According to investment firm Seraphim Space, funding for space startups fell 12.5 percent in the first quarter, indicating that the federal budget cuts in the US are beginning to have some early effects on these startups.
In an effort to reduce federal expenditure, the Trump administration and Elon Musk's Department of Government efficiency have been postponing or terminating contracts across all of its agencies.
"Within certain government departments, uncertainty is causing delays as they assess which contracts to move forward with," Seraphim Space investment analyst Lucas Bishop said.
Over the past five years, as geopolitical tensions have increased demand for data, images, and analytics from satellites, space startups—which attracted $2.1 billion in funding in the first quarter—have mostly depended on government contracts.
Voyager Space filed to go public in January, and Karman Holdings did the same in February, following the stellar stock performance of space companies like Rocket Lab and Redwire late last year.
However, according to Seraphim Space, the initial impetus is waning due to uncertainties brought on by President Donald Trump's tariffs and the resulting market instability.
Yet the January–March period saw a concentration of investments in businesses that manufacture and run space hardware, including satellites and rockets. Together, the two biggest fundraising rounds from Loft Orbital and Stoke Space raised $430 million in the first quarter.
"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.
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Commercial spaceflight and space technology businesses, on the other hand, have become increasingly important partners in uncertain economic times, allowing for more affordable missions, he said.