Space Tech's $1.8T Opportunity and the Big Beautiful Bill's VC Impact
09 July 2025 - A Weekly Publication by New North Ventures
Why Commercial Space Deserves Your Attention Right Now
Something remarkable is happening in commercial space. Launch costs have dropped 95%, and NATO just committed over $1B to commercial space procurement. This represents a fundamental shift—defense customers are embracing commercial innovation at unprecedented scale, breaking free from decades of contractor lock-in.
The dual-use opportunity in space feels different from other sectors. Companies like SpaceX and Planet Labs proved you can build for commercial markets first, then adapt for government buyers. This creates diversified revenue streams that don't depend on a single customer's budget cycles or procurement timelines.
The companies emerging from NASA SBIR Phase II programs tell an interesting story. They've solved the hard technical problems but haven't cracked the code on sophisticated commercial funding. Meanwhile, space tech funding hit $8.6B in 2024—a 75% jump that feels different from previous hype cycles. This time, companies are actually generating revenue instead of just burning through R&D capital.
Rapid funding acceleration could signal bubble territory, but when McKinsey projects the space economy growing from $630B to $1.8T by 2035, and NATO's Alliance Persistent Surveillance program demonstrates commercial integration at scale, we're looking at sustainable demand, not speculation. There's something deeply romantic about backing founders who look up at the stars and see business opportunities. It's venture capital at its most aspirational—funding the audacious leap from Earth-bound problems to space-enabled solutions.
For dual-use investors, three dynamics stand out. Satellite data and analytics companies offer superior risk-adjusted returns compared to launch services—70% lower capital requirements with faster paths to revenue. NASA SBIR Phase II and DoD AFWERX graduates represent a compelling sourcing arbitrage—these companies have proven technical merit and government endorsement but typically lack access to sophisticated commercial capital markets before entering traditional accelerator programs. The Q3-Q4 2025 deployment window presents optimal entry timing before valuations catch up to reality.
The administration's "Big Beautiful Bill" introduces several provisions affecting venture capital structures. Section 1202 qualified small business stock tax exemption has been expanded with a tiered gains-exclusion schedule—50% at three years, 75% at four years, 100% at five years—replacing the previous flat five-year requirement. Additionally, the qualifying startup cap increased from $50 million to $75 million at stock issuance. Concurrently, university endowments face an 8% tax on investment income for assets exceeding $1.25M per student. For dual-use investors, the QSBS modifications accelerate liquidity timelines while endowment tax pressures may constrain academic institutions' venture allocation capacity, creating potential funding gaps in early-stage deep technology sectors where university investors traditionally provide significant capital.
More links to explore:
NH Tech Alliance Forum: Companies learn how to partner with the U.S. Department of Defense
Kids are making deepfakes of each other, and laws aren’t keeping up
Congratulations to HavocAI on announcing their partnership with Lockheed Martin to integrate advanced sensors and weapons systems onto their medium unmanned surface vessel fleet. Since founding in 2024, HavocAI has achieved remarkable scale—boats in the water, $11M in funding led by Trousdale and Scout Ventures, and dozens of vessels already deployed globally with the DoD across 36 live demonstrations. The Lockheed partnership positions HavocAI to capture significant market opportunity as the administration's "Big Beautiful Bill" allocated $2.1B to medium USVs and $1.5B to small USVs. This collaboration exemplifies the dual-use value proposition—leveraging commercial innovation speed with prime contractor integration capabilities to deliver Navy-ready autonomous systems. HavocAI's progression from 14-foot Rampage drones to 100-foot vessels by December demonstrates exactly the kind of rapid scaling and government validation pathway that makes defense technology investments compelling.
In this episode of the 'Securing Our Future' podcast, hosted by New North Ventures, Jeremy interviews Veronica Daigle about her journey from Wall Street to the federal government, including her roles at the Office of Management and Budget (OMB) and the Pentagon. Veronica now leads the Defense Ventures group at Red Cell Partners, a venture firm focused on building and incubating companies with dual-use applications.