By Akash Sriram

(Reuters) - Space startups raised $1.9 billion in the third quarter, up nearly a fifth from a year earlier, fueled by strong investor interest in rocket launchers and satellite manufacturers, according to a Seraphim Space report on Thursday.

This marks a shift in investment trend, as nine of the top ten space sector deals in the third quarter were for capital-intensive businesses, the report said.

Venture capital firms and other investors had previously focused largely on data analytics and satellite imagery-related startups in the space sector as they bear a quicker path to generating revenue than businesses such as rocket makers and hardware suppliers which require heavy capital investment.

"As the activity and investment opportunities in space continue to grow, we need businesses capable of meeting demand for satellite launches," said Lucas Bishop, Investment Associate at Seraphim Space.

Funding in the third quarter was up 18% from a year earlier at $1.9 billion, with an average deal size of $18 million, according to the report.

The largest transaction of the three-month period to Sept. 30 was for World Labs, a geospatial intelligence firm, which raised $230 million from a host of high-profile investors including Nobel Prize-winner Geoffrey Hinton, Nvidia, AMD and Adobe.

The United States overtook China in space startups funding so far this year, the report said. It anticipates competition for dominance in space to drive further investment.

(Reporting by Akash Sriram in Bengaluru; Editing by Krishna Chandra Eluri)