Space Investing Goes Mainstream: VCs Break Through Rocket Science Barriers

Five years ago, investor Katelin Holloway embarked on what she describes as a “literal moon shot” investment. As a founding partner at the generalist venture firm Seven Seven Six, she admits that she and her team had “no clue” about the reusable launch technology of the rocket company Stoke Space when they pitched to the firm. “We knew full well we were not the specialists,” she recalls.

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

Holloway is well aware of the skepticism that surrounds such endeavors. However, her transition from a novice in space to an investor reflects a broader change in venture capital, where individuals without aerospace engineering backgrounds are increasingly funding space startups. As of July, global venture capital investment in space technology reached $4.5 billion across 48 companies, more than four times the amount attracted by space startups in 2024, according to PitchBook.

What’s driving this trend? Primarily, companies like SpaceX have dramatically reduced launch costs, making space more accessible for founders with application-driven business models. “As a species, we are literally on the brink of incorporating space into our daily lives,” Holloway mentioned in a recent episode of TC’s StrictlyVC Download podcast. “I genuinely don’t believe the world understands or is prepared for this.”

This shift allows VCs to extend their focus from just companies developing rockets to startups utilizing space-based data and infrastructure for new applications like climate monitoring, intelligence gathering, and communication. They are also investing in orbital logistics, in-space manufacturing, satellite servicing, and lunar infrastructure development. Companies like Interlune embody this emerging category. For investors such as Holloway, the appeal often lies at the intersection of “space tech and climate tech”—startups aiming to prevent replicating Earth’s environmental mistakes in space.

Geopolitical tensions are enhancing the appeal of defense-related space startups, as China’s rapidly growing space capabilities encourage increased U.S. investment. VCs known for their cautious nature find assurance in defense spending, given that the U.S. government acts as a dependable customer and validator for innovative technologies. At the Department of the Air Force Summit in March, Defense Secretary Pete Hegseth noted, “I feel like there’s no way to ignore the fact that the next and most important domain of warfare will be the space domain.”

Just this year, several U.S. defense-focused space startups have secured significant funding rounds, including True Anomaly, a military-class 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 received $110 million in February from Lightspeed Venture Capital and Altimeter Capital. The defense aspect enhances the attractiveness of space investments that might otherwise appear too risky. Holloway also highlights that helium-3, which Interlune aims to harvest, carries national security implications, such as monitoring nuclear weapon movements.

Artificial Intelligence is further propelling this momentum, particularly at the nexus of geospatial analytics and intelligence. For instance, in March, Fire Sat—a collaboration between Google, nonprofit Earth Fire Alliance, and satellite developer Muon Space—successfully launched its inaugural satellite designed to detect wildfires from space. The initiative aims to deploy over 50 satellites specifically for wildfire detection. Additionally, Earth imaging company Planet Labs has partnered with Anthropic to analyze Earth observation data.

Interestingly, the timeline for returns on these investments has unexpectedly shortened. While traditional space companies typically took decades to yield returns, today’s investors believe they can achieve liquidity within the standard 10-year fund duration. “Our fund model hasn’t changed; we still have a 10-year horizon,” Holloway clarifies. “We wouldn’t have made this investment if we didn’t believe we could generate outsized returns within 10 years.”

Such a timeline may seem ambitious, but public markets are showing interest in these new space startups. Space infrastructure firm Voyager went public in New York in June with a market cap of $1.9 billion, experiencing an 82% rise in share prices on its first day from the IPO price. (Its shares have since decreased by about 45%.) Karman Space & Defense, a 48-year-old space systems manufacturer, opened 30% above its listing price in February and has surged nearly 60% since then.

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

All these converging factors—reduced launch costs, defense expenditures, AI applications, and shortened return timelines—are redefining who can invest in space. Holloway’s varied background, from public school teacher to Pixar script supervisor to Reddit’s VP of People & Culture, to venture capitalist, highlights the diverse skill sets that today’s companies require. While she remains humble about her grasp on helium-3 harvesting physics, she brings significant operational expertise.

“Ultimately, a company is a company,” she states. “If you’re assembling people to create something challenging, you need someone experienced in building strong companies.”

Whether this approach will lead to success remains uncertain. The space economy is still largely untested at scale, and many of these ambitious initiatives face technical and regulatory challenges that traditional software startups have never encountered. However, as more generalist VCs like Holloway make their investments, space is starting to appear less as a specialized niche and more as an emerging sector where operational expertise may outweigh the need for an aerospace engineering degree.