Private capital firms target emerging opportunities in space sector

Space assets are attracting significant interest from venture capital (VC) as well as private equity investors. 

Two primary developments underlie this shift. The first is the industrialization of space manufacturing. Historically, spacecraft were capital-intensive, often single-use, government-commissioned systems. 

That model has been disrupted by companies such as SpaceX, which has imported manufacturing methods used in the automotive industry (e.g., in-house production and vertical integration, which provide significant efficiency benefits with fewer dependencies) to develop reusable rockets. By focusing on returning the most valuable sections of its spacecraft to Earth rather than abandoning them in orbit, SpaceX has dramatically reduced the cost of launch. 

Businesses are also creating new markets in space, such as low earth orbit (LEO) internet, which operates using satellites that fly much closer to the earth than traditional geostationary systems. LEO satellites can deliver fiber-like connection speeds and serve needs that require lower latencies such as gaming and in-flight Wi-Fi, generating billions of dollars in revenues for operators. SpaceX’s IPO prospectus points to potential future commercial opportunities, including orbital data centers powered by solar energy.  

Space infrastructure is increasingly essential to military strength

The second is the importance of space infrastructure to modern defense capabilities. Satellites are integral to air, land, sea, and cyber defenses, underpinning real-time intelligence, secure communications, navigational support and early warning systems. 

In 2023, more than 100 defense and dual-use satellites were launched by 14 nations, a 40% increase year-on-year. Amid the focus by governments on self-reliance in a more volatile geopolitical environment, sovereign space assets are seen as essential. The sector is also pulling in prime manufacturers: Rheinmetall has entered into a joint venture with Finnish satellite manufacturer ICEYE, while Safran is also growing its space program. For investors, these moves are a further signal of the space sector’s growing maturity.

Space remains a largely state-funded sector, with research putting total government spending in 2024 at around USD135 billion globally. Even Starlink relies heavily on contracts with NASA and the U.S. Department of War.  

With that said, the patterns of private capital investment are changing. VC funding has long been central to early-stage innovators, and increasingly significant amounts of new money are flowing into the sector (ICEYE’s recent EUR450m primary Series F round is a prime example). We are also seeing more big-ticket private equity investments. KKR acquired a 28% stake in the German satellite manufacturer OHB in 2024 and is now reportedly pursuing a share sale with OHB’s majority owner. 

Investors must separate hype from substance

Investors targeting space-related assets have several important issues to consider.

When assessing targets, it’s vital to separate substance from noise. The sector has seen some significant failures in recent years, including several unsuccessful SPAC deals and the collapse of startups such as UK-based rocket manufacturer Orbex. Rigorous diligence on the scalability of innovations, the capability of management teams, and the robustness of contracts and revenue pipelines is therefore essential.

Space investments are also complex from a regulatory perspective. Transactions are subject to foreign direct investment (FDI) screening processes in nearly every jurisdiction, with space assets (both satellites and ground systems) classified as critical infrastructure in many countries. These include the UK, Australia and larger EU member states such as Germany, while the Space Infrastructure Act, introduced to Congress in 2025, proposes doing the same in the U.S. Critical infrastructure transactions often require mandatory filings, are triggered at lower investment thresholds, involve heightened regulatory scrutiny and are more likely to be subject to risk mitigation.

As the sector evolves, new issues are emerging: satellite frequencies are becoming increasingly scarce, while the risk of collisions—which raise the threat of potential litigation down the line—is trending upwards as the number of satellites grows. Earth orbit is also an increasingly contested zone, with military activity and risks rising as a result.   

Space procurement processes are complex

Alongside these dynamics, space businesses may be exposed to complex government procurement processes. In Europe for example, the IRIS² sovereign satellite constellation program is governed by a dedicated procurement regulation that imposes limits on non-EU-controlled entities participating as major contractors. 

In addition, many space assets appear on dual-use technology lists, which could bring them into scope of regimes such as the U.S. International Traffic in Arms Regulation (ITAR). ITAR controls the manufacture, sale, and distribution of physical weapons, defense services, software, and technical data, with government licenses needed to export in-scope items to foreign persons. Financial sponsors must thoroughly diligence a target’s ITAR compliance procedures, although the regulation itself can pose challenges to diligence processes that require clean teams limited to U.S. persons. (We explore the ITAR regime in more detail here). 

Beyond these frameworks, entering the sector also exposes parties to space law, under which specific authorizations are required to launch and operate spacecraft, and operators are subject to strict liability regimes. Financial sponsors should take care to ensure their contracts are structured so they can own individual assets without assuming responsibility for their operation, or behavior, in orbit, which carries significant financial and litigation risks.