For infrastructure investors who prefer a barrier to entry so high that it’s technically low-earth orbit, 2020 has offered plenty of opportunity. Space Capital, a New York-based, early stage venture capital investor that is currently managing its second fund for space-related startups, has released its third-quarter market update for global space investment. And the big winner for space funding during the period? Launch infrastructure.
Released on Thursday, Space Capital’s Q3 Space Investment Quarterly noted that fund commitments to capital-intensive space infrastructure firm dropped precipitously during the second quarter, as funds shifted to nimbler, cheaper technology applications. But infrastructure as a group rebounded quickly to pre-covid levels in the third quarter.
Mission control
Interest in the sector is expected to remain—perhaps surprising—robust. Space Capital notes that each of the “FAMGA” tech giants—Facebook, Apple, Microsoft, Google and Amazon—have existing or emerging space programs, and these have continued to gather speed in recent months. In September, Microsoft announced the launch of Azure Orbital, a satellite “Ground-Station-As-A-Service” offering that allows satellite operators to connect quickly to Microsoft’s cloud platform. In July, the FCC voted unanimously to approve Amazon’s Kuiper satellite constellation, a $10 billion cluster of more than 3,000 satellites that aim to bring high-speed internet service to remote parts of this planet.
“As the broader economy embraces remote operations, the most innovative companies are leveraging Space technology to create a competitive edge. In times of uncertainty, business leaders are hungry for insights and information, which is exactly the type of data that Space companies provide,” Space Capital writes in the report. “In fact, many of our portfolio companies have seen an increase in demand for their products and services due to the current economic environment and we expect the Space economy to play an increasingly important role in the post-COVID world.”
Heavy Launch
Per Space Capital’s data, what may be described as a calamitous 2020 here on Earth is turning out to be the best year on record for space infrastructure companies. Fully $5.5 billion has been invested here year-to-date, due mostly to substantial late-stage venture capital and individual investments in the Heavy Launch subsector, where space funds invested $4.9 billion across 53 infrastructure firms.
After Elon Musk’s SpaceX successfully completed its crewed Dragon mission in May of this year, SpaceX closed a Series N funding round at an oversubscribed $1.9 billion, bringing that company to a reported equity value of $46 billion.
Also during the quarter, Amazon founder and CEO Jeff Bezos sold $3 billion in Amazon stock, $1 billion of which Space Capital says will fund development of his space subsidiary Blue Origin’s Human Landing System, a lunar architecture system developed in cooperation with NASA, Lockheed Martin, Northrop Grumman and Draper that aims to put humans back on the moon by 2024.
China startups draw funding
Two companies from China rounded out the top capital raises during the third quarter. In September, commercial rocket developer LandSpace raised $175 million in Series C funding in a round co-led by Sequoia Capital China, the VC subsidiary of real estate developer Country Garden, Matrix Partners China, and Co-Stone Capital.
And in August, Chinese commercial launcher iSpace (the company also known as “Beijing Interstellar Glory Space Technology Ltd.”) raised $172 million in a Series B funding round led by Beijing Financial Street Capital Operation Center, CICC Alpha and Taizhonghe Capital. According to a report from TechCrunch after the round was announced, iSpace’s Series B capital will go toward the development of its “Hyperbola” space launch vehicle.
Since 2009, a total of $28.1 billion of equity investments have been made across 404 infrastructure companies. The U.S. continues to lead global investment in space infrastructure, accounting for 62 percent of total investment since 2009, followed by the U.K. with 21 percent, and China with 6 percent).
SPAC(e)
Space Capital reports that company exits for 2020 so far have topped $27 billion, 87 percent of which were the result of M&A. The emergence of special acquisition company (SPAC) IPO’s—which allow companies to go public by merging or being acquired by an already listed “shell” company, or SPAC— have been particularly popular among space companies wishing to bypass the complexities of a traditional IPO.
Companies that have obtained public stock market listings via an SPAC (also called a “blank-check” IPO) include Richard Branson’s space tourism firm Virgin Galactic, which merged with Social Capital’s SPAC Social Capital Hedosophia last October. Earlier this month, California-based satellite transportation startup Momentus announced that it’s also taking the SPAC route to the public markets. After merging with $1.2 billion SPACE Stable Road Acquisition Corp., Momentus will be listed on the Nasdaq board under the ticker symbol $MNTS.
You want to believe….that private equity is involved
Indeed, private equity is also invested in this sector. On Thursday, a new purpose-built space company called BlueHalo announced its existence. BlueHalo is a portfolio company of Arlington Capital Partners, a Washington D.C.-based middle-market private equity firm that has managed around $4 billion in capital committed to heavily regulated markets (like space). BlueHost is the product of a merger combining the engineering firm AEgis Technology, which develops equipment for the“multi-domain battlespace” with sensor producer Brilligent Solutions.
May the Force be with you
BlueHalo’s activities are strictly defense and military focused, specifically in the fields of Space Superiority and Directed Energy (a.k.a. lasers), Missile Defense and C4ISR technology (look it up), and Cyber and Intelligence.
“At BlueHalo, our employees will have access to new and impactful programs and missions across the fields of directed energy, radar, SIGINT, laser comm, electro-optics, and complex space systems, as well as investment to accelerate both growth and innovation,” BlueHalo CEO Jonathan Moneymaker said in a company announcement on Thursday. “The name BlueHalo speaks to who we are as a company, a global protective ring that shields everything we safeguard most, that unbroken line ensuring our customers retain the advantage in any battlespace, from high above the Earth to deep in cyberspace. It’s who we are and who we want to be, a halo, a protector, the light of inspired engineering keeping our Nation safe.”
“We are proud to bring together these exceptional companies to form BlueHalo,” said David Wodlinger, a Partner at Arlington Capital Partners. “BlueHalo will have the capabilities, infrastructure, and resources to rival the largest companies combined with the innovation, responsiveness, and world-class talent to provide superior solutions for our customers’ most challenging and complex missions.”
