What will be the impact of Coronavirus on the small launcher sector?

[novak]

After missing the DARPA challenge deadline, losing a vehicle, and being hit with a pandemic halting operations? A mere 30-person (20%) headcount reduction and a few months delay is sing-it-from-the-rooftops good news.

Hopefully that's all that they get hit with and are able to make it to space soon. 

But the thing about launch vehicle startups is that they need a lot of money and manpower.  Cutting 30 heads is likely a reduction in workforce they can ill afford, which will cost them schedule they don't have.  It is a good indication that they are trying to slam the breaks down on spending, something which can be difficult to do when you have multiple rockets worth of long lead items at various stage in production.  Such an action has the smell of the beginning of the end, and I'd be sprucing up my resume if I worked there. 

I will add that I don't have any insider knowledge of their operations/funding/status and hopefully I'm wrong.

[TrevorMonty]

Its not just launchers affected by lockdown and recession, some of their future payloads are also going to disappear as smallsat startups fail, making if even tougher for new LV entrants.

[ringsider]

After missing the DARPA challenge deadline, losing a vehicle, and being hit with a pandemic halting operations? A mere 30-person (20%) headcount reduction and a few months delay is sing-it-from-the-rooftops good news.

Yes but it won't end here, unless they get an investor to step up soon. It's too little to have a major impact.

Here's the math:

They apparently have ~1 yr of money with 150 people, production and ops => circa $15m for people and approx. the same for production/ops = $30m. Burn rate must be therefore around $2.5m per month

30 people laid off = approx. $6m in savings per yr., or 3 months at the post-reduction burn rate ($12m for staff and $12m for work). If they can't / won't stop the production / ops cost short term then the saving is lower - if it's only the people it's just $3m, or 1.5 months of cash. The truth is somewhere in the middle: 2 months.

So by making those 30 cuts today they gained themselves just 2 months of extra time. It almost wasn't worth doing.

It's a classic mistake as companies try to mitigate impacts - they typically make three small cuts, instead of one very much stronger one at the start, which costs them more money as they sustain those extra staff for that additional time trying to avoid the bigger cutbacks.

If they follow the classic curve they will cut another 25 in another 3 months, and then another 25 people 3 months after that - 75-80 in total, roughly half their staff. And in the meantime they burn more money sustaining those costs... 25 people for 6 months ($3m), 25 more for 3 months ($1.5m) => an extra $4.5m gone forever.

If they instead bit the bullet and cut 50% of staff now - 75 people - they would save $7.5m on salaries annually and have a new burn rate of around $7.5m annually for staff and an enforced lower work cost - say $7.5m for work. Thats'a new annual burn rate of $15m total or roughly $1.25m a month. On top of this they saved / gained $15m in cash, which is an extra year of time to survive and get a new investment sorted out. They would double their headroom.
 
Is it sad and horrible? Yes, it's tragic, but no less so than is happening to 17m other Americans right now (so far).
Does it hurt the schedule? Sure. But what's the point of meeting a schedule if you die while running to meet it?

 

[RedLineTrain]

After missing the DARPA challenge deadline, losing a vehicle, and being hit with a pandemic halting operations? A mere 30-person (20%) headcount reduction and a few months delay is sing-it-from-the-rooftops good news.

I understand that VCs are advising their companies to immediately work toward a minimum 1.5 years of runway.  Some are advising their companies toward even longer runways, with the expectation that the market will be shut for an extended period except for exceptional growth opportunities (e.g., Musk's Paypal after the dot-com bust).

I don't know much about Astra, but the fact that they managed a year or less of runway is a signal that they are being advised poorly or that they have not found themselves able to take sound advice.  Agree with ringsider.  Red flag.

Keep in mind that even SpaceX probably is taking measures to conserve cash, as Tesla has done (everyone not furloughed including the CEO takes a 10-30% salary cut, merit increases suspended, stock bonuses suspended).

[Robotbeat]

After missing the DARPA challenge deadline, losing a vehicle, and being hit with a pandemic halting operations? A mere 30-person (20%) headcount reduction and a few months delay is sing-it-from-the-rooftops good news.

I understand that VCs are advising their companies to immediately work toward a minimum 1.5 years of runway.  Some are advising their companies toward even longer runways, with the expectation that the market will be shut for an extended period except for exceptional growth opportunities (e.g., Musk's Paypal after the dot-com bust).

I don't know much about Astra, but the fact that they managed a year or less of runway is a signal that they are being advised poorly or that they have not found themselves able to take sound advice.  Agree with ringsider.  Red flag.

Keep in mind that even SpaceX probably is taking measures to conserve cash, as Tesla has done (everyone not furloughed including the CEO takes a 10-30% salary cut, merit increases suspended, stock bonuses suspended).

To be clear about Tesla, the biggest 30% cut is for the VPs and above, with smaller cuts for the other, less-senior non-furloughed employees.

[Robotbeat]

Launch startups are always marginal, even in a good economy. I wouldn't take a short runway as a "red flag" except to the extent that being a launch startup in a bad economy is already a red flag...

[Davidthefat]

After missing the DARPA challenge deadline, losing a vehicle, and being hit with a pandemic halting operations? A mere 30-person (20%) headcount reduction and a few months delay is sing-it-from-the-rooftops good news.

If they instead bit the bullet and cut 50% of staff now - 75 people - they would save $7.5m on salaries annually and have a new burn rate of around $7.5m annually for staff and an enforced lower work cost - say $7.5m for work. Thats'a new annual burn rate of $15m total or roughly $1.25m a month. On top of this they saved / gained $15m in cash, which is an extra year of time to survive and get a new investment sorted out. They would double their headroom.

Won't the work cost scale non linearly with headcount? The end product is still a rocket with a material cost + additional time and effort required for people that stayed to get up to date with the work the laid off people had done/were doing.

I've personally seen in another aerospace company intentionally cutting teams starting at the lowest levels of the assembly and cutting headcount progressively as the product is built until you are left with the testing teams, and heads of each subassembly.

[novak]

Launch startups are always marginal, even in a good economy. I wouldn't take a short runway as a "red flag" except to the extent that being a launch startup in a bad economy is already a red flag...

Agreed, for most startups 1.5 years of runway is a bit less than the likely ~$100M it takes to for a launch vehicle company trying to fly.  Consider that number to have only one significant figure, and they're on the cheaper side compared to some larger vehicles.  Obviously, they could save more money by not building things but that's unlikely to be a very successful strategy either.

It's especially bad timing for them as they were apparently trying to get investor attention/more runway just before this whole chain of events started.

[TrevorMonty]

Relativity is in good financial shape, thanks to Oct19 $140m fund raising.

https://techcrunch.com/2020/04/07/relativity-spaces-focus-on-3d-printing-and-cloud-based-software-helps-it-weather-the-covid-19-storm/

[su27k]

Pentagon identifies small launch industry as one of the most impacted by pandemic

[FutureSpaceTourist]

Coronavirus freezing funding for space companies and more than half may not make it, analyst says
PUBLISHED WED, APR 22 20208:46 AM EDT
Michael Sheetz
@THESHEETZTWEETZ

KEY POINTS

Investment in private space companies had seen a golden age in recent years, including a record nearly $6 billion last year.

“When the dust settles, we believe that a bit less than half of the companies listed on our Top Venture Companies list below will remain healthy and operational,” Quilty Analytics said in a report.

The vast majority of VC-backed space companies are not yet profitable, Quilty Analytics noted, with less than half of the companies generating revenue currently.

https://www.cnbc.com/2020/04/22/space-sectors-most-at-risk-from-coronavirus-freeze-in-vc-funding.html

[FutureSpaceTourist]

twitter.com/peter_j_beck/status/1253856476751253506

This is a good summary. A shake out was inevitable but sadly a lot of great ideas and innovations are going to disappear.

https://twitter.com/rocketrepreneur/status/1253860393354575873

Yeah, it's been weird seeing the impact of this downturn on different companies. Some solid companies are sucking wind, while some not quite as solid ones are doing fine just because of the timing of when they raised their last round.

twitter.com/rocketrepreneur/status/1253860636515131393

While a lot of people like to think we'll see a Darwinian whittling down that only leaves the most deserving companies, I think we'll see just as many frozen accidents where survival of the lucky wins out over survival of the fittest.

https://twitter.com/peter_j_beck/status/1253873078855073792

Agree, some poor ideas will also survive by having good friends in helpful places rather than solid business fundamentals. But I do believe that great ideas and great teams always win out in the end, so let’s not get to down. #speedbump

https://twitter.com/rocketrepreneur/status/1253860885174513664

I'm glad you guys were able to raise such a large round last year, and have a solid product on the market. I just hope at least one or two other small launch startups also make it through as well.

[Nilof]

Oneweb already folded a while ago, and the smallsat constellation business is being eaten up by SpaceX. Small launchers won't be launching constellations so much as single payloads.

The weaker smallsat companies will all fold. Even rocketlab will likely not recover their initial investment on smallsat launch in the near term. The companies will likely be valued based on whether they can keep a growth narrative going, which will likely involve going after sectors other than space launch to expand into.

[TrevorMonty]

Oneweb already folded a while ago, and the smallsat constellation business is being eaten up by SpaceX. Small launchers won't be launching constellations so much as single payloads.

The weaker smallsat companies will all fold. Even rocketlab will likely not recover their initial investment on smallsat launch in the near term. The companies will likely be valued based on whether they can keep a growth narrative going, which will likely involve going after sectors other than space launch to expand into.

You are assuming SpaceX can find enough customers to justify a launch. At $1m for 200kg smallsat that is 50 they need. Also integration work is lot nore for 50 smallsats of various shapes and sizes compared to single GEO sat.

We'll see how often SpaceX actually does their regular rideshare launches. If it is to infrequent customers will move to quicker provider even if it cost more. Every day satellite sits on ground is another day of lost revenue and revenue is most important thing to startup.

[ChrisWilson68]

Oneweb already folded a while ago, and the smallsat constellation business is being eaten up by SpaceX. Small launchers won't be launching constellations so much as single payloads.

The weaker smallsat companies will all fold. Even rocketlab will likely not recover their initial investment on smallsat launch in the near term. The companies will likely be valued based on whether they can keep a growth narrative going, which will likely involve going after sectors other than space launch to expand into.

You are assuming SpaceX can find enough customers to justify a launch. At $1m for 200kg smallsat that is 50 they need. Also integration work is lot nore for 50 smallsats of various shapes and sizes compared to single GEO sat.

We'll see how often SpaceX actually does their regular rideshare launches. If it is to infrequent customers will move to quicker provider even if it cost more. Every day satellite sits on ground is another day of lost revenue and revenue is most important thing to startup.

If SpaceX can't find enough customers to fill periodic dedicated smallsat launches, then there won't be enough launches for any of the small launcher companies to be financially viable.

[TrevorMonty]

Oneweb already folded a while ago, and the smallsat constellation business is being eaten up by SpaceX. Small launchers won't be launching constellations so much as single payloads.

The weaker smallsat companies will all fold. Even rocketlab will likely not recover their initial investment on smallsat launch in the near term. The companies will likely be valued based on whether they can keep a growth narrative going, which will likely involve going after sectors other than space launch to expand into.

You are assuming SpaceX can find enough customers to justify a launch. At $1m for 200kg smallsat that is 50 they need. Also integration work is lot nore for 50 smallsats of various shapes and sizes compared to single GEO sat.

We'll see how often SpaceX actually does their regular rideshare launches. If it is to infrequent customers will move to quicker provider even if it cost more. Every day satellite sits on ground is another day of lost revenue and revenue is most important thing to startup.

If SpaceX can't find enough customers to fill periodic dedicated smallsat launches, then there won't be enough launches for any of the small launcher companies to be financially viable.

By your logic if SpaceX can't find enough smallsats to fill F9 there won't be any smallsats needing a launch.

[ChrisWilson68]

Oneweb already folded a while ago, and the smallsat constellation business is being eaten up by SpaceX. Small launchers won't be launching constellations so much as single payloads.

The weaker smallsat companies will all fold. Even rocketlab will likely not recover their initial investment on smallsat launch in the near term. The companies will likely be valued based on whether they can keep a growth narrative going, which will likely involve going after sectors other than space launch to expand into.

You are assuming SpaceX can find enough customers to justify a launch. At $1m for 200kg smallsat that is 50 they need. Also integration work is lot nore for 50 smallsats of various shapes and sizes compared to single GEO sat.

We'll see how often SpaceX actually does their regular rideshare launches. If it is to infrequent customers will move to quicker provider even if it cost more. Every day satellite sits on ground is another day of lost revenue and revenue is most important thing to startup.

If SpaceX can't find enough customers to fill periodic dedicated smallsat launches, then there won't be enough launches for any of the small launcher companies to be financially viable.

By your logic if SpaceX can't find enough smallsats to fill F9 there won't be any smallsats needing a launch.

No.  By my logic if SpaceX can't find enough smallsats to fill F9 there won't be many smallsats needing launch.  That's why I explicitly said "won't be enough" instead of "won't be any".

My logic doesn't require SpaceX to take 100% market share among smallsat launches.  Just some significant market share.  If SpaceX has any significant market share at all and can't find enough customers to do regular launches, that puts a ceiling on the number of launches available to small launchers.  The exact ceiling depends on the exact market share of SpaceX.

[ChrisWilson68]

Oneweb already folded a while ago, and the smallsat constellation business is being eaten up by SpaceX. Small launchers won't be launching constellations so much as single payloads.

The weaker smallsat companies will all fold. Even rocketlab will likely not recover their initial investment on smallsat launch in the near term. The companies will likely be valued based on whether they can keep a growth narrative going, which will likely involve going after sectors other than space launch to expand into.

You are assuming SpaceX can find enough customers to justify a launch. At $1m for 200kg smallsat that is 50 they need. Also integration work is lot nore for 50 smallsats of various shapes and sizes compared to single GEO sat.

We'll see how often SpaceX actually does their regular rideshare launches. If it is to infrequent customers will move to quicker provider even if it cost more. Every day satellite sits on ground is another day of lost revenue and revenue is most important thing to startup.

Also, as someone who has spent many years working at startups, I can tell you that your claim that "revenue is most important thing to startup" is wrong.  Conserving cash is the most important thing to the vast majority of startups.  Whether it makes sense to pay more for a launch sooner or wait depends on their burn rate, how much more it would cost to accelerate the launch, what else the company is doing during the time of the launch delay, and how much the launch will influence their next funding round.  It's a complex issue that will be different for each company.

[ncb1397]

Oneweb already folded a while ago, and the smallsat constellation business is being eaten up by SpaceX. Small launchers won't be launching constellations so much as single payloads.

The weaker smallsat companies will all fold. Even rocketlab will likely not recover their initial investment on smallsat launch in the near term. The companies will likely be valued based on whether they can keep a growth narrative going, which will likely involve going after sectors other than space launch to expand into.

You are assuming SpaceX can find enough customers to justify a launch. At $1m for 200kg smallsat that is 50 they need. Also integration work is lot nore for 50 smallsats of various shapes and sizes compared to single GEO sat.

We'll see how often SpaceX actually does their regular rideshare launches. If it is to infrequent customers will move to quicker provider even if it cost more. Every day satellite sits on ground is another day of lost revenue and revenue is most important thing to startup.

If SpaceX can't find enough customers to fill periodic dedicated smallsat launches, then there won't be enough launches for any of the small launcher companies to be financially viable.

Do small launchers need a lot of smallsats to launch though? Electron has launched 11 times over a couple years . That is maximum of 2475 kg of smallsats over ~2 years or ~309 kg per quarter. Apply that to SpaceX small satellite launch program, with regularly scheduled launches every quarter and $5000/kg revenue and revenue per flight is $1.5  million. Now, we don't know how financially viable electron was during that time period, but it is probably significantly better than Falcon 9 launches at $1.5 million per launch.

Anyways, unless you are launching falcon 9s with 225 kg to 1000kg of payloads, the small launchers are easier to fill up.

[high road]

Oneweb already folded a while ago, and the smallsat constellation business is being eaten up by SpaceX. Small launchers won't be launching constellations so much as single payloads.

The weaker smallsat companies will all fold. Even rocketlab will likely not recover their initial investment on smallsat launch in the near term. The companies will likely be valued based on whether they can keep a growth narrative going, which will likely involve going after sectors other than space launch to expand into.

You are assuming SpaceX can find enough customers to justify a launch. At $1m for 200kg smallsat that is 50 they need. Also integration work is lot nore for 50 smallsats of various shapes and sizes compared to single GEO sat.

We'll see how often SpaceX actually does their regular rideshare launches. If it is to infrequent customers will move to quicker provider even if it cost more. Every day satellite sits on ground is another day of lost revenue and revenue is most important thing to startup.

If SpaceX can't find enough customers to fill periodic dedicated smallsat launches, then there won't be enough launches for any of the small launcher companies to be financially viable.

By your logic if SpaceX can't find enough smallsats to fill F9 there won't be any smallsats needing a launch.

Peter Beck's logic is that the loss in revenue (or the continuing expenditure) while the company is waiting for the sat to launch, would more than cover the price difference. However, he was comparing 5 weeks against the usual more than a year wait time which doesn't apply to SpaceX's dedicated smallsat launch if it's regular and diverse enough for most applications. Let alone the spare capacity on Starlink launches.

Given that they're branching out into all smallsat related services, I think they've got quite a niche of customers left where they provide a more appropriate service for than SpaceX can. They reduce the uncertainty for startups by providing a spacecraft (Photon) and communications once it's on orbit. At a considerable price, naturally. But if they can standardize, their cost might be lower than startups trying to figure out everything fromt he start for one off projects. ChrisWilson68, if you care to comment on that in the RocketLab section, I'd greatly appreciate that.

This whole 'smallsat launchers require far more launches than big launchers to be viable' is nonsense I think. That would certainly help to keep their prices somewhat lower. But if the niche demand is there at a price where building their much cheaper rockets (per launch) and running their much smaller company is paid for, they can probably survive quite well.

But to remain on topic: this crisis is going to hurt those with the highest burn rate the most, especially if their funding rounds have an unfortunate timing. The worst companies, having little to no burn rate, will remain. The ones that are actually quite far along, will have much more trouble. I thought a few weeks ago that it would only weed out those that would collapse anyway when their first orbital launch inevitably fails. However, many of those companies might just have done a new funding round before their next launch. Even SpaceX still plans funding rounds before major launches to have a safety net. Doing that in todays climate would hurt.