2022 saw a 60% reduction in the funding raised by European launch startups. Although that reduction was driven largely by Isar Aerospace not securing a new funding round for the first year since its founding in 2018, the trend does mirror funding trends observed throughout the industry with many investors becoming increasingly cautious about launch startup investments.
As a result, as we move into 2023 I predict that funding levels will either remain even from 2022 or further tighten as investors become increasingly selective with funding. This will, however, be dependent on whether or not Rocket Factory Augsburg and Isar will secure additional funding.
Both German launch startups are looking to close funding rounds in 2023 as they prepare for the maiden flight of their respective launch vehicles. As I reported earlier in the year, a leaked funding memo from RFA outlined the company’s efforts to secure €70 million in additional funding. Isar brought on additional funding expertise in 2022 in the form of its new CFO David Kownator. To maintain the company’s valuation without taking a down round, Isar’s next funding round will need to be large. Early reports have suggested that the company is hoping to close a €200 million funding round in 2023. This funding will push them through testing and will likely also take them past a maiden flight. Securing this additional funding will likely be vital for the survival of both companies.
The third major launch startup in German HyImpulse secured additional funding from existing investors in 2022. The company has now raised around €20 million and with a relatively small employee count of just 55, HyImpulse likely has sufficient funding to take them through 2023 as the company prepares for the maiden launch of SR75 in early 2023 and SL1 in 2024.
PLD Space from Spain will also likely be looking to close a new funding round in 2022. The company has secured approximately €55 million since its founding in 2011. However, the company has failed to close a new funding round since its second series B in late 2021 which brought in €25 million. With a staff of more than 100 and preparation continuing for the maiden launch of two separate vehicles, the company is unlikely to have very much runway left.
Both Latitude and Orbex secured new funding in 2022 and will, as such, likely not be rushing back to investors in 2023. Both companies have shown impressive progress over the last 12 months. Orbex unveiled a fully stacked prototype of its Prime launch vehicle on a custom-built launch platform that the company is using for testing. The company also announced that it would be taking over the construction of Space Hub Sutherland to serve as the home base of Prime. And of course, the company also managed to secure that impressive £40.4 million in Series C funding. Latitude completed a rebranding to coincide with the announcement of a €10 million Series A funding round. The company also managed to get in an engine test just before Christmas marking a significant step in the development of its Zephyr launch vehicle.
Most other launch startups have smaller staff counts and will likely have enough runway to take them through 2023. However, I do expect that these companies will continue to receive grants from the European Commission, ESA, and other relevant space agencies across Europe throughout 2023 ensuring their survival for another year.
The launch industry’s future funding outlook
Chris Larmour – CEO of Orbex
It is currently not the friendliest environment for raising capital. Funding hasn’t stopped, but it is more selective and risk-averse, and you only have to look around to see the impact on the tech sector. Investors have become a lot more conservative about where they invest. They need more evidence of progress and momentum, as well as confidence in the company’s innovation, experience, objectives, culture, and destination. They want to see capital efficiency, an experienced team, strong independent validation, unique skills and capabilities, and a very focused goal. Those factors are a big part of how Orbex was able to raise almost $50M recently, despite the prevailing investment climate. Orbex has made very strong progress, both technically and commercially, and we were able to bring along our existing investors as well as attract new ones.
Joe Ward – CEO of SmallSpark Space Systems
Very difficult, as there are already 4-5 well-established players in the market. Making the business case for a pure launch company at the moment is very hard with that level of competition and margins on flights. This is part of the reason we at SmallSpark have always had multiple technology streams in development some within space (Frost, SLV) and some out of space (mooreAI, FLOWCOST, Loc.AI)
In general, the market is extremely tough; businesses are now needing to quickly establish revenue generation pathways that can sustain them during this period of turbulence.
Xavier Llairo – CCO of Pangea Aerospace
Pangea Aerospace believes that the vertical integration model that most launchers are following has been proven inefficient and not profitable. This model does not fit the European DNA of a strong and resilient industry composed of many players, and we do not have the capacity in Europe for very large funding rounds (+500M€ needed to go into recurrent operations). Some years of hype have passed, and the perspective of time shows that these players have not been providing the profitability expected or fulfilling their promises. Good investors have already understood the complexity of the launcher market and that the number of existing players is too large. However, thanks to our position as engine suppliers for rockets and other spacecraft, we bring solutions and profitability where others cannot. Thus, our round is advancing well, and we already closed commitments for a part of our Series A.
We should highlight the work of the EU Commission and EIF, and thank them for all the efforts they are putting into EUInvest and CASSINI programs. A lot of private investment is incentivized by them and although slower than anticipated, we believe they will become a catalyst for new investment in companies bringing disruption, like ours.
Stanislas Maximin – CEO of Latitude
“European state of funding for launch companies is, and always will be a niche funding market compared to other tech sectors, thus reducing the amount of funds interested. The launch industry is combining deep tech, new markets, space, industrialization, high-risk and long roadmaps. I believe that companies showing strong growth, technical milestones, and uniqueness in their product/service will be able to stand out. We also saw in our industry that the most funding doesn’t always get you the best results. Frugality, agile team, and simple products can make the difference in the end.”
Safouane Benamer – CEO of OPUS Aerospace
I think that attracting funds (public or private) will depend on our ability to develop reliable launchers & space systems. I am optimistic about our development. We have a very good team and partners! I think the government, CNES, and ESA provide more and more support and this should continue until public market traction is initiated to speed things up.
Clyde Laheyne – CEO of Dark
The fundraising experience has been great for us so far. In July 2021, we successfully raised seed capital from private funds, followed by public financial support. That was before France 2030 and the attention that the space sector received later that year. It makes me believe that whether it’s private or public investment, all the conditions are in place here in Europe for new ambitious companies to take off!
However, there is an increasing polarization between the thesis of private and public funds that will shape different types of companies. For example, in Europe, VCs will push for sovereign vertical models, which is a foundation of many powerful companies in the US. But, public funds will incentivize the creation of international conglomerates, which has led to many of our European prime companies like ArianeGroup.
Quentin Robert – Associate at Expansion
For now a year, the scarcity of available funds will accelerate the selection in all the numerous launcher projects in Europe. Launchers stay very CAPEX-intensive businesses. Investors are aware that there are too many ventures in this field today, even though they understand the need for European micro-launcher players.
Rob Desborough – Managing Partner at Seraphim Capital and CEO of the Seraphim Space Accelerator
“Despite the economic downturn, SpaceTech investment for 2022 remains near an all-time high, with $12.2bn invested over the past 12 months matching the same level in 2021. However, according to our Q3 Space Index, trailing twelve months (TTM) investment in the launch sector is down by 23% globally in the last year since Q4 2021, but the situation appears more severe in Europe, where investment is down by 74% from Q4 2021. TTM investment into European rockets was $45m across six deals, dwarfed by $712m invested in Asia over 11 deals and $586m invested in North America over 22 deals, and it’s particularly worrying that there were no rocket launch vehicle deals across Europe in Q3 this year.
Undoubtedly, the macroeconomic outlook has affected the current state of the markets, and we may see the tide turn next year, to reach the heights of 2020 and 2021 which witnessed the three largest ever recorded quarters for European launch investment (Q4 2020, $115m; Q3 2021, $75m; Q2 2021, $73m). At Seraphim Space, we’re looking for differentiated launch technologies. The next “SpaceX” which will dramatically reduce costs to access space, as well as removing some of the bottlenecks we see with chemical launch technology, in terms of reliability, frequency, and environmental impact.”
