MOUNTAIN VIEW, Calif. – Government funding for the space sector helps blunt the impact of a decline in private investment.
On the Satellite Innovation conference here, industry analysts, entrepreneurs and observers agreed that investors are much more cautious than they were in 2021, “a peak capital 12 months with $12 billion in private capital coming into sector,” said Brooke Stokes, McKinsey and Co. partner.
While private investment isn’t any longer pouring into space firms, it “hasn’t nosedived as much as a number of the talk may suggest,” Stokes said Oct. 17. For now, “it’s leveled out at about $8 billion dollars.”
Shift in Government Contracting
Meanwhile, U.S. government funding for space programs is climbing.
“There’s a 20% increase in the federal government funding within the U.S.” said Raghavan Alevoor, Deloitte Consulting principal. “There’s the silver lining.”
The U.S. government’s approach to purchasing space-related services is also changing.
“A decade ago, 75 percent of all space U.S. government spending was via traditional contracts,” following federal acquisition regulations, Stokes said. “That has now shifted to only 60%.”
Somewhat than demanding firms comply with voluminous regulations, government agencies have increased their use of other transaction authority agreements and “other more business acquisition models,” Stokes said.
Alevoor sees one other silver lining related to the private investment climate. For firms that also have access to capital, “that is an opportunistic time for them to search for acquisitions,” he said.
Potential Hurdles
The panel discussed to potential impediments to space sector growth including high rates of interest.
“We do see some softness out there because people think rates of interest are going to stay higher or rise,” said Don Claussen, ST Engineering iDirect CEO. “Customers outside the USA are also concerned that a powerful dollar will reduce their buying power.”
Claussen also thinks rising geopolitical tensions will create supply chain disruptions.
“If we take a look at who’s innovating and where they’re innovating, a few of our partners are in regions of the world under intense conflict right away,” Claussen said. “It’s going to slow that innovation in those smaller firms and that’s going to limit a few of our access to that next technology.”