By Akash Sriram
(Reuters) -U.S. federal budget cuts have started to have some early impact on space startups after funding for such companies dropped 12.5% in the first quarter, according to investment firm Seraphim Space.
Elon Musk-led Department of Government Efficiency and the Trump administration have been delaying or cancelling contracts across its agencies to curb federal spending.
“Within certain government departments, uncertainty is causing delays as they assess which contracts to move forward with,” Seraphim Space investment analyst Lucas Bishop said.
Space startups — which garnered $2.1 billion in investments in the first quarter — have largely relied on government contracts over the past few years as geopolitical tensions escalate, causing a surge in demand for data, imaging and analytics from satellites.
Following strong stock performance of space companies such as Rocket Lab and Redwire late last year, Voyager Space filed to go public in January, while Karman Holdings listed in February.
But the early momentum is fading with uncertainty sparked by President Donald Trump’s tariffs and ensuing market volatility, Seraphim Space said.
Still, investments in the January-March period were concentrated in companies that make and operate space hardware such as rockets and satellites. The first quarter saw two largest fundraising rounds from Stoke Space and Loft Orbital, together bringing in $430 million.
“More protectionist trade policies could slow development in the short term, as many advanced space technologies — from propulsion systems to high-performance materials — depend on global supply chains,” said former NASA scientist Robert Ambrose.
However, in times of economic uncertainty, commercial spaceflight and space technology companies have become more critical partners, enabling cost-effective missions, he said.
(Reporting by Akash Sriram in Bengaluru; Editing by Shilpi Majumdar)
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