A few months back I wrote about an incredible kiwi start up Rocket Lab: The Kiwis Winning The New Space Race. As part of researching that article I had the pleasure to interview Rocket Lab’s Founder and CEO, Peter Beck.
Peter is a pretty incredible guy. When he was eighteen he built a rocket in his garden shed, strapped it to a custom-built bicycle, and took it for a spin in a local parking lot (and hit speeds of over 150km per hour). If you don’t know much about Peter, this quick four minute video gives a great overview.
With plenty of other news outlets already asking about Peter’s extraordinary background, I instead focused my attention on the company’s business model. Due to size limits, most of our conversation could make it in to the final article. So for the folks that have asked, here is the full length interview:
I know your story pretty well. I am keen to hear in your own words, your story, and why you decided to start Rocket Lab?
Peter Beck: So, for me it was always very obvious that Spacecraft were going to shrink. So when you analyse what is in a spacecraft there is a bunch of electronics, batteries, solar panels, and a sensor . And all of those things are on rapid trajectories either down in size or up in performance. So it was always really obvious to me that small spacecraft were going to become a key element to building a space infrastructure in the future. So really their limiting factor and enabler for that future was the ability to get those spacecraft up in orbit regularly, affordably and frequently. So there is a good reason why we’re currently the only small launch vehicle delivering spacecraft to orbit and that’s because we saw that before others did. And also we were able to rapidly develop the capability. That’s what it is really all about.
It’s a super exciting time in space right now when you think about it. The best way I try to explain it to people is go back to when the Internet was brand new and somebody had just sent their first email. It was obvious that was pretty handy as a messaging tool. But if you went and sat beside that person at that time who sent the first email and explained to them all of the things the Internet was going to create it would largely seem like fantasy. And really with space, we have just sent that first email. That’s pretty much where we are at. Because space has been a domain that has been so hard to get to. So closed. So expensive. That it’s a domain that’s very hard to innovate and do these things in.
It’s an incredibly, incredibly,- exciting time. The biggest thing to be done in space is yet to even be thought of. People often ask me what do you think about are the various aspects of what is going on in space. What do you think of earth observation, and all these things. I think they are great. But the application of what they are providing is going to be dwarfed when we have full access to the domain of space.
I am keen to talk to that, and the economics that go with it. What do you think has sparked the small satellite revolution. What are the big enablers that have come together to allow Rocket Lab to work, and cubesats, and everything that goes with it?
There are a number of things that have combined at the right point in time. First there is the technology. That’s obviously a key enabler. That’s kind of a no-brainer. But technology by itself doesn’t necessarily enable a revolution. There are all kinds of different aspects.
Silicon Valley really saw it very early that space was something that was right for disruption. If you think of all of the domains where you build infrastructure: in the sea, on land, in the sky. Those have all gone through all their major disruptions. And its very incremental from here on in. But space is one of those things that hasn’t had a giant disruption. You could draw a line on a piece of paper that could show where you could create a disruption that didn’t require development of crazy new technologies or the usual billions of dollars that governments need to shell out to do these kind of things. So you had a perfect storm of technology that was ready to be used, investors that could see the opportunity and were ready to take the leap in to space, and a new generation of engineers and entrepreneurs who weren’t afraid of the space. Who broke out of the mold of space as a domain for governments to be in. it was kind of like, screw that, we can go there too. So I think that’s pretty much what has resulted in this industry.
So the Silicon Valley guys started investing in spacecraft very early on and in the very beginning it was earth observation because there was really only one giant monopoly company that was providing earth observation services, that was a printing press for money. So it was ripe for disruption. A number of companies started down that road, and build space craft. And then they tried to launch them. And that’s when it all fell to bits.
So when all the investors in Rocket Lab had [previously] felt the pain of launch. They all invested heavily in to small satellite companies. Only to have the satellites sit on the shelf for years. So when we turned up and said, hey look there’s a really big problem and there is a really big pipeline of spacecraft coming, and they go I know! We’ve got some of them. So it was a very very short line to draw to a launch vehicle that provided regular and rapid service to orbit.
What was your pitch to Venture Capital investors? You have been very successful targeting some top end VC firms. Was it ‘this is the world in 40 years’? Or was it, we have the technology now, and you already know the problem?
I was very targeted with who I wanted to invest in the company. It just so happened that the VCs I wanted involved in the company had big aspirations for large companies and large projects. But they also had felt the pain of launch. So that bit of the pitch didn’t need explaining. But you also have to realise that I had turned up, a New Zealander, from the country that had no space heritage. We had obviously done a lot at Rocket Lab, and we were going to build a small orbital launch vehicle. It was going to be using materials that nobody had ever used before, technologies that nobody had ever used before. From a launch site that required a bilateral and a whole regulatory framework to come together to make happen.
Launch vehicles are an enormous challenge. We often joke that the medical guys think they have a hard time getting a product in to market, boy you want to try a rocket. You’ve got everything against you from physics to regulation.
How do you think being from New Zealand and something of an outsider to what was happening in the States change the way you approached the problem?
Something that we did that was very different was we looked at the problem holistically. We said, it’s not just about the rocket. Basically I wrote two requirements on a piece of white paper: must be launched weekly, and must be affordable. And the affordable bit is relatively simple to model and understand. The launch regularly bit is the bit that everybody misses. So the only reason why we have operations in New Zealand even though we are a U.S. company, is because of the launch site.
We went to every single launch site in America and said look we want to launch ever 24 hours, and while everybody agreed that’s what needed to happen, they also reminded us that every time you launch a rocket you delay national air travel. So when Elon’s Falcon Heavy flew earlier in the year, there were 562 commercial air flights that were delayed or cancelled. So people get a bit antsy about that kind of stuff, and when you are trying to do it every 24 hours, ironically it was one of the few things that didn’t scale in America.
So I tell everybody that Rocket Lab is a third the rocket, a third regulatory, and third infrastructure. And the infrastructure and regulatory bit aren’t as romantic and sexy like a rocket, but they are actually more the enablers than the rocket itself.
Thinking through segmenting your customers, who is the typical Rocket Lab customer, and what are they trying to accomplish?
Yeah, look, I wish there was a typical one to be honest with you. It is very varied. We have at one end of the spectrum a high school student with a 1U* cubesat which we are flying on this next mission, through to a government trying to build a sovereign capability, and everything in between.
*[Matt’s note: Cubesat’s are the new generation of tiny satellites. As you might guess they are cubes, and 1U here denotes one ‘Cubesat unit’ which means a satellite that can fit entirely within a box with the dimensions of 10cm x 10cm x 10cm. Rocket Lab is taking bookings for cubesats of all sizes, with one rocket ride containing up to 82U worth of cubesats. A single launch can carry 20 different cubesats, each ranging in size from 1U to 12U. In addition Rocket Lab also offers bespoke flights for just one satellite with a typical payload capacity of 150kg. ]
So what are the current use cases today? Is it mostly imaging? Experiments? Without going in to the specifics for any particular customer. What are the use cases that you are seeing?
Sure. I think statistically based on the manifests next year we have a majority of weather spacecraft. So you know weather is something that has typically needed to be done by governments, at a pretty low government-type level of technology sophistication. So its one that is really ripe for disruption. So the high-fidelity that you can provide, not only am I get married today. They will make decisions like, am I going to build this infrastructure project this month. So really big decisions get made on weather data. So statistically speaking weather is probably next year, our biggest flight rate. Imaging is definitely there. Also a lot of technology development. So we have got a NASA payload that has 13 payloads on board, and all of those are basically technology demonstrators and sensor experiments and things like that. And that’s probably the vast majority that would be one of those three things.
Okay cool, and putting the Sci-Fi hat on, do you have any sense of where you see it ten or twenty years? Or are you trying to avoid any crazy predictions? Where do you see it could potentially go? I think you talked about a space Internet previously?
I am not even going to care to guess because like I said at the beginning, I think the most significant thing that is going to be done in space is yet to be even thought of. The most interesting thing for us is we see ourselves as the enablers of this. We already see it now. People are designing spacecraft for the Electron environment. It’s a very very smooth ride to space. Smoother than any of the other rides out there. It’s a big fairing volume and they can design spacecraft in a totally different way. And we already see that occurring and we see some really really unusual missions. So another example is that the traditional way that spacecraft are getting to orbit right now is that they are ride-sharing on the side of big rockets. But those big rockets only go to certain orbits. Now with our launch site we’ve got a huge range of orbits. So all of a sudden totally new missions are being developed. Totally different weather missions are being developed. Different earth observation and comms missions are being developed. Because all of a sudden you have access to all these different trajectories and all these inclinations to provide different services to different countries. So it’s already starting to happen. And that to me is one of the most exciting things is to see payloads that have been designed specifically for Electron, and those payloads would not have existed without the vehicle.
Absolutely. I think you mentioned that a lot of people are designing to the Electron specifications now which is pretty cool to see. What do you think are the top say 3-5 most important factors for a Rocket Lab, in rough order of importance? I’m guess frequency is pretty high up there, but what do you think is number one most important roughly and then down the list?
It’s control of destination and timeline. That’s the number one thing. “I’m going to this orbit on this day” because that’s one thing that [traditional] ride share can never offer. Because you just don’t know where you are going to go, when you are going to go. So that’s pretty much the order of conversation when someone comes and sees you is “I have got this spacecraft that requires to get to this orbit on this day, is that good?” Then other discussions occur later, like the environment of the vehicle and price, and all of that kind of stuff. But really that’s the number one thing that people need.
For us its a huge responsibility because a lot of these, especially these early stage guys, they are building their business plans off the back of us. They’re building their business off the back of us, to get them in to orbit and to get them generating revenue quickly.
Morgan Bailey (Rocket Lab’s Communications Manager): Just to point out too, those two factors are something that we offer a wider range of than anybody else. Not to mention that we are the only ones that have made it to orbit so far, but if you are looking at launch schedule, as well as where you want to go in orbit, we’ve got the widest range of orbital inclinations that you can reach from one site in the world. We also have the most launch frequency out of any site in the world and we are upping that and developing more schedule freedom by developing a U.S. launch site. So we have heard the market and really responded to that.
Peter I’d be keen to hear your thoughts on Rocket Lab’s ‘Master Plan’ thinking ten, or twenty years in the future, where would you like the company to be at that stage?
Well the first point here is that everybody thinks we’re going to build a bigger launch vehicle [rocket]…
I wasn’t going to ask that question… I think you’ve been asked that one too many times, and might be sick of answering it…
No, good, good, good good good. Yep. So the definition of success for me is that we are able to enable these companies to get on orbit to do the things that they want to do. And the things that they want to do are going to have a huge effect on everybody down here on earth. So you know, we don’t have aspirations of going to other planets, or taking humans in to space. Where I honestly believe we can move the needle for the human species in the most significant way, is actually to create space as an accessible domain for people to innovate. So if everything has gone well in 5-10 years, the world will be a totally different place. And we’ll be able to trace some of the origins at least, back to our program.
I’m keen to ask about the economics. So you have Space-X going in the opposite direction building a very large rocket. Do you see that [Space X] being the option if someone was looking at a launch and not worried about frequency and control of destination for whatever reason, it might be the low-cost option, versus Rocket Lab’s [more premium option]. You once talked about a freight train vs. a Fed-Ex truck. Do you see Rocket Lab more serving the more frequent and more targeted end of the market? Is that how you see the market breaking out?
The ironic truth is that we are pretty much the same price. You know the cost of a ride-share. We targeted the cost of the vehicle to basically equal the cost of a ride-share. So there is not a whole lot of advantage…
So there’s not that much price difference in it is what you are saying?
No! There wouldn’t be a whole of advantage for anybody to do that. And we are reaping the rewards of that decision right now.
Have you ever had contact with Space X or Elon Musk? You’re often compared to Elon. Is there a Space Club that you guys all hang out at?
A Space Club?! (laughing) No, no, there’s not a space club. Obviously the community is relatively small so we all kind of know each other, or know of each other.
[Matt’s note: Clearly it was foolish of me to ask about Space Club. As a good friend later pointed out, the first rule of Space Club is ‘Don’t talk about Space Club!’]
How have you found it building a lot of the R&D in New Zealand. How have you found that process? Was there a pool of engineers waiting for something like Rocket Lab to come along? Did you bring in a lot of expats? How was that recruiting process?
Yeah I don’t think it’s unique to New Zealand, but any company that grows at the speed that we have grown at struggles with that. We have recruited from all around the world, and New Zealand, and in our U.S. operations. It’s three to five new starters a week for us, pretty consistently. So its always a struggle. And I can say that operating both Rocket Lab USA and Rocket Lab New Zealand. It’s not unique to either one of those sites. There is a lot of competition for the talent up in the U.S. with Space X and Blue Origin. So it doesnt matter where you are in the world, it’s always a challenge.
How would you describe the culture at Rocket Lab? What kind of culture are you trying to build?
This is a place where you come if you really want to see what you are capable of. This is not a biscuit factory. This is a place where we try and attract the very best talent in the world, we give them all the resources, and the most amount of time that we can, and ask them to go and do incredible things. And the wonderful thing about Rocket Lab is we are at a size where you can still come here and own a really significant thing and be in charge of it and responsible for it. Once you get up to Space X and Boeing and those kind of sizes you end up being very siloed on one particular project or outcome. The one thing here is people can come here and own as little or as much as they want to, and really reach their full potential as an engineer.
I’m keen to dig in the economics. The price of a launch at the moment is around USD$5.7 million. When you are at scale, what kind of gross margins do you expect to generate?
Generally as a private company we don’t talk too much about that. But the starting price is $5.7 and depending what service you want service you want that changes. Like we said before it’s pretty competitive to rideshare. And we are anticipating being cash flow positive this year. So that should give you an indication of the financial footing of the company, and the financial performance of the product.
Something that is interesting about Rocket Lab is how much work you have done on the foundations. It’s not just vertically integrated, you’ve got your own monitoring sites around the world, you’ve built your own launchpads. So I am keen to hear more about that strategy? I imagine you have got a lot of fixed costs but after that you are able to pump out as many [rockets] as you can?
Exactly. There is nothing like owning it in my experience. Once you have got to ask somebody to borrow theirs, or rent theirs, then that gets a little more difficult. So the strategy is always to be as vertically integrated as possible. Owning that infrastructure is a key element because we have complete control over our launch windows, we have complete control over, basically everything. Whereas when you go on to somebody else’s launch range, and there is other people there and other customers there, and other activities there, you are always in a compromised position.
But like I said its from the vision from the beginning, which is, how can we get to a launch every 24 hours, or more. Really that comes down to, you have to own it all, you have to have these dedicated assets that serve your business and nobody else’s.
And once you are at scale, what do you think most of the cost of each rocket launch would be? Is there a lot fuel component there, is it a lot of man hours going in to construction? Whats the biggest driver of your costs once you are at scale?
Great question. So, fuel is irrelevant. So basically the cost of fuel is a rounding error. That’s because liquid oxygen is cents per kilogram. The kerosene we use, we use almost, bugger all of it. So that’s kind of in the weeds. The way we have designed the vehicle, its designed for manufacture. So while we use very expensive and exotic materials such as carbon fibre, and inconel superalloys and things like that, we don’t use very much of them. And the processes that we use, like the 3D printing of the rocket engines, means that while the material itself is very expensive, because we 3D print them, there is no wastage in the material. It’s additive manufacturing rather than subtractive manufacturing.
So the cost of the vehicle is pretty well equally broken up between raw materials and labour. Labour would be the higher cost component to the vehicle. But the great thing about that of course is that because the vehicle is designed for production, there are just huge automation opportunities just designed in.
I think you mentioned somewhere else with the batteries, you have already seen a 2X improvement in the size and cost over time. So that’s a driver for Rocket Lab as well, you are positioned to benefit from all those scaling effects in different technologies.
Yeah exactly. We stood back and said well what are the technologies that are either going to reduce in cost or improve in performance. Composites is one of them. 3D printing is another one. And batteries is another one. So there is no coincidence why a lot of the solutions we have chosen align with the trajectories of those either materials or technologies.
Something you’ve addressed elsewhere that I am sure our audience is interested in is the idea of [rocket] re-usability and why doesn’t that work so well for Rocket Lab, and why you haven’t pursued that to cut costs?
Yeah so the vehicle has been designed for manufacture from day 1. So to re-use a vehicle you end up making a lot of trades with propellant and mass. So some things scale very well, a reusable on something like a Falcon 9 scales very well. It’s important to note though that on a Falcon 9, the average payload mass that vehicle lifts is 3 tonnes. Yet it’s capable of a 13 tonne lift. And when you re-use a launch vehicle it takes about a third of all of your payload capacity to do that. Which is fine when you have a very large vehicle that can lift a lot and you are not lifting very much with it. But something like a small launch vehicle, that doesn’t scale very well.
Yes and as you say there is one third [of the business that is] infrastructure, all the other stuff that potentially goes with it if you have a robotic drone-ship out there trying to catch it [the rocket] and that probably doesn’t scale too well either.
This is a tough question because it is likely so varied, but what do you think the cost that Rocket Lab presents to your customers as a percent of their total costs. So if a customer is trying to put a satellite up, how much do you think Rocket Lab represents of that? Is it half the cost of the program for what they are trying to do? Is it a quarter? I’m trying to get an idea of Rocket Lab’s position in the economics of the business.
Yeah, you’re right Matt it really depends on the spacecraft. So if you’ve got a 3U cubesat that costs nothing to build, then you’ve got the launch element that is a much larger section of it. But when you are talking a government payload you are a small fraction of the cost of the development of that payload. Simply because of the cost of doing business as a government, or the complexity of the payload itself. So I am not sure where that would sit on an average. I would just say that it varies quite widely. So if you are an early-stage startup, then we’ll probably represent a significant portion of your costs. If you’re an established large Corporation or a Government that is flying one-hundred to two-hundred million dollar payloads, then we represent a relatively small section of the cost.
Something I noticed while browsing your website [www.rocketlab.com] which is very cool and lets me imagine I can buy a cubesat slot itself, it looks like you are significantly booked out already. I’m curious to hear, is sales much of a role at your company given the demand that you have now? What is the sales process like for Rocket Lab?
Not surprisingly this has been talked about and dreamed about, this capability, for many many years in the community of small spacecraft. So when something turns up, it’s greeted with much [excitement]. And there are so many people out there that have promised it for so long and never even made it to the pads, let alone to orbit. That it’s like pulling the path on a bathtub. We’re very busy and next year we’ve had to put more rockets on to try and meet the demand of our customers. And going out to the later years as well its still incredibly busy for us. But this is not surprising to us. This was always, this is the plan. For us it’s just about scaling up as fast as we can to service those customers. So that they can do the incredible things that they do on orbit.
You’ve made a lot of improvements that others are now following, with 3D printed engines, carbon fibre. What’s next in tech? Are there any other big step changes that you see? Or are these the main things and it’s just refining and cutting costs as it goes?
Oh look we’re not done yet. Not by a long shot. So, you would have seen the kick-stage which we announced on the second flight. That is hugely enabling for a lot of our spacecraft customers, we can deploy multiple spacecrafts at different orbits. So expect to see a steady stream of innovation from Rocket Lab. That’s what we’ve built ourselves on.
[Matt’s note: you can watch a video about the epic Mars cubesat project here]
Oh yeah look there is a lot of growth in that field right now. I just came back from the small satellite conference in Utah last week, and there must have been a dozen companies doing cubesat propulsion systems. Either electric ion thrusters, or chemical. And look it makes perfect sense. You put an asset up there, that assets lifetime is determined by how quickly it re-enters so you can increase its life by doing station keeping burns but then all of a sudden you can do all this other stuff, you know, like go to Mars. So this is kind of what I am talking about at the beginning, that the biggest thing is yet to be done or even thought of. Because we are just now seeing some of those innovations. Even five years ago if you would have said to me that you are going to put a hall thruster on a cubesat and take it to Mars you would just think: what!? But now that’s just like, oh ok, that makes sense.
On funding, do you have any plans in the future for an IPO, or are you quite happy not having to deal with all that side of things right now?
Oh well never say never. Right now we are fully funded and on a great trajectory. We’ll see what the future brings. It would be interesting to see a rocket company IPO’d for sure. I’m not sure if Space X is no doing that any time soon.
Peter, what’s been your proudest moment with Rocket Lab so far?
Oh jeepers…well the cop out answer is going to orbit. When we put that spacecraft in orbit, there were a lot of firsts there , first carbon fibre rocket, first private launch site, first 3D printed engine and blah blah blah. That was a defining moment for the industry. You know to do it out of New Zealand was great. You can imagine that not many people ever thought that the first one ever was going to be coming out of New Zealand. If you were a betting man ten years ago, that one would have been long odds. But that certainly is [a proud moment] but there are so many highs and lows that it’s hard to say. But really I guess I am proud for the team is the real answer there, because you know you take a couple of hundred of the brightest people on the planet, jam them in a little room, and feed them pizza and coke, and watch the magic happen.
I guess the humanity star was potentially quite a full circle moment given your origins as a kid looking up at the stars and deciding to get in to it?
Yeah that was bitter-sweet because not everybody liked that.
Yes that was a bit of a bizarre reaction.
Yeah but for every negative comment we saw on that, we got probably two positives. It makes a better story to have some tension there. But still I maintain I would do that again in a heartbeat. That was a great mission. And to see just the thousands that wrote in and actually that overview experience where they looked up and it was like ‘oh okay I am on this rock in the middle of the universe, maybe some of these things aren’t as big of a deal as I thought’. So that was a wonderful project.
Last one from me. What do you think is most misunderstood about Rocket Lab?
It depends if you are in the industry or out of the industry. If you are in the industry then we are pretty well known and understood. The easy one is that we are actually a U.S. company, not a New Zealand company. The New Zealand bit is really about launch. But out of the industry you’ll see Space X and Blue Origin and Virgin Orbit and those companies really talked about a lot. But out of all those companies it’s only Space X that has ever been to orbit. So that’s probably the one thing. There are two private companies in the history of this planet that have been to orbit and it’s Space X and it’s Rocket Lab and that’s it.
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