The SmallSats Investment in the small satellite sector is no longer just hype. With lower launch costs, faster deployment, and rising demand across Earth observation, IoT, and broadband, smallsats are scaling commercially and delivering real returns to investors.
This article highlights:
- Key risks investors should be aware of
- Where profits are being made across the smallsat value chain
- Why institutional investment is accelerating
🏆 Summary table: Sample smallsat winners
| Company | Type | Exit Method | Estimated Return | Notable Backers |
|---|---|---|---|---|
| AST SpaceMobile | Public | SPAC IPO | ~18Ă— (2024) | Vodafone, Rakuten |
| HawkEye 360 | Private | Secondary VC exit | ~6× | Allied Minds, Razor’s Edge |
| ICEYE | Private | Ongoing growth | Likely strong markups | Seraphim, In-Q-Tel, VCs |
What Are Smallsats?
What are small satellites? What’s its usage? Small Satellites (Smallsat) refer to artificial satellites that are significantly lighter than traditional satellites. Typically, a smallsat’s mass spans from 0.5 kg to 500 kg, with the typical lower design lifetime of 1 to 5 years. Smallsats are widely used in three core sectors:
- Earth observation: Utilized extensively in agriculture monitoring, urban planning, disaster response, and insurance. The low deployment cost of small satellites makes full-area monitoring possible.
- Internet of things: Smallsats enable IoT – Global connectivity, especially in remote or infrastructure-poor regions.
- Broadband communications: Due to its low deployment cost that the company could deploy as many as possible, smallsats enhanced the operating ability of broadband internet, especially in underserved areas.
Global Smallsats Market Terminal Usage Proportion
Source: Global Market Insights
Why are smallsats getting attention? Smallsats attract attention primarily due to their lower assembly and launch costs and the rapid deployment cycles. Currently, the medium costs of launching a typical smallsat could be lower than $3M and the time from assembly to deployment could also be compressed within 6 months. Therefore, smallsats could be easily scaled through constellations and are highly adaptable to market needs such as emerging remote sensing and IoT connectivity.
How do smallsat companies earn a profit? What’s its value chain? Smallsat companies primarily integrate the smallsats’ production and operation, and generate revenue through selling observation data and communication services (typically subscription-based). Due to their small size, simple manufacturing and low launch costs, these companies achieve cost efficiency by mass production and rideshare launches. The profitability comes from the difference between low production/deployment costs in the upstream supply chain and high-value data and connectivity services sold to the downstream.
Source: Global Market Insights
Why si it different between Smallsats and Terrestrial Network? Investing in smallsats is fundamentally broader than investing in terrestrial networks. Smallsats support not just communication, but also the built-in IoT connectivity, Earth observation, and real-time data services, in which the business model is more varied and integrated. Even within broadband, smallsats offer global and remote coverage, while terrestrial networks are limited to areas with existing infrastructure. Smallsats focus on rapid deployment and scalable constellations, while terrestrial networks require heavy local infrastructure and long-term maintenance. As a result, smallsats give investors access to a wider range of growth opportunities and new markets that are unreachable by traditional ground networks.
Market Prospects and Competitive Landscape
As seen in the figure, from ESA’s estimation the global market size is expected to rise from $6.9 billion in 2024 to a projected $23.2 billion or more by 2033, with the CAGR exceeding 20%. This is far from mere wishful thinking; it is an estimate backed by actual demand and advantageous supply factors.
Source: ESA
From the demand side, communication, agriculture, urban planning and emergency management are increasingly relying on real-time satellite data – not only a rigid demand, but a trend. The industries, including but not limited to those mentioned, need to use real-time data to ensure the increasing importance of precision, in which smallsats become their first choice.
Source: ESA
From the supply side, the current development progress of Smallsats also gives industries both accessibility and cost-effectiveness. Smallsat constellations are making it possible to deliver IoT, 5G, and broadband connectivity to remote and underserved areas, something traditional large satellites cannot do; lower manufacturing and launch costs as mentioned earlier mean smallsats can be built, launched, and updated much faster than large satellites, making it easier for new players to enter the market and for operators to scale quickly.
From the point of view of the competitive landscape, the current smallsat market is highly fragmented, with numerous emerging players across Earth observation, IoT connectivity and broadband communications. This fragmentation indicates that barriers to entry remain relatively low, with many companies achieving market presence. The absence of dominant monopolies, combined with increasing demand for high-frequency satellite data and global connectivity, presents a unique window of opportunity for new entrants. Many companies achieve market presence through cost-effective manufacturing, rideshare launches and agile technology development.
3 Potential Threats, Risks and Challenges
Regulatory and compliance risks: Unlike traditional large satellites, smallsats operate in a newer, fast-growing sector where regulations are still evolving. Smallsat operators also face uncertainty around debris mitigation, end-of-life disposal (for example, the 25-year deorbit rule) and export controls like ITAR. Since many regulatory procedures are still being updated to address the rapid growth in smallsat launches, changes in policy or interpretation can create unexpected delays and costs.
Space debris and collision risks: The increasing number of smallsats in Low Earth Orbit (LEO) heightens the risk of collisions and orbital congestion. Without proper debris mitigation strategies, smallsat constellations may contribute to space clutter, affecting operational safety and sustainability.
Technology and launch failures: The initial development and integration costs are still high if not considering relatively to traditional satellites and keeping satellites running in orbit isn’t cheap – regular updates, tracking, and troubleshooting are all part of daily operations. Most smallsats only last six to seven years before they need to be replaced, so operators face a constant cycle of reinvestment. Any technical fault or maintenance issue can mean a sudden loss of service or extra costs to restore capacity.