Private investment in the space economy dropped by 58% in 2022 compared to the year prior, with macroeconomic headwinds battering private and public markets, according to a new analysis from New York-based Space Capital.
But while 2023 is shaping up to be another hard year for startups, Space Capital’s report maintains that the external pressures on companies will be a net positive for the industry overall.
“Quality companies with product market fit, positive unit economics, and strong leadership will continue to get funded, although valuations will be more in line with historical averages,” Space Capital managing partner Chad Anderson said in the report. “We believe that less speculation will result in fewer competitors, and a larger talent pool that will make the next two years an attractive time to start and invest in space tech companies.”
Despite the overall bearish market environment, there was one clear winner last year: SpaceX, which managed to raise $2 billion, its second-largest annual raise since the company was founded in 2002. Notably, other companies that landed major rounds are explicitly targeting the defense sector: these include defense technology startup Anduril, which closed a $1.5 billion Series E; Shield AI’s $225 million Series E; and Slingshot Aerospace’s $40 million Series A.
Overall, late- and growth-stage companies were most highly impacted by the more conservative venture investing environment last year, while early-stage investments declined only 4% year-over-year. The total number of rounds in 2022 also decreased by 30% compared to the year prior.
While the overall picture from last year is negative, investing did pick up in the fourth quarter: 63% of the year’s deals were made in the last quarter, representing $2.6 billion.
The United States continues to lead in total private investment in space companies, with 46% of deals happening here, the report found. China comes in second place with 29%. China’s investment in space infrastructure, which includes launch and tech to build and operate satellites and other space-based assets, continues to climb.
The report also looks at emerging industries, like private space stations, in-orbit servicing, and mining companies. These companies saw a 63% drop in investment. The majority of the rounds in the fourth quarter of 2022 were early stage, which reflects that the industry is still very much in its beginnings.
Space Capital tracks 1,791 companies across the space sector. Over the last ten years, investors have now poured $273.3 billion of private equity into these companies.