Elon Musk's very public endorsement of Donald Trump last Sunday added a new dimension to the upcoming presidential election campaign… space exploration. Not since the Cold War has space taken such a central role in politics.
Musk declared via X, formerly Twitter, which he purchased back in 2022, that he plans to take anyone who wants to go to Mars to the red planet in the next few years. The caveat to his offer was, essentially, that this was only possible if Trump returned to the Oval Office in January. He said, “If the mean-lady candidate wins, no space for you!” He further claimed that “the bureaucracy currently choking America to death is guaranteed to grow under a Democratic Party administration” thus destroying the Mars programme and subsequently “dooming humanity”. Intense.
While it's clear that Musk’s rhetoric is becoming increasingly similar to that of Donald Trump, it is also clear that space is a powerful topic in politics. It is also a major focus for investors, who see the industry as a new frontier, a blank canvas and a chance to shape the future, gaining significant return on investment (ROI) along the way.
The purpose of this article is to look at this opportunity from the perspective of VC’s and to narrow down the role the UK is playing on this evolving stage.
Written by: Marcus McGrigor
Global Landscape & Market
Historically, investment in space innovation has been dominated by a few major players: The US, Russia (formerly the Soviet Union) and more recently, China. Whilst they are still leading the pack, there is a growing appetite from smaller nations to challenge them and stake their own claims in the sector. The European Space Agency (ESA), as well as other strategic blocs such as the Asia-Pacific Space Cooperation Organization (APSCO), are ramping up efforts to get into space, forming the astro-political and astro-economic backdrop we see today.
Due to technological progress, reduced costs of launches, and the rise of innovative entrepreneurs, the industry has opened up to private investment and is no longer considered the sole domain of government and policy. This is not to say it isn’t extremely important, only there has been a realisation that private enterprise is an effective way of generating innovation and supercharging progress in space - be it cultivation, manufacture, exploration and so on.
Research from Bloomberg highlights that venture capital has become the dominant force in funding space-tech startups, spurred on by an accelerating demand for satellite infrastructure and the expansion of national space programs.
Source: Bloomberg - Venture Capital Cash Fuels Space Startup Dreams
The sector is now driven by private enterprise, and VC funding has been instrumental to this shift. Several factors are behind this, reshaping the landscape, making it more attractive for venture capitalists to back space ventures.
Perhaps the most significant, is the dramatic reduction in entry costs, largely due to technological advancements in launch capabilities, miniaturisation of satellite components, and the rise of reusable rockets. These lower costs have democratised access to space, creating a more competitive marketplace driven by commercial interests, allowing startups with disruptive ideas to enter the field and compete in what was once an exclusive, capital-intensive industry dominated by large aerospace corporations and government agencies.
Venture capital has seized this opportunity, fueling the rapid growth of innovative companies across various segments within the space tech ecosystem, such as satellite communications, Earth observation, in-space manufacturing, and even space tourism. Notably, investment in space-related infrastructure, such as satellite constellations for global internet coverage and Earth monitoring systems, has been a major focus for VCs.
Source: McKinsey & Company - A giant leap for the space industry
Adding further momentum to the sector’s growth, projected to reach $1.8Tn by 2035, are rising geopolitical tensions, which are prompting governments to bolster their independent space capabilities. As nations increasingly view space as a critical domain for defence and national security, their investments are creating fresh opportunities for private companies and venture capital to play a role in developing new technologies. The growing geopolitical focus on space as a strategic domain, coupled with rising commercial interest, has created a duality that both accelerates innovation and assures venture capitalists of sustainable growth.
As a result, VC investment in space tech has surged to record-breaking levels. For instance, 2024 is poised to set new funding records for space tech startups, with 174 deals signed in Q2 alone—a new quarterly high—bringing the total number of deals to 528 over the trailing twelve months (TTM). This level of deal-making reflects both the sector's growing maturity and the confidence venture capitalists have in its long-term potential.
Source: Seraphim - Q2 Space Index 2024
The coming decade is likely to see even more significant contributions from VCs as the space-tech market expands into new areas, driven by commercial ambition, scientific exploration and geo-politics.
Industry Segmentation
Before we look at the UK ecosystem and its role in the global market, it’s important to know how the industry is structured. Companies, including start-ups, operating in this exciting sphere can be categorised according to what they do. It is generally believed that there are 6 categories to consider:
Builders - Companies who manufacture spacecraft, hardware, and the software systems required to operate a spacecraft. Example technologies include rockets, satellites & their components, propulsion systems and space materials.
Launchers - Companies that focus on getting things into space, including launch operators and launch service providers. These companies focus on mission management, finding a launch slot, and ensuring that a payload makes it safely into space. The UK is currently developing its own launch capabilities so that it can deliver payloads into orbit.
Data Providers - Companies operating satellites to collect and/or communicate data. The most recognisable examples are satellite imagery, mobile communications, and satellite internet. This data empowers decisions on matters such as climate change, insurance risk, financial assessment, and maritime safety.
Data Recipients - Companies managing the transmission and security of data, such as ground stations and encryption specialists.
Products & Services - Companies that process satellite data and offer products and services to consumers, businesses, or governments in industries like farming, mining, forestry, energy, finance, intelligence, and security.
In-space - Companies creating infrastructure, technology, and services that facilitate humanity’s interest in space settling, colonisation, and research. Examples include debris removal, space habitations, such as the ISS, and microgravity manufacture as a service.
UK Landscape
The UK is seeking to take up an important position in this new space race. Its government and VC firms are increasingly drawn to space tech, attracted by the potential for groundbreaking innovation, disruption, and commercial success. The UK wants to increase its share of the global space economy to 10% by 2030.
Despite its relatively small size, the UK is renowned for its world-class research and development infrastructure and outputs. A unique synergy exists between its globally recognised academic institutions and a robust investment ecosystem, creating fertile ground for an ambitious and rapidly growing space tech industry. In 2023, the sector generated £18.9 billion in revenue in the UK, marking a 2.7% increase (£503 million) since 2018/19. The industry is notably market-driven, with 83% of its income stemming from commercial activities, with Direct-to-Home (DTH) broadcasting remaining the largest segment, contributing 47% of total revenue.
Employment in the UK space industry is also on the rise, with 52,000 Full-Time Equivalents (FTEs) directly employed—a 6.7% increase from the previous year—and supporting a total of 128,500 jobs across the broader economy. Specific growth areas include Space Manufacturing, which expanded by 7% (£168 million), and Space Operations, which surged by an impressive 30% (£505 million).
The sector is characterised by exceptional productivity, with output per employee reaching £138,000—more than double the national average. This high productivity is supported by a highly educated workforce, with 80% holding at least a bachelor’s degree. Despite its relatively concentrated structure, with 20 key organisations accounting for 75% of space-related income, the UK space industry remains a key engine for innovation and economic growth. And, it is not done there.
Dubbed the “Year of the Space Entrepreneur,” the government launched the Fusion Programme in January 2024, designed to attract the UK’s brightest minds to the space industry. The initiative aims to lower traditional barriers to entry, making it easier for entrepreneurs to establish and grow businesses in the sector.
Source: Fusion Connect Capital
The programme offers support to up to 20 entrepreneurs, including:
Technical Support: Investment readiness in 6 months.
Investor Access: Direct connections with early-stage investors.
Expert Guidance: Weekly one-on-one sessions with top UK investors.
Boot Camp: Intensive, fully funded, pitch-focused training.
Demo days for raising up to £2 million in seed and pre-seed rounds.
Attracts investors from other sectors, highlighting cross-industry opportunities in space.
Challenges & Risks
For all the positives highlighted, investing in space tech carries significant risks and major challenges.
One of the main challenges for space tech ventures lies in securing investment and funding. The space sector is still relatively new and smaller compared to other industries, resulting in fewer angel investors who are familiar with its dynamics.
Additionally, space companies often face smaller market sizes and longer routes to market, which can make them less appealing to traditional investors. Many venture capital funds may also exclude space from their investment criteria due to its complex and specified nature. High capital expenditure is another significant barrier, as the cost of launching and sustaining a space business remains prohibitively high compared to other industries. Essentially, it is far easier and cheaper to start a SaaS or E-Commerce business than it is space tech.
Perceptions of the space industry present another challenge. A common misconception is that space ventures are primarily focused on scientific exploration, when in fact, 80% of the UK space market revolves around commercial services and products. Nevertheless, many still view the space industry as an expensive, complicated, and wasteful use of capital. High-profile failures, such as Richard Branson's Virgin Orbit selling its remaining assets last year, contribute to this negative backdrop and further dampen investor confidence.
Geopolitical tensions add another layer of complexity. Increasing political friction, particularly between major powers like the US and China, threatens to nationalise innovative and dual-use technologies, potentially limiting opportunities for venture capitalists. These ideological and political factors can hinder international collaboration and the commercial success of space tech ventures, restricting the sector’s growth potential.
Lastly, regulation and talent shortages pose risks to space tech companies. Legal and regulatory frameworks governing space are still in their infancy and remain loosely defined, creating uncertainty for businesses navigating this emerging sector. The industry’s talent pool is relatively small, and its diversity is limited, making it harder for companies to attract and retain the skilled workforce needed to thrive in such a technically demanding field. Therefore, human capital is of huge importance when it comes to the exit landscape.
Investment Benchmarks
Despite the aforementioned risks, investors are still very much attracted to the sector, as with great risk comes great reward. But, what exactly are they looking for?
Investors in the sector prioritise startups that target large, expanding markets with immediate revenue potential. Companies focusing on substantial segments such as launch vehicles, satellites, and spacecraft demonstrate a clearer path to achieving significant growth, making them more attractive to investors. The baseline expectation for investors is a 10-15X return on invested capital (ROIC) for space projects.
VCs also seek startups that develop proprietary or innovative technology, as the high costs associated with space ventures necessitate a strong competitive moat. Unique technological advancements can offer protection against competitors, further enhancing a company’s value proposition.
Additionally, experienced leadership is crucial for securing funding. Startups led by executives with deep industry knowledge, technical expertise, and entrepreneurial experience are more likely to gain investor confidence.
Investors also favour ventures that demonstrate clear commercial applications and serve both governmental and private sectors, thus diversifying their customer base. Innovative business models that are flexible and cost-effective further strengthen a startup’s appeal, as they help meet customer demands efficiently.
Finally, VCs look for startups showcasing rapid progress, achieving early profitability with minimal capital, which is particularly important in today’s economic climate.
Start-up Spotlight
Now for some examples. Who are the companies that have ticked some these boxes, managed to attract investment and are driving the UK space tech industry today?
The intersection of space and venture capital presents a unique and rapidly evolving opportunity. As space technology moves from government-dominated initiatives into the hands of private enterprises, the potential for groundbreaking innovation and commercial success grows. Despite the high risks, including significant capital expenditure, lengthy time-to-market, and regulatory uncertainty, investors remain drawn to the sector's promise of high returns. The UK, in particular, is carving out an important role in this new frontier, with strong governmental support, a robust academic and R&D ecosystem, and a growing number of innovative startups. For VCs and entrepreneurs with a long-term vision, space tech offers an unprecedented opportunity to shape the future and capitalise on one the most lucrative sectors of the 21st century, alongside bio-tech and AI.
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