Copyright SpaceNews
MOUNTAIN VIEW, California – Investors are backing space companies with defense-related business lines. In many cases, growing Department of Defense interest in commercial space technologies is benefiting the most well-funded firms. “DoD is basically saying, ‘Hey, private sector, spend your equity dollars, do some preliminary work and that will help us decide what we want,’” Shahin Farshchi, Lux Capital partner, said Oct. 29 at the Satellite Innovation conference here. “That puts those who have the access to capital in an advantaged position because they are now guiding the purchasers in terms of what they should ultimately solicit. That has been reinforcing the cycle of the most well-funded companies getting access to more business.” And while those actions do not create a level playing field, it provide opportunities for smaller companies to compete with prime contractors, Farshchi said. Renewed Interest Growing government interest in commercial space is helping startups raise money among investors who previously shied away from defense-related businesses. “The fact that we’re in Silicon Valley and it’s normal talking about defense is great,” said Karl Schmidt, KippsDeSanto & Co. managing director. “That wasn’t always the case.” Enthusiasm also has grown in Europe where military budgets are rising rapidly. “There’s a little bit of frenzy over there,” Schmidt said. “To a person, they want to get in defense.” Six months earlier, many of the same companies declined to participate in a European defense deal, citing environmental, social and governance issues, Schmidt said. Side Step In spite of enthusiasm for defense-related technologies, it’s important for startups to keep their original business goals in mind, said Alexandra Vidyuk, Beyond Earth Ventures CEO and general partner. Some companies take government funding to build resilience as they move toward long-term goals. Other companies pivot to attract government funding, forgetting their original strategies. “It’s good because people are busy and innovating,” Vidyuk said. “But what was the original idea about the product? Sometimes, I think it’s a side step.” Investor interest in defense technology follows high-profile exits of defense-related space companies. Rocket Lab‘s stock has grown rapidly in recent months. Palantir share prices have more than tripled in a year. And strong demand for shares has doubled Anduril‘s valuation in less than a year.
