Space startups funding surges to $3 billion in Q3, up 17%

After a prolonged period of funding challenges, the tech startup scene is finally showing signs of a resurgence. Just last week, we highlighted a significant uptick as global venture funding surged to an impressive $64.6 billion in the third quarter of 2023, marking an encouraging 11% increase compared to the previous quarter.

This boost can be attributed, at least in part, to substantial deals in tech sectors like electric vehicles (EVs), sustainable manufacturing, and artificial intelligence (AI). However, the positive momentum extends beyond AI and EV startups.

According to a report published on Monday, global investments in space startups experienced a notable uptick during the third quarter, marking the first increase in over a year. Investors are showing renewed interest in companies holding government contracts, which are seen as more resilient in turbulent economic conditions.

During the typically weaker July-September period, funding for 103 space startups surged by 17% to reach $3 billion, Reuters reported, citing venture capital firm Space Capital. This boost follows a period of stagnation in the second quarter, which had endured months of decline.

These positive numbers may suggest a return of investor confidence in startups capable of securing government funding and contributing essential technology to space programs.

While it has traditionally been perceived that defense technology was an ill-fit for venture capital, the challenging economic landscape is demonstrating that companies with government contracts are better positioned to sustain growth, as noted by Space Capital.

Among the companies funded in the third quarter, Axiom Space secured $350 million, while Sierra Space received an infusion of $290 million.

The infrastructure sector, responsible for building, launching, and operating space assets, has dominated this year’s industry funding, accounting for nearly three-fourths of the $11.6 billion invested during this period, according to the report.

“It has long been the view that defense tech is a bad fit for venture dollars, but the challenging economic climate is proving that companies which can secure government contracts are best positioned to maintain growth,” Space Capital said.

However, the potential for a sustained recovery in this sector faces uncertainties due to increasing interest rates and persistent inflation. The shaky stock market debuts of companies like Birkenstock underscore the fragility of investor sentiment.

Despite these challenges, the world is increasingly recognizing the significance of space-based technologies, as emphasized by Space Capital. Some investors believe that the sector would benefit from the wider adoption of new technologies, including artificial intelligence tools, which have enhanced the capabilities of geospatial companies in analyzing and interpreting space-based images and data more effectively.