Introduction:
Seraphim Space, a UK-based space tech investment group, is launching its second VC fund, SSV II. The fund aims to build a global portfolio of 30 startups in the space tech industry. Seraphim’s first VC fund returned three times the original investment, dispelling the notion that space investment is high risk and long term.
The Growing Space Tech Market:
The space tech market is growing rapidly, with projections indicating it could be worth $1.8 trillion by 2035, up from $630 billion in 2023. This growth has attracted increased interest from investors, including both generalists and specialists in space tech investment.
Seraphim’s Track Record:
Seraphim Space hopes to stand out in the competitive space tech market with its track record. The company’s first fund achieved significant returns, partly due to five successful exits. These exits included the trade sale of chip company UltraSoC to Siemens and four IPOs: Arqit, AST SpaceMobile, Nightingale, and Spire Global.
Challenges in the Public Market:
Seraphim Space Investment Trust (SSIT), Seraphim’s growth fund, listed on the London Stock Exchange in July 2021 but has faced challenges in the public market. Despite one of its holdings becoming profitable, SSIT’s market cap has decreased significantly. These market conditions have forced SSIT to focus on follow-on investments rather than new deals.
The Importance of VC Funds:
Venture capital funds like Seraphim’s provide a longer timeframe for high-risk investments compared to the public market. This flexibility allows VC funds to make mistakes and take risks that the public market may not be comfortable with. Seraphim’s warehouse arrangement, where SSIT funded investments made by SSV II, showcases the company’s investment thesis beyond traditional space-related ventures.
Space Tech’s Impact on Other Industries:
Space tech has applications in various industries, enhancing their capabilities. Seraphim Space is particularly interested in companies that apply AI to space data to address climate change issues. Startups like Delos and Renoster, backed by SSV II, utilize large amounts of data and modeling to tackle environmental challenges.
Investment Themes:
SSV II focuses on four main investment themes. The first is AI applied to space data, with companies like Delos and Renoster addressing significant global problems. The second theme is in-orbit computing, which has the potential to impact sectors such as agriculture and infrastructure. Aethero, a company developing edge computers for autonomous decision-making, falls under this category. The third theme is space-enabled communications, exemplified by portfolio company Hubble Network’s goal of connecting a billion devices through a space-based Bluetooth network. Finally, SSV II is interested in microgravity for science, including research on orbital drug manufacturing and new materials.
The Commercial Market Opportunity:
While defense is not highlighted as an investment theme for SSV II, the majority of space companies have dual-use capabilities. However, the broader market opportunity lies in the commercial sector as space tech expands into other industries.
Conclusion:
Seraphim Space’s second VC fund, SSV II, aims to capitalize on the growing space tech market. The fund’s investment themes reflect the diverse applications of space tech in various industries. Seraphim’s track record and expertise in the industry position it well to navigate the competitive market and identify promising startups with the potential for high valuations and returns.