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Last year was the “most difficult investment environment since the Great Recession,” Space Capital said in its 2022 space investment report, but the firm is also optimistic and said 2022 also marked a shift back to the fundamentals.

Space Capital released its fourth quarter 2022 report on Jan. 19, reporting total space investment was down by 58 percent in 2022. Overall, there was $20.1 billion in private market equity investment in space in 2022, compared to $47.4 billion in 2021. 

Space Capital’s assessment includes a broad swath of companies in its analysis, including GPS-enabled companies that do location-based services. Narrowing that focus to space infrastructure — companies that manufacture, operate, and launch satellites and spacecraft — the same trend is shown. Private equity investment in space infrastructure in 2022 was $6.3 billion — a 57 percent decline from $14.5 billion in 2021. 

Space investment was impacted by the rise in interest rates, but Russia’s war in the Ukraine emphasized the importance of space data and capabilities, and NASA’s Artemis program is funding growth in lunar activity. 

“Tight capital markets have put a premium on sound business models and revenue, including government contracts. And many leading space companies are actively prioritizing these fundamentals,” Space Capital said. 

The firm found that late- and growth-stage companies were most impacted, while early-stage investments proved to be resilient. 

Looking to 2023, Space Capital predicts it will be a difficult year for startups, but the “shift away from momentum investing and a greater focus on fundamentals is an overwhelmingly positive development for the space economy,” the firm argues. 

“Quality companies with product market fit, positive unit economics, and strong leadership will continue to get funded, although valuations will be more in line with historical averages. We believe that less speculation will result in fewer competitors, and a larger talent pool that will make the next two years an attractive time to start and invest in space tech companies,” the report says.