The Shortcoming of Space Startup Funding

The Growing Landscape of Space Technology Startups in India

Space technology is an ever-evolving field that encompasses a wide range of applications under the universe. However, when investors refer to space tech, they usually mean extraterrestrial businesses and the technology that empowers them. In recent years, there has been a significant increase in investor interest in space tech, resulting in a growing number of startups in this sector. In this article, we will examine the current landscape of space technology startups in India, their challenges, and their prospects for growth.

The Growth of Space Technology Startups in India

The Indian Space Research Organization (ISRO) has been leading India's space journey for several decades. However, in recent years, the private sector has emerged as a strong partner, incubating startups to be suppliers of components and sub-assemblies. According to the Economic Survey of India, the number of new startups in the space sector has increased from one in 2012 to 47 by 2021, with over 100 active space startups currently in the country.

Despite the COVID-19 pandemic and its associated economic disruptions, the Indian space sector saw a rapid increase in the number of startups in 2021. However, this trend was not reflected in investment activity. Space startups faced their toughest period since the 2008 economic crisis, with only $45.7 billion in funding in 2021. By the end of 2022, venture capitalists had reduced investments in space startups by more than half, to $21.9 billion, seeking safer havens in the face of a bleak economic outlook.

Challenges Facing Indian Space Technology Startups

The majority of Indian space startups have the capital to conduct their initial test launches. However, attracting global investors remains critical to scaling up their operations. Investors in India and globally are currently looking for startups that can provide early proof of concept for their technology. Once startups demonstrate their technologies, the Indian market should be profitable enough to attract global investments, according to industry experts.

However, in general, there are far more startups than capital in the space technology industry. Leading space companies have prioritized proven business models, revenue, and government contracts, making it difficult for startups to attract investments. Additionally, many Indian space-tech startups face an uncomfortable situation where they must attain space readiness (SR) before receiving larger investments to scale up. It is estimated that over 10,000 space tech startups exist worldwide, with the majority seeking venture capital. Several funds have emerged to meet the demand, including private equity transactions and special purpose acquisition companies (SPACs).

Prospects for Growth in Indian Space Technology Startups

Indian space startups have pitched the "low-cost" value proposition of the space operations they are building. However, according to Anupam Shukla, a space sector lawyer and partner at Pioneer Legal, just focusing on the cost aspect will not be enough to draw global investor attention. Investors are looking to markets such as the United States or the European Union, which have more favorable policies and regulations, to invest in space ventures.

In conclusion, space technology startups in India face several challenges, including attracting global investments and achieving space readiness. Nevertheless, the growing number of startups in the country demonstrates the potential for growth in this sector. As startups begin to demonstrate their technologies and achieve profitability, it is expected that the Indian market will become more attractive to global investors. Investors interested in space tech should weigh the pros and cons and consult with licensed advisors before investing.