I read and listened to space companies' Q1 reports, so you don't have to!Summaries of:$AJRD$ASTS$ASTR$BKSY$IRDM$MAXR$MNTS$MYNA$RDW$RKLB$SATL$SPIR$TSAT$LLAP$VSAT$SPCE$VORBhttps://www.cnbc.com/2022/05/28/space-company-q1-results-performance-during-supply-chain-disruptions.html
🧵I believe 2023 will be the year that the New Space bubble pops. It will mark the end of New Space 1.0 and lead to a new generation of New Space startups that will emerge from the rubble — New Space 2.0.1/n The New Space era began in 2002 with the founding of SpaceX. Their ability to drive down launch costs has been the biggest enabler in the development of New Space: the ecosystem of hundreds of space startups founded over the past 20 years I’m a big believer in the long-term New Space economy but, my view on the immediate opportunity set has evolved dramatically over the past 18 months as record-breaking levels of capital have flowed into New Space.The glut of inbound capital has exacerbated the core systemic risk within New Space — the overfunding of startups with highly speculative business models at unsustainable valuations. My thinking here is heavily influenced by a story I heard back in 2013 from the founder of Y-Combinator, @paulg, about how he foresaw the pending dot-com collapse while working at Yahoo.“History doesn’t repeat itself, but it often rhymes,” and I think there are parallels to draw here about the systemic risk of a new sector driven by new entrants selling primarily to other new entrants As it relates to New Space, not all companies are made equal from a customer perspective. The simple system we use internally buckets New Space startups into three categories based on the market they are pursuing: Space for Earth, Space for Space, and Beyond Earth.Space for Space and Beyond Earth are most at risk as they are generally pursuing markets that don’t exist yet and their customers are primarily New Space companies. This creates a circular dependency between startups that makes them vulnerable to a chain reaction of failures. The long fuse that will ultimately “pop this bubble” was lit by the departure of many growth-stage investors (Series B and larger) who are licking their wounds from massive valuation write-downs of their public positions and increasing interest rates. A record $15.4 billion was invested in New Space startups in 2021. Most startups raise for at least 18 months of runway so I think it’ll take until next year before the first wave of early-stage New Space startups are forced to go out to market and fail to raise new capital. The proceeding shutdowns and acquihires will represent the end of the first era of space startups — the end of New Space 1.0. I believe this type of financial correction plays an important cleansing function in markets: the strongest businesses will survive and then thrive as a result of the decreased competition for capital and employees. The future described here is not one of total destruction but one of bifurcated outcomes — the haves and the have-nots will diverge massively. And the winners that emerge will represent a new era — New Space 2.0. These companies will be defined by scrappy founders, pursuing capital-efficient business models, and credible paths to revenue. Undoubtedly the next SpaceX and PlanetLabs will be built in this upcoming period and we are excited to be their first check!🧵end
Some companies in the space industry may not survive the coming headwinds in the U.S. and global economies, United Launch Alliance CEO Tory Bruno said July 11.“I think we’re really looking at a sea state change,” Bruno said at the Space Innovation Summit, an online event
Space industry warned to prepare for impact from lurking recessionQuote from: SpaceNews Some companies in the space industry may not survive the coming headwinds in the U.S. and global economies, United Launch Alliance CEO Tory Bruno said July 11.“I think we’re really looking at a sea state change,” Bruno said at the Space Innovation Summit, an online event
* Private investment in space companies dwindled in the second quarter.* The sector was weighed down by broader economic and market headwinds but was salvaged in part by a funding round at Elon Musk’s SpaceX.* Space Capital tracks 1,727 companies which have raised $264 billion in cumulative global equity investments since 2012.
The SPAC boom hit a wall as risk appetite evaporated, and most space companies that went public are down 40% to 85% over the past year.My deep dive for @CNBCPro on value, opportunity, and danger for investors:
Investors don’t think this way, though that sounds counterintuitive. They care about % ownership of a specific valuation, that they want to see go higher. Valuation initially is more made up on some combo of projected revenues and future profits, but with revenue and profits per launch normal industry multiples start to matter. For tech startup, it’s based on revenue growth usually, then profit later. This is how you get companies like Tesla and Rivian that have raised astronomical amount of capital vs anything in rocket land, but at the time they brought such capital in they had less maturity. Launch market size is still several billion per year, so future revenue and profits have potential to be high
The question is simple: For a new launch company, how many launches are required to recover the initial investment?Thought experiment addressing the above:If you invest $1B to get your first rocket to orbit, what is the expected profit per launch? In the new low cost launch market built by SpaceX, $10M profit per launch for any small to medium lift launcher seems highly ambitious, probably flat out unlikely.But even at $10M, that means 100 launches just to recover the initial investment. If it’s just $5M, that means 200 launches.How long is that likely to take from first making orbit? 10 years? And that’s without accounting for continued R&D to stay competitive with the still innovating market leader.In this context, how does any new launch company make sense as a business case?
