The Rise of Space VC: Part II

What Happens After Liftoff? Founder Fatigue, Second Acts, and the Long Game Beyond Orbit

In Part 1 of this series, we looked at how venture capital helped ignite the space startup ecosystem, how a post-2015 inflection point, plunging launch costs, and a flood of VC dollars pushed NewSpace from fringe concept to a full fledged frontier. We followed the rise: the funding cycles, the archetypes, and the audacity of trying to turn rocket science into viable business.

But what happens after the capital lands and the first launch succeeds?

Part 2 picks up where liftoff leaves off, at the messy middle. We'll explore what happens when founders burn out, when exits prove elusive, and when VCs discover that orbit is only the beginning of the journey. From second acts to pre-seed bets, from missed milestones to slow-burn successes, this is the part of the story where patience, grit, and long horizon thinking really start to matter.

The Founder Fatigue Factor

Building any startup is hard; building a space startup can be brutal. The timelines are long, the technical hurdles higher (literally), and the capital requirements unrelenting. As the first wave of NewSpace ventures hit the 5-10 year mark, founder fatigue has become a real concern. Many early space founders set out with revolutionary zeal: to land on the Moon, to blanket the globe in broadband, to disrupt aerospace titans. A decade in, some of those founders and early employees are tired. They’ve weathered delayed launches, exploding test rockets, rounds of layoffs when funding got tight, and countless nights worrying if their big bet will ever pay off.

Unlike a quick software app pivoting on a dime, a space startup can take years just to get a prototype in orbit or regulatory approval to operate. The result? Burnout. We’ve seen some founding CEOs step aside or hand over the reins as their companies grew, bringing in seasoned executives from traditional aerospace. In other cases, startups simply shut down after grinding for years with little to show, leaving founders exhausted and investors licking wounds. Even those that achieved technical success sometimes faced market reality checkmates. The emotional and financial toll on founders has been immense, especially when exits remain scarce.

One subtle driver of founder fatigue is the mismatch of venture timelines vs. space timelines. Traditional VC funds often expect to see significant progress (or an exit) in ~7-10 years. Space startups, however, might just be hitting stride in year 10. This pressure can lead to tension between founders who need more time and investors who are growing impatient. Some founders have had to temper their initial vision, pivot to nearer-term products, or take on lucrative government contracts that weren’t in the original plan, all in order to keep the venture viable and supporters onboard. It’s a reminder that in space, persistence is as important as innovation. Those still standing are the ones who’ve learned to navigate setbacks, reallocate resources smartly, and maintain morale through the darkest launches.

Second Acts and New Beginnings

Despite the fatigue, the story doesn’t end with burnt-out founders fading away. Increasingly, we’re witnessing “second acts” in the space community, both for companies and for the people behind them. In some cases, a startup that stumbled in its first incarnation has been reborn under new leadership or a revised game plan. One notable pattern: when a pioneering space startup fails or sells for parts, its alumni often scatter and seed new ventures. The talent and hard won lessons don’t disappear; they respawn elsewhere in the ecosystem.

We’ve also seen serial entrepreneurship taking hold in space. Early success stories have spun out founders who, having tasted one victory (or failure), launch new startups with fresh approaches. A founder of a satellite imaging company might start a space data AI platform next. An engineer from a failed rocket venture may try again with a novel launch concept or join a rival rocket startup, bringing invaluable experience. This cross pollination means today’s new space startups are often led by folks who aren’t wide-eyed novices, they’re veterans from SpaceX, Blue Origin, Planet, and others, now doing their “version 2.0.” Venture investors, for their part, are keen on backing these repeat founders; they know the terrain and have networks to tap into.

Another form of second act: large aerospace and defense contractors acquiring or partnering with nimble startups, effectively giving the startup’s project a new lease on life under a corporate umbrella. For example, when a smallsat manufacturer or a propulsion startup gets acquired by a Lockheed or a Boeing, it can continue its mission with far greater resources (albeit less startup independence). Such outcomes, while not the classic VC mega exit, do offer founders and their teams a soft landing and an opportunity to see their ideas realized on a bigger stage.

In short, failure in space is not the end,  it’s often the foundation for future endeavors. The ecosystem has begun to recycle expertise. Just as important, the investor community has grown more comfortable with the idea that iteration is part of innovation in space. Today’s second time around space entrepreneur is more likely to get funded than the first-timer of a decade ago, because stakeholders know how high the learning curve is. This cultural shift bodes well for the industry’s resilience, each wave of companies builds on the remains of the last, climbing higher.

The Elusive Exit (So Far)

For all the money and sweat poured into space startups, one thing remains elusive: big exits. Ask a space VC about their chief concern, and many will point to the dearth of IPOs and acquisitions delivering substantial returns. Aside from the unique case of SpaceX (still privately valued at well over $100 billion) and a handful of smaller public listings, the industry hasn’t yet produced the kind of exit frenzy seen in sectors like fintech or biotech. The SPAC experiment was intended to change that, and indeed briefly created liquidity for some but as noted, those outcomes often fell short of expectations when stocks sank.

By the end of 2023, most space SPAC stocks were trading well below their debut price, and a couple of the newly public companies even faced bankruptcy or restructuring. Investors who thought they’d struck gold with early public offerings found themselves in for a rough ride. In venture portfolios, many space holdings remain on paper: valuable in theory, but with no clear timeline for cashing out. This naturally makes some VCs skittish. They’re asking: where will the next generation of exits come from?

There are a few glimmers. Some space startups have been acquired for healthy sums by tech or defense giants (for instance, Google’s 2014 purchase of Skybox Imaging for $500M was an early notable exit, and more recently, smaller acquisitions by players like Raytheon, Airbus, and Amazon have picked up startups specializing in sensors, launch services, or satellite tech). These strategic buyouts provide one path to returns, especially as traditional aerospace companies realize they need startup innovation to stay competitive. Another hopeful sign: companies like Rocket Lab (via SPAC) and Planet Labs have transitioned to public markets and are slowly proving their business models, which could pave the way for others if they succeed. And perhaps the biggest elephant in the room, SpaceX, still looms as a potential blockbuster IPO should Elon Musk ever decide to take it public (or spin off Starlink). A SpaceX IPO would be a tide that lifts all boats, validating the entire sector’s value.

For now, however, patience is the watchword. Venture investors in space are increasingly modeling longer horizons for returns and exploring alternative exit routes such as secondary sales of their stakes to late-stage growth funds or sovereign wealth investors. They’re also aligning expectations: a modest acquisition at $100–200M can be a win in this sector, even if it’s not a unicorn-level exit. The next few years will be critical as some of the most mature startups either find exits or face consolidations, we’ll learn just how viable the space VC model truly is. One thing is clear: success in space VC cannot rely on quick flips; it demands commitment to the long game.

Pre-Seeding the Future: Early Signals to Watch

In the shadow of large late-stage deals, a quieter revolution has been happening at the earliest startup stages. Pre-seed and seed investments in space startups are picking up, as more founders with space ideas emerge from universities, hackathons, and yes, the ashes of earlier companies. But investing at this nascent stage in space is tricky. How can one tell promising rocket science from pure rocket fantasy? Over the past decade, investors have identified a few signals that a pre-seed space startup might be worth the gamble:

• Team Pedigree: It’s almost a cliché, but in space it truly matters if the founders and key engineers have relevant experience. A couple of ex-SpaceX or NASA Jet Propulsion Lab engineers on a founding team go a long way toward credibility. Domain knowledge can’t be faked in aerospace, and VCs often look for teams that have done this before (even if at a larger org) as a green flag.

• Technical Proof Points: At pre-seed, few startups have hardware built, but the best come with some form of prototype or demonstrated experiment. Maybe it’s a lab test of a new thruster, a cubesat demo launched on someone else’s rocket, or even a high-fidelity simulation. Showing that the physics actually work, beyond equations on paper, dramatically increases investor confidence. In an era where “slide deck space startups” proliferated, tangible proof became a key differentiator.

• Early Validation or Partnerships: Signals from outside stakeholders can de-risk a space idea. A letter of intent from a prospective customer (e.g. a telecomm interested in a communication satellite service), a small SBIR/STTR grant or NASA contract, or a partnership with a research institution are all votes of confidence. They indicate that someone (other than the founders) believes in the concept. Startups that plug into government programs like NASA’s incubators or the U.S. Air Force’s AFWERX tend to attract more early funding, leveraging non-dilutive capital to mature their tech.

• Scope and Story: Finally, even at pre-seed, a startup’s narrative matters. Is this a science project, or a scalable business? Savvy founders articulate a phased approach,“We’ll start by servicing small satellites in low Earth orbit (LEO), then expand to lunar missions once tech is proven”, showing they understand the go-to-market path and regulatory landscape. They balance vision (“this could be huge in 10 years”) with practicality (“here’s how we make money in 2 years”). Investors have grown wary of grandiose space pitches with no interim milestones. A compelling story with both moonshots and near-term milestones is a strong signal of a grounded founder.

The pre-seed scene in space is also benefiting from a supportive community that didn’t exist a decade ago. Today there are space-focused accelerators, mentorship networks, and even crowdfunding platforms for space tech. All of this helps surface better prepared founders. Venture capital is taking note, many major firms now have an eye out for the next SpaceX in a garage. While early-stage space deals are still a small slice of the pie, they represent the next generation of ideas that will drive the industry in the late 2020s and 2030s. Those ideas range from asteroid mining, to in-orbit manufacturing, to climate monitoring satellites. Some will falter, but others could define entirely new markets. The seeds are being planted now.

Beyond the Horizon: Closing Thoughts

Ten years into the rise of space VC, one might ask: Has it been worth it? The answer is a resounding yes, with an asterisk. Yes, venture capital has undeniably accelerated the pace of innovation in the space sector. It has turned once improbable concepts into real companies, launches, and services that are expanding humanity’s reach. We have dozens of satellites beaming broadband to remote areas, commercial missions preparing to land on the Moon, and a vibrant marketplace of space hardware suppliers, all thanks in part to venture funding and startup agility. The asterisk is that this is still the beginning of a long journey. The space industry’s full potential plays out over decades, not single fund cycles. By nature, it’s a domain that tests the limits of patience and conviction.

Encouragingly, both founders and investors seem to be embracing the challenge. There’s a growing acceptance that space is a unique playing field where different rules apply, but the reward for getting it right could be astronomical. Some estimates project the global space economy’s annual revenue will top $1 trillion by 2040. If that’s even close to true, today’s trials and errors will be remembered as the early steps of an industry that truly takes off. The venture community’s role is to keep the momentum going without letting short-term setbacks derail long-term progress.

In the coming years, we’ll likely see a more mature space VC landscape. A blend of specialized space funds and knowledgeable generalists, funding startups that have learned from the pioneers and focused on sustainable growth. Exits will hopefully follow as companies prove out business models and public markets warm back up to space plays.

But even absent quick exits, the impact is evident, a new generation of private space companies is here, doing things that were once the sole province of governments. Venture capital opened that door and continues to push it wider.

The rise of space VC is ultimately about expanding the possible. It’s about bringing the Silicon Valley ethos, move fast, take risks, dream big, to a realm that demands all of that and more. It hasn’t been easy, and it won’t be smooth sailing from here. Yet, as we look at gleaming rockets on launchpads and constellations of startups in orbit, it’s clear the trajectory is upward. For investors and innovators willing to strap in for the long haul, the final frontier may well hold the venture's next historic wins. In space, as in startups, the sky is not the limit, it's just the beginning.