Buses in Space: Rocket Lab and Apex Shaking Up the Industry
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Buses in Space: Rocket Lab and Apex Shaking Up the Industry
Apex raises $16MM to mass-manufacture satellite buses // Rocket Lab doubles-down on marine booster recovery // Red-hot M&A market for space
Good evening Earthlings 👽️🖖
Let’s talk about satellite buses. They provide the structure, power and movement to spacecraft that ferry payloads from various companies to their specified destinations in space.
Before getting started, here’s a quick glossary:
Payload: Object or entity carried by an aircraft or launch vehicle into space
Satellite bus: The structure that provides power and propulsion to the payload
Launch vehicle: A rocket or missile used to carry a bus and payload into space
You can imagine this industry as a network of “space buses.” Think of this spacecraft as the last-mile logistics company that brings the patio set you ordered directly to your door. It would be terribly frustrating if you had to pick up your order from a distribution center 4 hours away. Maybe you wouldn’t have even ordered the patio set if that was the case. This frustration is similar to how the legacy satellite bus industry currently operates. If a company needs to send their payload into orbit, they would either have to manufacture their own “space bus” or submit a request for quotation (RFQ) to contract a manufacturer to build it for them. This often comes with lead times measured in years, not months.
Imagine another situation where you want your child added to a school bus route, only to be told, "apologies, we're fully booked for the next three to four years. To secure a spot, you'll have to initiate a proposal for a new bus to be added to our fleet or pay up. Good luck!”
Once Rocket Lab and Apex entered the arena, the entire industry was flipped on its head - for the better.
Traditional players like Ball Corporation and Lockheed Martin are now trembling in their boxy cubicles with corner-office executives calling up bankers to slice and dice their space divisions because the competition is getting too hot.
Today will be a long one. Let’s dive right in…
Apex raises $16MM to mass-manufacture satellite buses
Apex is an LA-based startup with plans to mass-manufacture satellite buses. Announced on June 22, 2023, the startup raised $16 million to fund development of its first large-scale factory, a 4,600-square-meter production facility in Los Angeles that the company will use to ramp up production of its Aries satellite bus. Apex is building its first Aries spacecraft now, and projects to scale up production capacity to five in 2024, 20 in 2025 and as many as 100 in 2026.
The plans are ambitious and investors are giddy.
Ian Cinnamon, chief executive of Apex, said in an interview with SpaceNews that the company was able to raise an oversubscribed Series A round due to high investor interest which was led by venture firms Andreessen Horowitz and Shield Capital. The company has already raised more than $27 million to date, including a seed round it announced in October 2022. Having Shield Capital on the cap table is a strong signal that Apex is looking to tap their network for partnerships with the U.S. government given Shield is a firm that’s known for investing in startups at the intersection of commercial and national security.
The Aries spacecraft remains on schedule to launch on the SpaceX Transporter-10 rideshare mission in early 2024.
WTF is a SpaceX rideshare mission?
These rideshare missions are considered to be one of the cheapest ways to get payload into space since the program allows multiple small satellite operators to share space on a Falcon 9 rocket. SpaceX has attracted significant demand for its Transporter missions, offering rideshare launches three to four times a year. The company’s website, which lists available launch slots and prices, suggests its Transporter missions are fully booked until the second quarter of 2025.
For Apex’s first mission, the Aries spacecraft will carry payloads for three customers: space refuelling company Orbit Fab, autonomous satellite technology developer Ubotica, and an unnamed “tier one” defense contractor.
The satellite bus industry is ripe for change
So what exactly are satellite buses? This type of spacecraft provides the structure, power and movement that allows satellites to deploy into orbit. Also referred to as a “spacecraft bus”, these vehicles are the main body components that hold payload and scientific instruments. Traditionally, customers would dictate customized requirements to a manufacturer in order to complete a specific mission. This model now a thing of the past. Rocket Lab and Apex have entered the satellite bus manufacturing arena and are challenging traditional manufacturers by moving from a “build-to-order” to a “build-to-production-slot” business model.
Legacy business models: Before Rocket Lab and Apex entered the manufacturing game, traditional manufacturers of satellite buses like Ball Corporation, Israel Aerospace Industries Ltd. (IAI), and Lockheed Martin would build buses based on customer-specific requirements (i.e., “build-to-order”). The unit economics on these deals are quite low and the industry is not set up for mass production because the demand for satellite buses was previously not high enough to justify the investment required to set up a production line.
Similar to the defense industry, incumbent satellite bus manufacturers get paid on what's called a “cost-plus“ basis which structures the price tag for a satellite bus using the total cost of completing a contract, plus a 6-10% margin of profit. Let’s say NASA wants to ship some weather satellites into orbit. Incumbents scooping up that NASA contract have historically been incentivized to move slowly since they make more money when they build expensive systems, and even more money when these systems break because they get to sell more parts. With many more private players in the space industry, there is strong push toward efficiency.
This is where Apex comes into the scene. They plan on delivering satellite buses to customers in a matter of months, rather than the status quo lead time of a few years. Apex is taking on a what is commonly referred to as the satellite bus “bottleneck”.
The trigger: Ian Cinnamon was previously the founder of Synapse Technology, which was acquired by Palantir in 2020. He noticed that many payload customers were “held back” by the long and costly process associated with building custom satellite buses. Max Benassi, an engineer whose career includes a six-year stint at SpaceX noticed changes to launch economics that make mass manufacturing possible now. The rest is history.
However, Apex wasn’t necessarily first to this market. A company called Rocket Lab continues to have a strong foothold in the market.
Rocket Lab ❤️ Vertical Integration
Rocket Lab was founded in New Zealand in 2006 by Peter Beck, and by 2009, the successful launch of Ātea-1 made Rocket Lab the first private company in the Southern Hemisphere to reach space. Now, Rocket Lab has established its headquarters in California, and in 2013, it had developed the expendable Electron rocket for small satellite launch services. Rocket Lab started its business by carving market share away from SpaceX by focusing on the small satellite launch market. The company’s extensive line of small and medium class spacecraft platforms support a wide range of mission profiles for the commercial, civil and defense market.
We’re witnessing a time in history where the miniaturization of electronics and advancements in 3D printing fuelled the business case for companies like Rocket Lab. The company’s Electron rocket and Rutherford engines are known for featuring 3D-printed parts, notably the carbon composite components of the main flight structure, engine chambers, prop valves, injectors, and pumps. The company is focused on the ability to quickly mass-produce its rockets, and has been known to build a Rutherford engine in three days.
While Apex is focusing on building a mass manufacturing machine for any customer, Rocket Lab is innovating by offering a complete end-to-end solution for customers to test and operate technologies in space. While Rocket Lab is best known for its Electron small launch vehicle, the company entered the small satellite bus industry in 2019 with the Photon, based on the Electron’s kick stage.
WTF is a Rocket Lab kick stage?
The kick stage is the third stage (i.e., section) of a rocket developed by Rocket Lab, equipped with a single 3D-printed Curie engine. The kick stage’s goal? To offer in-space transportation and maneuverability for Rocket Lab's customers enabling them to get satellites exactly where they need to go in space. The kick stage can do multiple burns to send payloads into various orbits, greatly expanding options for rideshare clients that have typically been constrained by a defined orbital path after launch. After the kick stage has completed its duty of deploying payloads, it can drastically lower its orbit, enabling it to burn up and disintegrate upon atmospheric re-entry without a trace. Rocket Lab wants the kick stage to feel the burn.
Anyways, Rocket Lab chief executive Peter Beck claims that, “if you can build a launch vehicle, you certainly have all the expertise and equipment needed to build a spacecraft [bus].”
Rocket Lab's Photon bus helps reduce the cost and risk involved in building a spacecraft. For a full-suite service offering, customers can come to Rocket Lab with an idea, and Rocket Lab can build them a payload, mass manufacture a satellite bus for the payload to get them into orbit, and schedule them for a launch using their Electron launch vehicle. This can all be done in a short timeframe and a relatively minimal cost. As you can assume, Rocket Lab is vertically integrated with in-house subsystems allowing them to incorporate Photon satellite buses with other Rocket Lab components and software, including star trackers, propulsion, reaction wheels, solar panels, flight software, radios, composite structures and tanks, and separation systems. The company’s Photon satellite bus is a mass-produced spacecraft that is configurable for a range of missions in Low Earth Orbit (LEO), Medium Earth Orbit (MEO), Geostationary Orbit (GEO), and beyond, including lunar and planetary. Their ultimate goal for the Photon bus is that it will enable an interplanetary mission to Venus in 2025, delivering a laser-tunable mass spectrometer into the atmosphere.
Rocket Lab is already a formidable player in the satellite bus market, but Apex is betting that Rocket Lab will continue building-out its launch and end-to-end space systems business. This will allow Apex to focus on mass manufacturing satellite buses for the rest of the market. On June 23, 2023, Rocket Lab announced its next Electron mission will deploy seven satellites to space and include an attempt to recover the rocket’s booster after launch for the first time. Rocket Lab clearly has other pressing items on its mind.
Tight fundraising and a red-hot M&A market
Broader macroeconomic issues like higher inflation and interest rates have fundamentally changed the fundraising climate for space companies. Near-zero interest rates for the last 10 years had these companies hallucinating - they operated in an environment that was defined by infinite growth and risk-free investments. But as Warren Buffet says, "only when the tide goes out do you discover who's been swimming naked."
As rates skyrocketed from near-zero to about 5%, many deals and companies that looked great under the zero-interest-rate phenomenon (ZIRP) are no longer profitable. On the surface, these are things like SPACs, meme stocks, working eight remote jobs at once, and NFTs. But when you peel back the onion, it’s clear that the knock-on effects of rapid interest rate increases are finally bubbling in the American industrial machine. Capital-intensive startups operating in the aerospace and manufacturing sector will likely hit a wall over the next 12 months. The world of free money is dead and gone.
As reported by CNBC, one anonymous banker came forward to suggest that, “this is a normal market cycle,” where “a lot of those weaker companies fail, and there’s a lot of consolidation.” Bankers and space industry insiders are saying that the M&A market is red-hot and “everything’s on the table.” “We’re early into the process of reckoning actual demand versus hype,” another banker said.
2022 also happened to be a blockbuster year for M&A activity in aerospace and defence with $30.4B in total deal value announced in 2022, including:
Advent International’s $6.4B acquisition of Maxar Technologies
Apollo and Hill City Capital’s $5.2B acquisition of Atlas Air Worldwide
L3Harris $4.7B acquisition of Aerojet Rocketdyne
Carlyle Group $4.2B acquisition of ManTech
Eutelsat $3.4B acquisition of OneWeb
Private equity associates are sharpening their knives. Investment bankers just got their favourite suits dry-cleaned. M&A lawyers are shining their deal sleds. We’re seeing the high-finance barbarians heading to launch pads and manufacturing facilities, and it’s clearly a signal that there’s much more to come in the pipeline.
It’s Time to Build
We’re being ushered into a new operating environment with investors rushing to companies with a near-term focus on products and services than can generate revenue and profitability - companies like Apex and Rocket Lab. Dollars are flowing to focused founders tackling billion-dollar issues. No more games.
With companies like Rocket Lab and Apex gaining a stronger foothold in an aerospace and defense market littered with inefficiency and bureaucracy, we’re going to see a lot of things break - and even more things built.
America’s industrial spirit is back, baby!
📰 In Other News
Boeing CEO reiterates commitment to Starliner program, with Dave Calhoun saying the company is not “shutting the door” on the capsule and is “going to do whatever NASA asks us to do.” Boeing still believes in the program and claims that the human spaceflight transportation market “has to be more than” just SpaceX. (Aviation Week)
An orbital transfer vehicle from SpaceX's Transporter-8 rideshare mission malfunctioned after deployment, jeopardizing the "Otter Pup," a technology demonstration spacecraft developed by Starfish Space. While Starfish is working to stabilize Otter Pup, the original mission involving a rendezvous with Orbiter SN3 has been rendered impossible due to Orbiter SN3's failure. (TechCrunch)
China's International Lunar Research Station (ILRS) moon base initiative has gained commitments from Russia, Pakistan, and the UAE, with over ten other countries currently negotiating agreements. The ILRS aims to construct a permanent lunar base in the 2030s. (SpaceNews)
Atmos Space Cargo, a German startup, is looking to open up the opportunities for life sciences research and manufacturing in orbit with its return capsules that will deliver cargo from space back to Earth. Following in the footsteps of Varda Space Industries, Atmos is aiming to conduct research into monoclonal antibodies, stem cells, artificially grown human tissue, and protein crystallization in microgravity. (TechCrunch)
That’s it for today, Earthlings. Enjoy the rest of your Saturday, and we’ll see you next time.
As always, thanks so much for reading! 🧑🚀