Space tech startups fall out of VC orbit

View of M74, otherwise known as the Phantom Galaxy in this handout image released August 29, 2022. NASA/ESA/CSA James Webb Space Telescope/Handout via REUTERS

Oct 18 (Reuters) - Space technology startups are being forced to limit their sky-high ambitions, as their venture-capital backers turn to safer bets due to the current economic turmoil, VC firm Space Capital said.

Decades-high inflation, rapidly rising interest rates and the Ukraine war have roiled global financial markets, forcing investors to evaluate their investment strategies and focus on companies with viable products in the market.

Investments in space technology companies, which collect, process and analyze space-related data, have fallen 80% in the third quarter to about $1 billion from nearly $5 billion in the year-earlier period, Space Capital said in a report.

"Venture Capitalists are refocusing on enterprise software-as-a-service companies and away from deep tech companies that provide solutions based on engineering innovation," New York-based Space Capital said.

VC investment volume in space companies fell 44%, compared with a broader market decline of 31%, it added.

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VC firms "are looking to reduce their exposure to capital intensive companies with low or long-term profitability models," Space Capital's managing partner, Chad Anderson, told Reuters.

"This is why space's infrastructure layer will be the hardest hit during the economic downturn."

The downbeat sentiment has also hit publicly traded "new space" companies such as Rocket Lab USA (RKLB.O), Astra Space (ASTR.O), Spire Global (SPIR.N) and Satellogic Inc (SATL.O), whose shares have fallen between 49% and 92%.

Many investors who explored aerospace last year have backed away, said William Kowalski, co-founder of Atomos Space, which makes spacecraft that help satellites maneuver in space.

"Fundraising has been challenging, but it has allowed more capital efficient companies to stand out," he said.

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Reporting by Akash Sriram in Bengaluru; Editing by Anil D'Silva

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