Europe must enhance how it allocates capital for the space industry to avoid missing out on the benefits of increasing early-stage investments, according to Bogdan Gogulan, CEO of Luxembourg-based private equity firm NewSpace Capital.
Investment Comparison
Recent research from the European Space Policy Institute (ESPI) indicates that Europe averaged 96 investment deals annually for space companies over the past three years, not far behind the United States at 114 deals. However, the United States averaged €6.3 billion ($6.8 billion) in investments, driven by larger growth-stage funding rounds, compared with Europe’s €1.4 billion.
Venture Capitalist Sentiments
More than 50% of venture capitalists surveyed by the European Investment Fund, part of the European Union’s lending arm, expressed a negative outlook on fundraising over the next 12 months.
Market Fragmentation and Innovation
While Europe’s fragmented market fosters technological development through numerous early grant programs, Gogulan noted that this diversity creates significant obstacles for more mature ventures. “It’s brilliant for innovation,” he said. “What it is really bad for is scaling.”
The U.S. Advantage
In contrast, the United States benefits from a larger, more cohesive market with a single regulatory framework and language, making it easier for companies to scale.
Growth Capital Deficit
Although Europe has increased support for early-stage ventures, Gogulan highlighted that these businesses often lack the growth capital needed to expand within the region. “Basically Europe is becoming a victim of its own success,” he added.
Missing Opportunities
European space companies have few options other than looking abroad to bridge the financial “valley of death” between technology development and commercial adoption. Even NewSpace Capital, which has invested in Finnish Synthetic Aperture Radar operator Iceye and French satellite imagery analysis provider Kayrros, receives most of its funding from investors in the United States and the Middle East.
“We [Europe] are spending a lot of time, effort, and energy on the most difficult part of the journey,” Gogulan continued, “and when everything is ripe to take advantage of it, we’re giving that away.”
Call to Action
Gogulan urged Europe’s largest financial asset managers and pension funds to allocate more funding to the space industry. NewSpace Capital is also in discussions with the European Commission and regional investment banks to establish a funding stream specifically for growth-stage companies.
“It takes a village to raise a child,” Gogulan said. “We need 20 funds like ours.”
