SpaceX's Vision for a Multi-Planetary Future

What's up Shareholders,

Every Sunday VC Brags will be here to remind you of what your number one life goal should be: buying quality companies with valuable products or services that are backed by a competent management team that has a stake in their company's success. Okay but seriously, We'll highlight one company per week to do an in depth breakdown of their business, financial situation, and whether or not it's a worthy investment opportunity - large or small. We'll make you laugh. We'll make you cry. We'll even make you think about why you entered venture in the first place.

And besides, You wouldn't dive into a frozen lake without a lifejacket, would you? Everyone is trying to jump into the startup industry, and in the process, they lose all sight of what a good business looks like. If we don't use this newsletter to discuss high quality businesses that are worth investing in, then we're going to go broke.

Let's begin, shall we?

P.S. Brag of The Year Winner is announced at the bottom

SpaceX's ambition is broad and far-reaching, ranging from reducing the cost of space exploration to multi-planetary travel to providing internet and connectivity to underserved areas across the globe from satellites. The company has often been credited with reviving commercial space launch development after decades of stagnation. Two decades into its operations, SpaceX has turned the Space economy on its head and has inspired over three dozen competitors to replicate its successes. The company recently raised $750 million at a $137 billion valuation, possibly making it the highest-valued "startup" in the world (only second to TikTok parent company ByteDance). Let's take a look to understand what makes SpaceX valuable, how it revolutionized the industry, and what's next for the tech juggernaut. 

Early Development and Eventual Breakthrough 

SpaceX is often credited with successfully commercializing Space, but the company came close to imploding even before its first milestone. Elon Musk predicted a 90% chance of bankruptcy due to the technological and commercial challenges in the business, but he may not have been prepared for the grueling developmental challenges in the first six years of the business. Musk had invested $100 million in capital from selling his PayPal stake in SpaceX, which would cover the development and up to three attempts to successfully launch a rocket into orbit. However, the first three attempts at launching Falcon 1, the company's first development rocket, between 2006 and 2008 failed. The first failed due to a fire, while the subsequent launches simply failed to reach orbit. Eventually, Musk invested more money into a fourth launch, which was eventually successful (Musk said that if the fourth launch failed- it would be the end of SpaceX). Falcon 1 put SpaceX on the map as it became the first private liquid-fuel rocket to reach orbit. This reputation enabled the company to land a massive $1.6 billion contract with NASA to provide a launch platform for space cargo. 

SpaceX quickly built on top of its success by raising funding and accelerating the development of the Falcon 9 and the Dragon spacecraft. Since its first successful launch in 2010, Falcon 9 has completed 174 launches, succeeding all but twice (once was a partial failure), which is the highest amongst any US rocket made to date. The Dragon capsule docked with the international space station in 2012, making it the first commercial spacecraft to achieve the feat. NASA eventually commissioned the dragon to ferry astronauts to the ISS after it canceled its shuttle program. SpaceX also eventually developed the Falcon Heavy, a bigger rocket capable of transporting more cargo, and had a successful launch in 2018.  

Reinventing the Economies of Space 

When the US landed its Astronauts in 1969, the mission's total cost was estimated to be $25.8 billion ($257 billion adjusted for inflation today). Since the Apollo Mission in the late 1960s, the US has been reluctant to fund missions for space exploration due to the lack of funding and added risk. President Nixon canceled all lunar landings after the Apollo mission between 1968 and 1972, resulting in space exploration stagnating for three decades. The major barrier to Space has always been the massive costs associated with launches and high failure rates, preventing most companies and even countries from attempting to replicate the feat. 

NASA admitted in a 2011 report that the development and contract for the Falcon 9/Dragon for the ISS mission would have cost the agency $4 billion based on traditional processes, but SpaceX managed to achieve it for $1.6 billion. It is estimated that, between 1970 and 2000, the cost to launch a kilogram of payload into Space remained fairly stable at $18,500 per kilogram. NASA's space shuttles, which were retired in 2011, cost an average of $1.6 billion per flight or $66,000 per kilogram of payload. By comparison, SpaceX's Falcon 9 rocket cost just $2,720 per kilogram of payload, greatly reducing the barriers to entry. 

But what gives SpaceX a huge price advantage compared to traditional launches?

The answer is really quite simple. It is the company's focus on reusability and its vertical manufacturing approach. 

SpaceX has focused on recovering key parts of the Falcon 9, as opposed to traditional space missions, which have disposed of rockets after missions. SpaceX has worked on recovering two major pieces of its rocket, including- 

• The 'First Stage' boosters, which make up 60% of the total cost of the rocket (around $37 million)

• The 'Fairing' or the rocket's nosecone makes up 10% of the total cost ($6 million)

SpaceX has found a way to land the boosters while it recovers the fairings by fishing them out of the ocean or catching them in large nets strung up behind boats. The company has theorized that Falcon 9's boosters can be reused as many as 100 times, but it is more likely to fly around 10 times. 

In addition to the reusability, SpaceX uses a vertically integrated manufacturing process (a similar approach to Tesla) to streamline processes and reduce costs. The short supply chain has meant that the company has been able to manufacture 70% of its rockets in-house, cutting production time and being averse to supply chain constraints and contractor delays that other space launch firms or NASA faces routinely. 

With a lead in technology and price, SpaceX has managed to land contracts from governments and enterprises around the globe, but it may just be getting started. While the company has been operating for nearly two decades, much of its technological and commercial success has come in the last five years. 

Starlink and Starship are at the center of the company's progress, which is expected to generate most of the value eventually. Let's look at the two projects in detail, their technological breakthroughs, commercial applications, and how they could potentially drive value in the future.  

Starlink: Global Internet Access 

What is it? 

Starlink, a subsidiary of SpaceX, aims to offer internet access to customers around the globe. As Musk describes it, the eventual goal is to provide internet access to customers around the globe, particularly to those in rural areas who may be limited to high-speed broadband. The company aims to achieve this by building a constellation of orbital satellites around the globe, which can relay internet access to terminals anywhere on Earth. Customers need to mount a terminal on rooftops, yards, and at the exterior of their homes, reviving the signal from Starlink's satellites, with the bandwidth passed on to the router. But how is Starlink's constellation currently being built? Let's take a look to understand the specifics. 

Starlink Satellites 

Starlink's original satellites weigh between 500 and 650 pounds and orbit 340 miles above the Earth's surface. Starlink has received approval from the Federal Communications Commission to launch 12,000 satellites in five different orbital 'shells.' The shells will orbit at different inclinations and distances to the Earth as follows-  

• First shell: 1,440 in a 550 km (341.8 mi) altitude shell at 53.0° inclination

• Second shell: 1,440 in a 540 km (335.5 mi) shell at 53.2° inclination

• Third shell: 720 in a 570 km (354.2 mi) shell at 70° inclination

• Fourth shell: 336 in a 560 km (348.0 mi) shell at 97.6° inclination

• Fifth shell: 172 satellites in a 560 km (348.0 mi) shell at 97.6° inclination

Starlink is also building its second-generation satellites, which will dwarf the existing satellites in weight and stature. The second-generation satellites will weigh roughly 2,755 pounds and be 22 Feet long; due to their massive size, they will only be launched on the company's Starship launch vehicle (more on that later). SpaceX plans to update the constellation every five years with newer technology. At the end of their service, older satellites will be steered into the Earth's atmosphere, where they will burn up. 

Starlink Progress 

Three years into development, Starlink picked up the pace in 2018. Between February 2018 and 2022, SpaceX completed the launch of 2,091 satellites into orbit, and SpaceX was reportedly producing six satellites per day by 2020. The company's satellite constellation now boasts 2,300 fully functioning satellites orbiting overhead. The initial satellites were deployed on orbital planes, each carrying 20 satellites. SpaceX eventually plans to launch Starlink satellites through its Starship launch vehicle, delivering up to 400 satellites simultaneously (V 1.0 Satellites). The company says that it will need to deploy at least 10,000 satellites before offering service around the globe, but it says that it wants to deploy as many as 42,000 satellites in the constellation. 

Since its inception, Starlink has looked to capture a growing customer base located in hard-to-service areas, but the company is also now working with enterprises to build out an alternate solution.  

Commercial Applications 

Global WiFi 

Starlink's terminals currently offer speeds of between 50-150 megabits per second based on the service area, with speeds expected to double to 300 mb/s by the end of the year. Customers need to pay an upfront install fee of $599 for the satellite terminal that receives the signal and a $110 monthly fee. Despite the high price point, the service demand is robust, with customers needing to wait many months for delivery. Starlink says that it now offers services across 39 countries, including the US, Canada, the UK, France, Germany, Austria, the Netherlands, Ireland, Belgium, Switzerland, Denmark, Portugal, Australia, and New Zealand. The company has also established preorder agreements in Italy, Poland, Spain, and Chile. Starlink's Users have dramatically grown from 10,000 in February 2021 to over 500,000 in June 2022. Internal projections at SpaceX in 2017 showed that Starlink would generate $30 billion in annual revenues by 2025.  

Carrier Partnerships 

SpaceX recently announced a partnership with T-Mobile to launch its Vision plan and could signal what future carrier partnerships could potentially look like around the globe. T-Mobile said that customers could connect to Starlink and use a slice of the connection resulting in speeds of between 2 and 4 mb/s. SpaceX says that, unlike traditional internet access, the T-mobile partnership could work without access to the company's full satellite constellation as it uses an intermittent connection for basic coverage, especially in areas with few mobile towers. Second-generation Starlink satellites will enable the service on the T-Mobile mid-band PCS spectrum by the end of 2023. 

This should theoretically let customers send text and MMS messages and use messaging apps, even if there's no traditional service available. This will mean that dead zones are a thing of the past, provided there is a clear view of the sky. A key technology breakthrough here is that this is expected to work with most modern phones, paving the way for mass adoption. SpaceX executives also said they were looking to partner with other mobile carriers worldwide in spectrum-sharing agreements so their customers would link up with SpaceX. This would let T-Mobile customers use those connections when they travel to those countries, essentially opening up global coverage (provided SpaceX can secure spectrum rights across the globe). 

While the commercial applications on the customer and enterprise side remain strong, Starlink could face competition from a rising number of challengers in the market, limiting its market dominance. Regulatory hurdles and a growing number of options could pose a threat in the future.  

The Competition 

Unlike the space launch industry, which is dominated by a handful of launch providers, the Space-based cellular industry could be just as fragmented as its land-based counterparts. Although SpaceX is in the lead in speed and coverage, governments worldwide and other companies are vying for a slice of the market. Amazon is best positioned to compete with Starlink through its project, Kuiper internet satellites. The company plans to invest over $10 billion to launch 3,236 satellites into orbit to build a constellation similar to Starlink over the next five years in 84 separate launches. Amazon plans to leverage its logistics and operations footprint and AWS infrastructure to find the optimal service deployment. As things stand, Starlink has the lead by a mile, with Amazon planning to deploy two prototype satellites in 2022, with further launches planned out later. In addition to Amazon, current satellite internet solutions providers, such as HughesNet (1.3 million) and ViaSat (590,000), have more subscribers than Starlink but have a limited number of satellites resulting in lower deployment/speeds. Other companies such as AST SpaceMobile, OneWeb, and Telesat have emerged in recent years, and time will tell which can capture the lion's share of the market. 

In addition to the competition from these companies, there are markets where Starlink's access may be limited, primarily by regulation. For instance, in China, where internet access is only provided by state-backed entities (due to security concerns), Chinese Auto firm Geely's subsidiary Geespace will provide a similar setup to Starlink. While the 240 satellite launches are paltry compared to Starlink, it will nonetheless provide access to China's 1.4 billion population. Another restricted market will likely be the European Union, which itself approved plans for a €6 billion satellite internet system to compete with Starlink and other Satellite communication services providers. The EU has commissioned Airbus, SES, and Eutelsat to conduct a technical study for the project, which will require approval from the parliament and member states. Since the EU's objective in building the system is to secure itself against outward influence (due to a growing state of De-globalisation), Starlink's reach in Europe could be limited.   

Starship: Next Generation Space Launch Technology 

What is it? 

Dubbed the "holy grail of space technology" by Elon Musk, Starship is at the center of SpaceX's ambitions and could be key in propelling the company moving forward. Aiming to build on top of the success of the Falcon 9, Starship has been designed with a fully reusable rocket system that can carry more payload, cost less, and fly more often. Starship will be the largest space vehicle built, potentially enabling space exploration, interplanetary travel, and eventual multi-planetary colonization sometime in the far future. In order to understand the technological progress achieved in the development of Starship, we should first look back fifteen years prior to the inception of the idea. 

A Brief History

SpaceX had envisioned a large-capacity launch vehicle (concept name Big Falcon Rocket) as early as 2005, but it took 14 years and several thousand engineers to bring the concept to life. During that time period, SpaceX worked on refining the design through an interactive process, committing to using methane fuel in 2012 and building a launched prototype with steel construction in 2019. Following a series of spectacular explosions, Starship's SN15 prototype finally had a successful flight and landed in May 2021 from its launch site in Texas, called 'Starbase.' SpaceX is now prepping for Starship's first-ever orbital test flight, which is expected to be conducted over the next few months. The company has received authorization from the Federal Communications Commission (FCC) for radio communications for the mission but is now working with the Federal Aviation Ministration for a launch license, which is subject to certain conditions. 

Technical Specifications and Advantages 

Starship is a behemoth, standing at 394 feet and having a diameter of 30 feet wide. The spacecraft is taller than the Saturn 5, which was used to send American Astronauts to the moon, while its width enables it to transport up to 250 metric tons of payload or 100 passengers in a single flight. This is a significant improvement over the Saturn 5 and could eventually make multi-planetary travel a reality. The primary Starship rocket sits on top of a large booster known as Super Heavy. Once the two pieces of the spacecraft exit the Earth's atmosphere, they separate at the edge of Space. As the rocket continues toward orbit, the Super Heavy booster returns to the ground. A large tower equipped with mechanical arms dubbed 'chopsticks' will aim to grab the descending rocket in an attempt to land it softly. Starship will enter the Earth's atmosphere from its side to endure the heat of re-entry. 

Before entry, the rocket will restart its engines to flip vertically for a soft landing. Since the main rocket and super heavy are meant to be reusable, this is expected to bring down costs compared to a traditional mission. Starship has a key technical advantage over other heavy-lift rockets, such as NASA's Space Launch System (SLS) and Blue Origin's New Glenn Rocket. The upper half of Starship's rocket is designed to be refuted in earth orbit by other Starships, enabling it to carry more payload than fuel. Musk has envisioned a mission to the moon where there would be as many as eight separate launches, with each consecutive 'tanker Starships' bringing fuel up to the 'Lunar Starship' carrying the scientific equipment and crew on board. 

Commercial Contracts and Potential Applications 

The applications for Starship in the future are as endless and exciting as Space itself. Potential applications will range from space tourism to launching communications satellites around the planet to potentially having manned missions to the moon and mars. SpaceX has already signed a $2.9 billion agreement with NASA to build a Starship model capable of landing astronauts on the moon for its Artemis III mission (the first crewed moon landing mission of Artemis and the first lunar landing since the Apollo era). The company has also signed various other agreements, including one with Japanese billionaire Yusaku Maezawa for a trip around the moon (mission titled dearMoon) in 2023 and a contract with Japan's Sky Perfect JSat to launch its Superbird-9 communications satellite in 2024. 

Beyond the contracts, several technical advancements enable Starship to carry out missions that were simply not possible before. Scientists have theorized that Starship's vehicle capacity could enable it to carry full-sized equipment from Earth. This is a departure from the current practice where equipment needs to be miniaturized to fit in a smaller vehicle. This would allow vehicles to carry full-sized drilling and collection equipment, enabling them to collect crucial resources that may be limited on earth/exclusive to Space. Furthermore, as Starship is designed to land back on Earth, it could, in theory, bring back a vast amount of samples or resources from various locations in the galaxy, giving scientists unprecedented access to extraterrestrial materials. In addition, more ambitious ideas have been conceptualized for Starship, from interplanetary travel to potentially defending Earth against asteroids to increasing visibility through giant space telescopes. 

How Much is SpaceX Worth? 

It's difficult to value the company, considering the various moving parts that make up the business. SpaceX's revenues can be categorized into two parts, namely launch revenues which are commercial agreements for launching satellites, other cargo, or humans into Space, and revenues from Starlink customers. SpaceX generally charges $60 million for a Falcon 9 launch, while a Falcon Heavy launch can range between $90 million and $150 million. Assuming 20 successful missions in a year with average revenues of $90 million per launch, SpaceX may generate $1.8 billion in launch revenues. On the other hand, SpaceX's Starlink service had 500,000 customers, with an additional half a million customers supposedly preordering the terminal. Assuming average revenues of $100 per/month, Starlink should generate recurring revenues of $1.2 billion by the end of this year. This isn't accounting for the company's enterprise partnerships, such as the one with T-Mobile, which includes revenue sharing.

So, theoretically, SpaceX could generate more than $3 billion in annual revenues by the end of this year. This doesn't take into account the future revenues with Starship and the further commercialization of Starlink. Musk has said that Starlink could be spun off as a separate company in four to five years and is estimating revenues to grow to $30 billion by 2025. This would indicate that Starlink alone would be worth $90 billion (based on a standard 3x Price/Sales multiple) if the company can achieve its targets. Starship could stay private longer, given the technical challenges, longer duration projects, and recurring government contracts. It's harder to gauge Starship's valuation, but every successful developmental milestone will likely be a boost, and the company could be worth several times its current value in the coming decade.   

The Risks Involved 

Despite several technological breakthroughs and their potential significance to the space economy and human civilization in general, SpaceX still faces several hurdles in the future. Many of the proposed solutions for Starship, such as the rocket being refueled in Space, remain untested and could face developmental hurdles. 

SpaceX is facing growing discontent from regulators, competitors, and environmentalists, claiming monopolistic practices and permanent damage to the environment. The company recently lost a $855.5 million grant from the FCC for the development of Starlink after failing to demonstrate the promised service. In addition, SpaceX had to pause development on the $2.9 billion NASA lunar lander contract after Blue Origin filed a lawsuit. 

The company is rapidly burning its cash reserves, subsidizing the cost of Starlink and through the development of Starship. For instance, the company's current costs for a Starlink terminal are estimated to be $1,000, but it sells it to customers at $599. SpaceX believes costs will eventually come down over time due to the economies of scale, but unprecedented inflation could put a wrench in the works. The company may also face capital constraints, considering the large capital expenditure on both Starlink and Starship and the deteriorating macroeconomic situation. 

Bottom Line 

Over the past two decades, SpaceX has single-handedly commercialized private space exploration and satellite communication, breaking conventional norms and proving naysayers wrong. The company has seen its valuation soar with each successful developmental and commercialization milestone. SpaceX's next-generation projects, Starship and Starlink, will push the boundaries further than ever before and redefine what is and isn't possible. The potential for SpaceX is as vast and deep as Space itself, and time will tell how high the company can soar. 

And that's a wrap on SpaceX, one of the hottest companies to grace the venture landscape in possibly a very long time. Now - on what you've been waiting for...

Brag of The Year

I, for one, would like to congratulate all of our nominees on their abilities to brag about themselves. You have distinguished yourselves amongst the entire industry as some of the best braggers.

Now as for the winner — It is truly an accomplishment for the ages, and you will be remembered in the anals of history as the winner of the first ever Brag of The Year.

Drumroll please...

Sequoia Capital

Congratulations guys, even through the defeat of the worst investment of all time, you've won the real prize - the Brag of the Year.

You will be receiving your award in the mail soon! (btw really sorry- even we didn't think that he could have lost that much money)

Thank you for reading on, and we hope you'll follow along as we bring you more absurdity in the months to come.

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