Space Startups in US See $1 Billion Investment Jump in Second Quarter

WASHINGTON, July 15, 2025 — Buoyed by strong demand from the defense sector, investors in the space startup ecosystem have recently set aside concerns about a potential slump driven by possible U.S. federal budget cuts.

Rising geopolitical tensions and countries’ growing reliance on mapping and satellite imagery have brought renewed attention to companies operating in the space sector.

With a $1 billion increase in the second quarter, compared to the first quarter, space startups in US attracted $3.1 billion investment in the Q2, according to a report by the VC firm Seraphim Space.

Notably, space startups garnered $2.1 billion investments in the first quarter.

In the first quarter, the looming Federal budget cuts, proved to be a dampener, as funding for space startups dropped 12.5 percent.

However, globally, the number of deals in second quarter grew to 171, registering a 36 percent growth compared with the first quarter.

With a 12 percent increase, investments in space startups, stood at $8.1 billion in the last financial year, as the number of deals in Europe rose nearly 50 percent in the first quarter.

This sharp growth was attributed to bigger European Union budgets and a new focus on self-reliance.

Experts expressed concern over Elon Musk-led Department of Government Efficiency and the Trump administration, delaying or cancelling contracts across its agencies to curb federal spending.

“More protectionist trade policies could slow development in the short term, as many advanced space technologies, from propulsion systems to high-performance materials, depend on global supply chains,” former NASA Division Chief Robert Ambrose told Reuters.

As the world is surrounded by economic uncertainty, commercial spaceflight and space technology companies are forging partnerships, leading to cost-effective missions, said Ambrose, who is also Chairman at Alliant Robotics.

The nature of collaborations has witnessed a major shift, as companies are now more critical partners.

Growth Factors

Both internal and external factors contribute to the growth of space startups.

The government contracts have been a major source of investments for the space startups.

Flagship defense initiatives of the US government, especially Golden Dome missile defense program, has bolstered investor optimism in the space sector.

The $ 175 billion government initiative, has led to new deals and collaborations among leading companies, according to the report.

“Given today's geopolitical climate, the pull from defense is strong, and founders are responding,” Seraphim Space investment analyst Lucas Bishop told Reuters.

Drawing maximum investment, capital-intensive companies, which make and operate space hardware such as rockets and satellites are driving the momentum.

Space Startup Deals

A strong stock performance of space companies such as Rocket Lab and Redwire late last year, was followed by Voyager Space going public in January, while Karman Holdings listed in February.

The first quarter saw the two largest fundraising rounds from Stoke Space and Loft Orbital, together bringing in $430 million.

Global investments in startups, varied from early stage to growth stage, and surged to $3.1 billion in the quarter ended June 30 from $2.1 billion in the first three months of the year.

Notably, Series B and C funding rounds accounted for a record 65 percent of total investment, pointing towards a strong investor confidence in scaling early-growth space ventures.

The biggest deal of the second quarter, involved US-based Impulse Space, which raised $300 million in a Series C round.

Impulse Space designs, manufactures, and operates in‑space transportation vehicles.

The growing investor confidence in national security-related space ventures has grown over last few years.

Countries around the world have increased defense spending, which rose to $2.46 Trillion in 2024, a 7.4 percent increase in real terms from $2.24 trillion in 2023, according to the Military Balance 2025 report.

This signifies an ongoing acceleration compared to growth rates of 6.5 percent in 2023 and 3.5 percent in 2022. Defense expenditure as a share of global GDP also increased, reaching 1.94 percent in 2024, up from 1.80 percent the previous year.

The number of deals in second quarter grew about 36% to 171, compared with the first quarter globally.

Inputs from Saqib Malik

Editing by David Ryder