A study conducted by the European Space Policy Institute (ESPI) revealed that Europe has averaged 96 investment deals annually for space companies over the past three years, which places it not too far behind the Unites States, which has seen an average of 114 deals in the same time period.

However, in terms of total investment, the gap between the two is much wider. The United States averaged €6.3 billion (£6.8 billion) in funding in the spacetech sector, which was primarily driven by larger growth-stage rounds, whereas Europe managed only €1.4 billion.

On top of this, over half of venture capitalists surveyed by the European Investment Fund expressed concerns about the challenges in fundraising over the next 12 months.

Venture capital and the funding share

In 2023, investment in European space startups reached €942 million, which was distributed across 78 deals. This represents a slight decrease of 7% in investments, and a significant 30% decrease in the total number of deals.

Venture capital still accounts for the largest share of financing worldwide when it comes to the spacetech sector. In 2019, this share was 45%, which then decreased to 31% in 2020. Since 2021, its share has been consistently increasing, reaching an astonishing 73% of investment in 2023. However, in 2023 its value hit its lowest level since 2021, as only €4.3 billion was raised.

For Europe to truly position itself as a hub of innovation, it must focus on nurturing the early-stage segment of its space startup ecosystem. In 2023, seed funding saw an alarming decrease of 71% in venture capital investment that was allocated to spacetech startups.

Public funding initiatives are vital to foster a thriving environment for innovation and disruption.

Beyond early-stage financial backing, public institutions need to align their strategic goals with opportunities in the spacetech sector. By offering bridge financing and generating demand through their own needs or market development, they can help startups scale and succeed in both European and global markets.

Other funding trends

Another notable trend in the sector has been the absence of major acquisitions. In 2022, acquisitions reached a record €1.8 billion. Whilst it is rare that the investment value of acquisitions is disclosed, even when looking at the number of recorded deals, 2023 only saw 20 acquisition deals. This was far lower than 2022’s 39 acquisitions.

Debt financing has seen a 53% year-on-year increase, hitting a high of $387 million. Debt has been increasingly more important in the fundraising strategy of space companies, increasing its share of the total investment raised from 0.4% in 2019 to 7% in 2023.

The future of spacetech

While the state of spacetech startup funding in 2023 was lower than it has been in many years, the future for the industry is looking bright. According to global Crunchbase data, funding to VC-backed spacetech startups has reached the $6 billion mark this year already.

Europe is well-positioned to become a leader in spacetech innovation, with innovative startups coming out of the area, such as England-based Space DOTS, Finland-based ICEYE, German-based AIRMO, and Scotland-based Skyrora.

Unlocking the industry’s full potential will require strategic investment and support. By focusing on strengthening early-stage funding and aligning public initiatives with market opportunities, Europe can create an environment where spacetech startups can thrive.  

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