Illustration: Aïda Amer/Axios

The economic downturn caused by the coronavirus pandemic will likely make the U.S. space industry even more focused on government money and funding —and potentially set back advancements toward commercializing the industry.

Why it matters: For over 10 years, the space industry has been making strides to diversify its base of customers away from just government entities to more commercial customers and industries.

  • Projections suggesting the space industry could one day be worth hundreds of billions if not a trillion dollars hinge on further commercialization.

What's happening: Many companies that are focusing on catering to commercial interests are young and rely on venture capital funding and other financing, which has largely dried up in the pandemic.

  • The U.S. Space Force Acquisition Council is now looking into what parts of the space industry will likely need the most support as the coronavirus pandemic continues.
  • The Small Business Association defines small businesses in a way that tends to exclude many venture-backed space startups from qualifying for pandemic relief loans, according to a report from SpaceNews.

What to watch: Government funds will help keep much of the space industry open for business, but that could also reorient the industry back toward government work just as the commercialization of space was starting to take hold.

  • "The problem for the commercial space industry is this economic downturn couldn't have come at a worse time," Todd Harrison, director of defense budget analysis at the Center for Strategic and International Studies, told Axios.
  • Many of these companies had raised a lot of capital but weren't at the point where they were making much revenue yet, making them more vulnerable to this economic downturn, Harrison added.
  • NASA and other government agencies are also hopeful they will one day be able to buy services from commercially focused companies instead of being their main customers, freeing those agencies up to focus on other things.

The space industry's industrial base — satellite manufacturers, rocket companies and others who support the industry — may also be in trouble, and that could spell problems for even the most generous of government agencies.

  • "The DOD can launch what's already in the barn, but if the barn isn't being repopulated, there isn't going to be anything to launch," space industry analyst Peter Marquez told Axios.
  • Even larger companies like SpaceX will also likely feel the crunch caused by a shrinking base of commercial customers and delays to nongovernmental missions due to the coronavirus, even if the government keeps them afloat in the meantime.

The bottom line: The U.S. government will likely reward contracts and other funds to help support the space industry through the coronavirus, but that financing may set back the commercialization of space.

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