Despite the global slowdown, space sector continues to be on a roll. Investment in space industry set a new record in 2020, with the space infrastructure segment garnering 8.9 billion, according to a new report by Space Capital. The total 2020 investment of 25.6 billion in the space sector was the third highest in the decade (trailing only 2018 and 2016), in the face of widespread fears that COVID-19 would dampen the past decade’s momentum.
“As the world entered its first waves of COVID-19 lockdowns in Q1-Q2, many industry commentators predicted a wave of bankruptcies and a general pullback by investors, which never materialized,” the report notes, adding that despite wide expectations that [space] Infrastructure would be hardest hit by the pandemic, 2020 turned out to be a record year for investment at this layer of the stack with $8.9B invested.
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The report classifies the investment in the space industry into three segments – Infrastructure (including companies in launch business of satellite manufacturers such as SpaceX, Blue Origin, Relativity Space, Rocket Lab etc); Application (including space-dependent services like ride-hailing or navigation) and Distribution (including terrestrial-based technologies that connect to space-based networks). Given the growing global appetite for location-based insights, it wasn’t surprising that the Application segment garnered a whopping $15.9 billion while Distribution scored $800 million (the second highest since 2011).
With another $25.6 billion invested across 359 rounds in 2020, there has now been $177.7B of equity investment into 1,343 unique companies in the space economy over the past decade. VCs invested another $15.7 billion into 252 space companies in 2020, of which $9.4 billion went to US companies, representing 6% of the total venture dollars invested during the year.
Infrastructure
Geospatial intelligence was high in demand as the world shifted to remote operations, which further underscores that in times of uncertainty, business leaders need more information and insights, which is exactly the type of data that space companies provide. The report underlines that the satellite industry has seen the most deal activity with 48% of total round share. The most active sectors include Manufacturing and Earth Observation, which account for 73% of satellite industry rounds over the past decade. This innovation laid the foundation for distributed satellite networks and dynamic Geospatial capabilities.
Over the past decade, 423 Infrastructure companies have raised $30.9 billion in cumulative equity investment that has radically increased access to orbits, enabled distributed networks of small satellites, and laid the foundation for ubiquitous global connectivity. Infrastructure investments in Launch business totaled at $6.8 billion in 2020. The cumulative Launch investment over the past decade was $18.8 billion with 74% invested in Heavy Launch, reflecting the capital intensity of the sector.
While US companies led global investment in space Infrastructure (accounting for 64% of the total capital since 2011), China continued its rapid Infrastructure development with large investments in Satellites and Launch, and now accounts for 8% of global investment over the past decade. “The country’s unique approach to Infrastructure development through the Belt and Road Initiative means that space will likely continue to play an increasingly important role in the country’s future,” the report notes.
Application
In the Application segment, capital continued to be heavily concentrated in the PNT (Positioning Navigation and Timing) sector — driven by investment in Location-Based Services (LBS) — accounting for 87% of the total 2020 investment. The LBS industry was in overdrive globally throughout the year in response to the pandemic.
Even otherwise, with location-based intelligence becoming an integral part of business intelligence and public services such as ride-hailing, on-demand delivery, and micro-mobility, the past 10 years have now seen $141.6 billion invested into 807 companies across 2,118 rounds in the Applications segment.
Not surprisingly, US companies continue to attract the largest share of Applications investment, accounting for 43% of the total since 2011, closely followed by China at 33% of the total with significant investments in Location Based Services, with Singapore (7%), Indonesia (4%), India (3%), UK (2%) bringing up the rear.
PNT accounts for 81% of all investment rounds in the Applications stack since 2011. Interestingly, Earth Observation represents a much larger percentage of rounds than capital (16% vs.1%), indicating a nascent sector with more early-stage activity. There are a number of notable early-stage companies actively working to unlock the full potential of Earth Observation Applications.
Distribution
Again, in the Distribution segment, since 2011, 63% of investment in Distribution has gone to PNT, followed by Communications with 33%, which is largely the result of location-based intelligence being added to end-user Applications. The report expects additional investment activity focused on Distribution within Earth Observation as more companies utilize this growing data set.
Here too, EO represents a larger percentage of rounds than capital (6% vs. 1%), once again indicating a nascent sector with more early-stage activity. This activity includes both hardware and software developments as entrepreneurs race to remove complexity from the Earth Observation value chain.
This segment has now seen $5.2 billion invested across 246 rounds over the last 10 years for development of hardware and software to connect hundreds of terrestrial industries to space-based Infrastructure.
American and Chinese companies attracted the majority of capital at the Distribution layer since 2011 (43% and 42%, respectively), which helped them to also dominate the LBS market. Other countries receiving investment include Israel (3%), South Korea (3%) , UK (2%), Belgium (1.5%), and Canada (1%).
The Big Tech
The report highlights Amazon’s and Microsoft’s accelerating space ambitions “one of the more overlooked stories of 2020”, and one which is expected to have a significant impact in 2021 and beyond. In September, Microsoft unveiled a preview of its ground stations as a business model that enables satellite operators to communicate to and control their satellites, process data, and scale operations with Microsoft Azure Cloud. This was followed by an announcement of a partnership with SpaceX in October, wherein the two companies plan to deliver satellite connectivity between field-deployed assets and Cloud resources across the world to both the public and private sector via SpaceX’s Starlink satellite network.
This pitches Microsoft in direct competition with Amazon’s AWS Ground Station and its Project Kuiper. Coming shortly after its announcement to set up a new business unit dedicated to accelerating innovation in the global aerospace and satellite industry, in August Amazon announced its intention to invest $10 billion for launching a LEO constellation called Project Kupier to eliminate Internet dark spots.
Azure Space and AWS Space are removing complexity across the value chain, making a global network of space-based communication and data collection infrastructure accessible to the tech community to innovate upon, a repeat of ‘The GPS Playbook’.
“The increased involvement of these tech giants will serve as yet another catalyst for growth in this sector. In the same way that every company today is a technology company, the companies of tomorrow will all be space companies.”