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Twin funds Space Capital and Space Angels are betting commercial space sector takes off

The commercial space sector may still be nascent, but decreasing costs of satellite launches and NASA‘s push to put humans on the moon by 2024 are helping boost investor interest in funneling more capital into space startups.

The recent announcement from Richard Branson‘s Virgin Galactic and its plans to go public via a reverse merger with Social Capital Hedosophia, a special purpose acquisition company, formed by venture capitalist Chamath Palihapitiya, has brought further buzz to the space industry.

In Q1 2019, $1.7 billion of equity capital was invested in the sector, which is already more than half of the nearly $3 billion deployed for space startups over the entire 2018, according to Space Angels, an early-stage, member-funded investment network.

The Q2 numbers aren’t yet compiled, but they would include two more rounds raised by SpaceX, a $536 million venture round closed in May from undisclosed investors and a reported $300 million investment in late June from the Ontario Teachers’ Pension Plan

Overall, the number of venture capital firms taking bets on the industry has been steadily increasing since the middle of the decade.

In fact, excitement about the future of the industry propelled the New York City-based Space Angels to expand beyond the network that accepts investments only from high-net-worth individuals, to launch an institutionally funded venture firm called Space Capital.

Since its launch more than three years ago, Space Capital has closed on $16 million in funding and is continuing to raise capital for a $50 million first fund, Managing Partner Chad Anderson told VCJ.

Space Angels, which has been around for 12 years, holds $15 million in assets under management, through a series of special purpose vehicles, said Anderson, who is also the CEO of the network.

In late 2017, the institutional side of the firm raised its profile when it brought on Tom Ingersoll as the managing partner. Ingersoll was previously the CEO of Skybox Imaging, a high-resolution satellite imaging company that Google bought for an estimated $500 million in 2014. Skybox Imaging was later renamed Terra Bella and Google sold it to Planet, a startup monitoring earth from space.

The two funds share the majority of the team, but they have different portfolios and LPs, Anderson said.

The funds generally write checks from $750,000 to $1.5 million for seed and Series A investments, backing startups in various aspects of the space industry. “Our companies range from launch, to satellite, to data analytics, and manufacturing in space,” Anderson said.

There are 30 companies in the collective portfolio, but only eight of those companies are held by Space Capital, he explained. The big names held by Space Angels, but not Space Capital, are Planet and SpaceX.

Although the funds still have not had an exit, “our paper returns look fantastic,” Anderson said.

Many investment opportunities in this industry are hardware companies working with software, he said. “Many other VCs may not understand both components,” he said about Space Angels’ and Space Capital’s advantage in focusing solely on commercial space sector.

Anderson highlighted several companies in the two portfolios.

LeoLabs, a startup that helps satellites avoid collision with debris and other floating objects in low Earth orbit, does this more accurately and cost effectively than traditional methods.

Previously, it cost billions of dollars to put satellites into orbit. Anderson said that “LeoLabs can do this for $2 million and in six months.”

SkyWatch, a developer of an API through which users can access various type of Earth observation data, “has great exit, even IPO potential,” Anderson said.  The company, which so far raised only $4.2 million, provides a “missing link” that connects satellite data with analytics companies that rely on this data to make decisions.

And what about putting men back on the moon? Astrobotic, one of its portfolio companies, is helping with that.

The company “just won an $80 million contract to deliver 14 NASA payloads to the lunar surface,” Anderson said.