<p>The New Space Economy (NSE) is reshaping the space sector through the transition from government-led exploration to market-driven innovation. In this scenario, startups are the main actors and have become central to technological advancement and the development of new business models. However, academic research has largely neglected the understanding of how space startups construct and adapt their business models. This study addresses this gap by investigating how Italian space startups navigate these dynamics. Employing an inductive qualitative research design and multiple-case study methodology, we analyse three Italian startups through semi-structured interviews and secondary data. Our findings suggest the existence of an interpretative framework of the main strategic choices startups adopt to balance technological innovation, institutional engagement, and environmental sustainability. The study contributes to the emerging NSE literature by offering empirical insights into business model adaptation in policy-driven high-tech sectors. Furthermore, it provides managerial recommendations for entrepreneurs and policymakers on leveraging institutional support, fostering sustainable design, and enhancing adaptability and flexibility. This research advances understanding of how entrepreneurial actors shape and are shaped by evolving public–private boundaries and sustainability imperatives in the rapidly transforming space economy.</p>