Space Investing Goes Mainstream: VCs Tackle Rocket Science Challenges

Five years ago, investor Katelin Holloway embarked on what she considers a “literal moon shot” investment. As a founding partner at the generalist venture firm Seven Seven Six, she admits that she and her team were entirely unaware of the reusable launch technology from the rocket company Stoke Space during their pitch. “We recognized that we weren’t specialists,” she recalls.

Since that time, Holloway has also invested in Interlune, a company focused on extracting helium-3 from the moon to be sold on Earth for applications in quantum computing and medical imaging.

Holloway is aware of the skepticism surrounding such initiatives. Still, her journey from a novice in the space sector to an investor reflects a broader trend in venture capital, where individuals lacking aerospace engineering backgrounds are increasingly funding space startups. By July, global venture capital investment in space technology reached $4.5 billion across 48 companies, which is more than quadruple the amount raised by space startups in 2024, as reported by PitchBook.

What’s fueling this trend? Primarily, companies like SpaceX have dramatically reduced launch expenses, making space more accessible for founders with application-driven business models. “As a species, we are on the brink of making space a part of our everyday lives,” Holloway mentioned on a recent episode of TC’s StrictlyVC Download podcast. “I truly believe that the world is not fully aware or prepared for this.”

This evolution enables VCs to expand their focus beyond companies creating rockets to include startups utilizing space-based data and infrastructure for innovative applications such as climate monitoring, intelligence gathering, and communications. Investments are also directed toward orbital logistics, in-space manufacturing, satellite servicing, and lunar infrastructure development. New ventures like Interlune exemplify this emerging category. For investors like Holloway, the appeal often lies at the intersection of “space tech and climate tech”—startups working to ensure that the environmental errors of Earth are not repeated in space.

Geopolitical uncertainties further amplify interest in defense-related space startups, as China’s rapid advancements in space technology lead to increased investment from the U.S. Venture capitalists, typically risk-averse, find comfort in defense funding, given the U.S. government’s role as a stable customer and validator of new technologies. At the Department of the Air Force Summit in March, Defense Secretary Pete Hegseth remarked, “It’s undeniable that the next major domain of warfare will be in space.”

This year alone, several U.S. defense-oriented space startups have secured significant funding, such as True Anomaly, a military-focused orbital systems developer that raised $260 million in a Series C round led by Accel in July; and K2 Space, a satellite manufacturer currently engaged in its first government project, which obtained $110 million in February from Lightspeed Venture Capital and Altimeter Capital. The defense aspect enhances the attractiveness of space investments, even if they might initially appear too risky. Holloway also emphasizes that helium-3, which Interlune aims to extract, has national security implications, such as monitoring nuclear weapon movements.

Artificial Intelligence is also driving this momentum, especially at the intersection of geospatial analytics and intelligence. In March, Fire Sat—a collaboration between Google, nonprofit Earth Fire Alliance, and satellite developer Muon Space—successfully launched its inaugural satellite designed for wildfire detection from orbit. This project aims to deploy over 50 satellites dedicated to wildfire detection. Additionally, Earth imaging company Planet Labs has teamed up with Anthropic to analyze Earth observation data.

Interestingly, the timeline for returns on these investments has unexpectedly shortened. While traditional space firms often required decades to yield returns, current investors believe they can achieve liquidity within the standard 10-year fund lifecycle. “Our fund model hasn’t changed; we still operate on a 10-year horizon,” Holloway states. “We wouldn’t have pursued this investment if we didn’t believe we could see exceptional returns within that timeframe.”

Although this timeline may seem ambitious, public markets are reacting positively to these new space startups. Space infrastructure firm Voyager went public in New York in June with a market capitalization of $1.9 billion, enjoying an 82% rise in share prices on its opening day compared to its IPO price. (Since then, its shares have decreased by about 45%.) Karman Space & Defense, a 48-year-old manufacturer of space systems, opened 30% above its listing price in February and has since increased nearly 60%.

For Interlune, Holloway envisions potential exits through strategic acquisitions by aerospace or defense companies, purchases by energy firms, or even a government buyout due to its national security implications.

All these converging factors—reduced launch costs, defense funding, AI applications, and accelerated return timelines—are reshaping who can invest in space. Holloway’s diverse career, spanning from public school teacher to Pixar script supervisor to Reddit’s VP of People & Culture, and now venture capitalist, reflects the variety of skill sets required by today’s companies. While she remains humble about her understanding of helium-3 extraction physics, she offers significant operational expertise.

“Ultimately, a company is a company,” she affirms. “When you’re assembling a team to tackle something challenging, you need people who know how to build strong companies.”

Whether this strategy will yield success remains to be seen. The space economy is still largely untested at scale, and many of these ambitious projects face technical and regulatory hurdles that traditional software startups have never encountered. However, as more generalist VCs like Holloway begin to invest, space is increasingly being perceived less as a specialized niche and more as an emerging sector where operational expertise may prove more critical than an aerospace engineering degree.