Alternative Market Briefing

This growth fund is well positioned for beginning of space technology supercycle

Thursday, June 08, 2023

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B. G., Opalesque Geneva:

Space is a timely topic for all leaders, global management consultant McKinsey asserts in a March report. Today, the space economy is valued at nearly half a trillion dollars and is growing at about 9% annually. Massive technological innovation is creating the opportunity for more capabilities to be deployed above Earth for the benefit of those on Earth. This creates an imperative for executives: if space isn't part of your strategy, it needs to be.

The space industry is not just about rockets, deep-space exploration and space tourism. Indeed, the combined market share of these segments is less than a few percent, whereas the industry as a whole enables in agriculture, transportation, mining, energy, communication and finance, according to Bogdan Gogulan, CEO and managing partner of NewSpace Capital, a European private equity firm that manages a fund with a focus on space and space-related industries.

"As the impact of digital transformation on the efficiency of the global economy winds down, space offers an opportunity of returning to higher productivity growth rates. The last few quarters of data confirm that we are at the beginning of a space technology super cycle," he says in a recent quarterly document seen by Opalesque.

Furthermore, he continues, rather than "growth at all costs", the space industry helps to fuel more sustainable economic growth at a time when natural capital costs are moving from policy debate to the companies' balance sheets.

For investors, the 65-year-old and more than €400-billion-strong ($427bn) industry offers diversification with limited correlation to a typical portfolio, and exposure to an industry with non-cyclical long-term growth that is well above the wider economy.

Before launching the fund, the senior team of NewSpace Capital had a great deal of experience and expertise in space tech and so understood the extraordinary potential of the space ecosystem, Gogulan tells Opalesque. "Speaking only for myself as the founder of the fund, I'm deeply interested in technology that can change the world. Space tech is at the cutting edge - it's an engine for massive economic and social change."

"We set out to empower our LPs to tap into the growth segment of the €300bn industry that space tech is. Our investments span Earth observation, communication, data analytics, and we aim to give corporates and financial investors the means to hit their net-zero targets and solve global ESG challenges. We are distinct in that we invest in growth-stage companies working to solve fundamental problems."

Gogulan will present the fund at the upcoming webinar, Small Managers - BIG ALPHA Episode 11, on Tuesday 13 June (details below).

NewSpace Capital

NewSpace Capital launched in 2018. In December last year, they announced the first closing of the space-focused growth fund at €105m and the final closing is planned for the end of this year. For now, they have only deployed about 40% of the capital and the value of the assets currently under management is close to €60m.

NewSpace adopts a "pick & shovels" investment strategy, that is, it invests in the supply chain and downstream segments of the market. The manager lowers risk by investing in leading companies with existent revenues and a unique market position and supporting management teams that demonstrate vision, clear strategies and a track record of focused execution.

"We've invested in ICEYE, a world-leading Earth observation satellite business based in Helsinki," says Gogulan. "ICEYE plays a crucial role in providing valuable Earth observation data and associated services. We also have investments in Kayrros, a global environmental intelligence company which supports, amongst other things, the United Nations and the IEA in tackling methane emissions. And we invested in Cailabs, a deep-tech company enabling revolutionary photonic solutions."

"If we look beyond ourselves, total investment in European space tech in the first quarter of this year reached $1.4bn - up 75% from Q4-2022," he adds. "The industry that spans Earth observation, communication and data analytics alone is worth about €300bn. If you include everything, that figure grows to €450bn."

NewSpace Capital is based in Luxembourg and was founded by Bogdan Gogulan and Felix von Schubert. Gogulan has more than 20 years of experience in finance and the communication, security and defence industries. Von Schubert has more than 25 years of experience in private equity, technology investment and operations.

Players in the space ecosystem

The four major categories of players in the space ecosystem, according to multinational professional services network Deloitte, are:

(i) Space companies whose primary business or a major segment of their business is space. These companies build products such as launch vehicles and satellites and/or provide services to consumers from space.
(ii) Government agencies that build, launch, and manage space-based capabilities for national security and scientific research and development.
(iii) Non-space companies that are impacted by space commercialisation and services.
(iv) Academia contributes to innovation through research and development of science and space technologies for future space missions and also plays a crucial role in educating and supplying talent for the industry.

Upcoming webinar:

Small Managers - BIG ALPHA Episode 11

Episode 11 of this ground-breaking live and interactive webinar series presents you with another carefully screened panel of investment managers worth taking a look at.

When: Tuesday, June 13 at 11 am ET (4 pm GMT, 5 pm CET)

Free registration here: www.opalesque.com/webinar/