The space sector is experiencing a notable rise in venture investment and a number of the industry’s large corporates are keen to play an active role. Europe, in particular, is set for a significant increase in corporate-backed funding of satellite…
The space sector is experiencing a notable rise in venture investment and a number of the industry’s large corporates are keen to play an active role. Europe, in particular, is set for a significant increase in corporate-backed funding of satellite start-ups.
In early July, UK-based venture capital firm Seraphim Capital announced that it is to launch a space-focused venture fund in October. The £83m (US$130m) fund is being backed by Airbus Defence and Space, Thales Alenia Space, Telespazio, Com Dev and Avanti Communications. Seraphim is not disclosing the level of investment that each firm has made but all are at a similar level.
Mark Boggett, managing partner at Seraphim, told SatelliteFinance that the fund hopes to bring in a couple more corporate investors over the coming months.
He said: “We expect that by the time we are fully launched in October that there will be maybe another three or four other names on that list of equivalent size and stature. The idea is that we get the broadest number of space-related corporates to engage with the fund because the fund itself is taking a broad approach to identifying space technology and space-enabling technology.”
Seraphim intends to engage privately with each of its corporate investors to determine what their long-term growth and technology targets are. It will then aggregate that information and develop a number of themes that the fund will then go out and identify technologies in. Each investor will also have an executive who will join the advisory board of the fund.
The fund will also work closely with the UK Space Agency and the Satellite Applications Catapult to help identify potential start-ups to invest in. The CEO of the latter, Stuart Martin, will also join the advisory board.
Outlining the structure of the fund’s planned investments, Boggett said: “We’re an A round investor so businesses post-seed but pre-profit. The business that we are investing into will ideally be the most promising that have been seed funded. They’ll have a piece of technology that they have developed, have a couple of customers and be on their way to achieving their business plan.
“Typically we will be investing around £2m (US$3.1m) in a round of up to £5m (US$7.8m) where either existing investors also participate or we bring in another co-investor alongside us. Of the most promising investments that we make in the first round, we’ll then follow them in subsequent rounds and put most of our money into the one third of our portfolio that looks like it is going to make it.
“The companies that we are supporting most with the portfolio will receive in the region of £10-12m (US$15.6m-US$18.7m) from us through our fund. That will be alongside other sources of finance which could include direct investment from the large space corporates that we are bringing on board.”
Boggett added that the space fund will follow a typical VC structure and have a 10-year time frame. For the first five years, Seraphim will make new investments and then after that it will purely invest in the existing portfolio. He expects that portfolio to be around 20 companies with the expectation that the successful ones will be sold (or listed) in a five to seven year period, while the unsuccessful ones are likely to fail in the first two to three years.
Targeting an earlier stage of start-up is France-based Starburst Acclerator, which acts as an incubator for new projects in the aerospace sector. This week Eutelsat announced that it has become a partner of the accelerator.
The satellite operator joins Airbus, Air France, Hutchinson, Liebherr, Panasonic, Safran and Thales. Eutelsat is Starburst’s first operator partner and will help it expand more into start-ups developing services, applications and downstream technologies.
Starburst Accelerator was set up in 2013 to help close the gap that separates new aerospace ventures from established companies, public organisations and venture capital firms. It has so far helped accelerate 28 start-ups and is actively working with 24 start-ups. Among these is Cosmica Spacelines, a nascent space tourism company that plans to use XCOR Aerospace’s Lynx space plane.
Commenting on the agreement, Jean-Hubert Lenotte, Eutelsat’s director of strategy, said: “Becoming a partner of Starburst Accelerator is one more step in our active policy of open innovation, following on from our investment in Sigfox, the fast-growing connectivity provider dedicated to the Internet of Things.
“In domains where disruptive changes are taking place, teaming with start-ups fosters joint exploring of new approaches and spurs innovation. As a corporate partner of Starburst Accelerator we want to support young ventures in the aerospace sector and help them successfully innovate and grow.”
See the next edition of SatelliteFinance for an in-depth analysis of the rise in venture funding in the space sector.
