Who will compete with SpaceX? The last two and next two years.

[oldAtlas_Eguy]

SpaceX was originally planning 4 year operating lives for the satellites, which means 3000 satellites per year.

Assuming they're roughly the same as Iridium (meaning ~10 per launch), that means ~300 Falcon 9 equivalent launches per year.

If SpaceX's constellation works out, they'll have plenty of launch volume. Even enough for a larger and fully reusable vehicle to replace Falcon 9 and Heavy.

Just to say that this launch volume is really them paying themselves to launch rockets. It's not externally sourced revenue. Basically, it is a necessary expense in order to generate revenue from the 3000 satellites in orbit.

The launches themselves generate zero revenue. It is the satellites that do so. So the only difference between them using another service provider to launch the satellites and them doing so themselves, is that they can do it cheaper, and thus reduce the cost of the satellite constellation, and up its profit margin. The launches themselves are not revenue generating at all.

Book keeping-wise, do they need to account for the launch 'prices' as income in one company sector and launch expenses in another?  Might be necessary for government launch pricing justification and/or capital market documentation...  I know zero about standard accounting practices.

Unfortunately there are many different "standard" accounting practices when it comes to business accounting. Which one they will use is up to them and we are unlikely to find out which one.

[Lar]

Internally at IBM we use "blue dollars" vs "green dollars" (that's a very informal description, and I don't think it's violating any confidentiality about IBM to say that) ... blue dollars are one group paying another for something (servers, software licenses, implementation assistance, whatever) so the supplying group isn't subsidizing the supplied group. No actual money changes hands but helps management understand how much gross profit each group generates. Green dollars are external customers paying for things, which means revenue actually coming in.

I would be very surprised if SpaceX didn't do something somewhat similar.. the launch department shouldn't be giving launches for zero cost, they should be charging (in blue dollars) about what the external customers pay.

[Lar]

I don't know that it ignores cost structures, we push back on pricing from other groups all the time (and get pushback too).

IBM is a laggard for a lot of reasons, sadly, but I'm not sure that internally transferring notional funds back and forth is one of the major reasons why.

You have to have SOME sort of notion of what one department spends when it supplies something to another department, or else some departments subsidize others and you get departments looking like they make more money (or less) than they actually do.

[jpo234]

A few things I haven't seen in this thread so far:

Latest public valuation data for SpaceX as of 06/2016: $15 billion

Then there is the Mars presentation, specifically the Cost slide. It states, that a single flight of the tanker to LEO with 380000kg propellant would (eventually) cost less than $5 million. Initially missing this target by an order of magnitude would still allow regular launches for a fraction of today's prices per mass. That's why Tom Mueller called the BFR the real revolutionary rocket,

[Coastal Ron]

Internally at IBM we use "blue dollars" vs "green dollars" (that's a very informal description, and I don't think it's violating any confidentiality about IBM to say that) ... blue dollars are one group paying another for something (servers, software licenses, implementation assistance, whatever) so the supplying group isn't subsidizing the supplied group. No actual money changes hands but helps management understand how much gross profit each group generates. Green dollars are external customers paying for things, which means revenue actually coming in.

At one point in my career one of the things I managed was an internal sales department, where we "sold" our product to another cost center within the same building. I had a supervisor and three employees working that unit - I chalked it up to upper management disfunction.

I would be very surprised if SpaceX didn't do something somewhat similar.. the launch department shouldn't be giving launches for zero cost, they should be charging (in blue dollars) about what the external customers pay.

As I recall SpaceX doesn't break out their labor according to projects, it just all goes into one pot. Probably the same with material too, which in their dynamic development environment would be the better way to go too (engineers are terrible about paperwork). But that does put the onus on their finance department to figure out how to keep track of costs - but could be manageable depending on their ERP system.

[Lar]

As I recall SpaceX doesn't break out their labor according to projects, it just all goes into one pot. Probably the same with material too, which in their dynamic development environment would be the better way to go too (engineers are terrible about paperwork). But that does put the onus on their finance department to figure out how to keep track of costs - but could be manageable depending on their ERP system.

There are other ways. Activity based costing, for example, and some educated guessing about what materials are used for what. But I think you have to have some idea or you don't know where you should be putting resources. SpaceX has a custom internal ERP IIRC, it may be already built to track some of this for them...

I think having an internal sales department probably starts to veer into dysfunctionality all right.

[Lar]

(BTW they also have a custom ERP system at Tesla.)

Heard they started out as the same codebase.

also I don't think anything else you said was disagreeing with what I said. If you just let each department ask for whatever it wants from any other department you have no idea what things are costing you or which departments are efficient. I suspect Musk wants to know what parts of his organization are in need of attention. Unless he just makes decisions (like laying people off at Vandy, which was rumored to happen recently) randomly.

[Coastal Ron]

There are other ways. Activity based costing, for example, and some educated guessing about what materials are used for what. But I think you have to have some idea or you don't know where you should be putting resources. SpaceX has a custom internal ERP IIRC, it may be already built to track some of this for them...

My expertise was on the product side, and it's pretty easy to cost of Bills of Material (BOM's) for material cost. Adding manufacturing costs is a little more detailed, but usually manufacturing engineering takes care of that estimation. So between actual material costs and good-enough manufacturing estimations that should be pretty good.

What is more difficult I think is the design engineering side of things, which is where activity based costing has historically been a good idea. Back in my old days of defense contractors everyone had to have a "charge number" for what they did in engineering, but that's what I heard SpaceX did not do - or at least not a few years ago. But that could be estimated by management if they needed to understand the details, so I think there are simple ways for them to manage and understand their costs in a general way.

So it's probably more a matter of what kind of detail Musk and Shotwell want management to have.

[Ludus]

Operating the Constellation and running a global internet provider would be such a radically different business from what SpaceX does otherwise it would be surprising if they didn't choose to structure it as at least a distinct subsidiary. Just a guess, but this could be the reason for buying back the domain name X.com. XCom.

[jpo234]

XCom.

xcom.com already exists.

[RedLineTrain]

The valuation that I am hearing for SpaceX's next capital raise is more than a bit mind-boggling by any metric – even a forward leaning one that prices in the constellation's existence.

If SpaceX can crack the code on the whole stack -- satellites, network equipment, and user terminals -- I can imagine that would be a very valuable vertically-integrated system.

[John Alan]

XCom.

xcom.com already exists.

X.com was the original Paypal address way back when EM owned it...
Was Paypal's as of late... and they just sold it back to him...   

[jpo234]

XCom.

xcom.com already exists.

X.com was the original Paypal address way back when EM owned it...
Was Paypal's as of late... and they just sold it back to him...   

I know. Just wanted to point out potential conflicts. Trademark and so on.

[philw1776]

A few things I haven't seen in this thread so far:

Latest public valuation data for SpaceX as of 06/2016: $15 billion

Then there is the Mars presentation, specifically the Cost slide. It states, that a single flight of the tanker to LEO with 380000kg propellant would (eventually) cost less than $5 million. Initially missing this target by an order of magnitude would still allow regular launches for a fraction of today's prices per mass. That's why Tom Mueller called the BFR the real revolutionary rocket,

Good info.
But note that it is "old" info. Heh! Shortly after RTF.

I expect that if we see some sort of equity deal regarding SpaceX later this year or early next (to fund ITS) the imputed company valuation will be several times February's paltry $15 billion. Given the huge increase in flight rate this year* and the post February demonstration of flying "flight proven" cores, investors will bet big on SpaceX value.  FH flight late 2017, early 2018 will be another accelerator.


* implied continued successful launches

[M.E.T.]

I'm still interested in views on the various cost of capital options available to SpaceX.

Basically, debt funding is cheaper than equity funding because of the simple fact that financing costs are tax deductible. So if you expect your company to be worth say $100bn in a few years time, why give away shares in it  - and lose that profit and ownership share in future - when you could instead borrow the money, pay it back with your massive future revenues, and retain all the profits for yourself?

Nothing stops SpaceX from say borrowing $5bn with Elon signing security for it with some of his privately held Tesla shares and paying that money back over time, while deducting any interest expenses from tax while doing so.

In the long term the current shareholders will make much more money, and can pump more of it into the company should they wish to, similar to how Bezos is pumping a billion a year into Blue Origin.

Elon becoming a trillionaire is probably the safest way to ensure that Mars colonization happens. And that is much more likely if he retains as much shareholding as possible.

[Ludus]

I'm still interested in views on the various cost of capital options available to SpaceX.


Nothing stops SpaceX from say borrowing $5bn with Elon signing security for it with some of his privately held Tesla shares and paying that money back over time, while deducting any interest expenses from tax while doing so.

I don't think they'd have much trouble selling bonds to finance the Constellation. It would start generating revenue within a couple years before it's even completed. Like any debt, interest is an write off. Bonds would just be secured by the Constellation itself. Musk already lives off of money borrowed against his Tesla shares.

[Ludus]

XCom.

xcom.com already exists.

X.com was the original Paypal address way back when EM owned it...
Was Paypal's as of late... and they just sold it back to him...   

I know. Just wanted to point out potential conflicts. Trademark and so on.

That XCom is in gaming and not necessarily a trademark conflict for SpaceX Communications. It shouldn't be too hard to work out if they want to use it.
https://en.m.wikipedia.org/wiki/X-COM It's not a bad association. In the game context it refers to an elite international group that defends against alien invasion. Since it was around well before Elon got the name originally and he was always into gaming, it seems likely he was always aware of this association.
Image from @sovereignmonkey on Elon Musks's twitter.

[Nomadd]

it refers to an elite international group that defends against alien invasion.

Are you sure it's not associated with Elon?

[AncientU]

The valuation that I am hearing for SpaceX's next capital raise is more than a bit mind-boggling by any metric – even a forward leaning one that prices in the constellation's existence.

If SpaceX can crack the code on the whole stack -- satellites, network equipment, and user terminals -- I can imagine that would be a very valuable vertically-integrated system.

Should include pads, engines, launch vehicles, payload dispensers, payload integration, landing pads, then the three you mentioned.  Basically vertically integrated from raw materials to delivered Global SkyFi.

[Jim]

The valuation that I am hearing for SpaceX's next capital raise is more than a bit mind-boggling by any metric – even a forward leaning one that prices in the constellation's existence.

If SpaceX can crack the code on the whole stack -- satellites, network equipment, and user terminals -- I can imagine that would be a very valuable vertically-integrated system.

Should include pads, engines, launch vehicles, payload dispensers, payload integration, landing pads, then the three you mentioned.  Basically vertically integrated from raw materials to delivered Global SkyFi.

All minor costs compared to the other three