Space Funding Dynamics 2020
With wanna-be funny notes and hopefully insightful comments.
May 2020 update: Following acquisitions also in 2021, I noticed that I haven’t mentioned Cesium, BirdsEyeView and Precious Payload getting funded.
In my view, tracing Mergers, Acquisitions and Startup investments is one of the best ways to keep up with activity in the Space industry. I scrolled through my Twitter feed and wrote down all of the announcements made last year.
As people are going crazy about PDFs for free, I wanted to add one of mine. 276 articles, 54 acquisitions and two unnecessary months later, I decided that writing only the key takeaways of M&A in Space would be more productive.
Once my friend came to me and said, “well, we decided to denounce our merger 😉”. This is not our case, I will write about actual decisions in the aerospace industry. As for last year, corporate structure changes were a topic for companies across size, sectors and locations.
“I know more people with SPAC, than Covid.”
My physics teacher is fighting Parkinson’s disease, which, amongst others, is also a problem with dopamine level control. Another group of people with dopamine level control problems are Wall Street Investors, which is sort of an explanation for recent development with SPACs.
Special Purpose Acquisition Company is basically an empty publicly-traded box, which has to merge with some “real” company up to two years since its foundation. As I’m lacking a finance degree so far, I rely on expert’s opinions who describe SPACs as a sort of publicly-traded VCs and as a bubble that will inevitably fail.
In the Space industry, this trend has started with Virgin Galactic and recently, SPAC is a case for RocketLab, Astra and Spire. But if we return a year earlier, we can find Momentus. Founded by a Russian Immigrant, graduated from Y Combinator — space logistics and last-mile delivery is the business of this company. The related press release was the longest I have ever seen. In the Forbes interview, there is a nice explanation of why the SPAC model was suitable for them.
Crazy ride
Two newly arrived holdings took acquisitions last year very seriously, they came to the industry with an intention to build vertically integrated companies through them. Voyager Space Holding, founded in October 2019 acquired Nanoracks, The Launch company and Pioneer Astronautics in 2020. RedWire, founded in June 2020 is not left behind with Roccor, Made in Space and LoadPath. As my brother used to repeat everything I did when I was young, I would for sure complain to parents.
A couple of decades after it stopped to be cool in automotive, vertical integration appears to be a new trend in the space industry. Benefits are quite obvious — reaching better efficiency, control and cost reduction.
Both Nanoracks and Made In Space are providing commercial services with a significant share of ISS projects.
The launch Company is building multi-user launching platforms, used by players like Virgin Orbit, Firefly or Relativity. This acquisition can be strategically very interesting, as the launch sector is expected to continue in growth tendency.
Leading Launcher Sector
You have probably already seen the table of most valuable non-public VC-backed space companies. Amongst them, the launcher sector is an outlier. It is therefore not a surprise that last year, Relativity Space raised $500 million series D, 14 months after the last funding round, shifting total valuation up to $2.3 billion. You may appreciate quite a detailed progress description since the last investment and expectations for the future.
In Europe, there is a reason to celebrate. German-based ISAR aerospace finished it’s $91 million series B. Thus ESA BIC alumni closed the biggest ever Europe Space-Tech funding round.
This investment reveals a lot about the startup ecosystem in Munich. Within one city, there are good universities, ambitious founders and experienced funds. All involved VCs have a pretty impressive background — Lukestar with Spotify, Skype or Revolut; Earlybird with N26, Photoneo or UiPath. The Advisory board of Airbus is quite impressive, with a position held also by Bulent Altan, who is experienced from SpaceX, Mynaric or Airbus — which is unsurprisingly another investor in ISAR.
As you can see, this investment made me really excited. Maybe because Munich is just a few hours by plane from both of the places I’m living in. Maybe because of the factor of choice — ISAR founders were looking for investment globally and found them literary next door. Maybe because of GroundCom.Space is incubatee of ESA BIC as well. Not surprisingly, ISAR claims to aim for building some sort of “platforms” in the future — what a lovely buzzword.
Overview of this sector wouldn’t be complete without mentioning SpaceX. If industry standard is pre-seed, seed, Series A, Series B [citation needed] then SpaceX made it up to series N. “SpaceX secured $1.9 billion at a valuation of $42 billion for their Series N round.” There is known a little about participating investors. A mutual conclusion of analysts says that the two biggest projects are currently Starship and Starlink — the latter is expected to go public when the cash flow is predictable, Musk said. Looking at investors structure can reveal that Google currently owns about 7% of SpaceX and also that Fidelity, as one of the significant investors, owns stakes also in Relativity Space, which can potentially cause a conflict of interests in the future.
Most lovely merger
Some mergers appear boring, some ordinary and some are leading to almost romantic feelings — which is definitely a case of RocketLab and Sinclair Interplanetary. The first-mentioned company recently announced to become publicly traded but last year, they spent by doing the following acquisition:
RocketLab is originally a New Zealand based-rocket manufacturer, with core product Electron and arguably side projects of reusability through using helicopters and satellite bus Photon.
Sinclair is a Canadian company, a provider of Space hardware. The company has a long-lasting flying heritage, with Ale and BlackSky (another SPAC) and recently also Kepler Communications’ constellation or several customers using VegaC rideshare option (shoutout to SAB Aerospace, my space alma mater)…
Anyway, at least from the external view, this looks like almost a textbook example of how a win-win acquisition should look. Sinclair is going to continue serving its customers, with the support of RocketLab’s scale and technologies, while they are expected to strengthen RocketLab’s satellite-related product line.
I like this transaction so much I wanted to bring it up during my Valentine’s day evening as a pick-up line, but I was rather studying math, instead. However, I hope that there will be more win-win mergers, as I don’t want to miss my chance to use it as a pick-up line next time.
What?
After mergers I really enjoy writing about, there are some transactions I don’t really understand. Namely, what is going on with OneWeb and then Kineis’ recent investment round — who is investing, in what entity? Too complicated corporate structures as for me — but you are more than welcome to explain it to me in the comments.
So far, I was writing only about hardware companies. On one hand, it does make sense — hardware investment rounds are at a much higher valuation and also it distinguishes the space sector from all the others. On the other hand, most of what we consider space startups are software companies up to 5 people.
Software
Amongst many of them, I choose SpaceSense.Ai. Recently €1 million is the first investment round taking equity for a startup aiming to democratize access to space data, with a focus on agriculture. Amongst 7 co-investors, there are also founders of the Dataiku platform, which is an enterprise AI unicorn. It’s a bit ironic to compare this investment allowing to hire 7 new employees with for example Relativity Space, which brought up 230 new hires.
Satellites
It told my friends this will be about satellites. Finnish based SAR satellite operator/manufacturer ICEYE raised $87 million Series C. Maxar acquired Vricon, whose specialization is 3D mapping, for approximately $140 million. Maxar has overall a complicated history of merging and separating. The company is providing satellite imagery to mainly government-funded organizations and listed at New York and Toronto stock exchange.
Cleaning services
I acknowledge the hype surrounding satellites in space, but it’s getting messy there and someone should clean it up. Since Astroscale had a very fruitful year, it seems like I’m not alone with this opinion.
Generally, Astroscale’s goal is to secure sustainable space operations and they are developing life-extension, active debris removal and end-of-life services towards it. Seeing the product portfolio of Effective Space Solutions we can see the fit for provided services. A unique product for ESS is Space Drone providing stationkeeping and attitude control.
For Astroscale, this transaction means an extension of services also towards GEO orbit and establishing Astroscale Israel. The last Investment ESS raised as a separate company was $10 million in 2016.
Astroscale also managed to close $51 million series E during October 2020. There are five investors in this round, aStart corp is the leading one. Without much media presence, they invested also in for example Synspective — satellite data solution provider — which can obviously create synergies between invested companies (as Noosphere Space Fund is doing). The total amount of collected funds has now shifted towards almost $200 million. We can see that across investment rounds, the participation is repetitive (particularly the case of aStart which participated already in C and INCJ — series B and D). The company also closed round earlier than expected, which can be obviously just a statement in the press release, but arguably worth mentioning.
Staying in the region, Japanese conglomerate and soy sauce producer Mitsui acquired rideshare mission provider Spaceflight. If you have a bit of spare time, I highly recommend searching for Keiretsu informal business groups. Mitsui is also an investor in Axel Space, a Japanese small satellite manufacturer currently building EO infrastructure, along with INCJ you already know from the previous paragraph.
Former VP of Spaceflight left the company to join STOKE space technologies (and guess what, they got investment early this year) which is a very good example of the importance of following the human capital movement.
Find ten differences
At least in 2019, China was the world’s second-biggest space VC market and accounted for 16%. [Bryce Startup Space 2020]. Also here the launch industry is a leading sector, namely represented by LandSpace and iSpace.
LandSpace has raised $175 million as a Series C, primarily to develop a ZQ-2 rocket, prepared to deliver satellites to SSO and LEO. If I say Sequoia and you recall Silicon Valley rather than the tree, you might like to know that their Chinese entity invested here as well.
Just two weeks earlier, i-Space got $173 million, in series B (my assumption would be, that shares there would be less dissolved, but it obviously depends on specific conditions — which are undisclosed) primarily for the development of the Hyperbola-2 rocket. (Czech-based readers will hopefully appreciate knowing CITIC securities investing there.)
Almost all of the China-based private Space companies started after 2014, as a result of Document 60, which loosened regulations around investment in space, where CASC is still a sole government/military contractor.
I don’t know a lot about the space industry in China — search for Blaine Curcio because he does. While you’re scrolling through Blaine’s Twitter, I will try to find 10 differences. When you are done with Twitter, search for a podcast about Chinese Aerospace.
If consolidation in NewSpace is a new, but inevitable trend, in the traditional rocket science field we can observe this for a longer period of time. Getting back to 1942, Aerojet was founded by aeronautics pioneer, Theodore von Kármán. They became Aerojet Rocketdyne after acquiring the second company in 2012. Boeing announced to acquire them for $4.4 billion, but the transaction was objected to by Raytheon, which…
… which is another defence/aerospace contractor, and last year they also finished the acquisition of Blue Canyon Technologies, a satellite manufacturer developing satellite buses and components such as attitude control, RF systems or reaction wheel for NASA, Air Force and DARPA [unrelated, but read this AWESOME ARTICLE about how DARPA works]. It is getting quite confusing as Rayethon-owned company is former owner Rocketdyne and objecting their further acquisition at some time. Like relationships at the average high-school.
Raytheon is publicly traded for the context to be added. We can see that those big aerospace holdings aren’t involved in on-the-edge technologies, which make sense as they aren’t incentivized to do so — they can simply acquire top-tier companies after the business model is proven and/or sustainable.
We could have seen one more acquisition. With a quite overlapping range of customers, AAC Clyde (Clyde was acquired by AAC in 2017) acquired Hyperion Space Technologies and established a Swedish-Dutch-Scottish network building different satellite components and platforms together.
As I mentioned 27 times previously, this year has been pretty solid in terms of space-related transactions. Kick-off for one of them was made last year — as a first NewSpace investment of European Investment Bank, Spire Global received $23.8 million as venture debt and this year they announced going public as a SPAC.
Shortcut
High-resolution GreenHouse Gas satellite (GHGSat) raised $30m in series B.
PredaSAR raised $25 million for its SAR constellations.
CGSTL (referred to as Charming Globe in the English-speaking community) shows that Chinese Aerospace is not just about rockets, raising $375m for its Earth Observation constellation.
GalaxySpace is raising an undisclosed amount in series C. I thought they are the Chinese answer to Starlink, but in reality, their role may be closer to what Blue Canyon tech is doing.
Satellite constellations are becoming a more and more crowded field (is it silly to cite my own article?). India NewSpace sector is represented by Pixxel Space, which, led by two university undergraduates raised $5 million.
I definitely had to mention Bellatrix Aerospace, an Indian company that raised $3 million to eventually build its own launch vehicle.
From Founders Fund (founded by coolest SV investor[no citation needed]), Magdrive raised $2 million to develop next-gen satellite thrusters. Another success story for ESA BIC.
Lessons learned
Connecting the dots. Out of 22 new unicorns of Feb 2021, Tiger Global Management, one of Relativity’s investors, is responsible for four of them. In this article, I mention at least 50 space companies and a number of investors — enough to find connections like the example everywhere around.
While startups are usually more than happy to disclose recently received amount, this practice is not common for mergers and acquisitions — which makes sense, valuation is a measure of success, but primarily for startups. We can see how different round tranches differ across industries and locations.
As the average lifespan of investment is about 16 months — we will hear exponentially more often — I will be even more depressed if I don’t manage to keep track.
Despite the value, which the space industry can offer in solving important problems, the field is strongly connected with defence and national security issues. DoD remains to spend more on satellite imagery than everyone else and a huge topic is also averting foreign interests, which recently caused problems to Momentus CEO or Max Polyakov pushed out of the board of Firefly.
2021 will be a year of more exits, propelling the process of NewSpace consolidation which already begun, and last but not least SPACs.
Players across applications will struggle with arising competition — I’m still excited about which USPs are going to be promoted by different satellite constellations.
About the author
Filip Kocián started his career in SAB Aerospace and later moved to GroundCom.Space. He is specifically interested in business analytics of satellite constellation companies, but also physics and economics. While studying in Norway, his best friends are CrunchBase, GeoGebra and Aziz Hanafi, in this order. In his free time, he likes to climb, eat chocolate and talk about satellites. Recently, he spoke at TEDx, ran a half marathon and considers it necessary to repeat it a few times a day. me@filipkocian.com is the best way to reach him out.
The author would like to acknowledge a wonderful man and a future political science student Martynas Ramanauskas for translating this text from wanna-be English into actual English.
Disclaimer
This is not investment advice. The list is not exhaustive. If you are interested in the same topic written by professionals, search for the Quilty Analytics report. The article is written about the transactions in 2020, which may be confusing as I delayed to publish it until March — sorry for the inconvenience.
Resources
- corporate websites
- business media — CNBC, WSJ, Business Insider, Fast Company, Forbes
- space industry reports — Quilty, PwC, Bryce
- startup investments tracking platforms, above all — CrunchBase
