When it comes to the frontier of investing in space, family offices are aiming for the stars.
Since early 2022, deals have exploded in the sector. Most recently, G3T, a single-family office for one of Spain’s wealthiest families, helped raise more than $70 million for a Munich-based developer of small launch vehicles, Isar Aerospace. In 2022, there were at least 25 family office investments in aerospace, quintupling the amount of deals in 2021. And there were at least 12 investments worth more than $500 million in total in 2023, according to data provided by FINTRX.
Overall, the space economy is expanding fast and is expected to be worth $1.8 trillion by 2035, according to the World Economic Forum. That’s due to the increasing prevalence of satellite and rocket-enabled technologies — which drive a dizzying array of devices and systems, from smart watches to weather forecasts.
“Space technologies are delivering greater value to a more diverse set of stakeholders than ever before,” said Sebastian Buckup, a member of the executive committee of the World Economic Forum. “As costs reduce and accessibility rises, these technologies could reshape whole industries and have as much impact on business and society as smartphones or cloud computing.”
Family offices are attracted to the sector because they’re more willing to take risks and to have the patience for the developing ecosystem to expand and mature, say analysts and investment advisers.
They also have to be intellectually curious and have a passion for space.
“In my experience, the family offices that want to invest in aerospace are those that have an intrinsic interest in technology,” said Stephanie Bruckner, managing director of family office solutions at Lynnfield, Massachusetts-based FL Putnam. One of her principals invests in satellite technology, “his passion since he was a teenager. He’s a really unique individual.”
The sector also rewards the patient, since some of the technologies — such as habitations on Mars — are decades-long projects. “And long-term investment horizons can deliver for family offices,” said Jake Miller, co-founder of the New York-based private markets platform Opto Investments.
It’s not just rocket science, Miller said. The sector has expanded in many directions in the past decade, especially with the advance of artificial intelligence.
Miller breaks it out into six areas:
- Launch providers, such as Elon Musk’s SpaceX and Jeff Bezos’s Blue Origin, often make the headlines.
- Satellite operators, such as StarLink, deal with navigation communications.
- Data analysis and cybersecurity in space is becoming increasingly relevant, especially with the arrival of AI.
- Space manufacturing: “It’s really expensive to get things to space,” Miller said. “What if we could build them in space. You could 3D-print a rocket in space rather than send delicate components up there.” Miller also noted the appeal of technologies that could be manufactured at scale in space, such as semiconductor components.
- In-space infrastructure, such as logistics, junk removal, solar arrays and habitats. “Who’s going to build the roads and bridges of space?” Miller said.
- Space tourism, available now to millionaires, will get more popular as prices drop.
Much overlap exists between these areas, especially manufacturing and infrastructure. “How will you get food and water on the moon?” Miller said, describing the confluence of those sectors.
There is also a convergence between space tech and climate tech, Miller said, pointing to the growing interest in solar arrays and desalination projects in space, which are key to addressing the impact of climate change.
That type of intellectual challenge is a cross-generational unifier, said Miller. He sees both founders and next-gen members of family offices sharing an excitement for the sector.
So far this year, investment in the sector has slowed a bit. Some of that may be attributable to its inherent risk — which is not dissimilar to that seen in biotech, said FL Putnam’s Bruckner.
“This type of investing can have serious binary outcomes — either be a zero or a huge win,” she said. And less adventurous investors, she said, see the sector as a “giant money pit — all those stories about waste at NASA.”
Investors also need to carefully consider “zombie companies,” which are subsidized by government contracts and lack “terminal velocity, in that whatever they’re doing is unlikely to be commercialized,” Bruckner said.
The flip side of that is companies getting consistent government revenue and the potential for mass commercialization.