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Matthias Knab, Opalesque for New Managers: When Opalesque first spoke with Bogdan Gogulan, CEO and Managing Partner of NewSpace Capital, in 2023, he described the sector as being at "the beginning of a space technology super cycle." Three years on, the macro backdrop has moved decisively in his favour, Fund I is delivering, and the firm is raising its second fund.
"A lot of things happened," Gogulan says. "On the macro side, there is clearly very strong momentum for the space sector."
B2G, B2B - and now B2C
Part of that momentum comes from governments. Sovereign defense capabilities and the strategic importance of space are now part of mainstream public debate. But Gogulan points out that the commercial side is accelerating too.
"On the B2B part of the market, there is continuous growth that is accelerating," he says. "More and more, the insurance industry, energy, transportation, agriculture and other industries are using space-enabled products and services."
There are a number of new entries on the consumer side. "There are now new applications covering and entering B2C for the space sector which are expected to gain significant importance in the coming years," Gogulan says. Starlink is the obvious example, with households buying and using it at home. Direct-to-device connectivity is developing, and a number of applications now bring earth observation data to people's phones, letting them buy and use satellite images. "Overall, the space sector is growing, and that growth is accelerating."
Sticking to the picks and shovels
NewSpace Capital has not changed its approach. "We are sticking to our guns: giving investors access to the growth of the space industry without taking on the extra risks," Gogulan says. The firm continues to focus on the ground side of the space business and on enabling technologies.
From the start, the aim was to back category leaders. "Every single company in the portfolio is definitely a category leader, from ICEYE and K2 Space to CesiumAstro and Cailabs," he says. The common thread is companies that solve significant technical bottlenecks as space moves "from the cottage economy into the industrial economy" and faces the manufacturing challenges that come with scale.
The approach is showing up in the numbers. "The portfolio is doing really, really well," Gogulan says. "In our vintage, we are top couple of percent, if not the top percent, both on TVPI and on IRR. We also had early DPIs to our investors. So the LP community is happy, which also helps with the fundraising for Fund 2, which we're doing right now."
LPs no longer need the macro pitch
The fundraising conversation itself has changed. "Before, we had to explain why people should think about a space allocation. Now we don't have to have that conversation. We just have to explain our strategy," Gogulan says. "More and more investors are actually coming to us and saying: we are looking at investing in space. Clearly, space, defense and AI are the three areas that are growing, and investors are looking at how to tap into this."
Two-thirds of the capital, under 15% of the market
Yet despite the inflows, Gogulan argues that the sector remains significantly underinvested, and that much of the capital it does receive is misallocated. Roughly two-thirds of investment goes into just two segments, launch and in-space infrastructure. Together they account for less than 15% of the market: launch about 1%, and in-space infrastructure roughly 10% to 14%.
The underserved areas are ground infrastructure, the supply chain, downstream applications and specific parts of the value chain. Many of the supply chain challenges also overlap with terrestrial industries. "The solutions work for space and non-space," he says. "That gives further diversification, a larger market and faster scaling of the businesses."
The concentration has consequences for pricing. "The valuations that we see in launch and in-space infrastructure versus the valuations that we see in the supply chain - the difference is astronomical," Gogulan says. "For the sector, this is not particularly good. But the educated investor - and we consider ourselves to be one - can take advantage of that."
"Space is not an industry, it is a geography"
The biggest remaining challenge, in Gogulan's view, is education. "There is still a lot of misconception about the sector, a lot of misunderstanding," he says. The analogy NewSpace Capital uses constantly is that space is not an industry but a geography. "The moment people integrate that into their thinking, it's easier for them to comprehend. It's not one industry. There is in-space infrastructure that serves multiple industries - telecommunications, agriculture, energy, insurance, finance - and every one of those industries has a space component."
Those space components are still small. "Even for telecommunications, which has the largest in-space component, it's about 4%. So it's tiny. There is huge room for growth," Gogulan says. Investors who connect the dots from the supply chain to these traditional industries, and understand why the demand is scalable and consistent, will think about space investments differently, he argues. That, in turn, should help correct the misallocation of capital.
The SpaceX effect
Asked about SpaceX, Gogulan focuses less on the company's valuation than on its effect on the ecosystem. SpaceX first provided reliable and consistent access to space. Its IPO has now "demonstrated to the wider market that space is definitely an investable asset class."
The IPO has also turned many SpaceX employees into millionaires, and some of them are leaving to invest in space or found space companies of their own. "SpaceX kind of came out of the PayPal Mafia, but right now there is the emergence of a SpaceX Mafia," Gogulan says. NewSpace Capital has already invested in companies founded by SpaceX alumni, with K2 Space the obvious example. "The ecosystem that SpaceX created is growing and definitely has a significant galvanizing effect for the sector."
Watch the replay of Bogdan Gogulan's presentation at the Opalesque Small Managers - BIG ALPHA investor workshop here. Read our previous coverage: This growth fund is well positioned for the beginning of a space technology super cycle.
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