Today’s space industry landscape features scores of relatively new players from all corners of the globe bringing a different mindset to the development and application of space capabilities. But many if not most of these newcomers share at least one thing in common with the large aerospace contractors that once dominated the sector: a keen interest in government markets.
The immense spending power of the U.S. government has long been the biggest factor, but in recent years national security and sovereignty concerns have boosted activity in other regions, notably Europe. There, the war in Ukraine and American demands for higher contributions from its NATO partners are driving increased spending, and this has begun to flow to the region’s space startups.
“The space sector has been government-driven since its inception.” —Alexandre Najjar, Novaspace
“The space sector has been government-driven since its inception, so this is nothing new,” said Alexandre Najjar, managing consultant at Novaspace, a market research firm specializing in space. Some companies do have business models primarily focused on commercial markets, but that sector is more fickle, he said.
The Rise of a New Guard
It wasn’t necessarily government contracting opportunities that gave rise to vibrant startup space sector in the last 15 years. Rather, Najjar cited a potent combination of venture capital, the success of one investment beneficiary—SpaceX—in bringing down launch costs, and advances in software, standardization and electronics miniaturization, all coming together in a perfect storm of sorts to reshape the sector.
While the United States continues to lead the way in investment and startup activity, the industry’s reach has spread to some seemingly unlikely places: New Zealand, Finland, Bulgaria, Argentina—the list goes on.
According to the venture capital firm Space Angels, investors of all types have sunk $345.2 billion into the space industry since 2009. While U.S. tech-billionaire-founded startups like Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin have garnered outsized shares of that total, the funding has been spread among more than 2000 unique companies, often in chunks of tens or hundreds of millions of dollars.
The number of governments investing in space increased from 61 in 2009 to 94 in 2024.
Meanwhile, the number of governments investing in space increased from 61 in 2009 to 94 in 2024, Najjar said. Countries in the oil-rich Middle East account for a large share of the dollar total, but governments in places like Sub-Saharan Africa and smaller Asian countries also are getting into the act, he said.
Keying on the U.S. Defense Market
While the newcomers have a different provenance than traditional aerospace prime contractors, they are increasingly focused on the same market: governments, and defense agencies in particular.
While the newcomers have a different provenance than traditional aerospace prime contractors, they are increasingly focused on the same market: governments, and defense agencies in particular.
Here again, the United States leads the way in spending, which is why so many startups from different countries are establishing U.S. operations to gain access to that market. Two examples are Finland-based ICEYE, operator of the world’s largest fleet of synthetic aperture radar (SAR) satellites, and Belgium based satellite manufacturing startup Aerospacelab.
ICEYE, which has raised more than $500 million to date, operates nine satellites dedicated to the U.S. government market in addition to its current commercial fleet of 20 to 30 operational spacecraft, according to Joost Elstak, the company’s vice president of operations. “For regulatory reasons, we have to keep [the U.S.] fleet separate,” he said, describing it as a dedicated, turnkey constellation for the customer.
The strategy appears to be paying off. In April 2023, ICEYE announced it had signed a five-year blanket purchase agreement with NASA to supply SAR data for evaluation to determine its suitability to the U.S. space agency’s scientific objectives.
Aerospacelab, meanwhile, in Sept. 2024 opened a 35,000-square-foot satellite manufacturing facility in Torrance, Calif., designed to address what the company calls a growing U.S. customer base. With the capacity to produce 25 satellites per year, the Torrance factory will open doors to markets that previously were out of reach, said Tina Ghataore, CSRO of Aerospacelab.
“It’s a clear statement of our long-term commitment to this powerful market,” Ghataore said.
European Government Sector Heats Up
But the bigger near-term opportunity for Aerospacelab is closer to home: the European Union’s planned 290-satellite, multi-orbit Iris2 constellation. Aerospacelab, which is building a satellite mega-factory in Charlteroi, Belgium, and recently announced $110 million in fresh financing, is reportedly a finalist, along with multinational conglomerate Airbus, for the (LEO) Earth orbiting portion of the constellation.
“With a 500-satellite-per-year capacity, we’re targeting sovereign constellations, defense and intelligence missions, Earth observation, and telecommunications architectures requiring persistent global coverage,” Ghataore said. “We see growing demand from both institutional and commercial sectors for custom constellations that blend reliability, autonomy, competitive costs and secure control—that’s exactly where our model excels.”
“We see growing demand from both institutional and commercial sectors for custom constellations that blend reliability, autonomy, competitive costs and secure control.” —Tina Ghataore, Aerospacelab
ICEYE, which has yet to announce a major U.S. defense contract, is getting traction in European military and intelligence markets, Elstak said. In June, for example, the company announced it will be providing cloud-penetrating SAR imagery to NATO under the Alliance Persistent Surveillance from Space Initiative, its second such deal with the alliance in 2025.
Interest in ICEYE’s SAR technology extends beyond data: The company recently signed contracts to supply turnkey satellites to be operated by the Netherlands and Portuguese air forces, while the Finish government has signed a letter of intent to make a similar purchase. Another customer, Poland, ordered three ICEYE satellites in May and more recently agreed to invest $11 million in the company, according to numerous news reports.
Getting to Where you Want to Go in Space
Launch, particularly for small satellites, is by most accounts another saturated sector, but that has not stopped the flow of investment to small launch vehicles.
Isar Aerospace of Munich, Germany, for example, has raised more than $500 million to date, including a $175M convertible loan from global investment conglomerate Eldridge Industries announced in June. The company, which operates out of Norway’s Andoya launch facility, is building a solid book of business despite the March failure on the inaugural mission of its two-stage Spectrum rocket.
“We’re sold out for next year and parts of 2027,” said Stella Guillen, Isar’s chief commercial officer. Customers include the Norwegian Space Agency, Airbus, Japan’s Elevation Space, Bulgaria’s EnduroSat, and Italy’s D-Orbit, she said.
A growing demand driver for Spectrum is the national security market, Guillen said. “In last nine months we’ve seen more defense and dual-use opportunities different parts of world,” she said.
“In last nine months we’ve seen more defense and dual-use opportunities different parts of world.” —Stella Guillen, ISAR Aerospace
That includes Europe, where the war in Ukraine is helping to drive up defense budgets, Guillen said. Isar has begun to get traction in the Asia-Pacific market and has signed at least one U.S. customer, she said.
One of the biggest challenges for small rocket makers is SpaceX, whose rideshare program aboard its medium-lift Falcon 9 rocket has captured a large share of their target market.
But Guillen said there is a place for dedicated small rockets.
“We have a good chance to be successful with customers going to a specific orbit at a specific time,” she said. “Rideshare programs are great, but they don’t necessarily take you to where you want to go.”
Meanwhile, Isar is busy gearing up for its next mission, which the company hopes will happen before the end of the year following tweaks based on lessons learned from the failure, which occurred about 30 seconds into the flight. The issue was loss of attitude control leading to a series of unintended events that ultimately triggered the vehicle’s flight termination system, Guillen said.
The failure was software- rather than hardware-related, Guillen said, which enables the company to bounce back more quickly.
While some small rocket makers are moving up the food chain to medium-class vehicles, Isar’s focus—at least for the time being—is getting Spectrum up and flying on a regular basis, Guillen said.
The vertically integrated company has big hopes for the future. Already it is building a new factory capable of producing 30 to 40 rockets per year, Guillen said. “We have a good recipe right now for success,” she said. “Now we have to focus on launching.”
Staying Ahead in a Crowded, Competitive Marketplace
With so many new companies in the sector, it is not possible for all of them to succeed, even if demand remains strong, according to Novaspace’s Najjar.
“Both for satellite manufacturing and launch of satellites and subsystems, it’s much more diverse and fragmented than it used to be,” Najjar said. “That means its more competitive as well—less profitable and sustainable than it used to be because the market shared among more players.”
For their part, ICEYE, Aerospacelab and Isar are unfazed.
Ghataore said Aerospacelab’s constellation-focused, vertically integrated and industrialized manufacturing approach will help it stand out. “Our blend of agile European engineering, end-to-end control over manufacturing, and now transatlantic production capacity allows us to respond to customer needs with unmatched flexibility,” Ghataore said.
Similarly, Guillen cited Isar’s vertical integration—to which many have attributed SpaceX’s success—and modern, scalable manufacturing as competitive advantages. “We’re not just building the machine, we’re building the machine behind the machine,” she said.
For ICEYE, which has taken a leading if not dominant position among SAR providers, it’s all about continued innovation, leveraging technologies like artificial intelligence, Elstak said. “As a deep tech company, if you’re not infused with AI you’re not going to succeed in the next couple of years,” he said.
As an example, Elstak cited a critical non-defense market for ICEYE: flood monitoring. By combining advanced analytics with its frequent satellite revisits, ICEYE can anticipate flooding before it happens. “We can capture the rise, providing a richer data set and better predictions,” he said.
There have been some casualties among the new industry players, and this attrition is likely to quietly continue with so many companies chasing the same markets with the same products.
Nonetheless, there have been some casualties among the new industry players, and this attrition is likely to quietly continue with so many companies chasing the same markets with the same products, Najjar said. “Companies don’t issue press releases—they tend to go down silently,” he said.
In the coming years, Najjar expects to see a lot more consolidation across the space industry in general. The example he cited is the once-unthinkable merger of global geostationary satellite operators Intelsat and SES, driven at least in large part by competition from SpaceX’s Starlink LEO broadband service. “That’s just the tip of the iceberg,” Najjar said.
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