Seraphim Space launches second VC fund with nine investments already under its belt

Seraphim Space, a UK-based space tech investment group, is officially launching its second venture capital fund after securing its first round of funding with limited partners, including Eutelsat. The early-stage fund aims to establish a global portfolio comprising 30 startups, which will receive backing at the seed and Series A stages.

Mark Boggett, CEO and manager of Seraphim, declined to disclose the exact percentage reached in the fund’s first close or the targeted size, but indicated that it is expected to exceed the £70 million VC fund raised in 2017 (approximately $90 million at the time). Similar to its predecessor, Seraphim’s second VC fund, SSV II, has garnered support from major players in the aerospace sector seeking to stay abreast of innovation.

This time around, Seraphim faces a more competitive landscape as interest in space startups and the broader market continues to grow. A recent report by the World Economic Forum and McKinsey suggests that the space market could reach $1.8 trillion by 2035, up from $630 billion in 2023. The influx of funds willing to invest in space tech includes both generalists and specialists such as Space Capital, Fund, Starbridge Venture Capital, and Starburst Aerospace.

Seraphim aims to differentiate itself through its track record of success. Its first fund delivered returns three times the initial investment, challenging the perception that space investment is excessively risky and long-term. Notably, returns from the previous fund were bolstered by five exits, including the trade sale of chip company UltraSoC to Siemens and four IPOs.

However, the current market dynamics pose challenges for both Seraphim’s portfolio companies and the investment group itself. Seraphim Space Investment Trust (SSIT), the firm’s growth fund, experienced fluctuations in market cap despite successful exits from portfolio companies like ICEYE. As a result, SSIT shifted its focus to follow-on investments rather than new deals due to funding constraints.

Nevertheless, Seraphim leveraged SSIT’s warehouse arrangement to finance investments made by SSV II before its first close. This strategic approach demonstrated to potential limited partners that Seraphim’s investment thesis extends beyond traditional space activities such as launching rockets and satellites.

Wide space

The anticipated market growth highlighted by the World Economic Forum underscores the wide-ranging applications of space technology across various industries.

According to Boggett, space technology serves as an enhancing and facilitating capability for every sector, much like AI. Seraphim’s second venture capital fund, SSV II, is poised to invest in themes that leverage the application of AI to space data. Already, investments in insurtech startup Delos and carbon credit verification platform Renoster demonstrate the potential for impactful solutions to address climate change challenges.

The fund’s focus areas also include in-orbit computing, which holds promise for sectors like agriculture and infrastructure. Aethero, for example, develops edge computers supporting autonomous decision-making in orbit.

Another target area is space-enabled communications, exemplified by portfolio company Hubble Network, which aims to connect a billion devices through a space-based Bluetooth network. The CEO, Alex Haro, brings valuable expertise from his previous ventures.

Microgravity for science represents another investment theme, encompassing endeavors such as orbital drug manufacturing by companies like Varda  Industries. Beyond biopharma, this theme extends to research on new materials with potential applications in various fields.

While defense isn’t explicitly highlighted as an investment theme, Boggett acknowledges its significance within the space tech landscape. He emphasizes that the majority of space companies have dual-use capabilities, but sees greater market opportunities in the commercial sector as they integrate into broader industries.

This story has been updated to clarify that Airbus did not participate in the first close, while Eutelsat did.