[Via Satellite 08-27-2015] The European space industry is soon to gain a boost in venture capital once the London-based Seraphim Capital launches the Seraphim Space and Special Situations Fund during the fourth quarter of this year. The venture fund, which recently partnered with the European Space Agency’s (ESA) Advanced Research in Telecommunications Systems (ARTES) applications program, is poised to accelerate startup and small business activity within the U.K. space industry.
“The economics of space have changed significantly in the last few years and that change is accelerating,” Mark Boggett, managing director of Seraphim Capital, told Via Satellite. “The reason we are thematically focusing our new fund on space is that we now consider that space technologies can be evaluated side by side with their terrestrial counterparts. We consider the corporate venture fund model adopted by Seraphim Space further lowers the risk through the access to the corporate evaluation resources and capabilities.”
Seraphim Capital’s space fund totals $136 million, and has backing from European industry titans Thales Alenia Space, Airbus Defence and Space, Telespazio, Com Dev International, and e2v. The U.K. Space Agency is also supporting the fund along with Avanti Communications. Former U.K. Minster David Willets tasked Avanti’s CEO David Williams with addressing the lack of risk capital in the U.K. space sector. Williams, whose company recently financed in full its fifth spacecraft Hylas 4, engaged the venture community to identify a suitable fund manager, leading to initial discussions with Seraphim in early 2014, and now culminating in the Seraphim Space and Special Situations Fund.
The new fund fills a void for budding European entrepreneurs, according to ESA’s Head of Integrated Applications, Amnon Ginati. The agency’s Integrated Applications Promotion (IAP) program focuses on the seeding and development of space applications and services to support growth in the commercial space sector.
Ginati told Via Satellite that ESA has assessed 168 projects for their potential Return on Investment (ROI), of which a third were generating revenues and more than half were delivering operational services. Nine projects/companies have already received private financing from a variety of investors, he said, but more capital is needed.
“There are limitations on the scope and the support that IAP, other ARTES programs, and ESA can offer. The scarcity of other private forms of funding in the space industry has meant that many startups backed by ESA struggle to grow once grant-funding ends. ESA’s involvement with the Seraphim Fund will help to accelerate deal flow and the fund will help to ensure that the commercial potential of candidates can be thoroughly vetted and market rollout will be supported,” he said.
Boggett said the fund will focus on both upstream and downstream space technology opportunities, and will also consider the broader “space-enabling” ecosystem. This, he said, encompasses a vast range of technologies that could benefit space, such as Artificial Intelligence (AI), robotics, and new materials. Boggett expressed strong interest in the fusion of terrestrial technology with space-based applications and services.
“To give the fund a clear focus, we are developing a range of long term investment themes working closely with the space corporate backers. As the fund manager, we will proactively source investment opportunities within each of these themes. As opportunities are identified, our corporate backers will help us evaluate, providing assistance with due diligence, potentially leading to proof of concepts for the technology, [and] potentially then becoming customers and/or partners,” Boggett explained.
Boggett added that Seraphim anticipates corporate backers will take up the opportunity to invest selectively alongside the fund according to their own interests in future investment rounds. The venture firm plans to enlist other seasoned industry leaders to join the boards of investee companies.
“To complement the fund, we are looking to develop a Seraphim network of ‘would-be’ Non-Executive Directors (NXDs) drawn from the ranks of senior executives within the space industry. Recognizing that many of these executives won’t have specific non-executive experience working with fledgling technology businesses, we will be holding regular seminars to share best practices — to help them develop appropriate NXD skills. As this network of space NXDs grows, it will become the fund’s eyes and ears, helping with the origination of proprietary investment opportunities, assisting with the recruitment of senior executive hires, as well as filling out NXD and consultancy openings within the portfolio,” he said.
When evaluating companies to invest in, Boggett said the first thing he looks for is the reason why the founded their business. He also gauges their history, aptitude, willingness to learn from others, and devotion to their vision.
“Being a founder demands commitment and dedication,” he said. “If they’re ambivalent or mildly enthused about their product or service, that’s not going to sustain them through the highs and lows that will inevitably occur. An unwavering passion is key.”
The Seraphim Space and Special Situations Fund is focused predominantly on U.K.-based companies. Boggett said the fund will consider overseas companies that have, or plan to have, operations in the country, and that even with a domestic prioritization, all of the businesses Seraphim will invest in will have a global focus “without exception.” ESA’s Ginati praised the combination of public, private and university knowledge and investment as one of the best ways to reduce risks to an acceptable level for investors and enable commercial success, particularly for Small to Medium Enterprises (SMEs) and startups. He hinted that the Seraphim Space and Special Situations Fund could be a model for the future.
“If this partnership proves effective and efficient in supporting our industry in the commercial market roll out function, it can be extended financially and geographically across Europe,” he added.
Boggett said enthusiasm for investing in space in Europe remains considerably lower than in the United States, but pointed to ESA’s IAP as an example of growing interest. Seraphim stands to further galvanize investment.
Juliet Van Wagenen contributed to this article.
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