Author Topic: SpaceX vs Blue Origin - Whose Approach / Business Strategy is Better? Thread 1  (Read 565741 times)

Offline RedLineTrain

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Alphabet, which has more cash on hand than Bezos has in total assets.
... but zillion other projects to fund. They are only funding the internet satellite project of spacex.

Alphabet's investment went for "general corporate purposes," not specifically to the satellite project.  Ref. Gwynne Shotwell.

Regarding claims on Alphabet's cash, those claims certainly must not be very great.  It is accumulating more than $10 billion a year.

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and, Elon is allowing NOBODY to invest so much into spaceX that he loses his >50% stake of it, until there is a colony on Mars. He has made it quite clear.

The whole purpose of SpaceX is mars colonization, and giving up his majority stake would endanger that.

Not a concern.  He has 78% voting control.

Offline jongoff

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What "book of business"?

Last I heard, the SpaceX "book of business" includes about $10 billion in revenue.  And given this is the rocket business, SpaceX gets progress payments.

Progress payments can also get you in trouble though, if your margin isn't very high. A lot of time the payments get ahead of the work you've actually done, and if you're not careful you can end up running out of money to finish the contract. For example, if your margin on a launch is say $10M (more realistic IMO than $20M), and you prespend more than $10M from the progress payments on R&D, that means you later have to come up with replacement money to finish the existing mission that you've pre-spent progress payments for, or find a way to lower your costs enough to pay back the R&D. The fact that Elon is having to raise several hundred million at this point makes me wonder if he's dealing with cashflow problems from having overspent progress payments on reusability R&D. The good news is I don't think he'll have trouble raising money to make it through the tough times with how much people are in love with him and SpaceX. But progress payments aren't a free-lunch--you still have to deliver on the contract, and that still costs real time and money.

~Jon

Offline AncientU

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...

This is not very much for developing new rockets and world's most advances rocket engines
...

And yet it moves...

'Not very much' is quite subjective -- apparently it depends on how you use it. ;)
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Offline RedLineTrain

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The fact that Elon is having to raise several hundred million at this point makes me wonder if he's dealing with cashflow problems from having overspent progress payments on reusability R&D.

Spending more money on R&D than your customers have financed is not indicative of "overspending" or "cashflow problems" in the venture-funded world in which SpaceX operates.  It is taken as a given that a young, growing business does this.

Offline Robotbeat

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Raising more money doesn't have to be indicative of a mistake. It may just be that they want to expand (i.e. ITSy and constellation) faster than they can with just profit from launches (that is a pretty slow way of expansion in a world with a lot of capital sloshing around).
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Offline launchwatcher

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and, Elon is allowing NOBODY to invest so much into spaceX that he loses his >50% stake of it, until there is a colony on Mars. He has made it quite clear.
The whole purpose of SpaceX is mars colonization, and giving up his majority stake would endanger that.
Not a concern.  He has 78% voting control.
Multi-class stock structures with unevenly distributed voting rights (usually done so that one or more founders can retain > 50% of voting rights while holding < 50% of ownership) have come under fire recently:

http://www.marketwatch.com/story/russells-line-in-the-sand-against-snap-could-give-investors-more-control-2017-07-28

One more reason why SpaceX is unlikely to go public any time soon.

Offline Space Ghost 1962

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Offline Ludus

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The fact that Elon is having to raise several hundred million at this point makes me wonder if he's dealing with cashflow problems from having overspent progress payments on reusability R&D.

Spending more money on R&D than your customers have financed is not indicative of "overspending" or "cashflow problems" in the venture-funded world in which SpaceX operates.  It is taken as a given that a young, growing business does this.

Additionally, SpaceX has to do at least an annual "liquidity round" for employees and others to be able to sell SpaceX stock for personal purposes. Relatively small numbers like these (hundreds of millions in a company valued now over $20B) likely don't reflect SpaceX needing to raise capital.

Offline Lar

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Additionally, SpaceX has to do at least an annual "liquidity round" for employees and others to be able to sell SpaceX stock for personal purposes. Relatively small numbers like these (hundreds of millions in a company valued now over $20B) likely don't reflect SpaceX needing to raise capital.

Not to go too far off topic but is this annual liquidity round for employees a requirement or just a common practice? Does it have to be annual? And how is Blue doing this, do employees get options to enhance retention?  or is Bezos the sole owner? I can't recall hearing about any liquidity rounds... That's an area where one or the other may have competitive advantage...
« Last Edit: 08/17/2017 04:22 pm by Lar »
"I think it would be great to be born on Earth and to die on Mars. Just hopefully not at the point of impact." -Elon Musk
"We're a little bit like the dog who caught the bus" - Musk after CRS-8 S1 successfully landed on ASDS OCISLY

Offline RedLineTrain

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Not to go too far off topic but is this annual liquidity round for employees a requirement or just a common practice? Does it have to be annual? And how is Blue doing this, do employees get options to enhance retention?  or is Bezos the sole owner? I can't recall hearing about any liquidity rounds... That's an area where one or the other may have competitive advantage...

It is common among large unicorns that have private for many years.  E.g., Uber.

https://www.bloomberg.com/news/articles/2017-02-15/uber-gives-restless-employees-a-way-to-cash-out

Offline Lar

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Not to go too far off topic but is this annual liquidity round for employees a requirement or just a common practice? Does it have to be annual? And how is Blue doing this, do employees get options to enhance retention?  or is Bezos the sole owner? I can't recall hearing about any liquidity rounds... That's an area where one or the other may have competitive advantage...

It is common among large unicorns that have private for many years.  E.g., Uber.

https://www.bloomberg.com/news/articles/2017-02-15/uber-gives-restless-employees-a-way-to-cash-out

thanks. Question still stands, does anyone know what Blue is doing? Do employees get only salary? Is that an advantage or disadvantage? Does it attract different sorts of people (I would think so... )
"I think it would be great to be born on Earth and to die on Mars. Just hopefully not at the point of impact." -Elon Musk
"We're a little bit like the dog who caught the bus" - Musk after CRS-8 S1 successfully landed on ASDS OCISLY

Offline RedLineTrain

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thanks. Question still stands, does anyone know what Blue is doing? Do employees get only salary? Is that an advantage or disadvantage? Does it attract different sorts of people (I would think so... )

According to comments on Glassdoor, they do not appear to have stock grants at Blue, but they do have a 3% 401(k) company match (not horrendous, but not terribly generous).  SpaceX has stock grants, but no 401(k) match.

I would guess that SpaceX would tend to attract those with a higher risk tolerance (young, ambitious people) and that Blue would tend to attract those with a lower risk tolerance (older, established people).  But I don't know the magnitude of those tendencies.

Offline AncientU

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Thinking more about this from the "SX competition" thread elsewhere.

It would appear that all providers (including potential new ones large and small), are becoming more "gradual". Even SX's rapid pace of development/flight test appears to have slowed from the frenetic pace of landing/engine performance/chilled props/other.

...

What happens to upset this, where "good enough" isn't "better"?  ;)

The reality that all competition has to recognize is that reusable rockets with minimal cost for refurbishment (at least for a batch of launches) is now the benchmark.  The recent comments by Russian leadership, and the much more public post-Ariane 6, reusable rocket development effort attest to this reality.

The recent 'gradual' -- or pause -- might be a reappraisal* of end goals that would only be 'good enough' for the market that was -- and never again will be.

* A test of this hypothesis would be one or more major programs realigning their development goals, attesting to this reality (e.g., Ariane dropping Ariane 6, instead continuing Ariane 5 and shifting the $5B to a reusable rocket program, or Russia dropping Soyuz 5/Angara for something reusable, or ULA scrapping Vulcan completely or going to something smarter than SMART reuse).

Edit: Added a wiki reference block of text... below.  Shows the hypothesis might have support.

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Proposed development options

CNES began studies in 2010[35] on an alternative, reusable first stage for Ariane 6, using a mix of liquid oxygen and liquid methane rather than hydrogen in the current Ariane 6 first-stage design. The methane-powered core would use one or more engines, matching capabilities of Ariane 64 with only two boosters instead of four. Economic feasibility of reusing an entire stage however remains in question. Con-current with the Liquid fly-back booster research in the late 90s and early 00s CNES along with Russia concluded studies indicating that reusing the first stage was economically unviable as manufacturing ten rockets a year was cheaper and more feasible than recovery, refurbishment and loss of performance caused by reusability.[36]
Main article: Adeline (rocket stage)

In June 2015, Airbus Defence and Space announced that development of Adeline, a partially reusable first stage, would become operational between 2025 and 2030, and that it would be developed as a subsequent first stage for Ariane 6. Rather than developing a way to reuse an entire first stage (like SpaceX), Airbus proposed a system where only high-value parts would be safely returned using a winged module at the bottom of the rocket stack.[35]

In August 2016 Airbus Safran Launchers gave some more details about future development plans building on the Ariane 6 design. CEO Alain Charmeau revealed that Airbus Safran were now working along two main lines: first, continuing work (at the company's own expense) on the recoverable Adeline engine-and-avionics module; and second, beginning development of a next-generation engine to be called Prometheus. This engine would have about the same thrust as the Vulcain 2 currently powering Ariane 5, but would burn methane instead of liquid hydrogen. Charmeau was non-committal about whether Prometheus (still only in the first few months of development) could be used as an expendable replacement for the Vulcain 2 in Ariane 6, or whether it was tied to the re-usable Adeline design, saying only that "We are cautious, and we prefer to speak when are sure of what we announce. ... But certainly this engine could very well fit with the first stage of Ariane 6 one day".[3] In 2017 the Prometheus engine project was revealed to have the aim of reducing the engine unit cost from the €10m of the Vulcain2 to €1m and allowing the engine to be reused up to five times.[37]

https://en.wikipedia.org/wiki/Ariane_6
« Last Edit: 08/18/2017 10:39 pm by AncientU »
"If we shared everything [we are working on] people would think we are insane!"
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Offline AncientU

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The issue overall with what you suggest is that they need sufficient reason. AG, in the best position, has some but a full plate so will have to creatively rework multiple programs on the fly w/o letting anything drop. ULA's marching orders don't contain a possibility of it, and they don't need it for the launches they've signed up for.

AG?
"If we shared everything [we are working on] people would think we are insane!"
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Offline AncientU

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...

Still think your 'gradual' (aka, pause) is an ah-shit moment... but appreciate your well-informed perspective of the field of play.  In all this, BO seems to have the best (second best) hand to play, since they are not battling history, heritage, hubris.  ...but of course, they haven't launched an orbital rocket yet...
« Last Edit: 08/18/2017 11:17 pm by AncientU »
"If we shared everything [we are working on] people would think we are insane!"
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Offline AncientU

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Suggest a variation on 3. That Boeing/LM shift to spacecraft production that takes advantage of launch frequency/immediacy to ramp volume of payloads. Then, there would be a reason once again for in house launch capability to meet the demand, for a subset of customers not comfortable with SX.

They will encounter great competition in the small/cheap/high-tech spacecraft market, being late to the game and having zero 'pivot' potential.  Recall Boeing saying they wouldn't be flying a small sat constellation until SIX YEARS after getting FCC approval...

New Glenn is signing up small sat constellation vendors already.
« Last Edit: 08/18/2017 11:06 pm by AncientU »
"If we shared everything [we are working on] people would think we are insane!"
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Offline AncientU

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If you're (Boeing/LM) so good, why not spin out (as is done in Silicon Valley - Cisco did this a lot) - a startup, co-financed with venture, conquer a part of the SC space, and acquire it again back into the main company. High capital reuse, keeps company culture end to end, secures inaccessible parts of the market, and you don't risk anything but your initial stake. When it works, you own all that market, and increase your market cap.

More likely is their buying one or more of the players in the game just as they gobbled up the space launch and spacecraft players.  That only reduced competition, advancing the technology approximately zero.  Once the satellite industry enters a Silicon Valley-like development cycle, lumbering old school companies are in trouble.  IBM, GE, others tried to push into the personal computing revolution...

New players like Blue and some of the small launcher/small satellite start-ups will own chunks of the field if history is any indication.  Figuring out who and how is the challenge.  Silicon Valley in the 1970s/80s all over again.
« Last Edit: 08/19/2017 03:33 am by AncientU »
"If we shared everything [we are working on] people would think we are insane!"
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Offline Space Ghost 1962

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If you're (Boeing/LM) so good, why not spin out (as is done in Silicon Valley - Cisco did this a lot) - a startup, co-financed with venture, conquer a part of the SC space, and acquire it again back into the main company. High capital reuse, keeps company culture end to end, secures inaccessible parts of the market, and you don't risk anything but your initial stake. When it works, you own all that market, and increase your market cap.

More likely is their buying one or more of the players in the game just as they gobbled up the space launch and spacecraft players.  That only reduced competition, advancing the technology approximately zero.  Once the satellite industry enters a Silicon Valley-like development cycle, lumbering old school companies are in trouble.  IBM, GE, others tried to push into the personal computing revolution...

That was also tried in Silicon Valley. The problem was fighting corporate culture(s). And when Boeing tried to do it, they had and even worse case.

In M&A, there's lots of failures and few successes in tech and aerospace. How we made this work was a hybrid solution - you'd spin out a strong small self sufficient group from Bigco, they'd acquire talent/startups, get a key market win, get a second round,  acquire/win more leveraging the acquisition value, possible go public, then be reacquired by Bigco.

The benefit is that the startups are acculturated to Bigco (otherwise they die - Google's garden of dying unicorns is a good example of this, and it's much worse for aerospace).

Most aerospace firms have no idea what to do with acquisitions of any sort. As we saw with ULA's dealings with XCOR and others (not to mention their own internal problems with corporate culture, being all chiefs fewer indians - they are in dire need of fresh blood).

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New players like Blue and some of the small launcher/small satellite start-ups will own chunks of the field if history is any indication.  Figuring out who and how is the challenge.  Silicon Valley in the 1970s/80s all over again.

The newer players haven't "happened" yet. True, they are looming, but both SX/BO have high turnover rates, and both lack a certain aspect of stability that makes them vulnerable in down turns, one of which is in the offing this fall.

You're right - there are aspects of the SV experience. (I jumped out of avionics/Shuttle/CELV into semiconductors, then software, then systems, then internet, then web startups, then databases, then medical, then managed service, financial services, stint as a venture consultant, stint with supporting senate staffers,  then big data/datascience, and now a matchmaker for aerospace startups/primes/other. Not bad a career for an mathematician that tamed GNC/Kalman filters to allow spacecraft/other landings.) Note that aerospace has been traditionally resistant to SV ideas/mindset.

Musk changed that in an unstable way. (Ironically, SX, BO, ULA, ... others have a acute "smell test" of what they like and don't - very chimerical, like petting a cat that likes it for a while then suddenly doesn't - scratch!) Have a lot of claw marks ...

Offline Chris Bergin

I'll say this much, I've never known so many people act like they are falling over each other to join BO. Sadly, if understandably, it's because they are offering incredible salaries and benefits - easily the best in the business...."by a massive margin".
« Last Edit: 08/23/2017 12:51 am by Chris Bergin »
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Online FutureSpaceTourist

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I'll say this much, I've never known so many people act like they are falling over each other to join BO. Sadly, if understandably, it's because they are offering incredible salaries and benefits - easily the best in the business...."by a massive margin".

Which to me means Blue has no aim to be profitable for some years? Or at least building capability is far more important to them at this point. It'll be interesting to see how this pans out.

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