When space is hot, Washington holds a match

A wave of private capital flowing into space and defense technology has made the sector fashionable again — but that popularity comes with a familiar constraint. For companies building systems relevant to national security, long-term value still hinges on the government’s ability to fund them consistently.

That was the message from Kirk Konert, managing partner at AE Industrial Partners, speaking Feb. 5 at the Miami Space Summit. AE Industrial has backed and taken public several space-focused companies, including Redwire, Firefly Aerospace and York Space Systems. Combined, the companies have a market cap that exceeds $7 billion.

A lesson from private equity investing in defense and space technology is that while the sector has become trendy among investors, success in the long run depends on sustained government engagement, since portfolio companies ultimately need program support and appropriations to secure their future.

Konert framed that reality with characteristic dryness. “I’ve learned that everyone now is a space and defense tech investor,” he quipped, pointing to the surge of enthusiasm in private markets for defense technologies. For AE Industrial, the response has been to lean harder into Washington, where budget decisions ultimately shape demand.

A shift toward government-driven space funding is evident in the market data. In 2025, governments accounted for $138 billion of the $236 billion space market, fueled largely by national security, sovereignty and exploration programs, according to estimates from Novaspace.

Konert said AE Industrial’s increased focus on government relations prompted him to move from Boca Raton, Florida, where the firm is headquartered, to the Washington, D.C. area.

“The government is still the largest buyer of space assets in the market,” he said. “And having a clear direction of what the demand signal looks like, and then get the actual budget passed on time will be helpful for the whole industry to be able to plan, execute and invest.”

Konert argued that private equity can play a distinct role once a company has landed its first government customer. Firms like AE Industrial, he said, are “really good at helping companies in that growth phase where they have a contract with the government, but they need help scaling that technology.” He pointed to operational expertise inside the firm that helps portfolio companies build supply chains and manufacturing capacity at scale, citing York Space as an example.

But execution alone is not enough. Companies at that stage also need to professionalize how they engage the government after winning a contract. “You have to actually get the money from Congress,” Konert said, noting that many growth-stage firms lack a robust government relations operation because they are focused on engineering, delivery and technology development.

In defense and space markets, he added, effective government relations is a competitive differentiator.

Konert said he is encouraged by recent rhetoric from the Pentagon about procurement reforms and greater adoption of commercial technology, though it is still unclear how these changes will be implemented. “The words are definitely there. The action is happening. We’re obviously hopeful for more,” he said.

He also framed private capital as an essential complement to government spending, particularly as the Pentagon looks to shore up fragile supply chains. Washington, he said, is trying to “engage with commercial companies and to engage with private capital as a resource to help capitalize the supply chain.”

Pentagon budgets alone will not be sufficient to rebuild the industrial base. “You can’t just depend on government funding to get the technologies you need,” he said. “You need to leverage what I think is a U.S. strength, which is our private capital and innovation.”

For an industry flush with investor interest, Konert’s message is a reminder that enthusiasm does not replace budgets — and that in space and defense, Washington still sets the terms.

This article first appeared in the March 2026 issue of SpaceNews Magazine.