The Rise of Space VC: Part I

How venture capital propelled a new generation of space startups

Space was once the domain of superpower governments and billionaire passion projects. A decade ago, the idea of venture capitalists betting big on scrappy space startups seemed far fetched. Fast forward to today, space tech has transformed into one of the hottest frontiers for VC investment. From reusable rockets to constellations of tiny satellites, venture funding is now propelling an entire ecosystem beyond Earth’s atmosphere. But this journey has been anything but smooth: boom and bust cycles, evolving startup archetypes, founder burnout, hard won second chances, elusive exits, and nascent early stage signals all color the story of how the final frontier became the next big venture frontier. 

This is Part 1 of a two-part series exploring the rise of space VC from 2015 to 2025. In this first installment, we’ll follow the capital. How venture investors catalyzed a new generation of space companies, what trends shaped the first big boom, and where the smart money went. In Part 2, we’ll zoom in on the aftermath: what happens when startups hit orbital turbulence, founders run out of steam, and investors search for returns in the vacuum of space.

2015: An Inflection Point for Space Startups

Space venture capital arguably kicked off in 2015, a year that marked a dramatic inflection point for investment in the sector. Before then, funding for space startups trickled in cautiously. Space was seen as too capital-intensive, too slow, and frankly too “sci-fi” for most investors. That changed when a record $1.8 billion poured into commercial space companies in 2015, more than the previous 15 years combined. This surge was catalyzed by headline grabbing successes: SpaceX’s Falcon 9 had its first historic reusable rocket landing in late 2015, and companies like OneWeb attracted massive rounds. Suddenly, space didn’t seem so out of reach for VC. As one early space fund founder noted at the time, lower launch costs and miniaturized satellites meant a space startup could be evaluated like any other tech venture. In short, 2015 signaled that investing in space had moved from science fiction to viable business.

The transformation since then has been profound. Annual venture funding for space startups skyrocketed through the late 2010s, producing a crop of “NewSpace” companies tackling everything from launch vehicles to earth imaging to in-orbit services. Silicon Valley’s interest was piqued, and new space focused VC funds emerged alongside increased participation from mainstream tech investors. Space startups graduated from novelty to a legitimate sector in the eyes of the venture community. This influx of capital and attention set the stage for the wild ride to follow.

Riding the Boom and Bust Fund Cycles

Venture investment doesn’t rise in a straight line, and the space sector has experienced its share of feast and famine. After the initial rush of enthusiasm, space VC has mirrored broader tech funding cycles. The late 2010s brought steady growth in deal flow and valuations. By 2020-2021, investment hit an all time high, fueled by bullish sentiment that space was the next big thing. In fact, total investment in space startups peaked at around $15 billion in 2021, only to fall by 46% to roughly $8 billion in 2022. This whiplash reflected both macro trends (easy money drying up as interest rates rose) and sobering realities in space (technical challenges and longer payback horizons).

The boom and bust cycle hit a crescendo with the SPAC frenzy of 2020-2021. Eager to find liquidity, a wave of space companies rushed to go public via special-purpose acquisition companies. 2021 alone saw 10 space startups merge with SPACs, raising a combined $3.6 billion, including well known players like Planet. For a moment, it seemed the stars had aligned for quick exits. But many de-SPAC’d space stocks plummeted in value, and by 2022 the SPAC window had slammed shut, only a couple of deals managed to close in 2022. The boom had overshot reality. Venture investors, some nursing losses, pulled back sharply on new space deals in 2022 and early 2023. As the dust settled, one lesson became clear: the space sector’s trajectory will not be a straight rocket ride up, but rather a volatile orbit requiring patience and fortitude.

Yet despite the turbulence, capital has continued to flow, albeit more selectively. 2023 has seen signs of stabilization with investors focusing on quality over quantity. The sector’s long term potential still has VCs intrigued, but the exuberance of the peak has given way to a more disciplined, thesis driven approach. Funds are diligencing technical roadmaps more rigorously and calibrating the timelines and burn rates unique to space. In short, space VC is maturing, initial euphoria tempered by experience, but conviction in the opportunity intact.

Archetypes in Orbit: Space Startup Models

Not all space startups are created equal. Over the past decade, a few archetypal business models have emerged in the industry, each with distinct investor appeal and challenges. Understanding these archetypes helps make sense of where venture dollars have gone in “NewSpace” and why. Here are some of the key categories that space companies (and their backers) fall into:

• Launch Providers: Perhaps the most visible archetype, these startups build rockets to send payloads to orbit. Example: SpaceX (though now an industry giant), Rocket Lab, Relativity Space. VC Appeal: Huge market if successful (every satellite needs a ride); technological moonshots with high risk/reward. Challenges: Extremely capital intensive, long development timelines, and a “graveyard” of failed launch startups over the years.

• Satellite Constellations: Companies launching networks of satellites for communications or Earth observation. Examples: OneWeb (broadband), Planet Labs (imagery), Spire Global (weather/tracking). Appeal: Recurring revenue from data or connectivity services; often vertically integrated (they operate what they launch). Challenges: Building and maintaining dozens or hundreds of satellites burns cash; need strong end user demand to justify the constellation.

• Downstream Applications: Startups using space generated data to solve problems on Earth. Examples: Geospatial analytics firms using satellite imagery for agriculture or climate; satellite AIS (ship tracking) services. Appeal: Asset light compared to building hardware, more akin to a software/AI startup in space clothing. Can generate earlier revenue by selling insights to enterprise/government customers. Challenges: Must compete with terrestrial solutions; reliant on quality data from providers; sometimes an unclear moat if data becomes commoditized.

• Infrastructure & Tech Providers: The “picks and shovels” of the space gold rush. These include propulsion subsystem makers, space battery companies, sensor manufacturers, in-space refueling or debris removal services (e.g. Astroscale). Appeal: Can sell shovels to all the miners, supply critical tech across many missions. Often have dual use appeal (space and terrestrial or defense). Challenges: Typically B2B hardware plays. Need the overall space market to grow to have many customers; not as sexy to generalist VCs unless you prove near term sales.

In the mid-2010s, launch and satellite constellation startups attracted the lion’s share of funding. These were the bold “moonshot” ideas that captured imaginations. But as time went on, VCs began appreciating the supporting cast: infrastructure plays and downstream apps that might generate revenue faster or enable the whole ecosystem. For instance, while billions were poured into rocket companies, investors also started backing satellite propulsion module startups and analytics platforms that turn satellite data into actionable intelligence for industries back on Earth. Today’s space portfolio might include a mix of these archetypes, balancing audacious long term bets with picks-and-shovels businesses that could achieve profitability sooner. This shift from pure moonshots to also chasing margins reflects a maturing approach, one that values not just reaching space, but making money there.

Looking Ahead

Looking ahead, these diverse models will be stress tested. Can massive constellations find paying customers? Will in-space servicing become routine? Those answers will unfold in the coming years. For now, the key point is clear: venture capital has created a rich tapestry of space companies, each targeting a slice of the $1.8 trillion opportunity. In Part 2, we’ll look at what happens next: how founders handle fatigue and “second acts,” where the exit opportunities lie, and how pre-seed signals hint at the next wave of innovation. The space race isn’t over, it's just evolving.