Venture capital investments in aerospace, space, and defence start-ups equated to $551 million in the first quarter of 2017 alone, with 26 investments made. This is according to a new report from Starburst Insights, an investment briefing and report service from aerospace and aviation incubator Starburst Accelerator.
Notable trends highlighted in the report include the increasing diversity of deal origins and the shift from west to east. The previously dominant US investor base is joined by new capital and interest from countries like Israel, China, and Singapore.
Additionally, the report finds that the increased number of investments, with smaller individual deals, signals a shift to less-capital intensive business opportunities, and reduced barriers for new entries. Starburst expects 2017 to meet or exceed 2015 levels, which topped out at $1.7 billion.
Supply chain innovations
According to the report, the new generation of aerospace start-ups has seen as much as a 250% spike in venture capital investment over the last year, enabling new companies to build on the innovation spurred by governments and large corporate incumbents.
The report states: “If the first wave of investment focused primarily on rockets, satellites and launchers, new investment is giving rise to an even wider range of innovators that will create and build not just the vehicles, but the foundational enabling technologies for this new era of aviation and aerospace, including new materials, distributed energy generation sources, autonomous technologies and increased levels of communication and control.”
Notably in Q1 of 2017, Series A rounds saw an average size of $10 million and received a total investment of $97.2 million. Series B funding, however, saw a 350% increase over 2016 at $325 million and a median round of $20 million, indicating, according to the report, a “sector-wide maturity”, with aerospace now considered a strong business proposition for venture capital.
Starburst expects 2017 to see a larger number of smaller deals, demonstrating lower entry barriers, a trend the firm forecasts will continue beyond this year.
The next phase
François Chopard, CEO and co-founder of Starburst Accelerator, said: “While commercial entities like SpaceX are already capturing the public imagination, the next phase of the space race will be led by smaller private companies.
“In the funding gap created by reduced government spending on NASA, start-ups are finding traction with an increasingly vast and global venture capital base. We expect that trend to continue, with government and traditional corporations racing to keep up with unicorns’ innovations in mini launchers, drone control chips, plastics intended for space manufacturing, distributed energy generation for remote autonomous aviation recharging, and metals from asteroid mining, and much more.”
We recently interviewed Chopard about the work of Starburst Accelerator. Watch the interview below:
An Executive Summary of the report is available for free download on the Starburst Accelerator site.