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

[TrevorMonty]

This Corona caused recession is going to take years to climb out of, better part of decade. Corona has yet to run its cause, either everybody is exposed or vaccinated, with later about 18-24months away, assuming a vaccine is possible given there seems to be more than one strain.

[CameronD]

This Corona caused recession is going to take years to climb out of, better part of decade. …...

You reckon it'll be the same duration as a typical space-related R&D project??  For planning purposes, how utterly convenient! 

[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.

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?? 

You're talking about loans. If startups are able to convince banks to lend them enough money at a low interest rate, they don't need to dilute their existing investor's shares by raising more capital. It's the investor money 'box' that's definitely less than half full at the moment. Given the number of capital raising rounds we saw, banks aren't throwing money at startups just because interest rates are low. They do care about getting their money back.

[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.

By the way, as shown above, I predicted a second round of layoffs, occuring 3 months after the April round, and here we are: according to those tweets above, and by simply counting the people in recent photos, by July they too had done the math and were moving more people on. I count about 90 in a recent image. So they have now moved approx. 60 people out of their workforce - another 30.

What typically also happens in this stage is that the good people sense the looming cliff, competitors smell the blood in the water, and a bunch of key people will be in the market looking around for new options.

The problem is those are the people you wanted to stay, the ones you tried to protect during the layoffs. But some key players will leave, they always do, and typically at the worst moment. Collateral damage.

And that leads to mistakes because you lack technical leadership. We may be seeing some elements of this in those tweets and various issues in these past few days in ground equipment.

[Bananas_on_Mars]

Laying off people IMO is quite shortsighted if you‘re into an R&D or on-ramp phase anyhow. Those people usually are there because they are needed, not unnecessary ballast.

Relativity is hiring despite Covid-19, they have had their last funding round at the right time and it’s been big enough to carry the whole company up to commercial operations (they say).

My prediction is that the companies powering through this will come out ahead.