TAMPA, Fla. — Growing investor scrutiny is making it increasingly difficult for young space companies to close growth-stage financing rounds, according to an April 9 panel of investment bankers and equity analysts. It is said that it has become.
In recent years, trading performance for early-stage space companies listed on stock exchanges has been weak, combined with the end of cheap capital due to rising interest rates, weighing on companies' ability to scale up in the market. There is.
Citigroup investment banker Sameer Garg said at the Space Symposium in Colorado Springs that young space companies previously only needed to find one lead investor to complete a funding round. .
It then becomes a “two market” and the success of a funding round depends on existing investors stepping up and continuing to demonstrate interest in and support for the company along with the lead investor. , Garg continued.
“We are in such a strange time right now because there is a certain amount of fatigue. [the] “In 2022-2023, it's three markets,” Garg said. “Not only existing investors, but lead investors want to know if there's someone who's going to be a co-lead, or if there's going to be someone in the future.” Write a sizable check. ”
Last year, Citigroup advised Sierra Space on a $290 million Series B financing round to accelerate development of the Dream Chaser spacecraft and commercial space station.
Garg said a funding round of this size was made possible due to the meaningful engagement of existing investors and participation in the consortium of lead investors.
Akshay Patel, managing director at boutique investment bank PJT Partners, added that securing larger funding needs in later Series B and C rounds is particularly difficult.
Companies at this stage typically face increased competition from other companies in space and other sectors for these growth funds.
Space companies can easily raise money at the very early seed and Series A stages. Capital requirements are lower here and companies can tap into a larger pool of investors willing to bet on a variety of companies.
“The world of fundraising is moving more towards seed, Series A, Series B,” said Michil Mehta, an investment banker at JPMorgan. There are a lot of people,” he said. But they don't want to write big checks to late-stage companies for a lower percentage of ownership. ”
Citigroup's Garg said later stages of growth should become easier for space companies as the market matures and procurement cycles become clearer.
With investors becoming more cautious these days and spending more time scrutinizing funding deals, Mehta advises young space companies to start approaching investors early and explain why they need capital. He advised them to have a well-crafted story about their path to profitability at scale.
On investor caution, Garg said that while the huge spending coming out of the U.S. government's Space Agency is a big boost to the broader space industry, “there's certainly a higher level of oversight than we've seen in the past.” ” he said.
