Plenty of space to make money
Rocket Lab founder predicts company will soon be cashflow positive
Rocket Lab’s maiden commercial launch on Sunday was a moment of pride for all New Zealanders, as its rocket “It’s Business Time” successfully launched a fleet of cube satellites into low Earth orbit.
But heavyweight backers from Lockheed Martin to Sir Stephen Tindall, who have put US$148 million into the company, will now be looking for a return on their investment.
Founder Peter Beck doesn’t shirk from that fact.
“We’re not funded by any billionaires,” the Aucklander says, in a nod to Space X’s founder, the eccentric Elon Musk, whom Forbes values at US$22.5 billion, and Blue Origin founder Jeff Bezos, whose early stage space venture is bankrolled by the US$141b personal fortune he has amassed through Amazon.
“We actually need to make money and that has been a key focus from day one,” says Beck. “It’s Business Time is ‘business time’ in more meanings that you can imagine.” And the news on that front is good. Beck won’t give a line-by-line account of the privately-held company’s financials, but “we’ll come out of the end of this year cashflow positive”, he says.
“It’s a real credit to the team here that we can come out of such an intensive R&D period to cashflow positive so quickly.”
The plan is for Rocket Lab’s second commercial flight to launch in as soon as a fortnight, and Beck says so far everything’s on track which would put his company ahead of its aggressive timeline to reach a monthly launch frequency by the end of this year, fortnightly by the end of next year and weekly by 2020.
It’s part of the Kiwi-American company’s plan to grab as much aerospace business as possible over the next four years.
“That’s not an estimate or including dreamers or companies in stealth mode, that’s the actual pipeline,” Beck says. “Whether there are enough customers is not one of the things that keeps me up at night.”
There are many budding competitors to Rocket Lab, including a Richard Branson effort that will launch rockets an “airborne platform” — or a modified Boeing 747.
But Beck says none are close to a commercial flight and capturing a slice of the multi-billion market.
“The opportunity is huge here, and we are currently the only show in town. Yesterday (Sunday) we commenced full commercial operations so that’s the new normal for the industry now. There is officially a launch vehicle on the market that’s capable of delivering small-sat payloads into orbit.”
Rocket can put a 150kg satellite into low Earth orbit for US$5.7m — chump change in aerospace terms.
Its success is partly down to Beck’s brainpower, and the one-time Fisher & Paykel Appliance engineer’s innovations in engine design and fuel.
But he also puts it down partly to process. He says while other rockets are custom-designed for each customer — including Space X’s Falcon — the Electron rockets produced by his company’s LA and Auckland plants are identical. Customers’ satellites are attached to a plate, which is then attached to the standard rocket design, helping to keep costs low and timelines to months rather than years.
Smaller clients can also split the cost with a “ride-share” arrangement that can be booked online, almost like booking an Uber.
Beck says next year there will be a ride-share flight about once a quarter to mop up smaller customers, but other flights will be each dedicated to a single larger satellite.
Rocket Lab’s most recent funding round was in 2017, when it raised US$75m at a post-money valuation of more than $1b. Beck says the company will seek to raise more funding.
“We’re in a very capital-intensive business and we’ve got a couple of big projects to roll out next year,” he says.
Rocket Lab recently announced the site for its first launch pad outside New Zealand — Nasa’s Wallops Launch Facility in the US state of Virginia. Beck says it’s scouting for a site in the UK, with one in Asia to possibly follow, although he adds Mahia Peninsula will always be its highest-frequency launch facility because of its geography and our relatively empty skies and shipping lanes.
The company is also in full-on hiring mode, looking to add 180 (which will be split evenly between NZ and the US) to its existing staff of around 350.
For all the expansion, Beck has no plans to move into larger rockets and challenge Space X’s heavy-lifting lineup. That means while Rocket Lab is capital-intensive, it’s still has nothing on Space X’s constant need for external capital raising.
“They have to pull in half a billion in every six months,” he says.
Rocket Lab will use different mechanisms to raise money, and a listing, at some point, is “under evaluation”.
But you get the impression he is enjoying life as the chief executive of a private company, which has seen most of its backers make repeat investments.
Beyond Lockheed and Sir Stephen, they include Khosla Ventures and The Data Collective, both based in Silicon Valley, and European outfit Bessemer Venture Partners.
Beck won’t comment on stakes, but says he has a minority investment in Rocket Lab.
“We’re very lucky the investors we have onboard are not looking for a quick exit but rather to build a large company,” he says.