Seraphim Area launches second VC fund with 9 investments already beneath its belt

Seraphim Area, the UK-based house tech funding group is formally launching its second VC fund following its first shut with restricted companions together with Airbus, TechCrunch discovered completely. The early stage fund will construct a world portfolio of 30 startups that might be backed on the seed and Sequence A phases.

CEO and supervisor Mark Boggett declined to reveal the share reached and fund’s focused measurement, however mentioned it must be bigger than Seraphim Area’s 2017 £70 million VC fund (round $90 million on the time.)

Like its predecessor, Seraphim’s second VC fund, SSV II, is backed by main gamers from the aerospace sector trying to sustain with innovation.

This time round, Seraphim may also be working in a busier and extra aggressive market.

Traders have develop into more and more conscious of house startups and the broader market, which could possibly be price $1.8 trillion by 2035, up from $630 billion in 2023, in line with a current report by the World Financial Discussion board and McKinsey. The variety of funds prepared to spend money on house tech has elevated in comparison with 2017, together with each generalists and specialists resembling Area Capital, SpaceFund, Starbridge Enterprise Capital and Starburst Aerospace.

Seraphim Area hopes to face out with its monitor file.Its first fund returned thrice the unique funding, which helped dispel the cliché that house funding is “tremendous excessive danger and tremendous long run,” Boggett mentioned.

Returns from its final fund have been partly fueled by 5 exits — the commerce sale of chip firm UltraSoC to Siemens and 4 IPOs: Arqit, AST SpaceMobile, Nightingale and Spire International.

Nevertheless, at present’s public market is a distinct world in comparison with 2021, particularly for tech listings. This impacts each Seraphim Area’s portfolio firms that went public and the funding group itself.

The agency’s progress fund Seraphim Area Funding Belief (SSIT) listed on the London Inventory Change in July 2021 with £250 million in gross proceeds (some $300 million on the time.) After an all-time low in July 2023, its market cap is now £130 million, or $162 million, even supposing SSTI’s largest holding, ICEYE, grew to become EBITDA worthwhile final yr.

These market circumstances compelled the cash-strapped SSTI to give attention to follow-on investments relatively than new offers, and instructed that getting funding by way of the LSE for early-stage, non-profitable bets can be even more durable.

“With VC funds, we’re in a position to make errors and have failures and excessive ranges of danger over an extended time frame than the general public market is comfy with,” Boggett instructed TechCrunch. And whereas it didn’t assist that SSIT was buying and selling at a markdown, its existence has been useful in different methods.

By means of an method referred to as a warehouse association, SSIT funded the 9 investments that SSV II already made earlier than its first shut. This helped present potential restricted companions that its funding thesis goes past what house is normally conflated with resembling. launching rockets and satellites.

Large house

The market progress anticipated by the World Financial Discussion board displays that house tech has purposes in different industries.

“All the large developments which can be underway are actually being enhanced by house,” Boggett mentioned, likening it to AI within the sense that “it’s actually an enhancing functionality, a facilitating functionality for each different sector.”

The appliance of AI to house information is considered one of essential themes SSV II will spend money on. In reality, it already has accomplished so by backing insurtech startup Delos and carbon credit score verification platform Renoster. Each firms use giant troves of information and modeling to deal with points associated to local weather change.

Seraphim Area’s enthusiasm for firms like Delos is two-fold: the tech may have an actual affect past monitoring they usually have the potential for top valuations (and returns).

“They’re addressing a few of the greatest issues that we’re confronted with.”

The fund’s third space of focus might be in-orbit computing. It sounds a bit extra summary, but in addition has the potential to have an effect on sectors resembling agriculture and infrastructure. As an example, this class contains Aethero, an organization that develops edge computer systems that might ultimately assist autonomous decision-making on orbit.

SSV II can be concentrating on space-enabled communications, with one portfolio firm up to now: Hubble Community, which desires to attach a billion units by way of a space-based Bluetooth community. Its CEO, Alex Haro, is aware of a factor or two about locators: He beforehand co-founded Life360, which acquired Tile in 2021.

SSV II’s fourth theme, microgravity for science, reminded us of an organization exterior of its portfolio: Varda Area Industries, which is making orbital drug manufacturing a actuality, and raised a $90 million Sequence B spherical a couple of weeks after its first capsule returned from orbit. Biopharma apart, different purposes embrace analysis round new supplies, Boggett mentioned.

Protection isn’t highlighted as an funding theme, regardless of its current tailwinds amongst funds, however Boggett acknowledged its ubiquity in house tech.

“The overwhelming majority of house firms are twin use firms,” he mentioned. However, he rapidly added, “the larger market alternative is within the business market as they transfer into the broader underlying sectors.”