Lessons Learned: Rockets in the 1980s and 1990s and now

[Robotbeat]

Masten has done pretty well given the lack of any significant start-up funding. They haven't grown explosively like SpaceX, but they've unquestionably made their mark on rapid reusability. And they may yet succeed in developing an orbital RLV if the DARPA Xs-1 thing pans out.

If your success criteria is being a non-bankrupt company that innovates and makes stuff (and not just crazily ambitious SpaceX size), then I'd put Masten on the list.

And XCOR isn't quite dead yet.

[HMXHMX]

They had $50M 1983 dollars. That's a pile.

Yes, but in 1982 they had nothing but a little seed money. The interesting part of the story is how they grew the seed.

Three basically unknown guys got together and convinced NASA to give them a contract to develop a new, low-cost upper stage (Transfer Orbit Stage, or TOS) based on "off-the-shelf" IUS components, to be designed and built by their subcontractor Lockheed Martin. Somehow they got NASA interested and won contracts eventually totalling $200+ mil to develop and launch two TOS upper stages. (The $50M was VC money raised to develop the concept and pitch it to NASA before they actually won the contracts.) They then used the profits from the cost-plus TOS contracts to fund Pegasus design and build, and then Taurus, and then Orbcomm, etc, etc. Voila.

So even though they're now more or less a "traditional giant," they really did start as three guys with zero hardware and a little seed money who somehow sold VC's and NASA on the idea that giving them $200+ mil (most of which they passed through to LockMart as their sub) was a good bet. And they won big. Not too many startups are going to be able to follow that model.

So yes, it's always going to be easier just to start with $50M - $100M right off the bat. But in rare cases you can succeed by starting with almost nothing, like Dave Thompson & Co. And it'll take a lot longer.

I know their story well.  They actually raised $2M from an angel in 1982.  I sat with them for several hours one night in the angel's townhouse in Thousand Oaks, CA, discussing our views of the commercial space business.  The $50M wasn't from VCs at all but from an R&D Limited Partnership (a clever financing strategy that was eliminating by the Tax Reform Act of 1986).  It was easy money with no VC or other strong investor to dictate their direction.  That gave them flexibility to pivot to Pegasus in 1987 after TOS was a commercial failure.

By the way, their original plan was a commercial Shuttle Centaur.  We discussed that at length that night along with my view that reusables were the vehicles of the future. 

[HMXHMX]

Masten has done pretty well given the lack of any significant start-up funding. They haven't grown explosively like SpaceX, but they've unquestionably made their mark on rapid reusability. And they may yet succeed in developing an orbital RLV if the DARPA Xs-1 thing pans out.

If your success criteria is being a non-bankrupt company that innovates and makes stuff (and not just crazily ambitious SpaceX size), then I'd put Masten on the list.

And XCOR isn't quite dead yet.

My success criteria is getting to orbit, at least for a launch company.

[ringsider]

My success criteria is getting to orbit, at least for a launch company.

I agree with this. But I would also say that credible, serious steps towards that goal are worthy of support. In my opinion that is why Rocket Lab is most worthy of support, whether a success or failure in the end. They have done things quite well in my view, whatever the outcome. There is always the risk of failure, but some make greater moves towards that goal than others who just talk and talk and talk about it without really doing anything significant.

[jongoff]

Masten has done pretty well given the lack of any significant start-up funding. They haven't grown explosively like SpaceX, but they've unquestionably made their mark on rapid reusability. And they may yet succeed in developing an orbital RLV if the DARPA Xs-1 thing pans out.

If your success criteria is being a non-bankrupt company that innovates and makes stuff (and not just crazily ambitious SpaceX size), then I'd put Masten on the list.

And XCOR isn't quite dead yet.

My success criteria is getting to orbit, at least for a launch company.

At least for an orbital launch company. Masten was at least initially primarily focused on suborbital spaceflight, so I'd say that their success criteria was entering regular revenue service flying 100km+ flights.

Which is to say they're not there yet, but I still think they've been punching way above their weight class, and making an outsized difference in the industry.

~Jon

[jongoff]

So can we agree that Systems Engineering is quite important and everyone needs to do it?

That sounds like quite a valuable lesson to learn sooner rather than later.

Not sure that's the lesson. Following traditional systems engineering from the start is unlikely to significantly improve on the status quo.

The lesson is to have $100M+ in your personal bank account so that you are not answerable to investors, and implacable will to not give up.  Then you have a chance to succeed.

If that's the only way??? we're hosed.

I think the other way to phrase it is that if you don't have $100M+ in your bank account, you're in for a rough ride. As others have pointed out, Masten is still in the contention, with XCOR possibly as well. RocketLabs is also in contention and didn't start with that much money. But without having those kind of reserves to start with, it's really hard to raise that money especially for something seen as risky.

~Jon

[savuporo]

So can we agree that Systems Engineering is quite important and everyone needs to do it?

That sounds like quite a valuable lesson to learn sooner rather than later.

Not sure that's the lesson. Following traditional systems engineering from the start is unlikely to significantly improve on the status quo.

The lesson is to have $100M+ in your personal bank account so that you are not answerable to investors, and implacable will to not give up.  Then you have a chance to succeed.

Fully agreed. It's not even so much about personal wealth, it's about securing plausible amount of funding with relatively few strings attached and about 3 times of patience from investors compared to almost any other tech investments.

These deals are rarer than unicorns.

Anyone who thinks they can get to orbit without spending many tens of millions towards that goal, is deluding themselves.

[Kabloona]

They had $50M 1983 dollars. That's a pile.

Yes, but in 1982 they had nothing but a little seed money. The interesting part of the story is how they grew the seed.

Three basically unknown guys got together and convinced NASA to give them a contract to develop a new, low-cost upper stage (Transfer Orbit Stage, or TOS) based on "off-the-shelf" IUS components, to be designed and built by their subcontractor Lockheed Martin. Somehow they got NASA interested and won contracts eventually totalling $200+ mil to develop and launch two TOS upper stages. (The $50M was VC money raised to develop the concept and pitch it to NASA before they actually won the contracts.) They then used the profits from the cost-plus TOS contracts to fund Pegasus design and build, and then Taurus, and then Orbcomm, etc, etc. Voila.

So even though they're now more or less a "traditional giant," they really did start as three guys with zero hardware and a little seed money who somehow sold VC's and NASA on the idea that giving them $200+ mil (most of which they passed through to LockMart as their sub) was a good bet. And they won big. Not too many startups are going to be able to follow that model.

So yes, it's always going to be easier just to start with $50M - $100M right off the bat. But in rare cases you can succeed by starting with almost nothing, like Dave Thompson & Co. And it'll take a lot longer.

I know their story well.  They actually raised $2M from an angel in 1982.  I sat with them for several hours one night in the angel's townhouse in Thousand Oaks, CA, discussing our views of the commercial space business.  The $50M wasn't from VCs at all but from an R&D Limited Partnership (a clever financing strategy that was eliminating by the Tax Reform Act of 1986).  It was easy money with no VC or other strong investor to dictate their direction.  That gave them flexibility to pivot to Pegasus in 1987 after TOS was a commercial failure.

By the way, their original plan was a commercial Shuttle Centaur.  We discussed that at length that night along with my view that reusables were the vehicles of the future. 

Cool that you were in on the ground floor. I joined Orbital in 1990 and worked on TOS as a systems/propulsion engineer. So it stings a bit to be reminded that TOS was ultimately a "commercial failure." Both TOS vehicles delivered their respective payloads to good trajectories, but we got underbid by Boeing/IUS on the next upper stage procurement. They had a big IUS block buy from the Air Force and gave NASA a good deal due to economies of scale that we couldn't match. Goodbye TOS. But it paved the way for Orbital's success.

(BTW, the final TOS mission was in 1993, so it wasn't a "commercial failure" until after that contract ended and we lost the next upper stage competition. So the "pivot" to Pegasus was actually more of a long process during which TOS profits suported Pegasus and Taurus development long after 1987.)

[ringsider]

I think the other way to phrase it is that if you don't have $100M+ in your bank account, you're in for a rough ride. As others have pointed out, Masten is still in the contention, with XCOR possibly as well. RocketLabs is also in contention and didn't start with that much money. But without having those kind of reserves to start with, it's really hard to raise that money especially for something seen as risky.

I can promise you it's not that hard with finance connections and a solid business case. In financial terms $100m* is peanuts, and you don't raise it all at once, but in tranches as the business proves itself. I have direct knowledge of this process in the space sector.

What is for sure hard is for purebreed engineers building their favorite technology, with no connections into the finance world, to raise private risk capital from professional investors. That is why most of these firms can't find money beyond SBIR/STTR/SAN/FFF etc. They can explain the tech but not the A-B of the deal.

*Based on analysis of documents and personal experience I am pretty confident Rocket Lab did not raise anything like US$100m from VCs. My estimate is about a quarter of that. People overlook that from 2015 they got access to a US$10m NZ Callaghan Innovation grant; $7m from the NASA VCLS contract, which is not all or nothing - if you read the milestone terms of NASA solicitation NNK15542801R it is payable in about 7-8 tranches as progress payments, 80% of which is payable well prior to launch; as well as other large dollar cash flows starting from 2015-16.

And their costs are well under control; as of June 2016 they only had 68 employees, and they aren't flying teams and hardware to an island in the middle of the Pacific (they are already on one). All this data and far more is public record.

[john smith 19]

I can promise you it's not that hard with finance connections and a solid business case. In financial terms $100m* is peanuts, and you don't raise it all at once, but in tranches as the business proves itself. I have direct knowledge of this process in the space sector.

What is for sure hard is for purebreed engineers building their favorite technology, with no connections into the finance world, to raise private risk capital from professional investors. That is why most of these firms can't find money beyond SBIR/STTR/SAN/FFF etc. They can explain the tech but not the A-B of the deal.

Something that the team behind the ARC fusion reactor plans at MIT would do well to know.

[Nomic]

All ideas come from a time and place, also hindsight is a wonderful thing.

Compared to brazed tubes, ablative combustion chambers/nozzles sound great. However when tried in RS-68, early Merlin models, problems of weight, cost and performance became apparent. Also electroforming and DMLS/other 3d printing methods of reliably producing channel wall chambers reduced the cost of regenerative cooling.

Likewise when the last turbo pumps developed where the SSME and F1, simplicity of pressure fed engines look appealing.

The $17 million ish for Rocket Labs is interesting, when John Carmack was winding up Armadillo he said that $20 million was roughly what was needed to develop a microsat launcher. Though how many launches will it take Rocket Lab to get orbit?

From a business/programmatic prospective, the companies that spent a lot without getting anywhere are the most interesting,  Beal went through $200 million? Kistler? How much did OTRAG burn through? Lesson of Beal would seem to be start small to find technical problems and get systems engineering running, OTRAG started small found there technical problems but kept trying anyway. Kistler could not really scale down that much smaller using NK-33 anyway, and would have needed a huge amount of money to complete development.

[A_M_Swallow]

So a space company needs to engineer its money from the beginning. Possibly a milestone model with several tranches of money. At each milestone produce something you can show to your investors. Include transitioning from a development company to an operational company. The initial venture capitalists may wish to make money by selling their shares to a different type of financial company.

[ringsider]

So a space company needs to engineer its money from the beginning. Possibly a milestone model with several tranches of money. At each milestone produce something you can show to your investors. Include transitioning from a development company to an operational company. The initial venture capitalists may wish to make money by selling their shares to a different type of financial company.

It is surprising to me that all these smart engineers can't master the basics of building value.

[john smith 19]

So a space company needs to engineer its money from the beginning. Possibly a milestone model with several tranches of money. At each milestone produce something you can show to your investors. Include transitioning from a development company to an operational company. The initial venture capitalists may wish to make money by selling their shares to a different type of financial company.

It is surprising to me that all these smart engineers can't master the basics of building value.

I get a sense it's not that simple. I get the feeling most aeroastro engineers don't have too much involvement with the money side. Personal contacts also seem to play a big part in success. Orbital's story looks like a classic case of this (as incidentally did Frank Whittles).

In the case of Reaction Engines when fully funded they have delivered what they've promised on schedule. A strong team that with a solid track record. Despite this, and having IMHO the most honest (bur possibly most radical, below "Settle Mars") business plan they have struggled to get funding. I'm not sure if their presentation skills to financial types need  improvement but I suspect they are not talking to enough organizations of a size able to deliver the funding they need.

[john smith 19]

Looking at CRS7 and how the capsule could have survived if the GNC software had detected failure and deployed parachutes suggests enabling all safety systems for all flight versions of your system is quite a good idea.

[A_M_Swallow]

It is surprising to me that all these smart engineers can't master the basics of building value.

They are engineers not salesmen, accountants and have little director level business experience.

Being NASA/aerospace they may have little experience of designing and operating a mass production line. Even though running a production line is an engineering problem.

No production line means the firm can only make one off products. Although subcontracting the manufacturing or licensing the plans may be possible.

Much of this can be taught. Writing a one page business plan is very important. The reader and author are the same person - themselves.

[Katana]

Is production line really critical for space startups? Very few of these companies reach their goal for even once.

[savuporo]

Is production line really critical for space startups? Very few of these companies reach their goal for even once.

Perfect effect and cause subtlety. If you were only gearing up to spend a few years and a sizeable team on building one rocket, then you probably didn't have a business case in the first place. Few years and a relevant sized team costs tens of millions.

[mmeijeri]

Today, turbopumps are getting ridiculously cheap, so there is little reason to go pressure-fed.  If I was to embark upon another LV project, it'd be pump-fed.

One thing I've been wondering about is compressed-air (or compressed Helium) turbopumps. That sounds low-tech and cheap, and still more efficient and lighter than pressure-fed. Yet nobody uses them, why is that? I know they were briefly used by the Russians in the forties in their early rocketry experiments, but nothing since. Couldn't this have been better than pressure-fed for say the Lunar Lander Challenge?

[Robotbeat]

Because if you can do that, you might as well use hydrogen peroxide to generate that compressed gas and get a big performance boost. Cheaper than a bunch of helium.