Sky’s (not) the limit for private investors boosting the UK Space Sector

Despite the dual challenges of Brexit and Covid-19, the UK space sector has bucked business trends with astonishing growth in recent years. In this article our experts explore the rapid growth of the sector and consider funding and investment challenges.

Rapid growth boosted by satellite technology

The 2020 "Size and Health of the UK space industry" survey shows a 2.8% growth rate per annum and over £360 billion of UK economic activity now supported through the wider use of satellites and satellite activity. Innovation around satellite data use and application seems to be leading sector growth, with some satellite activities such as location-based signal service providers seeing up to a 115% increase.

Funding challenge

With the meteoric growth of the sector and increasingly diverse uses for satellite data, space technology is emerging as a lucrative investment opportunity.

Over £4.33bn was invested in 110 UK space companies between 2013 and 2020. However, the sector is still not without its funding challenges. Cash flow and obtaining finance were in the top 5 "growth barriers" for the sector, and while grant funding can often be used to support growth, complete reliance on government or grant funding is not sustainable.  

Funding solutions

The push for private investment in the UK's space economy was buoyed by the UK Government's National Space Strategy announced in September 2021. The strategy seeks to empower British space businesses to innovate and grow by unlocking private finance.

This has opened the door for a new generation of private investors to enter the market, proving that investment opportunities in the space sector are no longer limited to governments, high net-worth individuals and niche specialists.

This new generation includes the likes of Seraphim Space Investment Trust, the world's first listed fund focused on SpaceTech companies, backed by the British Business Bank. Private investors like Seraphim are attractive to space businesses due to frequent and valuable investment activity and keen interest in the growth of the sector.  

Private investment, pioneering results

Seraphim is leading the way in SpaceTech investment. Seraphim's recent investments include a US$12.5m investment into Astroscale, and a new US$25m investment into HawkEye 360 Inc.

Tokyo-headquartered space debris pioneer Astroscale plans on offering on-orbit services to transport, inspect and extend the life of satellites, as well as remove them when their lifecycle ends. It plans to use this latest round of funding to accelerate its ability to make on-orbit servicing routine by 2030.

HawkEye 360 is a commercial provider of space-based radio frequency (RF) data and analytics. The company operates a first-of-its-kind commercial satellite constellation to detect, characterise and geolocate a broad range of RF signals to reveal hidden and previously unchartered activities across land, sea and air in support of first responders, law enforcement and telecoms operators.

Preparing for the future

It is clear there is an upward trend and growing opportunity for investment into satellite usage, launch, and associated activity within the sector. Many start-ups are now looking to become "investment ready", obtain private funding, and bring to market innovative ideas around satellite data, usage, and sustainability.

The key to maximising value for a future exit event or investment round is to present a clean company structure. It is critically important for companies to get their corporate governance right from the outset to ensure it attracts the very best possible investor and/or future purchaser. This would involve ensuring an appropriate shareholders' agreement is in place, the statutory books are properly maintained, and the share structure is set up to allow for future investment and tax planning.

Foot Anstey's Space and Satellite Team have extensive experience in working with fast growth, early stage SMEs to put in place the necessary documents and structure noted above. Our goal is to support businesses from the start, through the growth cycle and eventually to a successful exit or investment.

If you'd like to find out how we can help your business unlock the power of private finance, get in touch with a member of our specialist Space and Satellite team.

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