Why some commercial companies are more successful?

[meekGee]

In Musk's case, success was determined by the equivalent of a butterfly sneeze. Tesla and SpaceX were both a Planck constant from going under in 2008 before a few investors bailed them out. Don't count out luck. He didn't build his companies or go from broke to being worth $13 billion in seven years by luck, but he did need it to survive.

They were a "plank's constant" away from getting a somewhat worse deal on the next financing round.

Start ups raise financing multiple times before turning cash positive.  Both SpaceX and Tesla had very good outlooks.  They actually had a product that was on the right track, and a market.  If they had needed more money, they'd have gotten it.  Compared with other start ups, their trajectories are phenomenal.

"Luck" was just in the details here - how much, how early, etc.  Nothing fundamental.  There isn't a start-up in the world that doesn't have hair-raising "how we almost died" stories.

[Oli]

Not what I said. Using loans isn't dumb. Using loans with interest rate of 10%+ is dumb*. Original context is everything.

_{Unless you /plan/ on going bankrupt.}

It has nothing to do with being dumb, you take what you can get. The average start up business loan is probably around 10%. I seriously doubt any space start up planning to build/launch rockets would get better conditions, quite the opposite. We're talking about a stagnant market with excess capacity and government-subsidized players. Probably the worst investment ever.

Without Musk being very wealthy at the time SpaceX would not exist today, that's obvious.

[Robotbeat]

XCOR exists and it started out with basically no money. It is possible, it just slows you way down.

And 10%+ interest rate is exorbitant. I literally can get better on my credit card. You don't try to build capital-intensive rockets with that interest rate, you get money in other ways such as SBIR grants and maybe some DARPA grants. Once you have a little to work on, then you can gather investors and lower interest rate loans.

There are other ways to be financed than debt financing. As I said, trying to build rockets with a +10% interest rate is dumb.

[Robotbeat]

Also, larger small business loans nowadays have interest rates in the 6-8% range. 10% today is ridiculous. Maybe +10% makes sense in the late 1990s, but not in the early 2000s when SpaceX started.

[jongoff]

Not every business can start as a billionaire's plaything. Some actually have to start from nothing and build up.

No joke. This is why I root for XCOR even though they're taking longer than expected. They're likely going to be the first example of a successful space transportation startup that was bootstrapped without any billionaire sugar-daddy funding them.

~Jon

[jongoff]

XCOR exists and it started out with basically no money. It is possible, it just slows you way down.

And 10%+ interest rate is exorbitant. I literally can get better on my credit card.

Can you get enough cheap credit to cover payroll for even a small startup for a month?

You don't try to build capital-intensive rockets with that interest rate, you get money in other ways such as SBIR grants and maybe some DARPA grants. Once you have a little to work on, then you can gather investors and lower interest rate loans.

It's really easy to say this when you haven't tried. Admittedly both of our credit lines are right around or just under 10%, but we've had to take far worse occasionally. The problem is that typically when you're in the bootstrapping off of R&D contracts mode you don't have a lot in tangible assets that can be used to back the loans, and you look like a horrible credit risk, and if you're up to even a half dozen people you end up needing credit lines in the $50-100k range due to the lumpiness of payments on many contracts. I'm sorry Chris, you have no idea what it's like trying to keep a bootstrapped startup alive, even when things are growing and going reasonably well.

When the option is pay high interest rates or go out of business (and possibly go bankrupt because you're all-in on the company), you take the high interest rate loan and just try to make recurrences less likely in the future. That's not ideal, but it's not dumb.

~Jon

[QuantumG]

In Musk's case, success was determined by the equivalent of a butterfly sneeze. Tesla and SpaceX were both a Planck constant from going under in 2008 before a few investors bailed them out. Don't count out luck. He didn't build his companies or go from broke to being worth $13 billion in seven years by luck, but he did need it to survive.

SpaceX was saved by NASA contract.

By which you mean to imply that SpaceX would have died without that NASA contract - this is false, they would have become a space tourism company as that's what they were already pivoting towards with the UK build Magic Dragon and the Falcon 5.

It's also worth noting that the contract which saved SpaceX came from a NASA administrator who was a former consultant for Elon Musk. I'm not sure why people keep bringing it up like it's something to be proud of.. it was obvious cronyism.

[Robotbeat]

XCOR exists and it started out with basically no money. It is possible, it just slows you way down.

And 10%+ interest rate is exorbitant. I literally can get better on my credit card.

Can you get enough cheap credit to cover payroll for even a small startup for a month?

You don't try to build capital-intensive rockets with that interest rate, you get money in other ways such as SBIR grants and maybe some DARPA grants. Once you have a little to work on, then you can gather investors and lower interest rate loans.

It's really easy to say this when you haven't tried. Admittedly both of our credit lines are right around or just under 10%, but we've had to take far worse occasionally. The problem is that typically when you're in the bootstrapping off of R&D contracts mode you don't have a lot in tangible assets that can be used to back the loans, and you look like a horrible credit risk, and if you're up to even a half dozen people you end up needing credit lines in the $50-100k range due to the lumpiness of payments on many contracts. I'm sorry Chris, you have no idea what it's like trying to keep a bootstrapped startup alive, even when things are growing and going reasonably well.

When the option is pay high interest rates or go out of business (and possibly go bankrupt because you're all-in on the company), you take the high interest rate loan and just try to make recurrences less likely in the future. That's not ideal, but it's not dumb.

~Jon

Jon, my point is that you can't take high-interest loans (which yes, I know a higher interest rate line of credit is required for payroll) and use that to develop very capital-intensive orbital rockets. Oli is right, SpaceX would've failed in that case. But smaller contracts can be dealt with using a line of credit as long as the overall amount of cash needed isn't too high. And I do know what it's like.

Rockets and infrastructure are capital-intensive, smaller grants are not as much. That's why I said what I said.

[nadreck]

It's also worth noting that the contract which saved SpaceX came from a NASA administrator who was a former consultant for Elon Musk. I'm not sure why people keep bringing it up like it's something to be proud of.. it was obvious cronyism.

Excuse me but that is bass ackwards for cronyism, there is no incentive for someone in a position of power in the public sector, to put bread back in the hand that fed them before. It makes sense instead for people who work in the public sector to line their nest with good will for organizations they may 'semi-retire' to. 

[AncientU]

In Musk's case, success was determined by the equivalent of a butterfly sneeze. Tesla and SpaceX were both a Planck constant from going under in 2008 before a few investors bailed them out. Don't count out luck. He didn't build his companies or go from broke to being worth $13 billion in seven years by luck, but he did need it to survive.

SpaceX was saved by NASA contract.

By which you mean to imply that SpaceX would have died without that NASA contract - this is false, they would have become a space tourism company as that's what they were already pivoting towards with the UK build Magic Dragon and the Falcon 5.

It's also worth noting that the contract which saved SpaceX came from a NASA administrator who was a former consultant for Elon Musk. I'm not sure why people keep bringing it up like it's something to be proud of.. it was obvious cronyism.

Maybe he saw some potential worth investing in?  And some corresponding NASA need?

[RanulfC]

In Musk's case, success was determined by the equivalent of a butterfly sneeze. Tesla and SpaceX were both a Planck constant from going under in 2008 before a few investors bailed them out. Don't count out luck. He didn't build his companies or go from broke to being worth $13 billion in seven years by luck, but he did need it to survive.

SpaceX was saved by NASA contract.

By which you mean to imply that SpaceX would have died without that NASA contract - this is false, they would have become a space tourism company as that's what they were already pivoting towards with the UK build Magic Dragon and the Falcon 5.

It's also worth noting that the contract which saved SpaceX came from a NASA administrator who was a former consultant for Elon Musk. I'm not sure why people keep bringing it up like it's something to be proud of.. it was obvious cronyism.

Maybe he saw some potential worth investing in?  And some corresponding NASA need?

Griffin was predisposed to building a Mars Direct architecture based around Ares-V and was less than thrilled to be "required" to continue to support the ISS (per Congress) and things like "Commercial" access. He didn't even seem interested in the "requirement" to go back to the Moon and as far as I could tell pretty much everything OTHER than Ares-V and a Mars Direct style system was forced on him by someone else.

Griffin was, IIRC all for dumping both the ISS and any support thereof, (including commercial resupply) as soon as practical but was prevented from doing so by Congressional action.

Randy

[Coastal Ron]

It's also worth noting that the contract which saved SpaceX came from a NASA administrator who was a former consultant for Elon Musk.

I'm glad you highlight this, because it is a curious situation given the various pro & anti-commercial space positions Griffin has held over time.

I'm not sure why people keep bringing it up like it's something to be proud of.. it was obvious cronyism.

As to the cronyism charge, are you saying that SpaceX was not the least costly solution available?  Because to prove cronyism you have to be able to show that there was a better choice available that was ignored, and it sure doesn't seem like - as of today - you could support such a claim.  Even at the time of the award the claim from NASA was that they wanted a new approach, and SpaceX certainly fit the bill.

But maybe SpaceX received more serious attention from NASA because of Griffin than they would have received otherwise considering how young they were, but then they ended up actually being as good as they said they could be?  That could be true.

[QuantumG]

Nonsense, it was simple back scratching. Griffin has done consulting work for SpaceX since being administrator too. It's not rocket science.

[john smith 19]

Nonsense, it was simple back scratching. Griffin has done consulting work for SpaceX since being administrator too. It's not rocket science.

So I guess you're "recipe for success" would include "make sure you slip a few study contracts on a regular basis to govt employees" ?

[Robotbeat]

At the time, it seemed Griffin was downright hostile to commercial space companies like SpaceX. Corruption is a serious charge, people to to jail for it. I don't think it's fair to make such claims so loosely.

[QuantumG]

So I guess you're "recipe for success" would include "make sure you slip a few study contracts on a regular basis to govt employees" ?

It goes under the general heading of "lay of the land".

[Jim]

As to the cronyism charge, are you saying that SpaceX was not the least costly solution available?  Because to prove cronyism you have to be able to show that there was a better choice available that was ignored, and it sure doesn't seem like - as of today - you could support such a claim.  Even at the time of the award the claim from NASA was that they wanted a new approach, and SpaceX certainly fit the bill.

But maybe SpaceX received more serious attention from NASA because of Griffin than they would have received otherwise considering how young they were, but then they ended up actually being as good as they said they could be?  That could be true.

They were far from a solution at the time, they were unproven.
The better choice at the time would have been any of the various on new spacecraft on proven launch vehicles.
And no, Griffin had no say in the selection of Spacex

[meekGee]

So his rivals suck eggs, and wish for rockets to blow up. When they don't blow, they take the slow path to compete with him. Needless to say this is not an effective strategy.

All other space ventures of the past got sucked in to the aerospace cult and died as a result. Musk, locked out of that cult,  made a more successful cult they don't want to convert to, and they hate him for it, for it shows them up as addicts to dubious things. Even when things blow up, it's just another story to sell to backers with, as to why only he can do this. The other guys find this infuriating, as they save green stamps to get enough margin in budget to do small IRND on a RCS thruster or three lines of code in the guidance software.

FWIW, hope this answers your OP.

And that right there is the source of all the animosity.

Other startups were originally from the same core club, so were tolerated.

This guy OTOH looked different, spoke different - it rubbed everyone the wrong way.   I've seen aerospace execs speak at award dinners...   Big words, little ideas.

This new guy, he uses little words, he's self deprecating, and he's talking about colonizing Mars.

They talk about "the customer" even though in reality they wouldn't know a real customer if one took the elevator to the banquet room with them, and he's talking about "hours turn-around".

And so even now they are trying to run every which way but follow his tracks.  I guess one of the advantages of being out in the lead is that you don't have a disposition to not changing course.