SpaceX's record-breaking market debut has drawn substantial capital and attention to an industry that operated quietly for years. The signal matters, and the Finserve Global Defence & Security Fund, which has invested in the sector since its launch in 2019, sees the start of a new global era that spans broad societal sectors and goes beyond individual companies.

It is in conflicts and wars that space technology has advanced its position over the past two years. In both Ukraine and the Middle East, the ability to detect, track and act against a target within seconds has become increasingly important. Modern, secure and resilient satellite infrastructure is absolutely essential in this context. Stefan Gustafsson has extensive experience in European space strategy and worked for many years as Chief Strategist at Swedish Space Corporation. Today, he is a senior adviser to Finserve Global Defence & Security Fund.

“Demand across the sector is broad and will continue to increase. Everyone needs this type of capability. In several niches, Europe has developed technology that the world did not demand until now. Everyone will need that capability,” says Stefan Gustafsson. “The technology already exists and is ready to be integrated into larger systems.”

“The signalling effect is stronger for the sector as a whole than for any individual company. This is something that should be approached broadly and with a long-term perspective,” says Joakim Agerback, lead portfolio manager of Finserve Global Defence & Security Fund.

Speed and Cost Matter More Than Perfection

In Ukraine, command and communications were built on available commercial systems. It was not elegant, but it was fast and cheap. And it worked. In the Middle East, many were surprised by the use of inexpensive drones that caused extensive damage, both to infrastructure and to far more expensive weapons systems. The asymmetry is complete.

To detect and respond within seconds, communication must be fast and secure. The information must be accurate, and a decision made in a matter of seconds cannot wait for someone to verify the data afterwards.

This requires satellites that communicate with low latency. It requires satellites that can see, both with cameras and with radar that penetrates clouds and sees in the dark. They must also be capable of being redirected quickly. The latter is tricky: most satellites move so slowly that even a small course adjustment can take more than a day, making faster steering technology a niche. None of these capabilities is sufficient on its own. Their value emerges when they are connected, and these are precisely the pieces Europe already has.

Europe Lags Behind on Speed, Not on Technology

The cost of a single launch has fallen by more than 80 percent in ten years, driven by reusable rockets, new business models and methods borrowed from the automotive industry. This is where Europe struggles to compete. Europe buys American launch capacity, and if that continues, it is financing a dependency that Europe says it wants to break.

The United States is moving in the opposite direction. A new procurement strategy at the Pentagon provides faster regulatory processes and opens the door for new companies backed by government contracts, while foreign technology companies are attracted to the U.S. market. The result is that capital and capability are moving west, while Europe’s ambitions remain on paper.

At the same time, much of the innovation is found in small, fast-moving companies. Gustafsson points to the difference between European and American thinking: European companies think in terms of platforms and programmes, while American companies think in systems of systems, where existing technology is combined for new purposes.

Europe Has Cards to Play

But there are bright spots. In several critical areas, European companies are technologically ahead and have been waiting for demand to catch up. One company that developed faster satellite propulsion saw its revenue more than double in one year once demand materialised. In secure satellite communications and satellite-based SAR radar, there are European companies that were ready when the need became obvious. The technology was already in place. The buyers came later.

Space security has moved beyond being an issue primarily involving states and institutions. The threats have increased. What happens, for example, if someone releases gravel into low Earth orbit to sabotage satellites? The issue of security in space has moved from defence authorities to the startup sector, industry and finance. This is driving investment and rapid implementation of protective measures.

A Disciplined Approach to Valuations

The fact that capital is flowing in does not mean that any price is justified. SpaceX’s valuation leaves little room for anything other than exceptional growth and high margins over a long period.

“The greater opportunity does not lie in this individual listing. It lies in the broader space economy that it helps strengthen. We prefer diversified exposure to the entire structural trend,” says Joakim Agerback.

The long-term shift towards sovereign space capabilities in Europe and Asia should not be underestimated. It may not challenge the position of the leading players in the foreseeable future, but it can gradually create a more diversified and competitive ecosystem. For a patient investor, that is the development worth following.

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Stefan Gustafsson is a strategic adviser to Finserve Global Defence & Security Fund. The fund has holdings in the space and defence sectors discussed in this article.

This is marketing communication and does not constitute investment advice. Read the fund’s prospectus and key information document before making any investment decision. Past performance is no guarantee of future returns. The money invested in the fund may both increase and decrease in value, and there is no guarantee that you will recover the full amount invested.