Space investment soars despite market turbulence
- - - Space investment soars despite market turbulence
Chad AndersonJuly 18, 2025 at 8:15 PM
After years of being treated as a frontier opportunity, the space economy is now firmly entering the mainstream.
The sector just posted one of its hottest quarters since 2021 without a single SpaceX (SPAX.PVT) mega-round. It was driven not just by record-breaking capital flows but by a broader recognition that space is a macro-relevant asset class reshaping defense, connectivity, and global intelligence.
European governments are spending like it's 1949, and high-profile exits signal a thaw in the IPO market. Private capital surged even as the volatility index (^VIX) hit pandemic-era highs. In Q2 alone, 113 companies raised $7.8 billion, bringing total investment since 2009 to $357.8 billion. Venture capital made up 77% of this year's funding (up from 54% in 2024), signaling that professional investors are doubling down even as public markets wobble.
Amid the noise, one signal stands out: Capital is flowing to companies that turn space data into decisive advantages on Earth. This is the trade to watch, because in 2025, the real moonshot isn't the rocket. It's the revenue.
Government-backed growth
The clearest signal of this shift is the rise of defense. The US government's $175 billion Golden Dome initiative — an ambitious plan to harden national security through resilient, space-based infrastructure — has catalyzed investor confidence.
This massive source of funding is key to long-term growth. Commercial markets may be heating up, but nothing beats the scale or certainty of the government checkbook, and space startups are increasingly prioritizing stable, well-funded public contracts.
Another trend worth talking about: Europe is getting serious about the space domain as the continent pushes for greater sovereignty.
NATO members are pledging 5% of GDP to defense, the EU has carved space into its new Competitiveness Fund, and deals like France's 1.6 billion euro ($1.8 billion) Eutelsat rescue and SES's proposed 2.8 billion euro ($3.2 billion) Intelsat merger show that Brussels is trying to counterbalance Starlink.
Over the long term, this could pose risks for some US companies. But for now, this ambition is limited by a fundamental reality: 80% of European hardware is still imported, mostly from the US. The continent is as likely to write checks in Hawthorne, Calif., as in Toulouse, France, at least until homegrown heavy launchers prove themselves.
The 'picks and shovels' layer
Investors poured $3.2 billion into the infrastructure layer this quarter, up 60% since the prior quarter, which is its strongest showing in five quarters. These are the hardware-heavy plays: satellites, rockets, propulsion systems.
Leading the way were Applied Intuition's $600 million Series F and Impulse Space's $300 million Series C, both US-based and both aligned with Golden Dome's push for dual-use, AI-native systems. Seed-stage checks averaged $8 million — a 36% jump — and Series C valuations climbed 30%.
This is the "picks and shovels" layer of the space economy. These companies are building the foundation for national defense, global intelligence, and future economic expansion in orbit. For investors, they offer earlier-stage access to mission-critical technologies that governments are now committed to buying.
While SpaceX is still the apex player in the space economy, with $15.5 billion in projected 2025 revenue, its dominance is no longer absolute.
Four Starship mishaps this year, mounting political entanglements, and rising competition have raised investor eyebrows. Eight of the 10 largest infrastructure deals this quarter involved companies building in areas once thought squarely in SpaceX's path.
SpaceX isn't going away, but it's no longer the only game in town. That's healthy for the ecosystem and creates fresh opportunities for investors looking to diversify their exposure.
But for the real heat, look to applications. Applications banked $4.4 billion, the second‑highest quarter in three years, and 86% of that cash chased defense‑tilted geospatial intelligence (GEOINT).
Anduril's (ANIN.PVT) $2.5 billion Series G cemented its status as the world's most valuable defense-tech startup. Europe's Helsing raised $683 million, and US-based Chaos raised $275 million.
This layer is often misunderstood. These aren't the rockets and space stations that people often consider "space companies." They're software and defense platforms that leverage orbital infrastructure.
That makes them more accessible to public investors, as many already trade on major exchanges or are approaching IPO readiness. This is where retail and institutional investors alike can gain exposure with less exposure to hardware timelines or launch risk.
Exits are back, but the bar is higher
Of the 637 infrastructure startups that raised a seed round since 2009, only 14 have made it to Series E — a survival rate of just 2%. The real crucible is the Series C-to-D gap, where capital becomes scarcer and technical risks collide with commercialization challenges.
Application-layer startups, by contrast, show stronger scalability: 66% of those that reach Series D survive to Series E. Software still scales faster, especially once product-market fit is locked in.
Despite this brutal attrition curve, Q2 delivered signs of life on the exit front. The quarter delivered 20 exits worth $1.8 billion: 18 acquisitions and two IPOs.
Voyager Technologies (VOYG) floated at a frothy 26x sales, popped 82% on day one, then sagged as investors read the income statement: $144 million revenue, $66 million loss, and meager growth.
Meanwhile, CaoCao Mobility (2643.HK) was priced at just 1.3x sales, the lowest multiple in the cohort, and still struggled to gain momentum.
The liquidity outlook for the rest of 2025 is cautiously optimistic. Already in early Q3, Texas-based Firefly, which makes rockets, space tugs, and lunar landers, has filed for a Nasdaq IPO. ICEYE is reportedly exploring a public debut, and Sierra Space continues to weigh its long-anticipated offering.
The most valuable private companies, available in the second quarter Space IQ report, may provide clues to who will be next.
M&A activity, meanwhile, is on track to surpass 2024's record volume, but the game has changed. The era of "growth at any cost" is over. Acquirers are demanding solid unit economics, and IPO buyers remain skeptical of burn-heavy stories.
But with defense tech trading at premiums and the S&P 500 (^GSPC) hitting record highs, the window may be opening again with several GEOINT players rumored to be testing the waters later this year.
A SpaceX Falcon 9 rocket lifts off from launch pad 40 at the Cape Canaveral Space Force Station with the GPS III - SV 08 satellite built by Lockheed Martin. (Photo by Manuel Mazzanti/NurPhoto via Getty Images) (NurPhoto via Getty Images)What's next
Once Starship becomes fully operational, it is expected to drive an order-of-magnitude drop in launch costs that will unlock entirely new industries, such as logistics, stations, lunar, and industrials, which currently represent just 3% of invested capital. That's the next big wave.
But for now, here’s what investors should watch:
First, follow the defense dollar. Space startups aligned with national security missions are winning larger contracts and growing faster. This is a stable and expanding revenue base.
Second, prioritize real revenue and capital efficiency. Q2 rewarded companies that showed a credible path to profit, such as Anduril and SandboxAQ (SAAQ.PVT), and punished those reliant on multiple expansions.
Third, bet on applications. Software and autonomy platforms built on space data are where the growth and public-market opportunity is now. These companies scale faster and are increasingly accessible to retail investors.
The second quarter marked a significant turning point for the sector, and the companies that turn space-based capabilities into decisive advantages here on Earth are the ones attracting capital. For investors, it's not just about what gets to orbit anymore. It's about what delivers returns on the ground.
Chad Anderson is the founder and CEO of Space Capital, where he has been pioneering investment in the space economy for over a decade. He is an investor in SpaceX, along with dozens of other space companies, and is theauthor of "The Space Economy," published by Wiley.
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Source: “AOL Money”
