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Preamble
Over the years, there has been a lot of talk and discussion about how much space tech companies have raised, and whether we have peaked, but I have yet to come across a report that is only focused on investment trends in EO.
In the last few years, EO has been the segment with the highest deal volume in the space industry - not by volume of venture capital investment1, but by number of venture capital deals2.
But, the EO sector does not get the attention and analysis it deserves, especially with an outlook on what is best for the future of EO, from an independent perspective- this briefing is an attempt to change that.
In this piece, we will look into the investment trends in EO - by segment, growth stage, market vertical, and geography. We will then look into why some segments receive more investments than others and discuss some outlook for what to expect in the EO sector in 2024.
A few disclaimers before we get into the analysis:
- Only funding from venture capital and growth equity rounds are included, which means debt financing, government contracts or grants are not.
- Companies in the fringe, which include companies in the space industry supplying components or subsystems, for whom EO is just another market segment are not included in the analysis.
- The performance of publicly traded EO firms ($PL $BKSY, $SPIR, $SATL) is not included in the analysis, this is specifically focused on private funding.
Here is what we have in store for this briefing:
EO Investments in 2023
By Segment
Evolution of Funding Through 2023
Largest Rounds, by Volume
EO Investments: 2023 vs 2022
By Region
By Growth Stage
Outlook for 2024, by Segment
Data
Platforms
Analytics
Insights
Applications
M&A Activity
Looking Back at 2023
Looking Forward to 2024
EO Investments in 2023
By Segment
The total investments in EO for 2023 are estimated to be $1.9B, with Data and Application segments contributing to 95 per cent of the overall funding raised. Without the Application segment, which is typically not considered part of the EO sector, the total investment is about $664M, largely dominated by funding from companies in the Data segment.
Key Takeaways:
The overall funding for satellite EO companies has predictably decreased (vs 2022), but there is a significant increase in the number and funding for downstream application firms that use EO data.
The intermediary segments - Platform and Analytics - continue to be overlooked by the venture capital world, receiving less than 3 per cent of overall funding, which can be attributable to two reasons:
Most platforms are essentially marketplaces, which tend to be low-margin businesses, especially at the current levels of scale for EO data. While the Platform segment is undergoing an evolution across data management, distribution and processing categories3 , the demand for such platforms (whatever they might offer) is not yet fully established.
Some platforms are really custom, project-based consultancies disguised as a scalable, product-based business. While this is a result of a combination of a lack of understanding of the value of EO for several use cases, aka unvalidated demand and unstructured public funding mechanisms that create zombie platforms, one of my many theses is that, we might see the emergence of some vertical-specific platforms that enable some EO tasks for some selected EO applications, not all EO tasks for all EO applications (i.e. platforms good at some things, not all things ).
The Insights segment is simply EO companies that desperately try to find product-market fit within a specific vertical, to graduate to becoming an Application company. This segment usually does not get a ton of funding, as the number of EO companies that are not project-driven solution providers or public funding-dependent consultancies is simply too few.
Finally, the Analytics segment, which includes companies that convert satellite data into usable information that can be applied to several use cases, will most likely be disrupted by open-source tools and libraries such as Meta’s Segment Anything Model for object detection and IBM’s open-source geospatial AI foundation model, making this segment not very interesting for private funding. Any company that develops proprietary analytics will use that as a pathway to building an information product applicable to a specific use case (aka the Application segment).
