Sierra Space’s $290 million series B round, mostly from Japanese strategic investors, makes me wonder if the folks allocating capital to risky businesses are regaining their appetite for space.
Sierra says that the $1.7 billion it’s raised across its Series A and B rounds is a record for a space company, but that’s a bit of a fudge: The company’s first independent fundraising took place in 2021, but the firm has long existed as part of the Sierra Nevada Corporation. In 2008, that firm acquired the company SpaceDev and threw its hat in the ring to build a spacecraft for NASA. Its vehicle, Dream Chaser, is similar in design to the Space Shuttle. The company won funding from NASA in 2016; Dream Chaser is expected to make its debut trip to space in 2024.
Sierra’s investors are buying into that NASA contract, which could be worth more than $1 billion, and Sierra’s partnership with Jeff Bezos’s firm Blue Origin to build a new commercial space station. Sierra’s hope is to play in human spaceflight without rockets of its own, putting it in competition with a crowded field including SpaceX and Blue.
The Sierra raise comes after big deals for space companies like human spaceflight-focused Axiom ($350 million), engine maker Ursa Major ($100 million), rocket builder Stoke ($136 million) and German launch firm Isar Aerospace ($166 million). According to Pitchbook, space companies outside of China have raised nearly $4 billion this year; with a robust fourth quarter, the sector could match the $4.5 billion of capital deployed in 2022.
But there’s a pattern brewing: Only five companies raised more than $100 million last year—and two were Axiom and Ursa Major. Another was SpaceX, which has consistently raised big sums. Every year since 2019, the median venture deal in the space sector has gotten larger. That’s arguably because venture investors are throwing capital at companies with contracts and hardware already in place, not start-ups with riskier business models.
While venture funds who get in early enough will see a decent return from any IPO, the debut of pure-play space companies on public markets hasn’t been a home run, even in context of the recent bear market for tech stocks. Bankers are starting to believe in IPOs again, but it will take better performance from publicly-traded space firms (or the much awaited spin-out of Starlink as a public company) to see more novel start-ups attracting funding.
Tess Hatch, a frontier technology investor at Bessemer Venture Partners, told Quartz in August that venture funds are waiting for the next “technological catalyst.” Hatch led investments in Spire and Rocket Lab, two companies that went public in SPAC transactions in 2021. Those successful exits benefited from two of the biggest innovations in the space business: The growing power of small satellites, thanks to miniaturization of electronics, that make new satellite constellations cheaper than ever, and the falling cost of access to space thanks to new rocket makers.
“I’m ready for the next thing,” Hatch said, but it’s not clear what that will be. One of the industry’s current bottlenecks is getting stuff into space not just cheaply but quickly, but billions of dollars are being spent to fix that already. The earth observation market remains saturated, with a variety of companies working to match the quality of their sensor data with users prepared to pay for it. Other business models—manufacturing and returning goods in space; servicing the lunar economy; harvesting resources from asteroids; obtaining solar power—are all still too nascent for investors who want to see a return within ten years, if not sooner.
What could the next tech game-changer be? Some companies, like the large spacecraft start-up K2 or the space station company Vast, are betting it will be the fully reusable Starship, which in theory will offer the ability to fly large structures into space much more cheaply than ever before. Some analysts aren’t so bullish on those economics, and realistically the rocket won’t be commercially available for several years.
Of course, technological catalysts aren’t always new inventions; sometimes they are about changes in process or adapting ideas from other industries. Small satellites benefited from developments driven by the mobile phone industry, while reusability needed powerful chips and algorithms to make a long sought-after goal reality. Today, the tech sector is still craving advanced chips and throwing money at machine learning; perhaps moving more computing into space (with the help of laser-linked satellites) is the next big thing—or maybe it’s using multiple satellites operating in parallel.
I want to know what you think—what could be the next disruptive space technology that opens up VC spigots again?
🌕🌖🌗
IMAGERY INTERLUDE
NASA astronaut Frank Rubio has returned to Earth after spending 371 days in orbit onboard the International Space Station, the longest period any American has spent in space. (Russian cosmonaut Valeri Polyakov holds the world record of 437 days.) Rubio’s lengthy sojourn wasn’t intentional; a leaky Soyuz spacecraft delayed his return to Earth by more than 6 months. Here he is getting pulled out of the space capsule that brought him home yesterday.
So here’s to Rubio, who’s probably not feeling great right now.
📡 📡 📡
SPACE DEBRIS
There’s a new CEO at Blue Origin. Amazon vet Dave Limp will lead Jeff Bezos’s space company after several years of the firm failing to deliver a reusable rocket, among other planned space hardware. Limp’s aerospace experience is limited to supervising the Kuiper satellite constellation program at Amazon, but Bezos told Blue workers that he will bring a tremendous sense of urgency.
There’s a new plan to build a refueling spacecraft. The US Space Force will pay Astroscale $25.5 million, alongside $12 million invested by the space servicing company, to build a prototype vehicle for refueling satellites in the next two years.
There’s an $8 million hole in Rocket Lab’s earnings. After the failure of its last mission, the publicly-traded rocket maker (Nasdaq:RKLB) told investors its earnings would be reduced due to a postponed mission while its anomaly investigation proceeds.
There’s asteroid dust in NASA’s labs. A robotic mission dropped off a sample from the distant asteroid Bennu over the weekend, and scientists are in the process of popping it open—thus far, we’ve got dust, and hope for rocks.
There’s a new head of strategy at NASA. Charity Weeden, lately an Astroscale policy executive, has been chosen as the new NASA associate administrator for Office of Technology, Policy, and Strategy. The job helps guide NASA investment across the agency’s many responsibilities, and it’s notable that someone with Weeden’s background in commercial space is taking on the role.
Last week: Re-entry is the latest tech (and legal) problem facing the space industry.
Last year: Assessing Starlink as it nears two years in service.
This was issue 196 of our newsletter. Hope your week is out of this world! Please send your space technology catalysts, tips, and informed opinions to [email protected].