Investment

Is space investing the final frontier for family offices?

Family offices led by Louis Bacon’s Moore Strategic Ventures have played a key role in raising $1.4 billion for Sierra Space, top of a fourth quarter VC fundraising table compiled by investor Space Capital. 

According to the data, Sierra was easily the top space sector fundraiser in Q4, ahead of the $337 million in institutional funding raised by Elon Musk’s SpaceX. 

In a year when global VC inflows spiralled to $621 billion, against $294 billion in 2020, Sierra’s fundraising was the ninth-largest in the US

Planet Labs, a satellite service provider, came third with $250 million raised through a SPAC, whose backers included Time Ventures, led by Marc Benioff of Salesforce, and the Koch family. ABL Space Systems, backed by Fidelity, was fourth with $200 million. OneWeb, backed by the UK government and billionaire Sunil Bharti Mittal, came fifth with $164 million, raised from Hanwha Systems of South Korea

Sierra was the biggest fundraiser over calendar 2021, ahead of the $1.2 billion raised by SpaceX over two rounds. The year 2021 saw $17.1 billion invested in a record 328 space companies, according to Space Cadet.

It has warned, however, that new records are unlikely in 2022, with interest rates set to rise. So far in 2022, space stocks have been on the slide. But two family-backed groups Helios Capital and Exor Seeds backed Radian, which says it’s building the world’s first truly reusable orbital aerospace vehicle just this week. 

Moore Strategic, best known for backing nuclear fusion, is Family Capital’s investment office of the year. It invested in Sierra alongside other family offices, which have not been named. 

Other Sierra investors included BlackRock, General Atlantic, a private equity firm backed by several family offices and Coatue, a large tech investor run by Philippe Laffont 

In a year when global VC inflows spiralled to $621 billion, against $294 billion in 2020, Sierra’s fundraising was the ninth-largest in the US. Self-driving car company Cruise, backed by Walmart, had the biggest $2.75 billion fundraising worth $2.75 billion. 

The success of the fundraising can be largely explained by the backing provided by holding company Sierra Nevada, a multi-billion dollar company owned by Turkish born US immigrants Fatih and Eren Ozmert. 

Sierra Nevada has won big contracts to develop kit for Nasa and the US Department of Defence. Like Boeing and Rockwell it sees a massive opportunity to win contracts for space equipment as well.  Commercial contracts have lifted the notional value of SpaceX to $100 billion. 

The Olmerts can also talk to billionaires on equal terms. Sierra Space is already funding space planes called Dream Chasers to develop revenues from low-orbit research and commerce. It has a contract from Nasa to ferry crew and cargo to the International Space Station. The company also plans to develop space stations in a joint-venture with Blue Origin, the space tech company led by Jeff Bezos. 

It dreams of building space taxis and spaceships that can travel to the moon, Mars and back. But Elon Musk has the ambition to do the same. His new Starship rockets have the potential to achieve a trip to Mars. 

Billionaires can be fascinated by space. Jeff Bezos travelled on a flight to the edge of space with his Blue Origin in 2021, as did Sir Richard Branson, a would-be provider of space tourism through Virgin Galactic. Mark Zuckerberg backs Yuri Milner’s Breakthrough Initiatives which wants to use pulses of light to power small space probes to Alpha Centauri. 

Costs in the sector have fallen dramatically in value, thanks to new technology and competition. Relativity, which raised $650 million in June, is convinced it can build rockets through 3D printing without using a single human engineer. Rocket Lab, backed by Bessemer Venture Partners, has offered launches for a bargain $6 million. Virgin Orbit, which raised $160 million from a SPAC in June, believes it can offer a quicker service by launching them from an aeroplane.

Space, of course, comes with its own special risks.  A disaster that costs lives, for example, would have an extremely damaging impact on the sector. 

China’s claim that Elon Musk’s satellites nearly damaged their space station in 2021 acts as a reminder that big power rivalry can be a threat to operators, particularly in low orbit, where traffic is increasing.

But many billionaires would take the view that the emotional, and financial, reward from success in space would make such risks worth taking, given that governments are only too keen to help pay their way.

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