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This week, a group of students including German VC Point Nine’s Pawel Chudzinski gathered in Oslo for an executive course on how the space sector is developing, put on by the International Space University.
Point Nine hasn’t made any space investments yet, but Chudzinski tells me the firm is “looking more and more closely” at the sector: it’s “evolving very dynamically,” he says. “With increased scale, the costs are going down,” making it “viable for startups to play a significant role.”
While some VCs are just starting to consider investing in spacetech, the industry has been taking off in recent years, and “a lot” of new space startups have been popping up in Europe since around 2016, says Stanislas Maximin, founder and CEO of French small rocket developer Latitude, which he started in 2019. “It is not overcrowded,” he adds, but “normally crowded for a new industry getting disrupted.”
There have been some positive signals in the region lately. Last week, the European Space Agency (ESA) awarded two companies a contract to provide cargo return services to the International Space Station. One of them, buzzy Franco-German startup The Exploration Company (TEC), was awarded an initial €25m to build a commercial cargo service to low-Earth orbit by 2028. The startup raised €40.5m in Series A funding last February from EQT Ventures.
Observers have pointed out that it’s a big step for the European spacetech industry. The contract is similar to a much bigger one Elon Musk’s global leader SpaceX won from NASA more than a decade ago that was a boon to its success.
Spacetech is also clearly a political priority. “Governments seem to have fallen in love with the space segment and are pumping cash and incentives,” Chudzinski says. This week, Hélène Huby, the CEO of TEC, joined French President Emmanuel Macron during his state visit to Germany. According to a TEC LinkedIn post, they discussed the “criticality of developing a European space capsule for (a) positioning Europe in the global space exploration business, and (b) developing in Europe dual technologies like docking, reentry and thermal protection”.
Macron also called for a “European preference” for buying within areas like space. France has in recent years committed €1.5bn to its space agency CNES from the France 2030 programme, a financing plan to invest more in key areas like decarbonisation.
Space also falls squarely within defence tech — a newly hot area for VCs and a growing priority for governments because of conflicts like the Russia-Ukraine war. Spacetech has become part of the investment thesis for generalist VCs which have started to look more at defence tech, Maureen Haverty, principal at VC firm Seraphim Space, tells me.
Despite growing interest, however, industry players say the European ecosystem has a long way to go.
Europe’s space struggles
Funding last year for European spacetechs was less than $1bn, down more than 60% from its peak in 2021 but slightly above 2022’s figure, according to Dealroom data. So far this year, 24 spacetechs have raised €389m, according to Sifted data. That includes some large rounds, such as Latitude’s $30m Series B from investors like Bpifrance and Kima Ventures in January.
But Latitude’s chief Maximin says fundraising wasn’t easy: “It is incredibly hard to raise for space companies.” It took the startup “around nine, ten” months to raise its Series B. He adds it’s capital intensive for companies like his to work on their products even before they win that first contract; long and complex development timelines also put off many VCs.
European spacetech is also still far behind the US market. Haverty says that there’s a lack of growth-stage spacetechs in Europe. One big reason for that is the procurement system. In the US, the government has become a strong customer for space startups and provides “great contracts really almost matched to every stage of development [of a company] — like, a couple of million really early on, up to hundreds of millions,” she says. “That just absolutely does not exist in Europe.” It’s led to a lot of European startups getting “caught” in the early stages and failing to get enough traction to reach the growth stage, she adds. Haverty and Maximin agree that if a European spacetech wants to be successful, they need to have a big presence in the US.
2024 predictions
Instead of trying to build the “European SpaceX”, Haverty suggests startups in Europe play to their strengths, building products around satellite data that can help track climate change, for example.
2024’s dealmaking will be “about similar to 2023 and 2022,” she predicts. “I don’t think we’ll see a massive recovery from where we are right now.” She says she’s seeing good dealflow and is noticing a lot of promising companies coming out of Germany in particular.
Maximin predicts we’ll see a lot of consolidation in the next 12 months, from companies building satellites to launchers: “Consolidation also means money — so I expect to see some big rounds.” He believes a growing number of European VC firms will be open to space investments moving forward as they launch more deeptech-focused funds.
I’m curious to hear from you, spacetech aficionados: what developments are giving you more optimism about the European spacetech industry right now? Or where do you think Europe has room to improve when it comes to its space ambitions? And investors, are you planning to invest in spacetech this year? Why or why not? Send me a line.
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