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

[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.

Do small launchers need a lot of smallsats to launch though?

Yes, they do.  The business plan of every small launch company out there is built on the idea of large volume.  It's the only way to cover the high development and fixed costs when each launch is relatively low revenue.

Electron has launched 11 times over a couple years.

That is not enough for Rocket Lab to be financially viable.

[ChrisWilson68]

This whole 'smallsat launchers require far more launches than big launchers to be viable' is nonsense I think.

The reason smallsat launchers require far more launches than big launchers to be viable is that R&D and fixed costs don't scale linearly with launcher size.

[high road]

This whole 'smallsat launchers require far more launches than big launchers to be viable' is nonsense I think.

The reason smallsat launchers require far more launches than big launchers to be viable is that R&D and fixed costs don't scale linearly with launcher size.

Well yes, but both SpaceX and Rocket lab have already said that building a production chain for a large number of rockets is orders of magnitude harder than building that first rocket. So the idea that research costs level out relatively quickly after that first launch might be an illusion. Avoiding those costs but still increasing launch rate  is RL's motivation to try reusability. Earning back research costs is not going to go quickly. The old making a small fortune by starting with a large one and all that. But to stay in business, only the running costs need to be covered.

For the foreseeable future, research costs require new investment rounds for everyone out there not being bankrolled by the governmentt. Even SpaceX chooses to have new funding rounds to support their research costs at a pace higher than their revenue from launches.

[ringsider]

This whole 'smallsat launchers require far more launches than big launchers to be viable' is nonsense I think.

The reason smallsat launchers require far more launches than big launchers to be viable is that R&D and fixed costs don't scale linearly with launcher size.

If you have ~100 people, which was what RL had on first launch, and lower your ambitions from world domination, you probably only need 4-5 flights a year to have a sustainable business long term. R&D costs to get to the first flight are irrelevant.

[trm14]

If you have ~100 people, which was what RL had on first launch, and lower your ambitions from world domination, you probably only need 4-5 flights a year to have a sustainable business long term. R&D costs to get to the first flight are irrelevant.

So something like $20-$30 million revenue? That sounds really marginal for 100 people plus other costs.

[high road]

If you have ~100 people, which was what RL had on first launch, and lower your ambitions from world domination, you probably only need 4-5 flights a year to have a sustainable business long term. R&D costs to get to the first flight are irrelevant.

So something like $20-$30 million revenue? That sounds really marginal for 100 people plus other costs.

4-5 is a little low. Let's say 12, Rocket Lab's so far mythical 'monthly launches', at 6 million base price per launch, or 120 million in revenue. That's in the range of Antares, which launches up to twice a year at a base price of 80-85 million. More than Vega, launching 1-3 times per year at 37 million. Or HII, launching just once last year at 90 million (we'll have to see whether that's an exceptional year). More than half as much as Atlas V's 2 launches at 110 million base price, while rocket lab's expenditure is probably only a fraction of Atlas related costs or ULA's fixed costs not carried by Delta. But far less than SpaceX' launch rate.

To tie this back to the topic: coronavirus hurts established launch companies with plenty of money less, even though they will eventually be unable to compete. While potentially successful companies will be hurt a lot more. If Rocket Lab did not have their funding round when they did, they may well have been one of the victims, regardless of whether they could eventually reach those 12 launches a year.

[ChrisWilson68]

If you have ~100 people, which was what RL had on first launch, and lower your ambitions from world domination, you probably only need 4-5 flights a year to have a sustainable business long term. R&D costs to get to the first flight are irrelevant.

So something like $20-$30 million revenue? That sounds really marginal for 100 people plus other costs.

4-5 is a little low. Let's say 12, Rocket Lab's so far mythical 'monthly launches', at 6 million base price per launch, or 120 million in revenue. That's in the range of Antares, which launches up to twice a year at a base price of 80-85 million. More than Vega, launching 1-3 times per year at 37 million. Or HII, launching just once last year at 90 million (we'll have to see whether that's an exceptional year). More than half as much as Atlas V's 2 launches at 110 million base price, while rocket lab's expenditure is probably only a fraction of Atlas related costs or ULA's fixed costs not carried by Delta. But far less than SpaceX' launch rate.

To tie this back to the topic: coronavirus hurts established launch companies with plenty of money less, even though they will eventually be unable to compete. While potentially successful companies will be hurt a lot more. If Rocket Lab did not have their funding round when they did, they may well have been one of the victims, regardless of whether they could eventually reach those 12 launches a year.

12 launches at $6 million revenue each would be $72 million, not $120 million.

[ringsider]

If you have ~100 people, which was what RL had on first launch, and lower your ambitions from world domination, you probably only need 4-5 flights a year to have a sustainable business long term. R&D costs to get to the first flight are irrelevant.

So something like $20-$30 million revenue? That sounds really marginal for 100 people plus other costs.

100 people is approx. US$10M in cost at an average LLR of US$100k.

If you sell a single launch for about US$7.5m, which is where RL is at, you are turning US$30M on 4 launches, and have US$20M to build and operate 4 vehicles and at least break even.

If they can't do it for that price / cost point the business case doesn't make any sense.

Once you get above that approx. break even point it is very good - 12 launches a year is a good little business, even if you double the overhead:

Overhead for staff = US$20M (100% increase)
12 x say US$3.5M per launch to build and operate = US$42M
Total costs US$62M
Total revenue  12 x US$7.5M = US$90M
Gross profit = US$28M

And in some cases RL is probably getting paid 2-3x those prices for Wallops DoD launches, and has lower costs for launches as they have their own site and don't rent it from e.g. Alaska Aerospace.
 
R&D costs are irrelevant, of course.

[Mardlamock]

If you have ~100 people, which was what RL had on first launch, and lower your ambitions from world domination, you probably only need 4-5 flights a year to have a sustainable business long term. R&D costs to get to the first flight are irrelevant.

So something like $20-$30 million revenue? That sounds really marginal for 100 people plus other costs.

100 people is approx. US$10M in cost at an average LLR of US$100k.

If you sell a single launch for about US$7.5m, which is where RL is at, you are turning US$30M on 4 launches, and have US$20M to build and operate 4 vehicles and at least break even.

If they can't do it for that price / cost point the business case doesn't make any sense.

Once you get above that approx. break even point it is very good - 12 launches a year is a good little business, even if you double the overhead:

Overhead for staff = US$20M (100% increase)
12 x say US$3.5M per launch to build and operate = US$42M
Total costs US$62M
Total revenue  12 x US$7.5M = US$90M
Gross profit = US$28M

And in some cases RL is probably getting paid 2-3x those prices for Wallops DoD launches, and has lower costs for launches as they have their own site and don't rent it from e.g. Alaska Aerospace.
 
R&D costs are irrelevant, of course.

iirc rocket lab has around 350 employees on linkedin.

[high road]

If you have ~100 people, which was what RL had on first launch, and lower your ambitions from world domination, you probably only need 4-5 flights a year to have a sustainable business long term. R&D costs to get to the first flight are irrelevant.

So something like $20-$30 million revenue? That sounds really marginal for 100 people plus other costs.

4-5 is a little low. Let's say 12, Rocket Lab's so far mythical 'monthly launches', at 6 million base price per launch, or 120 million in revenue. That's in the range of Antares, which launches up to twice a year at a base price of 80-85 million. More than Vega, launching 1-3 times per year at 37 million. Or HII, launching just once last year at 90 million (we'll have to see whether that's an exceptional year). More than half as much as Atlas V's 2 launches at 110 million base price, while rocket lab's expenditure is probably only a fraction of Atlas related costs or ULA's fixed costs not carried by Delta. But far less than SpaceX' launch rate.

To tie this back to the topic: coronavirus hurts established launch companies with plenty of money less, even though they will eventually be unable to compete. While potentially successful companies will be hurt a lot more. If Rocket Lab did not have their funding round when they did, they may well have been one of the victims, regardless of whether they could eventually reach those 12 launches a year.

12 launches at $6 million revenue each would be $72 million, not $120 million.

Now how did I do that? So more like 20 launches for the numbers above. Still less than SpaceX, but more than the conventional launchers, not counting Arianspace's middleman launches and government funded launchers like CASC and Roscosmos. However, building a smaller and cheaper rocket should account for considerable running cost reductions. If they had already had a profitable year at 6 launches, I think we would have heard about it. So it's probably somewhere in between.

So if they actually produce one rocket every 35 years, they need on average one reuse from each of them to reach this high end number.

Sorry for going off topic like this, but it's waaay too interesting.

[high road]

If you have ~100 people, which was what RL had on first launch, and lower your ambitions from world domination, you probably only need 4-5 flights a year to have a sustainable business long term. R&D costs to get to the first flight are irrelevant.

So something like $20-$30 million revenue? That sounds really marginal for 100 people plus other costs.

100 people is approx. US$10M in cost at an average LLR of US$100k.

If you sell a single launch for about US$7.5m, which is where RL is at, you are turning US$30M on 4 launches, and have US$20M to build and operate 4 vehicles and at least break even.

If they can't do it for that price / cost point the business case doesn't make any sense.

Once you get above that approx. break even point it is very good - 12 launches a year is a good little business, even if you double the overhead:

Overhead for staff = US$20M (100% increase)
12 x say US$3.5M per launch to build and operate = US$42M
Total costs US$62M
Total revenue  12 x US$7.5M = US$90M
Gross profit = US$28M

And in some cases RL is probably getting paid 2-3x those prices for Wallops DoD launches, and has lower costs for launches as they have their own site and don't rent it from e.g. Alaska Aerospace.
 
R&D costs are irrelevant, of course.

iirc rocket lab has around 350 employees on linkedin.

The discussion is more nuanced than that. 100 employees was what they had once they flew the first rocket. 500 is what they have now to produce one rocket every 35 days. Cost per rocket is probably down, but R&D cost to get from the first to one every 35 days has most likely not been recovered yet.

[ringsider]

If you have ~100 people, which was what RL had on first launch, and lower your ambitions from world domination, you probably only need 4-5 flights a year to have a sustainable business long term. R&D costs to get to the first flight are irrelevant.

So something like $20-$30 million revenue? That sounds really marginal for 100 people plus other costs.

100 people is approx. US$10M in cost at an average LLR of US$100k.

If you sell a single launch for about US$7.5m, which is where RL is at, you are turning US$30M on 4 launches, and have US$20M to build and operate 4 vehicles and at least break even.

If they can't do it for that price / cost point the business case doesn't make any sense.

Once you get above that approx. break even point it is very good - 12 launches a year is a good little business, even if you double the overhead:

Overhead for staff = US$20M (100% increase)
12 x say US$3.5M per launch to build and operate = US$42M
Total costs US$62M
Total revenue  12 x US$7.5M = US$90M
Gross profit = US$28M

And in some cases RL is probably getting paid 2-3x those prices for Wallops DoD launches, and has lower costs for launches as they have their own site and don't rent it from e.g. Alaska Aerospace.
 
R&D costs are irrelevant, of course.

iirc rocket lab has around 350 employees on linkedin.

Now, maybe, but not on frst launch. The calculation still scales.

[ringsider]

but R&D cost to get from the first to one every 35 days has most likely not been recovered yet.

This is my favorite fallacy. That expense is irrelevant.

[TrevorMonty]

The 500 staff aren't involved solely with Electron. RL is now into smallsat market with Photon and Sinclair purchase. They also offer mission management of satellites.

[high road]

but R&D cost to get from the first to one every 35 days has most likely not been recovered yet.

This is my favorite fallacy. That expense is irrelevant.

For the topic this discussion is being held in, it's relevant 😉

[ringsider]

but R&D cost to get from the first to one every 35 days has most likely not been recovered yet.

This is my favorite fallacy. That expense is irrelevant.

For the topic this discussion is being held in, it's relevant

No it's not. For Rocket Lab or any other firm like them - Virgin Orbit, Relativity, ABL or Firefly, or for that matter firms like Facebook or Google - it is irrelevant.

[ChrisWilson68]

but R&D cost to get from the first to one every 35 days has most likely not been recovered yet.

This is my favorite fallacy. That expense is irrelevant.

For the topic this discussion is being held in, it's relevant

No it's not. For Rocket Lab or any other firm like them - Virgin Orbit, Relativity, ABL or Firefly, or for that matter firms like Facebook or Google - it is irrelevant.

A lot of the small launcher companies have not completed their R&D, so it is relevant to consider whether they can make back their R&D investment when considering whether it's worth it for investors to continue funding them.

[ringsider]

but R&D cost to get from the first to one every 35 days has most likely not been recovered yet.

This is my favorite fallacy. That expense is irrelevant.

For the topic this discussion is being held in, it's relevant

No it's not. For Rocket Lab or any other firm like them - Virgin Orbit, Relativity, ABL or Firefly, or for that matter firms like Facebook or Google - it is irrelevant.

A lot of the small launcher companies have not completed their R&D, so it is relevant to consider whether they can make back their R&D investment when considering whether it's worth it for investors to continue funding them.

I am sure Peter Beck is very happy that there are people who still think that.

[high road]

but R&D cost to get from the first to one every 35 days has most likely not been recovered yet.

This is my favorite fallacy. That expense is irrelevant.

For the topic this discussion is being held in, it's relevant

No it's not. For Rocket Lab or any other firm like them - Virgin Orbit, Relativity, ABL or Firefly, or for that matter firms like Facebook or Google - it is irrelevant.

A few posts ago I stated that all of the newspace companies are still spending more on R&D than their revenue allows, and they need to refinance to keep that up. If they need to do that in the current circumstances, that's bad news. Whether they need to pay it back sunk costs is not relevant per sé, but that they need to refinance it eventually to continue operating is.

[CameronD]

but R&D cost to get from the first to one every 35 days has most likely not been recovered yet.

This is my favorite fallacy. That expense is irrelevant.

For the topic this discussion is being held in, it's relevant

No it's not. For Rocket Lab or any other firm like them - Virgin Orbit, Relativity, ABL or Firefly, or for that matter firms like Facebook or Google - it is irrelevant.

A few posts ago I stated that all of the newspace companies are still spending more on R&D than their revenue allows, and they need to refinance to keep that up. If they need to do that in the current circumstances, that's bad news. Whether they need to pay it back sunk costs is not relevant per sé, but that they need to refinance it eventually to continue operating is.

Sure, but (a) interest rates are ridiculously low at the moment, (b) there are a lot of folks, from design professionals to construction workers, desperate for work and (c) we all know this Coronavirus thing isn't going to last forever - so in many ways this is an absolutely perfect time to refinance, work on your R&D under reduced time, political and public pressure (heck, it seems the bug is all anyone from government to news outlets wants to talk about) and aim to be ready to go the moment the skies clear again.

Is the money box half full or half empty??