Entrepreneurs have traditionally needed five things to build their business: capital, customers, product development, staff recruitment and, eventually, an exit. A sixth factor of increasing importance in a world of heightened geopolitical tensions involves dealing with government and regulators.
Defence suppliers Boeing and Lockheed Martin’s creation of a joint venture, United Launch Alliance (ULA), 15 years ago picked up the monopoly for launching rockets into space until it was challenged by Elon Musk’s startup, SpaceX, which promised lower costs.
Opening up to competition has worked and forced ULA to try and reduce costs. The US Government Accountability Office (GAO) had calculated the average cost of each ULA rocket launch was about $420m in 2014 compared to a SpaceX offer of $90m per launch.
From offering $11bn in an uncontested US Air Force (USAF) block purchase of 36 rocket cores for up to 28 launches in 2013, the Air Force has chosen ULA and SpaceX for its next batch of flights, according to the Starburst accelerator.
Northrop Grumman and Blue Origin missed out on the tender, which was estimated at $1bn per year on 30 launches across a five-year period by the US military. ULA gained 60% of those contracts and SpaceX the remaining 40%.
SpaceX has its fleet of Falcon 9 and Falcon Heavy rockets and is testing a new rocket, dubbed Starship. ULA is building its Vulcan rocket to replace its previous Atlas and Delta fleet, and Lockheed Martin’s corporate venturing unit is exploring how it can work with startups to develop its services, particularly for commercial contracts.
Lockheed Martin Ventures was part of a syndicate that recently invested $49m in US-based ABL Space Systems, which is developing a launch vehicle for small satellites. ABL also won contracts worth $44.5m from USAF.
For all the talk – rightly – about how governments can help prime the pump of innovation through mission-oriented finance such as the European Union’s proposed green deal, the basics remain the same: competition requires customers as well as development capital.
The magic is in the market.
