Italy has technology, supply chains and talent. What it lacks is scale. Growth capital, buy-and-build, governance and hybrid finance can close the gap — provided investors can tell a satellite from a slide.
The space industry has a ritual that works at almost every conference. A speaker goes on stage, shows glossy satellites, charts with very steep curves and, after a few minutes, says: “we need more capital.” True. But that is a little like explaining that winning a race requires going faster. The useful question comes next: what kind of capital, for what company, with what risk and for what purpose?
This is where private equity belongs. Not as an ATM wearing a tie, but when technology and customers already exist and the hard jump remains: moving from an excellent SME to a European industrial platform.
The problem is not orbit. It is scale
Chapter 11 of Volare Alto focuses on precisely this paradox: many Italian space companies are too mature for early stage and still too small for large buyout funds. They are not startups in the classic sense, but they are not mid-caps either. They occupy the financial zone where everybody finds them interesting and nobody has exactly the right product. Capital purgatory: award-winning technology, mission-ready team, ESA contract. Then the investment committee says: “ticket outside mandate.” Romance over.
Italy’s industrial structure makes the issue even clearer. The latest mapping of the Italian space economy identifies 530 companies and reports that more than two thirds generate less than €10 million in revenue. It is a striking picture: huge density of expertise, limited critical mass. Engineers call it miniaturisation. Finance occasionally calls it a problem.
An SME may build a mission-critical sensor, master extreme materials, develop flight software or propulsion components and still depend on two customers, one public programme and one person who “knows where everything is.” That is not a joke. In many due diligences, the difference between a beautiful company and a scalable investment sits right there. If the founder takes a holiday and the factory loses navigation, key-man risk is not a footnote. It is the operating system.
Not everything that flies is venture capital
For years, Europe’s space-finance debate treated venture capital as a financial Swiss Army knife. Startup? Venture. Scale-up? Venture. New production line? Venture again. Acquisition of a competitor? At that point someone usually begins to suspect that other instruments may exist.
Venture capital is essential when technology and market still need validation. Private equity and growth capital become relevant when the objective changes: no longer proving that something works, but producing it better, selling it in more countries, acquiring complementary capabilities, strengthening management, financing working capital and building governance able to sustain growth. A prototype needs capital to become a product. An SME needs capital to become a system. Financing both the same way is like valuing an engine and the whole aircraft with one spreadsheet.
Chapter 12 of Volare Alto uses the BCG matrix to think about Stars, Cash Cows, Question Marks and activities that should be reconsidered. It is old enough to qualify for retirement and useful enough never to get there. In private equity, the logic remains powerful: mature businesses should generate cash, high-growth businesses should deserve capital, promising activities must prove they can become leaders. And sometimes a project must be stopped. Gravity can be defeated. Unit economics is less cooperative.
Good capital does not just buy shares. It buys industrial time
Private equity creates value when it allows a company to do in five years what self-financing might require fifteen to achieve. More capacity, management, markets and acquisitions. Project reporting, cash conversion, procurement, cybersecurity, export control and succession planning are not decoration; they stop a technology company from imploding as it grows.
Forgital illustrates the industrial logic. Under private-equity ownership the group strengthened management, procurement and operating processes, expanded its order book and diversified customers. It is not a pure-play space business, but it serves aerospace, defence and space and shows what institutional capital looks for: capabilities that are difficult to replicate, certification, global customers, proprietary process know-how and room to expand.
It also dismantles a familiar caricature: the fund arrives, cuts costs, hires a CFO and sells. It happens. Restaurants ruin carbonara too; we have not abolished pasta. Serious industrial private equity creates value through revenue, margins, capacity, acquisitions and internationalisation. Saving printer paper is not a strategy.
Buy-and-build: a new logo does not create a group
For Italy’s space supply chain, buy-and-build is probably the most natural strategy. Fragmentation creates excellent but small companies; aggregation can build stronger platforms. The Bromo dossier shows why scale, governance and supply chains are now part of the same equation. But buying three businesses does not automatically create a fourth.
The combination of D-Orbit and Planetek offers an interesting example of complementarity between orbital services, Earth observation, analytics and software. That is the correct logic: widen the value chain and build integrated capability. The opposite is sticker-album buy-and-build: beautiful collection, limited synergy.
An industrial group begins when processes, procurement, reporting and product development are integrated. Three companies with three ERPs are not yet a platform. They are a meeting that should have been an email, only with more covenants. The question is how much future EBITDA comes from addition and how much from real synergies.
Governance: everyone loves the word until it has to be used
Many entrepreneurs fear private equity because they associate it automatically with loss of control. But capital structures are not binary. Qualified minorities, capital increases, rollover equity, earn-outs, reserved matters and governance rights can combine entrepreneurial continuity with institutional discipline.
The OHB-KKR transaction is instructive: institutional capital was combined with long-term family control, alongside a capital increase and a convertible investment dedicated to a microlauncher. A fund entering the shareholder base does not automatically mean handing over the factory keys. The cap table is an architecture, not an eviction notice.
The real issue is who decides what: budget, M&A, debt, appointments, capex and exit. Well-designed governance removes ambiguity before it becomes conflict. Poorly designed governance produces the most expensive phenomenon in private equity: two shareholders both convinced they have the final word. At that point propulsion is no longer the hard engineering problem. The board meeting is.
Europe has finally discovered that debt exists too
A significant 2026 development is the expansion of financing tools. ESA’s Investor Forum explicitly identified growth equity, commercial debt and project finance as necessary for the sector’s next phase. The Space Economy Report 2026 also records €1.4 billion of private capital raised by European space ventures in 2025.
At the same time, the EIB’s Space TechEU programme aims to mobilise roughly €1.4 billion through €500 million of dedicated financing and partnerships with commercial banks. The message matters: equity should not finance everything. A company with contracts, reasonably visible cash flows and identifiable capex can use debt, guarantees and hybrid instruments and project finance. Funding every need with equity is expensive. It is the financial equivalent of using Ariane to deliver a pizza: technically possible, economically imaginative.
The Monday-morning test
A good thesis must survive Monday morning, when the rendering disappears and what remains are orders, margins, factories, cash collection and people. If fresh equity is needed every twelve months just to absorb delays and working capital, that is not growth. It is subscription-based dilution with premium storytelling. If capital funds capacity, new products, acquisitions and international customers, the value multiple becomes industrial before it becomes financial.
That is why due diligence must be double. EBITDA, leverage and cash conversion must be read alongside TRL, qualification, customer concentration, genuinely contracted backlog, export control and cybersecurity, dependence on prime contractors and actual ownership of technology. A patent can be beautiful and create no pricing power. A backlog can look enormous and depend on one programme. A margin can be excellent and remain trapped for months in an unpaid milestone. In space private equity, detail is not pedantry. It is return.
The right fund must understand the company, not fall in love with the satellite
The conclusion is simple. Italy does not have a technology problem. It has a technology-to-scale problem. The country has clusters, universities, prime contractors and capabilities that are difficult to replicate. What remains insufficient is specialised capital able to accompany companies from niche excellence to industrial platform.
If the right capital arrives, it can aggregate, industrialise, internationalise and prepare credible exits. If the wrong capital arrives, it will bring leverage, slides, another English acronym and perhaps an excellent “value creation” workshop with very good catering. The difference will not be the money. It will be the quality of those investing it, the patience with which they deploy it and their ability to understand that a good space company is not the one promising to travel furthest. It is the one that gets there without burning all its cash before lift-off.
