Nato fund takes stake in German rocket start-up

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Nato’s new €1bn venture fund is investing in Munich rocket microlauncher start-up Isar Aerospace as the alliance’s European member states seek to harness private sector space capabilities for security needs.

The Nato Innovation Fund, backed by 24 countries excluding the US, Canada and France, has joined several other new investors in a £220mn series C fundraising that values Isar at roughly $1bn, according to people close to the company.

This takes the total raised since Isar was founded in 2018 by three German postgraduate students to more than $400mn.

The company is raising the funds to build a bigger, fully automated factory near Munich, where it intends to produce at least 40 of its Spectrum rockets a year by the end of the decade, according to co-founder and chief executive Daniel Metzler. This is more than was planned just over a year ago at the start of its fundraising.

“We realised through the last year or two that the space industry has been picking up significantly,” he said. “We feel we will need more rockets rather than less.”

Military interest in space has accelerated since Russia’s invasion of Ukraine. Defence spending in the space domain last year surpassed investment in civil programmes for the first time, according to Novaspace, a market analytics group. Some 107 defence and dual-use satellites were launched in 2023 by 17 governments, Novaspace reported, up 40 per cent on 2022.

To keep costs down, the world’s biggest space powers are emphasising greater collaboration with commercial service providers. In April, the US Department of Defense set out its commercial space integration strategy, while the EU last year also published its first “space strategy for security and defence”, calling for investment in more dual-use technologies.

Andrea Traversone, managing partner of the Nato Innovation Fund, said access to space was “critical to the technological sovereignty of Europe and the UK”. Isar offered a “promising technology”, he said, adding that the fund would help it identify government and commercial opportunities.

Metzler said the fund was “more than just an investor . . . It is a big potential customer either through Nato itself or through the individual countries”.

The Isar chief executive said military customers were expected to account for about 20-30 per cent of overall demand in the near future. However, commercial customers would still dominate at 50 per cent.

Isar is one of a handful of European rocket start-ups hoping to tap into booming demand for space-based communication and observation services. The group is attempting to replicate the success of Elon Musk’s SpaceX by doing the design, manufacture and testing of its vertical launch system in-house.

Isar’s microlauncher will fly small and medium-sized satellites into space, with a total capacity to carry 1,000kg into low earth orbit.

Spectrum was due to fly last year but technical challenges led to delays, according to Metzler, who said the first flight was now expected to take place this year from the Andøya space port in Norway.

“We are now at the point where we are literally just waiting for a permit to do the final-stage testing of the vehicle and go into test flight,” he said. “We are ready.” However, he added that Andøya was still waiting for permits to host launches.