Data Science Investment Counter —Funding raised by UK data science companies in 2018.
£ 5.640 Million

What’s the Deal with Seraphim Capital’s £80M Space Fund?

About a month ago, London-based VC firm Seraphim Capital launched an initiative that grabbed headlines both in tech publications and on the mainstream press.

The firm, whose usual focus are early stage tech startups, announced it would launch a £80 million fund destined for UK Space Technology companies.

Had London suddenly transmogrified into Cape Canaveral? Not really: Seraphim’s definition of what a space company is is looser than one would imagine. It encompasses any tech venture that relies, in some measure, on the increasing amount of data harvested daily from satellite orbiting our planet. That means that for instance, companies like Uber—which makes use of that data to efficiently deploy its fleet— would qualify for funding.

So, to what extent will Seraphim’s Space Fund be a Data Science Fund? And how many budding SpaceX (or Uber) can we expect to rise from London’s FinTech-dominated scene? We sat down with Seraphim Capital’s managing director Mark Boggett to make sense of it all.

Hello Mark, thanks for chatting with us. To start: can you explain us how Seraphim’s Space Fund project came about?
Mark Boggett: It all started in 2010, when corporate representatives from the UK space sector came together to work out how to further stimulate the industry’s growth. The result was a document—called A UK Space Innovation and Growth Strategy 2010 to 2030—where they gauged the size of the industry, what actions could be taken to make it go forward, and what that growth would look like. They set some pretty ambitious targets back in 2010, and up to date they’ve largely met those targets— mainly because the UK government really got behind the space industry and invested  much more money, effort and time than it had done in the previous decades. The current goal is to triple the size of the industry, bringing its annual revenue to £40 billion by 2030. Now, there are two ways to achieve it: one is  increasing exports, the second is backing innovation.
To achieve this, the document indicated that a venture fund should be created to support innovation.

How specifically will the Space Fund support innovation?
The industry forecasts that that majority of that growth will come from downstream applications (that is, companies using digital data from satellites). That’s really the growth area of the space industry, with many applications looking to using that data for industry, for governments and for consumers. The founder of Google Earth—Michael Jones—joined the funds management team, as he recognises from his Google experience that we are just scratching the surface of the type of things that can be done with this ever-increasing amount of data from space.

Why is space data “ever-increasing” right now?
The satellites number is set to exponentially grow because satellites have become much cheaper, smaller, lighter— and the cost of launching satellites into orbit is falling. From the fund’s perspective, that means that there will be an ever-increasing amount of data available, data will be higher in resolution, low cost, and it’s moving towards being gathered and transmitted in real time. That has the potential to benefit a broad range of sectors: when you start thinking about it, you quickly realise that space is not a niche market, but space data has usage cases across every sector you can imagine.  

What’s the state of London space startup scene?
There’s a number of initiatives that have been launched over the last two-three years to support this sector in the UK: from the Catapult programme, to the ESA incubator in Harwell, to organisations like the Satellite Finance Network. And there are a whole bunch of companies in London—which sometimes don’t recognise themselves  as space companies. They’re using satellite data but they don’t see themselves as space companies.We do: that’s why we located our fund in the Old Street area, London’s technological startup heart. We believe there’s a growing number of very interesting businesses to invest into. We’ve just recently launched, but we’ve had a profile of the industry for more than a year, and we have already received about 500 applications for funding.

How many of them will secure an investment?
The Space Fund will invest into four A Stage investment opportunities per year.
But we have also set up another initiative for earlier stage companies: it’s called UK Space Tech Angels. This is an angel group to which, on a quarterly basis, we will refer seed or early stage companies we have come across, and that look exciting or interesting. They will fund three to six transactions per quarter, typically funding businesses in the region of £1 million equity each.

Let’s take a step back. You said you’re mainly interested in “downstream applications” for space data. Does that mean you wouldn’t invest into a possible “British SpaceX”?
There are four areas we’re going to invest into. And, sure downstream applications represent the largest area, because it has huge opportunity for growth. The second area includes spinouts from space companies. The point is that some space companies spend decade developing lots of different technologies —software or hardware— in-house. Those technologies, often, could be used for other applications in terrestrial markets. We want to identify technologies that we can take from space and monetise them in other markets. Another core area will be the “space enablement ecosystem”, core technologies where there is potential convergence with space application – examples would include graphic recognition technology, artificial intelligence, sensor technology, new materials, drones and robotics. The final area we’re going to invest into is space technology, we refer to as ‘upstream’— in other words companies like SpaceX. These companies have typically  very high equity requirements, high risks, they take a lot of time to develop, so we’ll be very selective. But, yes, we’ll look out for the next SpaceX’s, and I think we are very well positioned to spot them.

What do you think is the biggest challenge facing London’s and the UK’s space tech sector?
I don’t think the challenges for this sector are any different from the challenges affecting any other technology sector. Deep tech continues to face a challenging environment to access risk capital. Linking tech hubs, accelerators and incubators will enable better access to funders – the ecosystem is steadily getting better connected but we still have some way to go. We hope that the Seraphim Space Fund and our associated UK Space Tech Angels will bring a tangible impact during 2017 and beyond.

 

Image via bit.ly/2hWQk8f

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