009, venture capital firms have invested $4.2B into space companies. VC interest in Space has hit an inflection point in the last three years, with 70% of capital being deployed from 2016-2018. During this period, investment has been concentrated at the Series A and Series B rounds, accounting for 60% of total capital deployed.


Why did you initially invest in Space and why do you continue to do so?

Rob Coneybeer (RC): Shasta is investing in space because we view it as one of the key next-generation platform opportunities after the smartphone. It’s a largely overlooked, huge market opportunity that has billions of dollars coming from a few key customers over the coming decade: governments and the large communications constellation operators (including Amazon which just announced their own massive constellation). These customers will need new satellite component technologies and lots of launch and in-space propulsion capacity.


Steve Jurvetson (SJ): Quite simply, it’s my job to make money through VC investments and make the world a better place while we’re at it.

On the investment side, I have followed a simple rule for the past 24 years as a venture capitalist—I invest in companies that are unlike anything I have seen before, yet adjacent to an area of prior expertise. And like most VCs, I also look for inspirational leaders, a motivational mission, and a large market size. So, you can imagine why I was smitten with SpaceX when we first invested, back before they had put a satellite in orbit. I had a prepared mind as a long-standing space geek—launching my own supersonic rockets for 16 years, flying in zero gravity, supporting space philanthropies like B612 and a lunar non-profit (still in stealth), and turning the office into a veritable space museum full of rocket engines and a piece of every Lunar Module from Apollo 10 to 17.

As for making the world a better place, democratizing and easing the access to space benefits many other businesses, and Planet is a great example of a beneficiary—better Earth observation allows us to be better stewards of this planet. Every entrepreneur seeks to change the world. But why stop there? There are other worlds out there, beyond the frontiers of the imagination.


Deepak Kamra (DK): At Canaan, we try to take advantage of technology disruptions that can enable growth in large markets. We think the space market is currently undergoing such a disruption. The availability of smaller and cheaper satellites and launch vehicles, coupled with newer, cheaper data and distribution platforms is expanding the New Space market significantly. A commonly used analogy is one of PC’s and smartphones disrupting minis and mainframes, creating markets that few could have imagined earlier. Today’s new space markets are growing fastest for commercial applications which previously did not have access to affordable imagery, communications, and other types of data from space.


Will Porteous (WP): We believe satellites represent one of the last corners of the computing industry that has not yet been transformed by the power of open interfaces, standard architectures, and software-defined capabilities. The precedents from the mainstream computing and networking industry suggest this transformation will unlock tremendous value and create an insertion point for several important new independent companies.



Venture Capital Investment Allocation by Stage and Industry

Space Angels data shows that the number of venture rounds at Growth and Late Stages are concentrated within the Satellites (63%) and Launch (28%) industries. However, at the Early Stage (Pre/Seed, Series A), we see a much greater diversity of industries represented. We believe this dynamic shows that as the Satellites and Launch Industries mature and VC portfolio companies graduate, VCs are expanding their space exposure to include other industries.


Are you considering investment opportunities outside of the Launch and Satellites industries?

RC: As a firm, space opportunities are only a small segment of our overall portfolio. Within the space category, we have made significant investments in propulsion (Vector for launch, and Accion Systems for in-space propulsion), and smaller seed investments in constellation technologies (Spire, Analytical Space, and SpeQtral). Going forward, we see three major areas of opportunity: remote sensing, communications, and manufacturing. In-space manufacturing is nascent but we think that manufacturing special high-value items is intriguing, as well as methods of building large structures in orbit, which can’t fit inside launch fairings. Space tourism will probably become a significant category but we think that’s a really tough area for startups to address due to the extreme challenges of human-rated spacecraft (and thus high capital intensity).


DK: We are focused today on markets that will benefit from the availability of cheap, near real-time data from space. Certain areas such as imagery, IoT communications, and launch appear over-invested but falling prices will benefit many players through market growth. Marketplaces (like an API marketplace) will allow companies to consume and use the data created by satellites in real time. There could be new information products, platforms, and analytics companies to help develop.

We are also exploring terrestrial operational businesses as satellite constellations grow exponentially, such as new software platforms to help manage the operations of the second wave of smallsats.



Venture Capital Investment Rounds by Industry and Sector

Since 2009, VC firms have participated in 455 investment rounds; 114 (25%) occurred in 2018 alone. Of the total, 355 (74%) rounds were in the Satellites industry, of which 180 rounds (54%) were in the Earth Observation sector, with the other 175 (46%) split amongst Manufacturing & Components, Operations & Ground Segment, Communications, and Positioning, Navigation, & Timing (PNT). The Launch industry accounted for 72 rounds (16%) of total VC investment, with 60 rounds (83%) going to the Small Launch sector. Just 48 investment rounds (11%) went to emerging industries like Industrials, Logistics, and Planetary Markets.


What is your thesis for Earth Observation and Data Analytics?  

WP: We believe EO is an ideal market to prove the viability of the trends described above. Our data analytics thesis is predicated on choosing sectors (e.g. SAR [synthetic aperture radar]) in which there is an abundance of available data and capacity.



Venture Capital Investment Amount by Industry and Sector

Consistent with the overall flow of capital into the space economy, VCs have focused primarily on the Satellites and Launch industries. However, venture funds appear more overweight in Satellites. Since 2009, investment into the Satellites industry represents 57% of total capital deployed by VCs, compared to 46% of total capital deployed by all investor types.

Of the $2.4B deployed by VCs into the Satellites industry, $0.9B (40%) has gone to companies in the Earth Observation sector. We suspect this sector is more palatable to generalist VCs because, compared to Launch companies, they are relatively less capital intensive and the path to revenue is shorter. Pure-play Earth Observation Analytics companies have been particularly attractive to VCs for their hardware-free, SaaS business models.

The $1.5B of investment into the Launch industry is almost entirely concentrated in Small and Heavy Launch, with 97% deployed between the two sectors. With SpaceX dominating Heavy Launch in terms of total capacity, new entrants in Small Launch, like Vector and Rocket Lab, have attracted venture capital investment for their flexible and frequent launch business models, benefiting from the growing smallsat market.

What are the key milestones you are looking for to sustain your space investment thesis?

SJ: I continue to focus on organic growth from customer cash flows. These flows have been quite healthy at SpaceX and Planet, and the broadband data business, which will be commencing soon, is the largest business opportunity I have ever seen. Now that the U.S. and China have a new space race to the Moon underway, there will be multiple approaches seen to establish a permanent lunar presence in the next five years, and from years of preparatory analysis, we figure that it will cost less than $5B, all in, for an agile, commercial, new space approach to moon base alpha. The future is quite bright indeed!


RC: For Shasta to continue investing in space in the coming years, we’ll want to see some significant successful space startup exits. There haven’t been many to date. We will also want to see real progress with at least a few mega-constellation operators actually building, launching, and successfully operating their systems. Once that starts to happen, and the economics prove out, there will be wave after wave of constellation upgrades which will drive demand for other supporting space technologies.


DK: We look to revenue growth as the best milestone for creating long term viable companies. For the New Space companies we invest in, government and civil revenues are important to start off with, but ultimately we believe the more important growth milestones are for commercial revenues. Most commercial revenues in this market today are tiny today compared to their eventual potential. Beyond that, there needs to be a robust market for exits like IPOs and acquisitions to continue to fuel our investment strategies. Other than Skybox, there have been few notable acquisitions in the New Space market to date, but many venture-backed companies will test the exit market over the next 5 to 10 years.


WP: Continued progress moving innovative capabilities from Earth into space, scaling revenue and a clear path to profitability.


Venture capital investment in Space is now a generally accepted investment theme, so to better understand these dynamics, we created a special VC infographic in our year-end Q4 2018 Space Investment Quarterly. It is important to note that our definition of VC excludes corporate venture funds and fund-of-funds making direct investments. Based on this definition, our research shows that between 2009-2018, venture capital funds invested $4.2B into space companies, with 70% of that capital deployed in just the last three years. In 2018 alone, 114 VC funds made their first space investment, bringing the total number of VCs with a Space investment to 534. These funds have primarily invested in Series A and B rounds, focused on the Satellites and Launch industries. Space investments are particularly common among top-tier firms, as our analysis reveals that 41% of the Top 100 firms ((determined by fund size, excluding corporate venture funds and sector-specific funds) now have one or more space investments.

To get a better sense of why these generalist venture capital funds see opportunity in the Space economy, we spoke with some of our co-investors including Rob Coneybeer, Founder and Managing Director of Shasta Ventures; Steve Jurvetson, Managing Director and Founder of Future Ventures; Deepak Kamra, General Partner at Canaan Partners; and Will Porteous, General Partner and COO at RRE Ventures. Our key takeaways from these conversations are:

  • Space is a largely overlooked, huge market opportunity with billions of dollars of revenue expected over the coming decade
  • While there are still opportunities in the Launch and Satellites industries, opportunities in new industries are materializing as the Space economy matures
  • To sustain their space investment thesis, VC investors are looking for commercial milestones: organic growth from customer cash flows and profitability. Most commercial revenues in this market today are tiny today compared to their potential

Venture Capital Activity 2009-2018

Venture Capital Investment by Round Over Time

Since 2009, venture capital firms have invested $4.2B into space companies. VC interest in Space has hit an inflection point in the last three years, with 70% of capital being deployed from 2016-2018. During this period, investment has been concentrated at the Series A and Series B rounds, accounting for 60% of total capital deployed.


Why did you initially invest in Space and why do you continue to do so?

Rob Coneybeer (RC): Shasta is investing in space because we view it as one of the key next-generation platform opportunities after the smartphone. It’s a largely overlooked, huge market opportunity that has billions of dollars coming from a few key customers over the coming decade: governments and the large communications constellation operators (including Amazon which just announced their own massive constellation). These customers will need new satellite component technologies and lots of launch and in-space propulsion capacity.


Steve Jurvetson (SJ): Quite simply, it’s my job to make money through VC investments and make the world a better place while we’re at it.

On the investment side, I have followed a simple rule for the past 24 years as a venture capitalist—I invest in companies that are unlike anything I have seen before, yet adjacent to an area of prior expertise. And like most VCs, I also look for inspirational leaders, a motivational mission, and a large market size. So, you can imagine why I was smitten with SpaceX when we first invested, back before they had put a satellite in orbit. I had a prepared mind as a long-standing space geek—launching my own supersonic rockets for 16 years, flying in zero gravity, supporting space philanthropies like B612 and a lunar non-profit (still in stealth), and turning the office into a veritable space museum full of rocket engines and a piece of every Lunar Module from Apollo 10 to 17.

As for making the world a better place, democratizing and easing the access to space benefits many other businesses, and Planet is a great example of a beneficiary—better Earth observation allows us to be better stewards of this planet. Every entrepreneur seeks to change the world. But why stop there? There are other worlds out there, beyond the frontiers of the imagination.


Deepak Kamra (DK): At Canaan, we try to take advantage of technology disruptions that can enable growth in large markets. We think the space market is currently undergoing such a disruption. The availability of smaller and cheaper satellites and launch vehicles, coupled with newer, cheaper data and distribution platforms is expanding the New Space market significantly. A commonly used analogy is one of PC’s and smartphones disrupting minis and mainframes, creating markets that few could have imagined earlier. Today’s new space markets are growing fastest for commercial applications which previously did not have access to affordable imagery, communications, and other types of data from space.


Will Porteous (WP): We believe satellites represent one of the last corners of the computing industry that has not yet been transformed by the power of open interfaces, standard architectures, and software-defined capabilities. The precedents from the mainstream computing and networking industry suggest this transformation will unlock tremendous value and create an insertion point for several important new independent companies.



Venture Capital Investment Allocation by Stage and Industry

Space Angels data shows that the number of venture rounds at Growth and Late Stages are concentrated within the Satellites (63%) and Launch (28%) industries. However, at the Early Stage (Pre/Seed, Series A), we see a much greater diversity of industries represented. We believe this dynamic shows that as the Satellites and Launch Industries mature and VC portfolio companies graduate, VCs are expanding their space exposure to include other industries.


Are you considering investment opportunities outside of the Launch and Satellites industries?

RC: As a firm, space opportunities are only a small segment of our overall portfolio. Within the space category, we have made significant investments in propulsion (Vector for launch, and Accion Systems for in-space propulsion), and smaller seed investments in constellation technologies (Spire, Analytical Space, and SpeQtral). Going forward, we see three major areas of opportunity: remote sensing, communications, and manufacturing. In-space manufacturing is nascent but we think that manufacturing special high-value items is intriguing, as well as methods of building large structures in orbit, which can’t fit inside launch fairings. Space tourism will probably become a significant category but we think that’s a really tough area for startups to address due to the extreme challenges of human-rated spacecraft (and thus high capital intensity).


DK: We are focused today on markets that will benefit from the availability of cheap, near real-time data from space. Certain areas such as imagery, IoT communications, and launch appear over-invested but falling prices will benefit many players through market growth. Marketplaces (like an API marketplace) will allow companies to consume and use the data created by satellites in real time. There could be new information products, platforms, and analytics companies to help develop.

We are also exploring terrestrial operational businesses as satellite constellations grow exponentially, such as new software platforms to help manage the operations of the second wave of smallsats.



Venture Capital Investment Rounds by Industry and Sector

Since 2009, VC firms have participated in 455 investment rounds; 114 (25%) occurred in 2018 alone. Of the total, 355 (74%) rounds were in the Satellites industry, of which 180 rounds (54%) were in the Earth Observation sector, with the other 175 (46%) split amongst Manufacturing & Components, Operations & Ground Segment, Communications, and Positioning, Navigation, & Timing (PNT). The Launch industry accounted for 72 rounds (16%) of total VC investment, with 60 rounds (83%) going to the Small Launch sector. Just 48 investment rounds (11%) went to emerging industries like Industrials, Logistics, and Planetary Markets.


What is your thesis for Earth Observation and Data Analytics?  

WP: We believe EO is an ideal market to prove the viability of the trends described above. Our data analytics thesis is predicated on choosing sectors (e.g. SAR [synthetic aperture radar]) in which there is an abundance of available data and capacity.



Venture Capital Investment Amount by Industry and Sector

Consistent with the overall flow of capital into the space economy, VCs have focused primarily on the Satellites and Launch industries. However, venture funds appear more overweight in Satellites. Since 2009, investment into the Satellites industry represents 57% of total capital deployed by VCs, compared to 46% of total capital deployed by all investor types.

Of the $2.4B deployed by VCs into the Satellites industry, $0.9B (40%) has gone to companies in the Earth Observation sector. We suspect this sector is more palatable to generalist VCs because, compared to Launch companies, they are relatively less capital intensive and the path to revenue is shorter. Pure-play Earth Observation Analytics companies have been particularly attractive to VCs for their hardware-free, SaaS business models.

The $1.5B of investment into the Launch industry is almost entirely concentrated in Small and Heavy Launch, with 97% deployed between the two sectors. With SpaceX dominating Heavy Launch in terms of total capacity, new entrants in Small Launch, like Vector and Rocket Lab, have attracted venture capital investment for their flexible and frequent launch business models, benefiting from the growing smallsat market.

What are the key milestones you are looking for to sustain your space investment thesis?

SJ: I continue to focus on organic growth from customer cash flows. These flows have been quite healthy at SpaceX and Planet, and the broadband data business, which will be commencing soon, is the largest business opportunity I have ever seen. Now that the U.S. and China have a new space race to the Moon underway, there will be multiple approaches seen to establish a permanent lunar presence in the next five years, and from years of preparatory analysis, we figure that it will cost less than $5B, all in, for an agile, commercial, new space approach to moon base alpha. The future is quite bright indeed!


RC: For Shasta to continue investing in space in the coming years, we’ll want to see some significant successful space startup exits. There haven’t been many to date. We will also want to see real progress with at least a few mega-constellation operators actually building, launching, and successfully operating their systems. Once that starts to happen, and the economics prove out, there will be wave after wave of constellation upgrades which will drive demand for other supporting space technologies.


DK: We look to revenue growth as the best milestone for creating long term viable companies. For the New Space companies we invest in, government and civil revenues are important to start off with, but ultimately we believe the more important growth milestones are for commercial revenues. Most commercial revenues in this market today are tiny today compared to their eventual potential. Beyond that, there needs to be a robust market for exits like IPOs and acquisitions to continue to fuel our investment strategies. Other than Skybox, there have been few notable acquisitions in the New Space market to date, but many venture-backed companies will test the exit market over the next 5 to 10 years.


WP: Continued progress moving innovative capabilities from Earth into space, scaling revenue and a clear path to profitability.


Space is Now a Generally Accepted Venture Investment Theme
Click to Read More

Venture capital investment in Space is now a generally accepted investment theme, so to better understand these dynamics, we created a special VC infographic in our year-end Q4 2018 Space Investment Quarterly. It is important to note that our definition of VC excludes corporate venture funds and fund-of-funds making direct investments. Based on this definition, our research shows that between 2009-2018, venture capital funds invested $4.2B into space companies, with 70% of that capital deployed in just the last three years. In 2018 alone, 114 VC funds made their first space investment, bringing the total number of VCs with a Space investment to 534. These funds have primarily invested in Series A and B rounds, focused on the Satellites and Launch industries. Space investments are particularly common among top-tier firms, as our analysis reveals that 41% of the Top 100 firms ((determined by fund size, excluding corporate venture funds and sector-specific funds) now have one or more space investments.

To get a better sense of why these generalist venture capital funds see opportunity in the Space economy, we spoke with some of our co-investors including Rob Coneybeer, Founder and Managing Director of Shasta Ventures; Steve Jurvetson, Managing Director and Founder of Future Ventures; Deepak Kamra, General Partner at Canaan Partners; and Will Porteous, General Partner and COO at RRE Ventures. Our key takeaways from these conversations are:

  • Space is a largely overlooked, huge market opportunity with billions of dollars of revenue expected over the coming decade
  • While there are still opportunities in the Launch and Satellites industries, opportunities in new industries are materializing as the Space economy matures
  • To sustain their space investment thesis, VC investors are looking for commercial milestones: organic growth from customer cash flows and profitability. Most commercial revenues in this market today are tiny today compared to their potential

Venture Capital Activity 2009-2018

Venture Capital Investment by Round Over Time

Since 2009, venture capital firms have invested $4.2B into space companies. VC interest in Space has hit an inflection point in the last three years, with 70% of capital being deployed from 2016-2018. During this period, investment has been concentrated at the Series A and Series B rounds, accounting for 60% of total capital deployed.


Why did you initially invest in Space and why do you continue to do so?

Rob Coneybeer (RC): Shasta is investing in space because we view it as one of the key next-generation platform opportunities after the smartphone. It’s a largely overlooked, huge market opportunity that has billions of dollars coming from a few key customers over the coming decade: governments and the large communications constellation operators (including Amazon which just announced their own massive constellation). These customers will need new satellite component technologies and lots of launch and in-space propulsion capacity.


Steve Jurvetson (SJ): Quite simply, it’s my job to make money through VC investments and make the world a better place while we’re at it.

On the investment side, I have followed a simple rule for the past 24 years as a venture capitalist—I invest in companies that are unlike anything I have seen before, yet adjacent to an area of prior expertise. And like most VCs, I also look for inspirational leaders, a motivational mission, and a large market size. So, you can imagine why I was smitten with SpaceX when we first invested, back before they had put a satellite in orbit. I had a prepared mind as a long-standing space geek—launching my own supersonic rockets for 16 years, flying in zero gravity, supporting space philanthropies like B612 and a lunar non-profit (still in stealth), and turning the office into a veritable space museum full of rocket engines and a piece of every Lunar Module from Apollo 10 to 17.

As for making the world a better place, democratizing and easing the access to space benefits many other businesses, and Planet is a great example of a beneficiary—better Earth observation allows us to be better stewards of this planet. Every entrepreneur seeks to change the world. But why stop there? There are other worlds out there, beyond the frontiers of the imagination.


Deepak Kamra (DK): At Canaan, we try to take advantage of technology disruptions that can enable growth in large markets. We think the space market is currently undergoing such a disruption. The availability of smaller and cheaper satellites and launch vehicles, coupled with newer, cheaper data and distribution platforms is expanding the New Space market significantly. A commonly used analogy is one of PC’s and smartphones disrupting minis and mainframes, creating markets that few could have imagined earlier. Today’s new space markets are growing fastest for commercial applications which previously did not have access to affordable imagery, communications, and other types of data from space.


Will Porteous (WP): We believe satellites represent one of the last corners of the computing industry that has not yet been transformed by the power of open interfaces, standard architectures, and software-defined capabilities. The precedents from the mainstream computing and networking industry suggest this transformation will unlock tremendous value and create an insertion point for several important new independent companies.



Venture Capital Investment Allocation by Stage and Industry

Space Angels data shows that the number of venture rounds at Growth and Late Stages are concentrated within the Satellites (63%) and Launch (28%) industries. However, at the Early Stage (Pre/Seed, Series A), we see a much greater diversity of industries represented. We believe this dynamic shows that as the Satellites and Launch Industries mature and VC portfolio companies graduate, VCs are expanding their space exposure to include other industries.


Are you considering investment opportunities outside of the Launch and Satellites industries?

RC: As a firm, space opportunities are only a small segment of our overall portfolio. Within the space category, we have made significant investments in propulsion (Vector for launch, and Accion Systems for in-space propulsion), and smaller seed investments in constellation technologies (Spire, Analytical Space, and SpeQtral). Going forward, we see three major areas of opportunity: remote sensing, communications, and manufacturing. In-space manufacturing is nascent but we think that manufacturing special high-value items is intriguing, as well as methods of building large structures in orbit, which can’t fit inside launch fairings. Space tourism will probably become a significant category but we think that’s a really tough area for startups to address due to the extreme challenges of human-rated spacecraft (and thus high capital intensity).


DK: We are focused today on markets that will benefit from the availability of cheap, near real-time data from space. Certain areas such as imagery, IoT communications, and launch appear over-invested but falling prices will benefit many players through market growth. Marketplaces (like an API marketplace) will allow companies to consume and use the data created by satellites in real time. There could be new information products, platforms, and analytics companies to help develop.

We are also exploring terrestrial operational businesses as satellite constellations grow exponentially, such as new software platforms to help manage the operations of the second wave of smallsats.



Venture Capital Investment Rounds by Industry and Sector

Since 2009, VC firms have participated in 455 investment rounds; 114 (25%) occurred in 2018 alone. Of the total, 355 (74%) rounds were in the Satellites industry, of which 180 rounds (54%) were in the Earth Observation sector, with the other 175 (46%) split amongst Manufacturing & Components, Operations & Ground Segment, Communications, and Positioning, Navigation, & Timing (PNT). The Launch industry accounted for 72 rounds (16%) of total VC investment, with 60 rounds (83%) going to the Small Launch sector. Just 48 investment rounds (11%) went to emerging industries like Industrials, Logistics, and Planetary Markets.


What is your thesis for Earth Observation and Data Analytics?  

WP: We believe EO is an ideal market to prove the viability of the trends described above. Our data analytics thesis is predicated on choosing sectors (e.g. SAR [synthetic aperture radar]) in which there is an abundance of available data and capacity.



Venture Capital Investment Amount by Industry and Sector

Consistent with the overall flow of capital into the space economy, VCs have focused primarily on the Satellites and Launch industries. However, venture funds appear more overweight in Satellites. Since 2009, investment into the Satellites industry represents 57% of total capital deployed by VCs, compared to 46% of total capital deployed by all investor types.

Of the $2.4B deployed by VCs into the Satellites industry, $0.9B (40%) has gone to companies in the Earth Observation sector. We suspect this sector is more palatable to generalist VCs because, compared to Launch companies, they are relatively less capital intensive and the path to revenue is shorter. Pure-play Earth Observation Analytics companies have been particularly attractive to VCs for their hardware-free, SaaS business models.

The $1.5B of investment into the Launch industry is almost entirely concentrated in Small and Heavy Launch, with 97% deployed between the two sectors. With SpaceX dominating Heavy Launch in terms of total capacity, new entrants in Small Launch, like Vector and Rocket Lab, have attracted venture capital investment for their flexible and frequent launch business models, benefiting from the growing smallsat market.

What are the key milestones you are looking for to sustain your space investment thesis?

SJ: I continue to focus on organic growth from customer cash flows. These flows have been quite healthy at SpaceX and Planet, and the broadband data business, which will be commencing soon, is the largest business opportunity I have ever seen. Now that the U.S. and China have a new space race to the Moon underway, there will be multiple approaches seen to establish a permanent lunar presence in the next five years, and from years of preparatory analysis, we figure that it will cost less than $5B, all in, for an agile, commercial, new space approach to moon base alpha. The future is quite bright indeed!


RC: For Shasta to continue investing in space in the coming years, we’ll want to see some significant successful space startup exits. There haven’t been many to date. We will also want to see real progress with at least a few mega-constellation operators actually building, launching, and successfully operating their systems. Once that starts to happen, and the economics prove out, there will be wave after wave of constellation upgrades which will drive demand for other supporting space technologies.


DK: We look to revenue growth as the best milestone for creating long term viable companies. For the New Space companies we invest in, government and civil revenues are important to start off with, but ultimately we believe the more important growth milestones are for commercial revenues. Most commercial revenues in this market today are tiny today compared to their eventual potential. Beyond that, there needs to be a robust market for exits like IPOs and acquisitions to continue to fuel our investment strategies. Other than Skybox, there have been few notable acquisitions in the New Space market to date, but many venture-backed companies will test the exit market over the next 5 to 10 years.


WP: Continued progress moving innovative capabilities from Earth into space, scaling revenue and a clear path to profitability.


Venture capital investment in Space is now a generally accepted investment theme, so to better understand these dynamics, we created a special VC infographic in our year-end Q4 2018 Space Investment Quarterly. It is important to note that our definition of VC excludes corporate venture funds and fund-of-funds making direct investments. Based on this definition, our research shows that between 2009-2018, venture capital funds invested $4.2B into space companies, with 70% of that capital deployed in just the last three years. In 2018 alone, 114 VC funds made their first space investment, bringing the total number of VCs with a Space investment to 534. These funds have primarily invested in Series A and B rounds, focused on the Satellites and Launch industries. Space investments are particularly common among top-tier firms, as our analysis reveals that 41% of the Top 100 firms ((determined by fund size, excluding corporate venture funds and sector-specific funds) now have one or more space investments.

To get a better sense of why these generalist venture capital funds see opportunity in the Space economy, we spoke with some of our co-investors including Rob Coneybeer, Founder and Managing Director of Shasta Ventures; Steve Jurvetson, Managing Director and Founder of Future Ventures; Deepak Kamra, General Partner at Canaan Partners; and Will Porteous, General Partner and COO at RRE Ventures. Our key takeaways from these conversations are:

  • Space is a largely overlooked, huge market opportunity with billions of dollars of revenue expected over the coming decade
  • While there are still opportunities in the Launch and Satellites industries, opportunities in new industries are materializing as the Space economy matures
  • To sustain their space investment thesis, VC investors are looking for commercial milestones: organic growth from customer cash flows and profitability. Most commercial revenues in this market today are tiny today compared to their potential

Venture Capital Activity 2009-2018

Venture Capital Investment by Round Over Time

Since 2009, venture capital firms have invested $4.2B into space companies. VC interest in Space has hit an inflection point in the last three years, with 70% of capital being deployed from 2016-2018. During this period, investment has been concentrated at the Series A and Series B rounds, accounting for 60% of total capital deployed.


Why did you initially invest in Space and why do you continue to do so?

Rob Coneybeer (RC): Shasta is investing in space because we view it as one of the key next-generation platform opportunities after the smartphone. It’s a largely overlooked, huge market opportunity that has billions of dollars coming from a few key customers over the coming decade: governments and the large communications constellation operators (including Amazon which just announced their own massive constellation). These customers will need new satellite component technologies and lots of launch and in-space propulsion capacity.


Steve Jurvetson (SJ): Quite simply, it’s my job to make money through VC investments and make the world a better place while we’re at it.

On the investment side, I have followed a simple rule for the past 24 years as a venture capitalist—I invest in companies that are unlike anything I have seen before, yet adjacent to an area of prior expertise. And like most VCs, I also look for inspirational leaders, a motivational mission, and a large market size. So, you can imagine why I was smitten with SpaceX when we first invested, back before they had put a satellite in orbit. I had a prepared mind as a long-standing space geek—launching my own supersonic rockets for 16 years, flying in zero gravity, supporting space philanthropies like B612 and a lunar non-profit (still in stealth), and turning the office into a veritable space museum full of rocket engines and a piece of every Lunar Module from Apollo 10 to 17.

As for making the world a better place, democratizing and easing the access to space benefits many other businesses, and Planet is a great example of a beneficiary—better Earth observation allows us to be better stewards of this planet. Every entrepreneur seeks to change the world. But why stop there? There are other worlds out there, beyond the frontiers of the imagination.


Deepak Kamra (DK): At Canaan, we try to take advantage of technology disruptions that can enable growth in large markets. We think the space market is currently undergoing such a disruption. The availability of smaller and cheaper satellites and launch vehicles, coupled with newer, cheaper data and distribution platforms is expanding the New Space market significantly. A commonly used analogy is one of PC’s and smartphones disrupting minis and mainframes, creating markets that few could have imagined earlier. Today’s new space markets are growing fastest for commercial applications which previously did not have access to affordable imagery, communications, and other types of data from space.


Will Porteous (WP): We believe satellites represent one of the last corners of the computing industry that has not yet been transformed by the power of open interfaces, standard architectures, and software-defined capabilities. The precedents from the mainstream computing and networking industry suggest this transformation will unlock tremendous value and create an insertion point for several important new independent companies.



Venture Capital Investment Allocation by Stage and Industry

Space Angels data shows that the number of venture rounds at Growth and Late Stages are concentrated within the Satellites (63%) and Launch (28%) industries. However, at the Early Stage (Pre/Seed, Series A), we see a much greater diversity of industries represented. We believe this dynamic shows that as the Satellites and Launch Industries mature and VC portfolio companies graduate, VCs are expanding their space exposure to include other industries.


Are you considering investment opportunities outside of the Launch and Satellites industries?

RC: As a firm, space opportunities are only a small segment of our overall portfolio. Within the space category, we have made significant investments in propulsion (Vector for launch, and Accion Systems for in-space propulsion), and smaller seed investments in constellation technologies (Spire, Analytical Space, and SpeQtral). Going forward, we see three major areas of opportunity: remote sensing, communications, and manufacturing. In-space manufacturing is nascent but we think that manufacturing special high-value items is intriguing, as well as methods of building large structures in orbit, which can’t fit inside launch fairings. Space tourism will probably become a significant category but we think that’s a really tough area for startups to address due to the extreme challenges of human-rated spacecraft (and thus high capital intensity).


DK: We are focused today on markets that will benefit from the availability of cheap, near real-time data from space. Certain areas such as imagery, IoT communications, and launch appear over-invested but falling prices will benefit many players through market growth. Marketplaces (like an API marketplace) will allow companies to consume and use the data created by satellites in real time. There could be new information products, platforms, and analytics companies to help develop.

We are also exploring terrestrial operational businesses as satellite constellations grow exponentially, such as new software platforms to help manage the operations of the second wave of smallsats.



Venture Capital Investment Rounds by Industry and Sector

Since 2009, VC firms have participated in 455 investment rounds; 114 (25%) occurred in 2018 alone. Of the total, 355 (74%) rounds were in the Satellites industry, of which 180 rounds (54%) were in the Earth Observation sector, with the other 175 (46%) split amongst Manufacturing & Components, Operations & Ground Segment, Communications, and Positioning, Navigation, & Timing (PNT). The Launch industry accounted for 72 rounds (16%) of total VC investment, with 60 rounds (83%) going to the Small Launch sector. Just 48 investment rounds (11%) went to emerging industries like Industrials, Logistics, and Planetary Markets.


What is your thesis for Earth Observation and Data Analytics?  

WP: We believe EO is an ideal market to prove the viability of the trends described above. Our data analytics thesis is predicated on choosing sectors (e.g. SAR [synthetic aperture radar]) in which there is an abundance of available data and capacity.



Venture Capital Investment Amount by Industry and Sector

Consistent with the overall flow of capital into the space economy, VCs have focused primarily on the Satellites and Launch industries. However, venture funds appear more overweight in Satellites. Since 2009, investment into the Satellites industry represents 57% of total capital deployed by VCs, compared to 46% of total capital deployed by all investor types.

Of the $2.4B deployed by VCs into the Satellites industry, $0.9B (40%) has gone to companies in the Earth Observation sector. We suspect this sector is more palatable to generalist VCs because, compared to Launch companies, they are relatively less capital intensive and the path to revenue is shorter. Pure-play Earth Observation Analytics companies have been particularly attractive to VCs for their hardware-free, SaaS business models.

The $1.5B of investment into the Launch industry is almost entirely concentrated in Small and Heavy Launch, with 97% deployed between the two sectors. With SpaceX dominating Heavy Launch in terms of total capacity, new entrants in Small Launch, like Vector and Rocket Lab, have attracted venture capital investment for their flexible and frequent launch business models, benefiting from the growing smallsat market.

What are the key milestones you are looking for to sustain your space investment thesis?

SJ: I continue to focus on organic growth from customer cash flows. These flows have been quite healthy at SpaceX and Planet, and the broadband data business, which will be commencing soon, is the largest business opportunity I have ever seen. Now that the U.S. and China have a new space race to the Moon underway, there will be multiple approaches seen to establish a permanent lunar presence in the next five years, and from years of preparatory analysis, we figure that it will cost less than $5B, all in, for an agile, commercial, new space approach to moon base alpha. The future is quite bright indeed!


RC: For Shasta to continue investing in space in the coming years, we’ll want to see some significant successful space startup exits. There haven’t been many to date. We will also want to see real progress with at least a few mega-constellation operators actually building, launching, and successfully operating their systems. Once that starts to happen, and the economics prove out, there will be wave after wave of constellation upgrades which will drive demand for other supporting space technologies.


DK: We look to revenue growth as the best milestone for creating long term viable companies. For the New Space companies we invest in, government and civil revenues are important to start off with, but ultimately we believe the more important growth milestones are for commercial revenues. Most commercial revenues in this market today are tiny today compared to their eventual potential. Beyond that, there needs to be a robust market for exits like IPOs and acquisitions to continue to fuel our investment strategies. Other than Skybox, there have been few notable acquisitions in the New Space market to date, but many venture-backed companies will test the exit market over the next 5 to 10 years.


WP: Continued progress moving innovative capabilities from Earth into space, scaling revenue and a clear path to profitability.


Venture capital investment in Space is now a generally accepted investment theme, so to better understand these dynamics, we created a special VC infographic in our year-end Q4 2018 Space Investment Quarterly. It is important to note that our definition of VC excludes corporate venture funds and fund-of-funds making direct investments. Based on this definition, our research shows that between 2009-2018, venture capital funds invested $4.2B into space companies, with 70% of that capital deployed in just the last three years. In 2018 alone, 114 VC funds made their first space investment, bringing the total number of VCs with a Space investment to 534. These funds have primarily invested in Series A and B rounds, focused on the Satellites and Launch industries. Space investments are particularly common among top-tier firms, as our analysis reveals that 41% of the Top 100 firms ((determined by fund size, excluding corporate venture funds and sector-specific funds) now have one or more space investments.

To get a better sense of why these generalist venture capital funds see opportunity in the Space economy, we spoke with some of our co-investors including Rob Coneybeer, Founder and Managing Director of Shasta Ventures; Steve Jurvetson, Managing Director and Founder of Future Ventures; Deepak Kamra, General Partner at Canaan Partners; and Will Porteous, General Partner and COO at RRE Ventures. Our key takeaways from these conversations are:

  • Space is a largely overlooked, huge market opportunity with billions of dollars of revenue expected over the coming decade
  • While there are still opportunities in the Launch and Satellites industries, opportunities in new industries are materializing as the Space economy matures
  • To sustain their space investment thesis, VC investors are looking for commercial milestones: organic growth from customer cash flows and profitability. Most commercial revenues in this market today are tiny today compared to their potential

Venture Capital Activity 2009-2018

Venture Capital Investment by Round Over Time

Since 2009, venture capital firms have invested $4.2B into space companies. VC interest in Space has hit an inflection point in the last three years, with 70% of capital being deployed from 2016-2018. During this period, investment has been concentrated at the Series A and Series B rounds, accounting for 60% of total capital deployed.


Why did you initially invest in Space and why do you continue to do so?

Rob Coneybeer (RC): Shasta is investing in space because we view it as one of the key next-generation platform opportunities after the smartphone. It’s a largely overlooked, huge market opportunity that has billions of dollars coming from a few key customers over the coming decade: governments and the large communications constellation operators (including Amazon which just announced their own massive constellation). These customers will need new satellite component technologies and lots of launch and in-space propulsion capacity.


Steve Jurvetson (SJ): Quite simply, it’s my job to make money through VC investments and make the world a better place while we’re at it.

On the investment side, I have followed a simple rule for the past 24 years as a venture capitalist—I invest in companies that are unlike anything I have seen before, yet adjacent to an area of prior expertise. And like most VCs, I also look for inspirational leaders, a motivational mission, and a large market size. So, you can imagine why I was smitten with SpaceX when we first invested, back before they had put a satellite in orbit. I had a prepared mind as a long-standing space geek—launching my own supersonic rockets for 16 years, flying in zero gravity, supporting space philanthropies like B612 and a lunar non-profit (still in stealth), and turning the office into a veritable space museum full of rocket engines and a piece of every Lunar Module from Apollo 10 to 17.

As for making the world a better place, democratizing and easing the access to space benefits many other businesses, and Planet is a great example of a beneficiary—better Earth observation allows us to be better stewards of this planet. Every entrepreneur seeks to change the world. But why stop there? There are other worlds out there, beyond the frontiers of the imagination.


Deepak Kamra (DK): At Canaan, we try to take advantage of technology disruptions that can enable growth in large markets. We think the space market is currently undergoing such a disruption. The availability of smaller and cheaper satellites and launch vehicles, coupled with newer, cheaper data and distribution platforms is expanding the New Space market significantly. A commonly used analogy is one of PC’s and smartphones disrupting minis and mainframes, creating markets that few could have imagined earlier. Today’s new space markets are growing fastest for commercial applications which previously did not have access to affordable imagery, communications, and other types of data from space.


Will Porteous (WP): We believe satellites represent one of the last corners of the computing industry that has not yet been transformed by the power of open interfaces, standard architectures, and software-defined capabilities. The precedents from the mainstream computing and networking industry suggest this transformation will unlock tremendous value and create an insertion point for several important new independent companies.



Venture Capital Investment Allocation by Stage and Industry

Space Angels data shows that the number of venture rounds at Growth and Late Stages are concentrated within the Satellites (63%) and Launch (28%) industries. However, at the Early Stage (Pre/Seed, Series A), we see a much greater diversity of industries represented. We believe this dynamic shows that as the Satellites and Launch Industries mature and VC portfolio companies graduate, VCs are expanding their space exposure to include other industries.


Are you considering investment opportunities outside of the Launch and Satellites industries?

RC: As a firm, space opportunities are only a small segment of our overall portfolio. Within the space category, we have made significant investments in propulsion (Vector for launch, and Accion Systems for in-space propulsion), and smaller seed investments in constellation technologies (Spire, Analytical Space, and SpeQtral). Going forward, we see three major areas of opportunity: remote sensing, communications, and manufacturing. In-space manufacturing is nascent but we think that manufacturing special high-value items is intriguing, as well as methods of building large structures in orbit, which can’t fit inside launch fairings. Space tourism will probably become a significant category but we think that’s a really tough area for startups to address due to the extreme challenges of human-rated spacecraft (and thus high capital intensity).


DK: We are focused today on markets that will benefit from the availability of cheap, near real-time data from space. Certain areas such as imagery, IoT communications, and launch appear over-invested but falling prices will benefit many players through market growth. Marketplaces (like an API marketplace) will allow companies to consume and use the data created by satellites in real time. There could be new information products, platforms, and analytics companies to help develop.

We are also exploring terrestrial operational businesses as satellite constellations grow exponentially, such as new software platforms to help manage the operations of the second wave of smallsats.



Venture Capital Investment Rounds by Industry and Sector

Since 2009, VC firms have participated in 455 investment rounds; 114 (25%) occurred in 2018 alone. Of the total, 355 (74%) rounds were in the Satellites industry, of which 180 rounds (54%) were in the Earth Observation sector, with the other 175 (46%) split amongst Manufacturing & Components, Operations & Ground Segment, Communications, and Positioning, Navigation, & Timing (PNT). The Launch industry accounted for 72 rounds (16%) of total VC investment, with 60 rounds (83%) going to the Small Launch sector. Just 48 investment rounds (11%) went to emerging industries like Industrials, Logistics, and Planetary Markets.


What is your thesis for Earth Observation and Data Analytics?  

WP: We believe EO is an ideal market to prove the viability of the trends described above. Our data analytics thesis is predicated on choosing sectors (e.g. SAR [synthetic aperture radar]) in which there is an abundance of available data and capacity.



Venture Capital Investment Amount by Industry and Sector

Consistent with the overall flow of capital into the space economy, VCs have focused primarily on the Satellites and Launch industries. However, venture funds appear more overweight in Satellites. Since 2009, investment into the Satellites industry represents 57% of total capital deployed by VCs, compared to 46% of total capital deployed by all investor types.

Of the $2.4B deployed by VCs into the Satellites industry, $0.9B (40%) has gone to companies in the Earth Observation sector. We suspect this sector is more palatable to generalist VCs because, compared to Launch companies, they are relatively less capital intensive and the path to revenue is shorter. Pure-play Earth Observation Analytics companies have been particularly attractive to VCs for their hardware-free, SaaS business models.

The $1.5B of investment into the Launch industry is almost entirely concentrated in Small and Heavy Launch, with 97% deployed between the two sectors. With SpaceX dominating Heavy Launch in terms of total capacity, new entrants in Small Launch, like Vector and Rocket Lab, have attracted venture capital investment for their flexible and frequent launch business models, benefiting from the growing smallsat market.

What are the key milestones you are looking for to sustain your space investment thesis?

SJ: I continue to focus on organic growth from customer cash flows. These flows have been quite healthy at SpaceX and Planet, and the broadband data business, which will be commencing soon, is the largest business opportunity I have ever seen. Now that the U.S. and China have a new space race to the Moon underway, there will be multiple approaches seen to establish a permanent lunar presence in the next five years, and from years of preparatory analysis, we figure that it will cost less than $5B, all in, for an agile, commercial, new space approach to moon base alpha. The future is quite bright indeed!


RC: For Shasta to continue investing in space in the coming years, we’ll want to see some significant successful space startup exits. There haven’t been many to date. We will also want to see real progress with at least a few mega-constellation operators actually building, launching, and successfully operating their systems. Once that starts to happen, and the economics prove out, there will be wave after wave of constellation upgrades which will drive demand for other supporting space technologies.


DK: We look to revenue growth as the best milestone for creating long term viable companies. For the New Space companies we invest in, government and civil revenues are important to start off with, but ultimately we believe the more important growth milestones are for commercial revenues. Most commercial revenues in this market today are tiny today compared to their eventual potential. Beyond that, there needs to be a robust market for exits like IPOs and acquisitions to continue to fuel our investment strategies. Other than Skybox, there have been few notable acquisitions in the New Space market to date, but many venture-backed companies will test the exit market over the next 5 to 10 years.


WP: Continued progress moving innovative capabilities from Earth into space, scaling revenue and a clear path to profitability.


Venture capital investment in Space is now a generally accepted investment theme, so to better understand these dynamics, we created a special VC infographic in our year-end Q4 2018 Space Investment Quarterly. It is important to note that our definition of VC excludes corporate venture funds and fund-of-funds making direct investments. Based on this definition, our research shows that between 2009-2018, venture capital funds invested $4.2B into space companies, with 70% of that capital deployed in just the last three years. In 2018 alone, 114 VC funds made their first space investment, bringing the total number of VCs with a Space investment to 534. These funds have primarily invested in Series A and B rounds, focused on the Satellites and Launch industries. Space investments are particularly common among top-tier firms, as our analysis reveals that 41% of the Top 100 firms ((determined by fund size, excluding corporate venture funds and sector-specific funds) now have one or more space investments.

To get a better sense of why these generalist venture capital funds see opportunity in the Space economy, we spoke with some of our co-investors including Rob Coneybeer, Founder and Managing Director of Shasta Ventures; Steve Jurvetson, Managing Director and Founder of Future Ventures; Deepak Kamra, General Partner at Canaan Partners; and Will Porteous, General Partner and COO at RRE Ventures. Our key takeaways from these conversations are:

  • Space is a largely overlooked, huge market opportunity with billions of dollars of revenue expected over the coming decade
  • While there are still opportunities in the Launch and Satellites industries, opportunities in new industries are materializing as the Space economy matures
  • To sustain their space investment thesis, VC investors are looking for commercial milestones: organic growth from customer cash flows and profitability. Most commercial revenues in this market today are tiny today compared to their potential

Venture Capital Activity 2009-2018

Venture Capital Investment by Round Over Time

Since 2009, venture capital firms have invested $4.2B into space companies. VC interest in Space has hit an inflection point in the last three years, with 70% of capital being deployed from 2016-2018. During this period, investment has been concentrated at the Series A and Series B rounds, accounting for 60% of total capital deployed.


Why did you initially invest in Space and why do you continue to do so?

Rob Coneybeer (RC): Shasta is investing in space because we view it as one of the key next-generation platform opportunities after the smartphone. It’s a largely overlooked, huge market opportunity that has billions of dollars coming from a few key customers over the coming decade: governments and the large communications constellation operators (including Amazon which just announced their own massive constellation). These customers will need new satellite component technologies and lots of launch and in-space propulsion capacity.


Steve Jurvetson (SJ): Quite simply, it’s my job to make money through VC investments and make the world a better place while we’re at it.

On the investment side, I have followed a simple rule for the past 24 years as a venture capitalist—I invest in companies that are unlike anything I have seen before, yet adjacent to an area of prior expertise. And like most VCs, I also look for inspirational leaders, a motivational mission, and a large market size. So, you can imagine why I was smitten with SpaceX when we first invested, back before they had put a satellite in orbit. I had a prepared mind as a long-standing space geek—launching my own supersonic rockets for 16 years, flying in zero gravity, supporting space philanthropies like B612 and a lunar non-profit (still in stealth), and turning the office into a veritable space museum full of rocket engines and a piece of every Lunar Module from Apollo 10 to 17.

As for making the world a better place, democratizing and easing the access to space benefits many other businesses, and Planet is a great example of a beneficiary—better Earth observation allows us to be better stewards of this planet. Every entrepreneur seeks to change the world. But why stop there? There are other worlds out there, beyond the frontiers of the imagination.


Deepak Kamra (DK): At Canaan, we try to take advantage of technology disruptions that can enable growth in large markets. We think the space market is currently undergoing such a disruption. The availability of smaller and cheaper satellites and launch vehicles, coupled with newer, cheaper data and distribution platforms is expanding the New Space market significantly. A commonly used analogy is one of PC’s and smartphones disrupting minis and mainframes, creating markets that few could have imagined earlier. Today’s new space markets are growing fastest for commercial applications which previously did not have access to affordable imagery, communications, and other types of data from space.


Will Porteous (WP): We believe satellites represent one of the last corners of the computing industry that has not yet been transformed by the power of open interfaces, standard architectures, and software-defined capabilities. The precedents from the mainstream computing and networking industry suggest this transformation will unlock tremendous value and create an insertion point for several important new independent companies.



Venture Capital Investment Allocation by Stage and Industry

Space Angels data shows that the number of venture rounds at Growth and Late Stages are concentrated within the Satellites (63%) and Launch (28%) industries. However, at the Early Stage (Pre/Seed, Series A), we see a much greater diversity of industries represented. We believe this dynamic shows that as the Satellites and Launch Industries mature and VC portfolio companies graduate, VCs are expanding their space exposure to include other industries.


Are you considering investment opportunities outside of the Launch and Satellites industries?

RC: As a firm, space opportunities are only a small segment of our overall portfolio. Within the space category, we have made significant investments in propulsion (Vector for launch, and Accion Systems for in-space propulsion), and smaller seed investments in constellation technologies (Spire, Analytical Space, and SpeQtral). Going forward, we see three major areas of opportunity: remote sensing, communications, and manufacturing. In-space manufacturing is nascent but we think that manufacturing special high-value items is intriguing, as well as methods of building large structures in orbit, which can’t fit inside launch fairings. Space tourism will probably become a significant category but we think that’s a really tough area for startups to address due to the extreme challenges of human-rated spacecraft (and thus high capital intensity).


DK: We are focused today on markets that will benefit from the availability of cheap, near real-time data from space. Certain areas such as imagery, IoT communications, and launch appear over-invested but falling prices will benefit many players through market growth. Marketplaces (like an API marketplace) will allow companies to consume and use the data created by satellites in real time. There could be new information products, platforms, and analytics companies to help develop.

We are also exploring terrestrial operational businesses as satellite constellations grow exponentially, such as new software platforms to help manage the operations of the second wave of smallsats.



Venture Capital Investment Rounds by Industry and Sector

Since 2009, VC firms have participated in 455 investment rounds; 114 (25%) occurred in 2018 alone. Of the total, 355 (74%) rounds were in the Satellites industry, of which 180 rounds (54%) were in the Earth Observation sector, with the other 175 (46%) split amongst Manufacturing & Components, Operations & Ground Segment, Communications, and Positioning, Navigation, & Timing (PNT). The Launch industry accounted for 72 rounds (16%) of total VC investment, with 60 rounds (83%) going to the Small Launch sector. Just 48 investment rounds (11%) went to emerging industries like Industrials, Logistics, and Planetary Markets.


What is your thesis for Earth Observation and Data Analytics?  

WP: We believe EO is an ideal market to prove the viability of the trends described above. Our data analytics thesis is predicated on choosing sectors (e.g. SAR [synthetic aperture radar]) in which there is an abundance of available data and capacity.



Venture Capital Investment Amount by Industry and Sector

Consistent with the overall flow of capital into the space economy, VCs have focused primarily on the Satellites and Launch industries. However, venture funds appear more overweight in Satellites. Since 2009, investment into the Satellites industry represents 57% of total capital deployed by VCs, compared to 46% of total capital deployed by all investor types.

Of the $2.4B deployed by VCs into the Satellites industry, $0.9B (40%) has gone to companies in the Earth Observation sector. We suspect this sector is more palatable to generalist VCs because, compared to Launch companies, they are relatively less capital intensive and the path to revenue is shorter. Pure-play Earth Observation Analytics companies have been particularly attractive to VCs for their hardware-free, SaaS business models.

The $1.5B of investment into the Launch industry is almost entirely concentrated in Small and Heavy Launch, with 97% deployed between the two sectors. With SpaceX dominating Heavy Launch in terms of total capacity, new entrants in Small Launch, like Vector and Rocket Lab, have attracted venture capital investment for their flexible and frequent launch business models, benefiting from the growing smallsat market.

What are the key milestones you are looking for to sustain your space investment thesis?

SJ: I continue to focus on organic growth from customer cash flows. These flows have been quite healthy at SpaceX and Planet, and the broadband data business, which will be commencing soon, is the largest business opportunity I have ever seen. Now that the U.S. and China have a new space race to the Moon underway, there will be multiple approaches seen to establish a permanent lunar presence in the next five years, and from years of preparatory analysis, we figure that it will cost less than $5B, all in, for an agile, commercial, new space approach to moon base alpha. The future is quite bright indeed!


RC: For Shasta to continue investing in space in the coming years, we’ll want to see some significant successful space startup exits. There haven’t been many to date. We will also want to see real progress with at least a few mega-constellation operators actually building, launching, and successfully operating their systems. Once that starts to happen, and the economics prove out, there will be wave after wave of constellation upgrades which will drive demand for other supporting space technologies.


DK: We look to revenue growth as the best milestone for creating long term viable companies. For the New Space companies we invest in, government and civil revenues are important to start off with, but ultimately we believe the more important growth milestones are for commercial revenues. Most commercial revenues in this market today are tiny today compared to their eventual potential. Beyond that, there needs to be a robust market for exits like IPOs and acquisitions to continue to fuel our investment strategies. Other than Skybox, there have been few notable acquisitions in the New Space market to date, but many venture-backed companies will test the exit market over the next 5 to 10 years.


WP: Continued progress moving innovative capabilities from Earth into space, scaling revenue and a clear path to profitability.


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