The European Space Policy Institute (ESPI) has just released the latest edition of Space Venture Europe: Investment in the European and Global Space Sector, its annual report on private (and quasi-private) investment in the space sector, focusing on investment data for global, European, Chinese, and African markets.
The study is available on our website, here, and in it you will find different metrics and ways to assess the data. In addition to the report, we have compiled four Key Takeaways, which can be found below:
1. European space start-ups are in the midst of the best investment cycle to date
As ESPI’s data collection reaches the point where it almost spans one decade, it opens the opportunity to have a broader view of investment cycles in the European ecosystem. In the last two years, Europe raised more than half of all investment since 2014. Nevertheless, 2023 saw a slight YoY decline of €68 million (7%), while the number of deals was back to pre-2021 levels, suggesting a sharper downward trend.
The question now is whether this phase will persist, or will a new phase open up after 2023, and if so, for better or worse? Our researcher João Falcão Serra (main author of ESPI’s Space Venture) is planning to keep you up to date on the latest trends in our data in 2024, give a follow if you are interested.
2. But globally, especially in the U.S., the picture is different:
Meanwhile, globally the sector (within the perimeter consistently tracked by Space Venture Europe, see report for more info on the methodology) experienced a 32% decline in total investment in 2023, and when compared with the peak reached in 2021, it fell by 51%, sliding back to levels of investment reminiscent of those recorded in 2020.
Why then is there such a discrepancy between current European and Global NewSpace investment trends?
The decline, mostly driven by the U.S. market, results from a multitude of factors from the SPAC boom/bust to the decrease in access to venture capital, which forms the backbone of the NewSpace fundraising ecosystem (65% of all investment since 2019). Recent macroeconomic and geopolitical shifts serve as a backdrop for these developments. Accordingly, when zooming out to broader trends of VC markets, it mirrors that of global funding dynamics.
3. Now, with that as a backdrop, let’s assume two scenarios:
Negative outlook: One could argue that the European NewSpace fundraising ecosystem is lagging in facing the repercussions of ongoing macroeconomic and geopolitical shocks, especially when the broader European VC landscape has faced a heavy downturn in 2023. Moreover, as the European NewSpace sector matures, we saw an increase of approx. 150% in Series B and C rounds respectively, which carry higher ticket sizes, driving funding through fewer rounds. Indeed, deal activity decreased by 30%, a significant drop compared to the 7% decline in investment value, returning to levels last seen before 2021.
Positive outlook: Alternatively, the perceived underdevelopment of the VC ecosystem in Europe, especially in the space sector, when compared with the U.S. (e.g.: in Europe, general investors are not as present in the space sector), could have led to less exposure to these shocks. Two examples of how this translates to reality: i) specialised investors have more skin in the game, and hence more incentive to remain patient and provide follow-on funding, given their strong exposure to the sector, ii) the continued increase of mixed public/private funding consortia in recent years could be a factor for more resilience in the proposed positive reading of the situation.
4. Tailor-made solutions for a unique investment ecosystem
Regardless, one thing is certain, it highlights the differences between different fundraising ecosystems both in geographical terms (Europe vs U.S.) and in different sectors (broader European VC landscape vs European space investment ecosystem). European public institutions should be aware of such differences and take them into consideration when developing policies to sustain a healthy funding ecosystem in Europe. In this regard, ESPI is committed to bolstering research in its industry and finance research portfolio, building upon the conclusions and recommendations of the report released in March 2024 that explores Alternative Funding Pathways for the European space industry.
We are at a pivotal phase for Europe's investment ecosystem. Over the past two years, European space startups have raised nearly €2 billion, accounting for over half of the sector's total investments since 2014. Whether this growth continues will depend on sustained commitment to a robust investment environment by European institutions and private partners. This report aims to guide them in navigating the evolving space economy.
