Funding into space tech start-ups grew 198 per cent y-o-y in 2021

Indian space technology start-ups are soaring new heights. Funding into this sector jumped 198.67 per cent in 2021 touching $67.2 million across 11 rounds, up from $22.5 million in 2020 across nine rounds, according to data accessed from Tracxn.

Top space tech start-ups to raise funding last year include satellite-based services and applications start-ups Pixxel, Astrome and Dhruva Space. Space launch vehicle manufacturing start-ups AgniKul and Skyroot, too, were among the top ones to raise funds. Pixxel is the highest funded start-up among all.

Not just in terms of funding, according to the Economic Survey 2022, 2021 saw 47 new spacetech start-ups launching in the country, up from 11 in 2020 and seven in 2019. This took the total number of active spacetech start-ups in India to 101.

The industry experts credit the opening up of space sector to private companies through a slew of policy changes by the government proposed in mid-2020s as the key factor to enable this funding rush.

“We have started seeing a few successes in the spacetech sector globally, especially with SpaceX. A lot of these early-stage funding is also trickling down from there. The FDI flowing in India gives a lot more confidence about the sector as the Indian space industry already has so much of heritage. The acceptance by the government in mid-2020 with the announcement of opening up the space sector to the private sector companies happened which led to this funding jump,” Awais Ahmed, Founder and CEO, Pixxel told BusinessLine.

Pixxel will be launching its first phase of satellites with ISRO’s launch vehicles in the next few months. The company is currently focussed on providing satellite-based Earth imaging solutions for the agricultural sector. The start-up is already working for 50 plus clients globally, using drones to provide solutions at the moment.

Jatin Desai, Managing Partner, Inflexor Ventures which has invested in propulsion systems start-up Bellatrix Aerospace said, “This is not a one-year phenomenon, it has developed over the past few years. Overall, the global trend of privatisation of space tech and the NASA model of having their core functions and then outsourcing certain technology and parts from other companies. So, participation of private sector in space tech is complimenting bigger government programmes worldwide especially in the developing countries.”

“India has been well-known for its cost-effective missions through ISRO, additionally last year the government took notice of the sector and started working on policies which will boost the space. This had created more funding,” he told BusinessLine.

Shortage of funds

“Right now, we require clarity and finalisation of these policies. Policy assurance is very critical for this sector to develop. The second issue that needs to be looked into is the clarity on FDI forces. When these start-ups go to the second level of development, the requirement of funds will be higher. Each company will be looking at $10-20 million in funding and that necessarily won’t come entirely from within the country,” Lt Gen. A.K. Bhatt (Retd.), Director-General, Indian Space Association ( ISpA) told BusinessLine.

Ahmed concurred, “Funding is still an issue with the Indian space tech start-ups. Early stage investing in this sector has opened up very well. Most of these are Indian funds which have put in money, but in the later stages where the start-ups have to raise tens and hundreds of millions of dollars, there is still lack of options here in the country, that money needs to brought from abroad.”

Bhatt added that a majority of these start-ups in India are working in the upstream segment, developing launch vehicles, satellites, propulsion engines, remote sensors etc., but he expects that foreign funding is largely going to come in for the downstream players.

“Downstream start-ups aren’t many in India. That’s where the global funding will happen — for applications. While communication use cases are quite developed, the other applications involving remote sensing, IoTs, satellite solutions to name a few, is where we are hoping to see more players,” Bhatt said.