Shifting Opportunities: The Space Economy Matures
By Tim Chrisman, Skytop Contributor / December 5th, 2022
Tim Chrisman is a space policy and geopolitics expert who writes extensively about the future of humanity in space. He leads the Foundation for the Future, a nonprofit based in Washington, D.C. which is leading the policy conversation around space infrastructure. Tim founded the Association for Space Finance, the industry association representing space investors, and whose membership ranges from small family offices to Barclays Investment Bank.
Tim is a former Army officer, who spent nearly a decade leading intelligence teams in combat and special operations units through five deployments to Iraq and Afghanistan. After his military service, Tim was selected to be a special advisor to the Chairman of the Joint Chiefs of Staff before joining the Central Intelligence Agency. He held multiple assignments at the Agency, including with the Directorate of Operations and Directorate of Analysis, culminating in a role supporting the National Space Council.
Tim studied at American University where he earned his Masters in International Relations and Affairs; the second of his two master’s degrees (the other is in Intelligence Studies). Tim is the author of the book Humanity in Space and is a prolific writer about the expanse of our civilization in space.
Shifting Opportunities
Venture investment in space companies is slowing, and that is a good thing. That isn’t the message you would expect to hear from someone who runs the Association for Space Finance, since the pace of investment slowing looks and feels similar to dying. But there are few industries that have been built exclusively on the back of equity investments. And fewer still that have lasted without making the transition to more mature forms of capital. Over the past 10 years we have seen nearly 300 billion of equity investment into 1,753 unique space companies. And we have seen this pace begin to slow as the broader investment community transitions from chasing momentum to seeking to mitigate downside risk. Taken alone – this would suggest that the opportunities in the space sector are starting to dry up. However, that is not the case. Only that the types of opportunities are shifting as sectors of the space economy mature.
The Launch Sector
A typical industry’s life cycle has four phases: introduction, growth, maturity, and decline. The commercial space sector as a whole is in the introduction phase; however, within the industry as a whole there are a number of sub-sectors which are later in their life cycles.
Take the launch sector for instance. For the past 5 to 10 years we have seen an explosion of new companies attacking established, government-backed players in the space economy. The launch sector shares some similarities to the transportation sector in that launch involves moving people and cargo from point A to point B. As of October 2022, there are over 100 launch companies operating around the world, according to SpaceFund. This is roughly the same as the number of international ocean shipping companies.
Mature Capital
There is no business case for this many launch companies operating simultaneously, but many of these companies have interesting and unique processes or technologies. Whether that is SpinLaunch or ABL Space, these companies have a useful product, but may not have the market penetration to compete with the likes of SpaceX or Blue Origin. This is where more mature capital comes in. That could look like Voyager Space, where small and medium companies are consolidated into a single, vertically integrated organization. Or it could look like AEI buying majority stakes in suppliers to major space companies. Still missing from the mix are private credit funds and infrastructure investment funds that large institutions like Blackrock and JP Morgan operate.
Extracting Value
These other forms of capital unlock new ways of extracting value from the space economy. No longer will the sector be entirely dependent on creating new technologies in order to flourish. Now, with the addition of these long-term capital sources, space companies can look to acquire what they need; or scale through improving their processes.
So in the end, a slowing of venture investing opens up new opportunities for larger, more consequential investments in the space economy.