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The commercial space economy is underway, and recently-public Rocket Lab $RKLB is helping companies to set up their orbital shop. Rocket Lab's CEO Peter Beck and CFO Adam Spice chat with Simon and Steve about where the greatest opportunities are arising for businesses and for investors.
September 7, 2021– By Simon Erickson
The commercial space economy is taking off, and it’s capturing the imagination of entrepreneurs everywhere. This trillion dollar new horizon is unlocking opportunities that span across the globe and will fundamentally change many industries.
But while the potential is certainly there, actually setting up shop in outer space remains very challenging. Companies today need to draw up a business plan, design and build their satellites and infrastructure, launch them into outer space, and then keep everything monitored and operational. Even considered individually, each of those is a monumental task!
Yet a company named Rocket Lab (Nasdaq: RKLB) is uniquely rising to this challenge. Self-described as an “end-to-end space company”, Rocket Lab looks to simplify the entire process and democratize outer space for business purposes. They design and manufacture custom satellites and rockets, they launch payloads into space, and they manage the infrastructure required for continual support. You can think of them as the one-stop-shop space vendor of preference.
And Rocket Lab has even bigger ambitions arising. It initially focused on launching smaller satellites of up to 300 kilograms, yet its newly-unveiled Neutron rocket can carry payloads of up to 8,000 kgs. That means instead of placing individual satellites, it will soon be placing entire satellite constellations. That will give larger customers an opportunity to scale up their commercial operations.
The commercial space economy is a higher-altitude movement that absolutely needs to be on your investing radar right now.
In an exclusive interview, Rocket Lab’s CEO and co-founder Peter Beck and CFO Adam Spice recently spoke with 7investing CEO Simon Erickson and Lead Advisor Steve Symington. Peter explained why now is the golden era for the space industry and why several customers are asking for dedicated launches as an alternative to ridesharing. Adam described the opportunities that Neutron will enable and the important impact it will have on Rocket Lab as a business.
The two also describe upcoming industry consolidation and the opportunity for “Space as a Service”. And in the final segment, Peter — who has been a rocket scientist since his childhood — describes the things he is most excited about achieving in the coming years.
Publicly-traded companies mentioned in this interview include Rocket Lab. 7investing’s advisors or its guests may have positions in the companies mentioned.
00:00 – Overview and Introduction
01:07 – Where are the biggest commercial opportunities in the space economy?
03:46 – Comparison of dedicated launches to ridesharing. What are customers asking for?
06:26 – What business impact will Neutron have on Rocket Lab’s future?
10:56 – Will be there upcoming industry consolidation?
12:31 – What is Rocket Lab’s vision for “Space as a Service”?
14:08 – What are a few things you’re excited about and that investors should be watching?
Simon Erickson 0:00
Hello everyone and welcome to today’s episode of our 7investing program. I’m 7investing founder and CEO Simon Erickson, joined by my colleague Steve Symington. And we’re very excited to welcome several of the executives of Rocket Lab to our show today. We have the company’s CEO and founder Peter Beck and also its Chief Financial Officer Adam Spice. As a reminder for anyone who’s watching, Rocket Lab is now a publicly traded company with the ticker RKLB. Hey Peter and Adam, thanks for joining us at 7investing and congratulations!
Well, we wanted to start at the 10,000 foot level. I think it’s only appropriate to start at the geosynchronous orbit level for this question. But Peter, the first ones for you, you know, we hear about the space economy in the media quite a bit these days. Some are saying this is a trillion dollar industry that’s developing out there right now. You’re someone who lives this every single day, how do you see space economy developing? And what are some of the biggest opportunities you see there?
Peter Beck 1:07
It’s a really pivotal time within the industry. I mean, as I was growing up as a young child, I wish to lamented that I was born in the Apollo era, because that was going to be – that was really the, you know, the heyday of the space industry. But boy, was I wrong. I mean, this is this is really the era, you know, to be in the space business. And that’s testament by the fact that, you know so many companies are able to, you know, create value within the industry. So I think we go through a time, we’re typically dominated by governments and government programs. And now it’s really starting to become, you know, more controlled by commercial enterprises and commercial entities. And if you look at the really, really large programs, you know, they are commercial. The shift from, from government, all the way into commercial and in private companies, in public companies now, taking advantage of all of the opportunities that is available in the space.
Simon Erickson 2:18
We’ve seen a lot of talk about Satellite Internet and imagery and data collection in outer space, are there certain fields you think are going to grow at a kind of an outsized rate out there, Peter?
Peter Beck 2:31
So I think my view is always that, you know, perhaps the largest thing to be done in space is yet to even be thought of, but certainly the things that you mentioned, have big opportunities. So, you know, communications is always a big one. Comms is a big one. And Earth, of course, is always a large opportunity. But I really do think that there’s going to be some, some significantly more interesting opportunities in the future. And that’s what you kind of do in your approach with kind of like Rocket Lab and others have is where it’s not just, you know, combining launch, building spacecraft, and then moving, you know, into those applications, and really flattening the whole stack there, you know, create a huge advantage to do things in orbit but at a cost in a frequency that just hasn’t been possible in the past.
Steve Symington 3:27
So you mentioned launches. And I know you’ve been the leader, Rocket Lab for small launches for the last three years or so correct?
Peter Beck 3:40
Yes, so, yeah, correct. We have over 100 satellites on orbit today.
Steve Symington 3:46
Okay. And there are I know, there’s kind of two distinct ways to go about it, right, and dedicated launches and ride sharing. Anyway, you can kind of give us some some thoughts on the advantages of and costs of each approach, and maybe how customer preferences are shifting in the industry?
Peter Beck 4:06
Yeah, so it’s the difference between rideshare. So rideshare is where obviously you share your ride on a large rocket and then dedicated is where you have, you know, a dedicated vehicle to get you to where you want to go. And, you know, not all space is the same. It’s a physics problem. And the best way I can describe it is if you’re sitting in New York, and you want to get to Australia, it doesn’t really matter if someone gives you a free ticket to the United Kingdom, or very low cost ticket to the United Kingdom, you need need to get to Australia. And it’s the same thing with the difference between rideshare and small, dedicated launch. If you’ve got a common destination, and you don’t mind sharing the bus and you’ll get dropped off, we get dropped off in the timeframe we get dropped off, then right here is a great opportunity because you’re always leveraging the cost of a large launch vehicle in the lower cost per kilogram, and you can get your satellite into orbit, it’s great.
But as with almost all of our customers, they actually have a really specific destination that name they need to get to, for their satellite or their constellation to be commercial. You know, for example, if you’re trying to look at, if you’re an Earth observation company, and you want to spend the majority of your time over North America, and maybe some of the other other troubled countries, then a mid inclination orbit puts you over those countries. If you want to, you know, provide communications to, say, in the continental United States, then you need to be an America nation, if you go sun synchronous, you’re only crossing over those, you know, over the over the landmass very infrequently. So, you know, for every application in space, there is a specific requirement for every orbit. And you know, if you can get on the bus and get delivered to a destination that works with and that’s great. But like I say, the vast majority of all of our customers have a very specific destination that they need for their satellites and their business to, you know, to be commercially viable.
Simon Erickson 6:14
Adam let me segue into a question for you, we know that you all have been focusing on the dedicated launches heavily, you know, this small satellites of 300 kilograms payload with your electron rockets. But we’ve seen that you’ve spent a lot of time developing the neutron rockets too. The 8 ton rockets, that primarily, as I understand it, are more for satellite constellations, rather than just single purposes. From a business perspective, what’s the impact of neutron? And how is that gonna impact the future of Rocket Labs? Of the company?
Adam Spice 6:46
Yeah, it’s a great question. I’ll give you my thoughts on it. You know, I know Pete has others as well. But if you really think about electronics, it’s a phenomenal platform for doing any bespoke type of operations. Right. So if you want to try out new technologies in orbit quickly, and affordably, particularly, as Pete mentioned, you’ve got a unique either L10 requirement or inclination, it’s a great way to get technology up in orbit, get proof, and then really kind of allows, you know, those operators gain confidence in deploying larger constellations of the satellites, if that’s their plan. If their application requires a large constellation.
So what we really view is, we view this as just another piece of our overall strategy where we’re not just a small launch company, right, we have sunlight components, for the small satellite market. We are building buses, full satellite buses, you know, we of course, launched them on electron, and also those some of those buses will launch and components launch and others launch vehicles, not not necessarily electron. When it comes to our space systems business. You know, we certainly want to have the ability to be launch vehicle agnostic, we’d love to launch everything, of course on electron, ultimately neutron, but we, you know, we want a bigger bite at the overall ecosystem than what only our vehicles can provide.
So when you think about what neutron really does, is allows us to take those really strategic early relationships, and credibility and track record from those bespoke, you know, in some cases, Pathfinder missions, and when things are really – when the constellations are ready to go to, you know, into volume deployments, you know, we can just take those relationships, those capabilities and everything we’ve learned about those payloads and put them on a much larger launch vehicle and deploy the constellations in volume. So it’s an incredibly strategic investment. You know, I think that it would be It’d be great if we, if we even hadn’t had electron or the Space Systems business as it is today. But it’s that much more strategic and leverageable. When with everything that’s come before it. So yeah, we’re incredibly excited about neutron.
Steve Symington 8:37
Now, you mentioned, you know, satellite components, and, you know, kind of the end end platform, and I know, your first acquisition, you made just a little over a year ago, it was a satellite components company, wasn’t it?
Adam Spice 8:51
Correct, yes. It was gonna be called Sinclair Interplanetary, they were based up in Toronto. And Sinclair was very well known to the industry as making superb, very exquisite components such as reaction wheels and star trackers and sun sensors. And so it was – well what we realized very quickly as we were developing our own photon family of satellite buses was that the lead times are very, very, very long. And you know, one thing that Pete and the rest of the team identified really early on was that if new space is going to live up to its promise of becoming this trillion dollar opportunity for everybody, but it can’t be done the old space way, right? So that really means you’ve got to, you’ve got to find new ways, cheaper ways, quicker ways to really get to volume deployments.
And so for example, Sinclair was, was selling hundreds, you know, one to 200, for example, reaction wheels per year. We’ve now secured constellation contracts, which will be shipping 1000s of reaction wheels per year, and you just can’t do that the old way. So it’s all about bringing Rocket Labs, you know, ability to produce at scale, high volume, high quality, and really bring that to the market bring down lead times not only for our own internal needs for photon, but everybody else in the small sound like market. So the component piece is very strategic enabler for us, you know, when it makes sense is just a one-off isolated siloed business, probably not for us, because it probably doesn’t ended up itself wouldn’t have necessarily the the profile that we look for as a public company. But it absolutely is critical. And it’s kind of already proven itself out to be an incredibly strategic play for us.
Steve Symington 10:26
And, Peter, that’s really interesting, and have got all kinds of other questions that pop up. But I heard you mentioned, some thoughts on that the industry will consolidate. That you fully expect it? And, you know, that was, I guess, part of it, right? Is this kind of inorganic growth where you acquire a company, like the satellite components business, any other thoughts you can offer on industry consolidation for the broader space economy?
Peter Beck 10:56
Yeah, I think I mean, our view is that the the large space companies of 2030, and on are gonna look a little bit like Rocket Lab, where they’re a launch company, they also build spacecraft, and they probably also have an applications business, or, you know, their own revenue line associated with that. And, you know, I think the space industry is kind of thing, Adam said, Uh, well is, is is really characterized by a tremendous number of very small operators at some scale. And one way to bring scale to the industry is by consolidation. And, you know, as Adam said, if you go to most of the space, space component shops and say, I want 2000 of something, you can just watch the head spontaneously, you know, explode, because there’s none of that. But in the rest of the world, there’s not a big number.
Simon Erickson 11:52
Yeah, double clicking on the applications when they’re paid. I think that if there’s a large market for launch, and there’s a large market for the components and the satellites, but it seems like one of the things that you’re most excited about is just laying the infrastructure for companies to set up shop in outer space, right? It seems kind of like the early days of the internet, it’ll lay the groundwork for networking and packet information exchanges, and then you kind of got cloud computing, or someone’s got to build out the infrastructure for hosting software that’s cloud based, it seems like now there’s an interest in laying the infrastructure up in an orbit. How do you how do you see that space applications? Or maybe we call it space as a service? How is that going to evolve in the next couple of years?
Peter Beck 12:37
I think it’s really obvious what what’s going to happen there, I mean, the when you have the ability to deploy infrastructure at such a rate in a frequency, in a cost, that it’s really, really hard to match. Then it’s gonna be pretty obvious, you know, ultimately, we’re all that goes. And that will be, you know, building of that infrastructure, you know, in orbit and beyond.
Simon Erickson 13:07
If I can follow up on that, too, would customers then just pay a monthly fee, or an annual fee to Rocket Lab just to host all the infrastructure and say, Hey, you guys take care of it, just keep my business up and running up there?
Peter Beck 13:19
Yeah, I mean, it can take all different kinds of models. So we already run, like a hosted payload model where, you know, customers can come to us, and with just a sensor on a photon, and we’ll put a we’ll put a photon up on orbit. And, and then we can we can host the pilot and just provide the data to them. In fact, you know, we even have a customer that we never built the satellite, nor did we launched a satellite, but we actually just operate the satellite for that particular customer. So you can really think about this, you know, as by going into wind.
Steve Symington 13:55
So, I mean, we’ve tackled a lot of kind of the direction and what we expect the space economy to have the ways we expected to change and evolve, I’d love to hear from both of you, maybe what a few things that you’re excited about. Things that maybe investors can benefit from.
Adam Spice 14:15
Where investors can benefit the most, where people that really do have this platform view where, again, it’s not just bet on the launch piece, it’s because you know, you could win or lose launch business. But if you’ve got, you know, Pete’s we said this, you know that everything that goes to space, he ultimately wants to have a Rocket Lab logo on it, right? So if we don’t win the launch, or we don’t win the bus contract, we want to have the reaction wheels or the star trackers or, you know, the the high voltage battery systems, whatever you want to call it, we want a piece of that, or we want to operate it on orbit.
Like the one opportunity that Pete mentioned earlier, where, you know, we need to build or launch a satellite, but we’re going to basically flip the ticket on orbit services. So to me, that’s what’s most exciting, and I don’t think you see a lot of other industries, least ones that I’ve been involved in or aware of, where there’s that many ways to really kind of play at the table. Right, it’s usually a one sided opportunity, it’s a very focused bet. Here, there’s a lot of opportunities. But you also have to have the right pieces kind of brought together under one roof. And that comes back to the question you had about consolidation. And that’s why I think, you know, consolidation, this industry is very, very important. It’s very strategic. And there’s definitely going to be a first mover advantage and who basically gets to clean some of this real estate in this new kind of Wild Wild West.
Simon Erickson 15:25
There is so much good stuff to unpack there, like Adam just mentioned, lower Earth orbit. Low Earth orbit, the Leo opportunities that are out there. Of course, if you look at Rocket Labs press releases, you see the diversity of opportunities of what people are bringing to outer space, the execution and capital pieces of it, like Peter mentioned, as well, Peter, I’ve got to slide in one more question for you, since you’ve been a lifelong rocket scientist, I see some pretty exciting stuff you’re working on, you guys are going to go to Venus, and then you’re going to go to the moon, and then you’re going to go to Mars. I mean, this is kind of the lifelong dream that you’re living here, what is something that you’re really, really excited about that’s a couple years out, that’s in outer space?
Peter Beck 16:09
Well, I keep having to readjust my expectations on peak, that’s for sure. But we have some really exciting missions, you know, the NASA mission to the moon, as you mentioned, is a really exciting one, you know, this is one of the first missions after the Artemis program. And, and we just recently run two spacecraft orbiting Mars for NASA as well, which is a real testament to the team. Because it’s one thing to put a spacecraft in low Earth orbit, you know, doing a comms relay or something, it’s a whole nother deal to go to another planet. That is, that’s seriously hard stuff. So we were super honored that NASA, you know, views the team at that level, and also know, trusts us with those kinds of, really fundamental science game changing stuff.
Naturally, we have a private mission to Venus, which is something I’m very, very passionate about. I think that gives us, you know, the human species, the ability to answer one of perhaps the largest questions that ever and that is, you know, are we the only life in, in our solar system, let alone universe. So it’s tremendously exciting. But, I think there’s, there’s just so much going on that is really formative and foundational. So, obviously, Rocket Lab becoming a public company, this is this is something that we’ve been working for, towards for many years. And bringing a really high class asset to the market, I think, is has been really important.
And, neutron is, is going to be a real game changer within the industry. You know, I keep telling the team, if you’re lucky, you get to design and build one rocket in your life. That’s like -you’re already an incredibly rarefied air to get to build one rocket. Then to take all of the learnings from that one rocket all the operational experience the reentry experience from recovering reusability and get to roll out a clean white piece of paper and have a do over on a new vehicle. It just doesn’t come around. So we are leveraging and making the absolute most of that to bring to a vehicle to the market that I’m pretty sure everybody will stand in front of and point it out and go “that’s 2050, not 2021”.
Simon Erickson 18:35
Absolutely. Well, it’s a lot of passion and a lot of accomplishment that’s coming from rocket lab. We’re really excited to see where your company goes. And not just for those of us who like science and who likes space, but also for those of us that are investors as an opportunity for us now that you’re a publicly traded company. For Peter Beck who is calling in from New Zealand where there’s a massive storm I hear going on right now. Thanks for calling in. And Adam Spice calling from California. Gentlemen, we really appreciate your time with 7investing this afternoon, or this morning, depending where you’re calling from.
Adam Spice 19:05
Yeah, thank you very much. We definitely appreciate the opportunity and let’s keep in touch as the story continues to evolve. It’s gonna be a very exciting run.
Simon Erickson 19:15
Absolutely, and on behalf of my colleague Steve Symington, I’m Simon Erickson. Thanks for tuning into this edition of our 7investing program. We are here to empower you to invest in your future. We are 7investing.
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