Europe’s space sector is ready for lift-off

22 August 2025

A rejuvenated European space sector is emerging as a compelling investment theme. For two decades, the US has dominated the commercial launch and satellite market, drawing in global talent and capital. But as the US private space ecosystem matures – and questions around European security grow louder – Europe’s skies are clearing for a new generation of founders.

Investors have already noticed the shift. The STOXX Europe Aerospace & Defense Index has risen by more than 50% this year, underpinned by new EU space initiatives like IRIS (Infrastructure for Resilience, Interconnectivity and Security by Satellite) and a growing push for strategic autonomy.^[1]^,^[2] For policymakers and investors alike, European space ambitions are a strategic priority.

Alternative capital, including equity-backed financing, can play a supporting role in Europe’s space race, providing access to flexible funding for investors and entrepreneurs in a notoriously capital-intensive industry.

Carving out a niche

Europe’s start-up scene in launch vehicles, Earth observation (EO) satellites, and in-orbit servicing is growing, with 2024 one of the most active years on record.^[3] While it still trails the US, that gap could mean less saturation and more room for differentiation.

Isar Aerospace, Germany’s best-funded space start-up, has raised over €550 million and secured multiple commercial contracts. In EO, ICEYE (Finland) is becoming a global leader in satellites that collect images day and night, while France’s Exotrail focuses on in-orbit propulsion systems for small satellites, which are increasing in number exponentially.^[4]^,^[5]

Europe’s comparative advantage may lie not in giant rockets but in specialized technologies for a rapidly growing, medium-sized downstream market — from climate analytics to space debris mitigation – that serves mostly commercial customers.

Now is the time for Europe’s space tech sector to expand its own orbit. Founders can leverage equity-backed financing to unlock growth capital without dilution, supplementing rising venture inflows.

Embracing private capital

Europe once controlled over 50% of the geostationary launch market through Arianespace, the world’s first commercial launch provider. But the rise of SpaceX and its reusable Falcon 9 rocket pushed Europe aside.^[6] Arianespace’s Ariane 6 program has since been plagued by delays and cost overruns — symptomatic of deeper structural issues.^[7]

To be sure, Europe embraced private participation earlier than the US — Arianespace is a joint venture between Airbus and Safran — but bureaucratic requirements favor incumbents. The European Space Agency (ESA)’s “geographic return” principle, which allocates contracts by member-state contribution rather than merit, has stifled innovation. Add the absence of an EU space fund and a unified single market for space services, and it’s no wonder space start-ups did not feel confident about scaling up to compete with Arianespace.^[8]

Europe’s downstream space sector — data services from satellites already in orbit — may hold more promise. EO demand is soaring, driven by environmental monitoring, precision agriculture, defense intelligence, and disaster response. European firms already account for nearly 20% of global EO revenues.^[9]

Russia’s invasion of Ukraine was a turning point. It highlighted the value of commercial satellite data in securing communications and mapping conflict zones in real time.^[10] But it also exposed Europe’s vulnerabilities: a pause in US intelligence-sharing and threats to restrict Starlink access have underscored how space infrastructure could be weaponized — even by allies.

In response, programs like IRIS², alongside the ESA and the European Commission’s recognition of the need to break with legacy models, are leading to greater collaboration with private players.^[11]^,^[12] Unlike NASA, which outsources extensively, ESA historically prioritized “launch sovereignty,” keeping most projects for the public sector.^[13]

That approach no longer works in a market defined by speed and reusability. In 2023, France and Germany opened micro-launcher contracts to competitive bidding, making private firms a part of the supply chain.^[14]

Market forces

The global space economy is projected to hit €1.6 trillion by 2035,^[15] and Europe can get a larger share, both in the launch and the downstream space sector. The opening up of Europe’s space economy to market forces will make investing in European space start-ups less of a moonshot.

It helps that American counterparts have soared in visibility despite a long path to profitability – Rocket Labs, SpaceX’s chief rival, is being sought after for defense contracts to diversify the supply base for medium-lift rockets.^[16] The lossmaking start-up’s share price has surged by more than 800% over the past year.^[17]

Funding ambitious projects remains a challenge amid shifting policies, fierce competition, and talent constraints. Equity-backed financing offers a practical solution for founders and investors to unlock liquidity from personal holdings to reinvest in growth without dilution. Paired with rising venture inflows, it can help turbo-charge Europe’s prospects in a race where timing is everything.

The launch window for European space tech is still open — for now.

[1] https://stoxx.com/index/sxgraro/

[2] https://www.ft.com/content/8e75ed31-0c72-4160-b406-1ca6aa36a84f

[3] https://dealroom.co/guides/space-tech-europe

[4] https://www.bloomberg.com/news/articles/2025-06-23/military-satellite-maker-iceye-explores-ipo-as-sales-on-track-to-double

[5] https://sifted.eu/articles/exotrail-raise-spacex-musk-satellites-news

[6] https://tomorrowsaffairs.com/europes-space-competitiveness-falls-into-a-black-hole

[7] https://interestingengineering.com/beyond-earth/opinion-europes-space-sector-10-years

[8] https://www.ft.com/content/f0ca3593-d4ed-4cd5-9f61-ef0219869c28

[9] https://defence-industry-space.ec.europa.eu/document/download/f9f09eb2-6f58-412f-ae1d-64cd06160e2d_en

[10] https://www.oecd.org/en/publications/how-the-war-in-ukraine-is-affecting-space-activities_ab27ba94-en.html

[11] https://www.esa.int/About_Us/Corporate_news/ESA_and_the_EU_agree_to_accelerate_the_use_of_space

[12] https://www.reuters.com/technology/space/european-space-chief-says-europe-must-be-able-compete-globally-2024-10-18/

[13] https://www.ft.com/content/77d78040-0bbb-45ee-9a11-1a5644aeaf1f

[14] https://www.lemonde.fr/en/economy/article/2024/07/09/europe-is-looking-for-its-place-in-space_6679186_19.html

[15] https://defence-industry-space.ec.europa.eu/document/download/f9f09eb2-6f58-412f-ae1d-64cd06160e2d_en

[16] https://www.reuters.com/business/aerospace-defense/trumps-golden-dome-looks-alternatives-musks-spacex-2025-07-22/

[17] https://www.investing.com/news/analyst-ratings/rocket-lab-stock-rating-reiterated-by-cantor-fitzgerald-ahead-of-iqps-mission-93CH-4168304

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