The past two decades have seen the global landscape of space activities undergo profound changes. Whereas most space activities were (and still mainly are) led by governments, a disruptive, commercially driven ecosystem emerged. ESPI assessed New Space as being a combination of 6 underlying dynamics: New public schemes, new entrants, new industrial set-up, new solutions, new markers, and new private investments. This wide range of interrelated trends have led the space sector towards a more business and service-oriented set-up.
One of the key underlying dynamics that made the New Space dynamic break from previous historical commercial phases of space sector development is the sheer volume of private investments. Private investments have exploded over the past decade reaching a staggering €12 billion globally in 2021. Even while fundamentally different in purpose, private investments now not only supplement public space budgets but truly complement them. As a result, much of the global New Space sector has relied or is expected to rely on private investments in the future.
Recent market conditions have taken a turn for the worse. Worldwide inflation, supply chain shortages, geopolitical tensions and a rise in interest rates are combining to make even the most bullish of investors fear a recession. Public markets are generally first in line when it comes to being affected by macroeconomic conditions; however, private markets and investment are never far behind. It appears increasingly likely that a slowdown of private investments is on the horizon, with investors moving away from risky investments and businesses that remain far from revenue.
The New Space ecosystem will be increasingly put under stress should a protracted economic downturn occur. In the case of Europe, the lack of large-scale anchor tenancy contracts by public institutions such as seen in the United-States is a key risk factor for European space start-ups. The “dependency” on private investments at all development stages, may force many companies to make tough decisions in the months and years to come depending on their runway.
In an actively changing funding landscape, the New Space ecosystem may likely mutate into a new phase, where only the companies with the most efficient business models and credible paths to revenue survive. With a concentration of talent and capital into the most capable companies, this new phase, while initially destructive, may also witness the emergence of the leading space companies of tomorrow.