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SpaceX: Let’s Do Launch

Let’s get this out of the way first. Iron Edge VC sincerely apologizes for the corny title of this essay. But you obviously have been brave enough to read on, so perhaps it wasn’t such a bad pun after all. In any case, we would like to reward your fortitude with some information that will likely impress whatever friends with whom you choose to share it, as well as draw your attention to a great pre-IPO investment opportunity.

 Ask most people what SpaceX does, and they will likely respond by saying that it’s a company that sends rich thrill seekers into space. As a key participant in the “billionaire space race”, SpaceX does indeed aspire to put a great many affluent tourists into orbit, as do competitors Virgin Galactic and Blue Origin. None of these ambitious enterprises are limited to this solitary goal, though. They all have working agreements with other companies in the private sector and even with some government agencies (like NASA, naturally). SpaceX is arguably taking the lead in the high-stakes competition of relevance, and last Monday’s picture-perfect launch of sixty shiny new satellites into the heavens has underscored that lead beautifully.

 The company chose November 11, 2019 — Veteran’s Day — to execute its fiftieth consecutive successful launch. In a classy flourish, the announcer ended the countdown with a tip of the hat: “With gratitude to our veterans today and always… Go USA!” as the Falcon 9 majestically parted ways with planet Earth. See that touching moment, and the subsequent payload deployment and the landing on the “Of Course I Still Love You” droneship somewhere out in the Atlantic Ocean by clicking here. It is an awe-inspiring display, and it left me thinking, Man, those people can vertically land a million-pound rocket better than I can parallel park a Chevy!

 There is no disputing that Elon Musk enjoys the spotlight. Case in point: in February 2018, the man sent his cherry red Tesla Roadster, complete with a space-suited dummy behind the wheel, into orbit. Astronomers predict that “Starman” will be cruising about the solar system for “a few million years” or until he smashes into an asteroid, whichever comes first. By contrast, last Monday’s maneuvers were no publicity stunt. The aforementioned “payload” was sixty Starlink satellites. These million-dollar gadgets are but a tiny fraction of the planned network of 12,000 units that SpaceX has permission from the FCC to put out there. The purpose of this vast constellation of satellites is to supply high-speed internet service to remote and rural (i.e. underserved in the internet realm) parts of the world. Conveniently, they also will provide nearly flawless GPS navigation services to Musk’s other little company, Tesla, Inc. When fully deployed, the 12,000 SpaceX satellites will constitute the largest-ever low-Earth-orbit broadband constellation.

 Keep reading… This gets even better. To settle for having the largest such network — by far, in fact — would be so very “un-Musk-like”. No, good ol’ Elon has recently applied for clearance to launch an additional 30,000 satellites in the future. As one might imagine, a filing like this is considerably more complex than, say, applying for a fishing license down at Lake Ozark. But with the United States Federal Communications Commission submitting multiple filings to the International Telecommunication Union (an entity of the United Nations) on their behalf, SpaceX is demonstrating that they are quite serious in their objective, and they are likely to succeed. The hurdles they face are related to objections about “spectrum hogging” and disruptions of literally astronomical proportions, but these will likely be quelled by assurances of corporate responsibility and the promise of breathtaking technological advances.

Should SpaceX be granted this wish of expansion, even the layman would easily conclude that 46,000 satellites should do the trick. But hold on, you might protest, at sixty satellites per launch, it would take at least 766 missions to get that many doohickeys up in the air. Nobody can afford to do that! Well, in that case I say shame on you for not clicking that cool video above. Remember, that rocket landed on a platform in the ocean, ready to be used again. Design improvements to the Falcon 9 (fun fact: the name is an homage to Han Solo’s ride in Star Wars) have focused on reusability. Thermal protection coating in place of plain old paint and shielding on the rocket’s tail end protect the boosters from destruction upon re-entry. Instead of a maximum of two uses, the boosters can now be used a minimum of ten times, and possibly up to a hundred times more than that with planned refurbishments and careful inspections.

 Taking things a step further, to the surprise of precisely nobody, SpaceX has plans to up the ante with a new rocket they are developing. The new, lower-cost system, dubbed “Starship”, is designed to be indefinitely reusable. Furthermore, Starship will have a dramatically improved turnaround time. Whereas earlier Falcon 9 versions required several months of maintenance between launches, SpaceX aspires to build Starship to perform several missions a day. On top of that, there’s the payload factor: Falcon 9 is capable of lifting sixty satellites at 500 pounds each, or 30,000 pounds. Starship can hoist a whopping 220,000 pounds, or up to 440 units per flight.

 Trying to put a price tag on an operation of such proportions can be a profoundly challenging task. But proportions aside, the math is the same. Elon Musk has floated the suggestion that with an aim toward manufacturing 42,000 satellites, mass production strategies will bring the per-unit price to the hundreds of thousands of dollars, down from a million apiece. The reusability of the rockets, particularly that which Starship will have along with its miniscule turnaround time and boosted payload size, will save billions over time. Musk claims that Starship could be flying “within one or two years”. Can you say “game changer”?

 Elon Musk hopes to capture just a small percentage of the global telecommunications industry with this project. If this goal is met, it could be worth up to $50 billion annually for the company. Of course, as in any business, revenue is offset by expenses. But if SpaceX eliminates so much of the expense of building new rockets and shrinks the number of flights needed to get the whole constellation in the air, the calculations start to look more favorable. As a private company, SpaceX doesn’t have to show us their financials, but one can assume that if launch expenses are reduced to things like fuel and ground support, a healthier valuation must follow.

 If this is the first time you are receiving an Iron Edge VC newsletter in your inbox, welcome to our community! We hope you enjoyed reading about SpaceX. Please click here to check out our website for a better understanding of what Iron Edge can do for you. While you’re there, peruse the News section for our earlier newsletters highlighting our other exciting investment opportunities.

 We at Iron Edge VC are proud to have access to privately held SpaceX shares. If you would like to learn more, or if you know of anybody else who would, please do not hesitate to contact us by clicking “Get in Touch” below.

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5f6e0d464e388c4975685025 Paul Min

Paul Maguire

Founder And Managing Partner