Orbital AI: Seattle-based startup Starcloud raises $1.1B to build space-based data centers
Starcloud, the first company to build data centers that operate in space, announced $170 million in new funding on Monday, putting it in unicorn territory at a $1.1 billion valuation. The Redmond, Wash.-based company is now the fastest in Y Combinator history to hit that milestone, reaching the billion-dollar mark 17 months after its accelerator demo day.
A meteoric rise follows a period of great doubt.
Philip Johnston, CEO and co-founder of Starcloud, said the company was “fairly circular” in its early days. “If you go back to what X said when we announced it, people said it’s impossible and we can’t do it.”
Starcloud is an engineering satellite equipped with solar panels, a radiation shield to protect electronics from the harsh environment of outer space, communication devices, and a cooling system adapted from International Space Station technology to manage the heat generated by a high-performance computer.
Accomplishments and new milestones. In November, the startup teamed up with SpaceX to launch Starcloud-1, its 130-pound satellite carrying an Nvidia H100 chip. The mission successfully demonstrated that the hardware can reliably process AI workloads in orbit, including being the first to train a large language model in space, the startup reported.
Its next milestone will be the launch later this year of Starcloud-2, a satellite with 100 times the power generation capacity of the first and equipped with Nvidia’s Blackwell B200 chip, considered the world’s most powerful AI chip. The program will use customer workloads.
Starcloud’s orbital pitch comes as terrestrial data centers face a dual challenge: rising energy demand and growing “not in my backyard” opposition from local communities. Citizens and officials across the country have pushed back against new computer services that could raise electricity prices and use more water for cooling. From local governments to President Trump, leaders are trying to bolster the implications of new data center deployments.
“We have to start looking for new ways to do this,” said Johnston. “And actually, what we’re doing makes a lot of sense.”
A new space race. Starcloud was founded in January 2024 by Johnston, Chief Technology Officer Ezra Feilden and Senior Engineer Adi Oltean. The founders previously held roles at SpaceX’s Starlink, Airbus and McKinsey & Co.
The team has been at the forefront of space-based data centers, with an initial focus on processing data from other satellites before transmitting it to Earth. The long-term plan is to handle all types of workloads, including downlink data.
Other companies are also joining the campaign. SpaceX applied to the Federal Communications Commission earlier this year to deploy up to one million data center satellites, according to reports. Axiom Space, Kepler Communications and Sophia Space are also developing the technology, and Google began testing the concept with its Project Suncatcher.
Johnston touches Starcloud’s head start.
“We have a huge advantage being ahead,” he said. “We have the best team in the world for this. We’re moving very fast. We’re two years ahead in terms of having any kind of data and telemetry from how these chips work in orbit.”
The economic way forward. Not everyone is convinced. At a recent Microsoft event, company President Brad Smith said the tech giant could eventually pursue a satellite strategy, but “we weren’t betting on it.”
“We keep our feet on the ground,” Smith said.
Johnston acknowledges that space-based computing won’t replace terrestrial data centers anytime soon. He expects the economics to shift in favor of space within three to five years, but even so, less than 1% of the new computer coming online will be in orbit.
In about a decade, he expects the industry to reach a tipping point where satellite data centers “will be the fastest-growing segment,” he said, “and it will continue to grow rapidly until it reaches almost every location in space.”
Funding details. A notable list of venture capitalists are already betting on it.
The Series A round is divided into two parts: the first round led by Benchmark with the participation of EQT – which operates more than 70 global data centers – and the expansion round led by both firms. As part of the deal, Benchmark general partner Chetan Puttagunta will join Starcloud’s board.
The round also included infrastructure fund Macquarie Capital, NFX, Nebular, Y Combinator, Adjacent, 776 Ventures, Fuse Ventures, Manhattan West and Monolith Power Systems. Angel investors include retired US Air Force General Stephen Wilson, former Boeing CEO Dennis Muilenburg, and former Starbucks CEO Kevin Johnson.
The startup has raised a total of $200 million.
