The global spacetech investment sector is experiencing a resurgence in the third quarter of 2023, with signs of renewed investor confidence and record-breaking merger and acquisition activity, according to a new report from Seraphim. Notable trends indicate a growing shift towards late-stage investments and strong growth in seed funding.

The Seraphim Space Q3 Investment Report noted that in the last quarter, global investment into spacetech displayed a 39% increase over the previous quarter, with a total of £1.6 billion invested compared to £1.16 billion in Q2.

Notably, a significant shift has occurred between early-stage and late-stage investments, with Q3 seeing 82% of investments flowing into late-stage businesses, up from 63% in Q2. This shift was partly driven by substantial investments in companies like Axiom, Sierra, and MapBox.

The return of large growth rounds is indicative of renewed investor confidence, with private equity giants like KKR, Advent, and Blackrock entering the SpaceTech sector to bolster their exposure.

The spacetech mergers and acquisitions (M&A) landscape is witnessing an all-time high, primarily driven by well-capitalised ‘New Space’ acquirers.

High-profile mergers such as Eutelsat’s merger with OneWeb and several private equity-backed acquisitions of New Space companies have contributed to this trend. Space sector deals in the twelve months leading to Q3 2023 have increased by 45% year-on-year, a stark contrast to the broader market, which saw a 31% decrease in M&A deals involving venture-backed startups.

Within the SpaceTech sector, companies focusing on launching vehicles and satellites to provide services from space, known as “Build products,” secured the largest number of deals in the quarter. These predominantly consisted of early-stage investments aimed at developing innovative satellites, propulsion systems, and satellite subsystems.

The “Product” category emerged as another standout sector, accounting for 25% of total investments for the quarter. Investors are displaying a keen interest in Software as a Service (SaaS) and software enterprises that leverage space and satellite-derived data for terrestrial business and consumer applications. This underscores the substantial growth potential and revenue opportunities within the Product sector.

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Seed-stage funding has continued to rise in 2023, making up 10% of all investments in the quarter. Notably, Series C funding has tripled in this period, driven by the increasing investment in Product and Build products.

The United Kingdom stands out as the European success story, nearly doubling its year-on-year investments to $326 million. Overall, UK investments in spacetech have grown by 22% in Q3 compared to Q2.

In the UK, the Product and Build sectors have seen the most substantial growth, fueled by growth-stage investments in climate-related product companies and support for satellite firms like Open Cosmos, which aligns with the climate theme through novel Earth observation.

The number of seed deals in the UK has increased, indicating the founding of new businesses within the UK space sector. Series A deals have also exhibited strong growth, particularly in the downstream market, specializing in satellite wireless technology, with notable fundraises including Fatmap and Sofant.