Startup space companies raised $15.4 billion in total financing in 2021, double the amount raised in 2020.
Surging venture capital investment and money from startups going public via special purpose acquisition companies (SPACs) pushed the industry to a record-setting year, according to a report by Bryce Tech, a research and consulting company. The sector raised $7.7 billion in 2020.
Last year also set a record for the number of space startup investments made, with 241 transactions completed, up 48% from 2020. The average deal size climbed 35% to $64 million.
The number of “mega-rounds” totaling more than $100 million increased, the Bryce Tech report says. For instance, SpaceX reportedly received $1.8 billion in venture capital in 2021; OneWeb received $1.5 billion; and Sierra Space received $1.4 billion.
“Record-breaking 2021 space [venture capital] investment was consistent with total U.S. [venture capital] investment trends,” Bryce Tech says. “According to data from PitchBook, overall U.S. [venture capital] investment nearly doubled in 2021, rising from $167 billion to $330 billion, supported by continued low interest rates, increasing venture activity by ‘nontraditional’ investors such as private equity firms, hedge funds, and corporations, and an increasingly robust exit market.”
Though the largest single investment category continues to be venture capital, representing $9 billion of the $15 billion raised during the year, public market capital emerged in 2021 a as a significant source of startup funding.
“Space startups raised over $4 billion in public market capital in 2021, representing 28% of total investment over the year,” Bryce Tech says. “In 2021, 10 space startups went public via special purpose acquisition company, raising nearly $4 billion.”
SPAC funding helped newly minted publicly traded companies drive a record number of mergers and acquisitions, with 13 acquisitions happening last year, compared to 11 in 2020.
“Leveraging cash from the SPAC IPO process, these companies generally pursued acquisitions to further vertically integrate or to improve near-term revenues,” Bryce Tech says.
Redwire made the most acquisitions in 2021, closing three purchases: Oakman Aerospace, Deployable Space Systems and TechShot.
Despite a record-setting year, possible headwinds are emerging, Bryce Tech says.
“While startup space remains well-supported by investors, future performance risks include unproven business models, uncertain customer bases, and typically lengthy time horizons for space businesses to mature,” the research company says. “Newly public space companies, with requirements for quarterly financial reporting, face pressure to meet financial targets and may see stock price impacts for missing them.”