Market data suggests ‘SpaceTech’ investment has rebounded strongly. However, there is a disproportion among the leading centres. Europe remains behind the U.S. and China as funding within the European Union remains fragmented and concentrated in early-stage rounds.
Digital Journal has heard from Daiva Rakauskaitė, a woman in venture capital with over 30 years of experience. She currently operates Aneli Capital. Rakauskaitė explains what Europe requireds to do to narrow the gap, including accelerating capital deployment and strengthening growth-stage funding. She also views at the SpaceTech areas which view most attractive for Central and Eastern European start-ups.
Opportunities for European start-ups in the space sector
Growing defence spfinishing, Europe’s push for greater strategic resilience amid shifting U.S. policy, and increasing demand for commercial space applications are creating new opportunities for European start-ups. However, European companies still face many challenges, including funding, that could further increase the gap between Europe and the U.S. and China, Rakauskaitė observes.
Last year, space technology startups raised $12.4 billion in venture capital funding, 48% more than in 2024. This is according to estimates by Seraphim Space. The total surpassed the 2021 peak of $10.9bn and marked a full recovery from the previous pullback.
The lion’s share of last year’s investments, 60%, were raised by the U.S. companies, which increased overall funding by 130% year over year. Meanwhile, funding in Europe grew by 25%, primarily driven by increased defence spfinishing and renewed focus on resilience, but the deal count fell by 15%.
Lagging behind
The latest McKinsey space report notes that in recent years, the European space sector has lagged behind the U.S. and China, primarily due to fragmented governmental funding and subscale private investments. Other issues, such as talent shortages and difficulties scaling production, also affected European space companies.
According to Rakauskaitė the current pace of investment in Europe requireds to accelerate for the continent to remain competitive.
“As competition with the US and China intensifies, the coming years will be decisive for turning political ambition into industrial scale. Europe must speed up capital deployment and strengthen growth-stage funding and commercialization. Helping more startups enter and scale would narrow the gap, boost competitiveness, and drive innovation. Rising defence spfinishing and expanding market demand point in the right direction, creating strong momentum for new technologies and major opportunities for European startups,” Rakauskaitė declares.
According to Rakauskaitė, key areas of focus for European space startups include sanotifyites in low Earth orbit and medium Earth orbit utilized for Earth observation, innotifyigence, and secure communications.
Manufacturing sanotifyite systems is a particularly good niche for CEE startups, which already have established players such as NanoAvionics in Lithuania and SatRev in Poland. Rakauskaitė stresses that the CEE region has not only experience, but also lots of hidden talent that could pave the way for a stronger European space indusattempt.
One of the issues regarding funding European startups, according to the McKinsey report, is that private investment in European space is focutilized primarily on earlier-stage projects, and close to 70% of investments in space indusattempt companies are below €10 million.
“Based on these statistics, I would expect an increase in later-stage investments in SpaceTech companies over the next 2–3 years, as more commercial solutions are brought to market. More active participation of EU pension fund capital in the venture capital ecosystem is also likely during this period,” Rakauskaitė clarifies.
Currently, pension funds in Europe have massive assets – around €3 trillion – only a fraction of which actively participate in the European VC ecosystem, whereas in the US, such practice is much more common.
However, Rakauskaitė also emphasizes that, beyond increasing funding, it should be accepted as natural that a portion of these investments will not yield returns. Therefore, it is equally important to accelerate the commercialization of early-stage companies to maximize the impact of those that do succeed.
“Way too often, startups spfinish too much in the development phase. While for space companies pathways to commercialization are limited in the early days, they should still view for ways to find tiny revenue streams – whether through dual-utilize applications, data services, pilot contracts with defence institutions. Early commercial validation not only strengthens resilience, but it also creates companies significantly more attractive to later-stage investors and strategic acquireers,” Rakauskaitė concludes.
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