Investment Perspectives: Investing in Space in 2020

September 3, 2020 • By Sven Eenmaa, Director of Investment and Economic Analysis for the ISS National Lab

What 2020 has not been short of is volatility, and day-to-day we all now have to deal with the “new normal” of the pandemic and its effects on our daily lives, our interactions, our consumption patterns, or our companies’ and partners’ business execution capabilities. Despite all this, the year has brought some very solid successes in the space industry, which we have highlighted below.

Financial Markets—Grab Your Dramamine

For space investments, the year started with a carry-over of momentum from a record-breaking 2019, although investor appetite had become somewhat more mixed, with venture capital (VC) funding positions strong and continued new investor entry, but more seasoned investors increasingly focusing on achieved product-market fit and business execution progress.

This calm was disrupted by COVID-19-driven pull-back and reassessment of VC new investment appetite, as the broader financial market declined sharply with the S&P 500 index dropping a whopping 35% in a little over a month, bottoming on March 23. The sell-off was followed by a relatively rapid rebound in public equity markets and deal activity.

In terms of impact on the new space sector, neither of the book-end prognostications of “space industry is insulated from the broader economic malaise” or “this is the end of the new space VC investment cycle” materialized. The industry saw some rationalization and restructurings, including notably OneWeb, and space infrastructure investment declined sharply in the second quarter of 2020. However, we also saw some successful closings of funding rounds in the second quarter, including in the ISSInternational Space Station U.S. National Laboratory ecosystem, and the deal activity continued to rebound into the third quarter, as evidenced by the recent $2 billion funding round by SpaceX.

Space Industry—Several Execution Successes Despite the Volatile Environment

We are highlighting only a few achievements here (apologies on the wins not included). In January 2020, NASANational Aeronautics and Space Administration announced the selection of Axiom Space to provide at least one habitable commercial module to be attached to the ISS, shedding light on a potential path beyond the current ISS platform. In May, we saw the significant success of SpaceX’s Demo-2 launch and the docking of Crew Dragon to the ISS followed by its subsequent successful return in early August, ushering in a new era of spaceflight from the U.S. soil.

In June, we saw AE Industrial Partners portfolio company Redwire acquire Made In Space, a positive indication in our view of increasing investor recognition of value creation by a broader range of in-space or in-orbit applications. The Starlink launch and deployment cadence remained impressive through the year, and Kuiper received its Federal Communications Commission approvals. The ongoing pandemic highlighted additional user cases for low Earth orbit(Abbreviation: LEO) The orbit around the Earth that extends up to an altitude of 2,000 km (1,200 miles) from Earth’s surface. The International Space Station’s orbit is in LEO, at an altitude of approximately 250 miles. Earth observation data. In addition, the space sector is seeing strong interest and engagement from the defense complex, including interest in new constellations as well as unmanned orbital outposts and platforms, and the satellite servicing market is taking increasing shape with Northrop Grumman’s Mission Extension Vehicle (MEV) deployments.