Vector Launch (formerly Vector Space Systems)

[playadelmars]

Will be interesting to watch news and see what comes of any internal backstories here. Lessons learned are helpful for other companies to avoid making same mistakes or navigate challenging situations.

[ringsider]

Guys, I really don't care if he's getting his cashflow from pyramid selling Tupperware in the Florida retirement communities. More rockets please.

This comment aged well.

[ringsider]

Am I the only one who senses a degree of perfume in this PR cascade from Vector?

They say things like they have 100 launches contracted. And statements like "$45m in backlog and another $25m in backlog." (http://usgif.org/system/uploads/4608/original/Vector_Space_USGIF.pdf)

Let's look at this.

The Iceye contract is for 21 launches. But this is a young startup that raised $5.5m in VC and EU grant money 2015/6, and probably has around $4M of that money left today.

Helsinki, Finland, 12 November 2015 – Iceye announced today a $2.8 million Series A funding round led by True Ventures, with participation from Lifeline Ventures and Founder.org. In September, ICEYE also secured € 2.5 million in R&D funding from SME Instrument within EU Horizon 2020.

There is industry commentary which is hard to take seriously:

And because Iceye is buying in bulk, and in advance (deliveries will begin in 2018), it's getting the best rates Vector has to offer -- somewhere on the order of $20 million to $30 million for the entire project.

Vector R has a 50kg payload bay. $1.5M is the price for the entire bay. Iceye is developing a nanosat, so it won't be taking 50kg or paying $1.5M per launch, even if it had the money to do so.

And then the contract with York Space - a company that is barely a year old, which got seed funding in late 2015, and has 7 employees:

The seven-employee company, currently based in Denver, is establishing a satellite factory near Centennial

And that company signs an alleged $60m contract?

The launch contract with Vector covers six launches between 2019 and 2022 and can be extended to add 14 more missions, the companies said.

So actually 6 contracted, with an option for 14. The headline figure is just PR waffle.

Plus, Jim Cantrell is on the York Space Systems advisory board, and Iceye is buying 10 of YSS's platforms. Is it a circle?

And then there are the "fueling test" images, where they basically vent some LOX out of an empty aluminium tube (watch the video, there is only one "fuel" line running to the "rocket" http://vectorspacesystems.com/video/).

That tube, an "engineering model", was welded up in what looks like Jim's garage, with all his racing photos on the wall:



I get that they want to make some noise, but this looks like heavily scented PR, and that usually ends up hurting everybody.

I should take up fortune telling.

[TrevorMonty]

No surprise. Vector has had a smell of mismanagement for a long time, and a ridiculous cash burn.

I have similar impression of Firefly, not as bad as with Vector but some things are feeling strange there. Let's hope I am wrong.

That leaves RL which seems safe given its flying and making money, Virgin LauncherOne should fly this year and is well funded but its big OneWeb contract has shrunk.
In +1000kg class its Firefly, Relativity and Boeing Phantom Express (XS1). Boeing is funded internally and by Draper, it should fly, how competitive it will be is another story, but is RLV. RL move to RLV may give Firefly and Relativity financial backers doubts given they are both building ELVs.

Some of international SLVs should be OK,  if nothing else, because there is still strategic importance in having domestic access to space and SLV are cheap compared current big LVs.
Expect at least one or two from China and same for Europe.

Maybe Relativy can survive until they flying her orbital rockets, with the deep pockets of Mark Cuban...

Edited: Launcher Space and ABL Space, both coming with rockets in the same league (1000 kg in LEO) and both should be survive,  until they launch her orbital rockets, with her investors , Haot, and LM respectively...

Mark Cuban invested $500k at beginning, the other $44m to date has come from venture capital market.

Not lot info on the other two companies. ABL targeting 2020 for first launch. I'd add a year or two based on LV companies target dates always slipping to right. LM recent investment doesn't guarantee success but its good sign.

[jstrotha0975]

Maybe someone can buy Vector and Stratolaunch, convert Vector rockets to air launch? I know, I'm crazy.

[Lars-J]

Maybe someone can buy Vector and Stratolaunch, convert Vector rockets to air launch? I know, I'm crazy.

The biggest aircraft ever to launch the smallest orbital rocket? Uh-huh.

[QuantumG]

Guys, I really don't care if he's getting his cashflow from pyramid selling Tupperware in the Florida retirement communities. More rockets please.

This comment aged well.

I stand by it. If ya hadn't filled 40 pages with moaning we wouldn't have to scroll through it to look at the piddling amount of work they've done.

[ringsider]

Guys, I really don't care if he's getting his cashflow from pyramid selling Tupperware in the Florida retirement communities. More rockets please.

This comment aged well.

I stand by it. If ya hadn't filled 40 pages with moaning we wouldn't have to scroll through it to look at the piddling amount of work they've done.

This lamentable attitude is precisely why companies like Vector, Arca, Swiss Space Systems, Aphelion, etc. are encouraged to start, but ultimately fail horribly, burning many behind them.

The money side matters just as much, if not more than, the technology. The huge amount of these firms who have failed and who will soon fail is not because they didn't know about rockets, but because they didn't know about money.

This cowboy attitude to money and wild applause of obvious nonsense (as long as there are cool pictures) assures more failures; a more respectful and analytical attitude to money and harsh intolerance for nonsense would assure more successes.

There are those who view this and other failures like it as depressingly predictable and avoidable with some focus on the business mechanics - a focus that would have saved 170 employees and their families from hardship in this case, a fact that seems lost on you and your scrolling inconvenience.

The main reason many more will go under will be because they did not focus on this aspect, thanks to wild applause and kudos for crowd-pleasing tech porn, when what was actually needed was crushingly boring  management.

[Comga]

Ringside and QuantumG:
Are you two sniping at each other or patting each other on the back?
You seem to agree that the collapse of Vector is between unsurprising and inevitable.
And while we as spectators all like “rocket porn” we have little to do with which programs proceed and which fail.
It’s the venture capital and other finance people who bet on flashy rocket stuff rather than business plans that prolong these lost causes.

[edzieba]

I'd view Vector's (provisional, in its current guise) failure as a result of too much focus on financials at the expensive of results, rather than vice versa. Cantrell raised large amounts of funds on very small amounts of rocket after all, and much as we'd like to think VC funding is based on analysis and results, it's for the most part based on hype and marketing. Success needs both the marketing skills to raise funds, and the engineering skills to build rockets. Musk struck the right balance of building hype and building hardware (and even then it was a close thing until CRS), Beal had the hardware but couldn't get anyone to pay for it, and Cantrell had lots of funding but used it to hype up more investment rather than for hardware.

[Star One]

No surprise. Vector has had a smell of mismanagement for a long time, and a ridiculous cash burn.

I have similar impression of Firefly, not as bad as with Vector but some things are feeling strange there. Let's hope I am wrong.

That leaves RL which seems safe given its flying and making money, Virgin LauncherOne should fly this year and is well funded but its big OneWeb contract has shrunk.
In +1000kg class its Firefly, Relativity and Boeing Phantom Express (XS1). Boeing is funded internally and by Draper, it should fly, how competitive it will be is another story, but is RLV. RL move to RLV may give Firefly and Relativity financial backers doubts given they are both building ELVs.

Some of international SLVs should be OK,  if nothing else, because there is still strategic importance in having domestic access to space and SLV are cheap compared current big LVs.
Expect at least one or two from China and same for Europe.

There are dozens more companies, and a lot of them are probably more likely to make a commercially viable launcher than Boeing.

Sniping at other launch companies just adds to the noise on the thread, and certainly isn’t helpful.

[toren]

I am not a rocket scientist or engineer, but I do have a past in venture capital.  I thought I'd do a little poking around on this story and write a longish post on what could have happened with Vector's funding.  I started the research, and quickly came across this:

Vector's B round was last October, and was led (that mean the terms and price were set) by a firm called Kodem Growth Partners out of New York.  As of today, that firm's web site is off line, and the profile of its founder, Avi Lindenbaum, has been pulled from LinkedIn.   Very interesting...

I may still write that longer post, but I'll put this up in case anyone can do some sleuthing on what might have happened.

[abaddon]

A bit late to the (not) party here, but I wonder if Vector's funding issue might stem in part from the prospect of not only having to battle with Rocket Lab but also now Arianespace with the Soyuz rideshare program and SpaceX with theirs.  The timing seems about right for an investor or investors to have seen that unfolding, get cold feet, and pull out.

[ChrisWilson68]

Given how the company went out of its way to announce that Jim Cantrell is not only out as CEO but also no longer associated with the company in any way, this looks like more than just a case of running out of money.  This looks more like a case where investors discovered something Cantrell was trying to hide.

That's just speculation, but it seems to me the best fit for the announcement and Cantrell's history.

[toren]

I decided to do the longer post, and structured it in the form of a Q&A, reflecting a number of issues that have been raised up-thread.  This is devoted strictly to the financing issues, I am not qualified to comment on the technical side:

----------

Q:  I thought Sequoia was backing Vector.  Aren't they a big deal?  How'd this happen?

A:  Sequoia is a big deal, one of the most senior venture firms in Silicon Valley, founded all the way back in 1972.  But they led the 'A round' for Vector.  The A round is the first funding in which a valuation for the company is set.  It is considered bad form for a participant in an earlier round to set the value for the next round, particularly if that venture firm set the previous value, which Sequoia did, and if they have board seat at the company, which Sequoia undoubtedly had.  That means the investor will have simultaneously a fiduciary duty to the company's shareholders (including the founders) by virtue of the board seat, and a fiduciary duty to its own funders (limited partners).  The first would suggest getting the highest valuation (lowest dilution) in the next round, and the second getting a lower valuation (bigger share).  This is a direct conflict of interest, and is avoided whenever possible.

Q:  OK, but Vector got $70 million last October, how'd they burn through all that and not launch anything?

A:  They probably didn't get $70 million in October.  Public announcements seldom tell the whole tale about the structure of the round.  In addition to cash received at the close, in exchange for shares, there may be two other things happening (or both):

- There may be previous cash transfers in the form of convertible loans.  These convertible notes are exchanged for shares at the close, at the agreed valuation.  That converts the loan from debt to equity, so it's nominally part of the round's face value, but it doesn't bring in any fresh cash - it's already been burned.

- The investment that is committed may be 'tranched', that is, broken up into several pieces which can be drawn by the company upon meeting defined milestones.  Those milestones can be just about anything the investors and management agreed upon - team formation, product development, customer closings, financial milestones, etc.  The company gets some money now and the promise of more at an agreed fixed valuation, if they execute.

If I had to guess (and I do) I'd say there were likely both of these involved in the nominal $70m and that's what led to the current situation.

Q:  What makes you say that?

A:  The structure of the B round was unusual.  It was led by an outfit called Kodem Growth Partners out of New York.  They are about as different from Sequoia as you can get: Founded in 2016, it is very junior.  It has one managing partner, unlike Sequoia's team of graybeards.  It has three 'operating partners', two of whom have connections to Germany's CSU political party and another who is plugged into an NYC private investment manager.  Also involved was Morgan Stanley Alternative Investment Partners, which "specializes in providing world-class private market investment solutions to institutional and high net worth investors".

The way I read it, Kodem valued and structured the deal and syndicated it to a bunch of wealth managers and wealthy individuals, commonly called "dumb money".  Not that that's a horrible thing in this situation - even Sequoia is dumb money when it comes to rocket science.  (There's probably only one individual qualified as both a rocket scientist and venture investor, and he's otherwise occupied.)

Q: So why did it blow up?

A: abbadon and others up thread have probably called it.  When you're dumb money - and KNOW you're dumb, there are still ways to control your risk. You set execution milestones, you keep careful track of market sizing and competitors as they emerge, and you structure the deal so you can cut your losses if things are starting to go sideways.  I am not a rocket scientist either, but it's had to miss that RL is launching to orbit and Vector seems no where close, that some established players have decided to big-foot the small sat market, and that Vector must have had a hell of a cash burn rate.  If it was a tranched deal, Vector may have failed one or more milestones.  It's also very odd that the lead investor seems to have gone completely dark (see above).

Q:  Do you know, or are you guessing?

A:  I'm guessing.  I'm out of the trade for some years, and no longer have access to the private databases (or gossip networks) that would let me possible confirm or deny, or flesh out this speculation.
 

[Lars-J]

Given how the company went out of its way to announce that Jim Cantrell is not only out as CEO but also no longer associated with the company in any way, this looks like more than just a case of running out of money.  This looks more like a case where investors discovered something Cantrell was trying to hide.

That's just speculation, but it seems to me the best fit for the announcement and Cantrell's history.

It sounds like it. And given how Cantrell was apparently sitting on the boards of several Vector "customers", it does look very fishy.

If I was looking for work in the sector, I would be very cautious joining any enterprise led by Cantrell.

Here's a choice quote from him back in March 2018: (when he was 100% sure they would make orbit in 2018)
"Not to pick on them, but we don't work on SpaceX schedules. We can't afford to run a business like that. We're not giving you schedules that we know we can't live with." 
Source: https://arstechnica.com/science/2018/03/vector-founder-100-percent-confident-in-first-orbital-launch-this-year/
 

[ringsider]

Given how the company went out of its way to announce that Jim Cantrell is not only out as CEO but also no longer associated with the company in any way, this looks like more than just a case of running out of money.  This looks more like a case where investors discovered something Cantrell was trying to hide.

That's just speculation, but it seems to me the best fit for the announcement and Cantrell's history.

What could be worse than what was publically known?

- incessant ego-hype
- 4km banana flights
- empty tubes venting hype gas
- contracts with related firms
- contracts with unbelievable terms
- tanks too heavy (3 years in)
- flight termination system doesn't work
- no launches above cloudbase
- schedules way, way too optimistic
- costs way, way too heavy
- launch site issues despite "any where, any time"
- license issues with FAA - and probably not just govt shutdown issues
- sponsorships for the CEO's Porsche habit
- pumping son's scam coin Nexus
- 170 employees wat?
- SpaceX co-founder silliness
- suing Lockheed Martin...
- ...then ABL gets Lockheed Martin Ventures investment, just 2 weeks ago
- losing trademark fight with Space Vector
- almost certainly no actual revenue (?)

As an investor that is a serious set of problems. You can almost guarantee somebody is taking legal advice, and sooner or later the filings will be public.

[FutureSpaceTourist]

https://twitter.com/jamesncantrell/status/1161367124323065858

Many of you may have already heard that Vector recently laid off nearly its entire staff when a key investor withdrew support making it difficult for the company to continue on at its previously fast pace. I resigned from the Board last Friday and am pursuing new things.

“previously fast pace” ...

Edit to add:

https://twitter.com/jamesncantrell/status/1161368569986396166

I wish Vector well and remain supportive of their efforts as they look to reboot to Vector 2.0.  Stay tuned as I am definitely NOT leaving the space business despite going back to racing for a while.  Ad Astra !

[FutureSpaceTourist]

Vector relinquishes Air Force launch contract, mission re-awarded to Aevum
by Sandra Erwin — September 9, 2019

Vector on Aug. 26 withdrew as the contractor for the Air Force Agile Small Launch Operational Normalizer (ASLON)-45 space lift mission.

WASHINGTON — The Air Force Space and Missile Systems Center on Monday awarded a $4.9 million contract to space startup Aevum to lift experimental satellites to low Earth orbit.

https://spacenews.com/vector-relinquishes-air-force-launch-contract-mission-re-awarded-to-aevum/

[high road]

Aevum? The guys that came out of nowhere last year and were going to launch in 2019? The guys with the counter counting down to their big reveal, which was postponed indefinitely? Haven't heard a word from them since then. Any one have anything more recent?