The Complexity of a Rocket

Space, low altitude and quantum often get put on the same table for discussion. How do you rank them? Our view: look at the milestones first.

A clear milestone is one an outsider can sign off. A rocket's checkpoints are ground testing, first flight, orbital insertion and recovery. Each step is a step, and none can be faked. In some directions the progress is nearly invisible from outside, and with two or three companies each telling their version you cannot separate true from false. The clearer the milestones, the easier it is to set the tempo of capital — each round of financing corresponds to a visible stretch of engineering delivered. That is a very hard ruler.

Clear Is Not the Same as Simple

But clear is not simple. In this round of commercial space the whole system is being rebuilt from scratch: it used to be small rockets of a few hundred kilograms carrying satellites of tens of kilograms; now it is payload capacity of several tonnes up to twenty, carrying satellites of a few hundred kilograms, a dozen or more at a time. Payload capacity is simply how much you can put up in one go. Demand counts in hundreds, capacity in tens — an order of magnitude apart. The bottleneck is the rocket.

In other words, this industry has no excess demand right now, only insufficient supply. As things stand, every order of magnitude that launch cost falls brings space a new batch of customers who can afford it — compute, remote sensing, energy, all queuing outside. So who pulls capacity a full generation ahead? Whoever does sets the price for the industry.

Is money easy to make on small rockets? Easy, but short-lived. A small solid rocket can bring in revenue within a year, but the endgame is medium and large reusable liquid rockets, where a vehicle comes back after a flight and flies again. We care about teams willing to give up the short-term temptation: turning rocket-making from a craft into a product on a production line, trading a closed data loop for iteration speed. That road is ten times slower, but it leads to the endgame.

Complexity Decides Who Sets the Tempo

Complexity also decides how patient the money must be. Five or six years without revenue is normal for a rocket company, which is half a fund's life on the bench. That has to be worked out before investing. Rockets do not run on stories. First, they are driven by fundamentals: the hard groundwork in engines and orbital insertion decides who survives. Second, they are driven by policy: one adjustment to listing rules changes the list. Third, both have to be read on the same sheet at the same time. We are fairly sure of this one.

One more thing, worth a founder thinking through alone. Clear milestones are good, but who writes those three points? An investor willing to lay out your milestones means well. Once the checkpoints are defined from outside, though, the company's tempo gets converted into a progress bar inside someone else's exit model. The real question is not whether to accept them. It is whether those three points also happen to be your own three points.

There is an old line in the industry: the system pulls, propulsion goes first. Test the engine enough on the ground and you have the nerve to fly. Financing works the same way, and a window only ever rewards those already prepared. So how many commercial space mandates do we take? Not many. Not because we cannot follow more, but because the complexity requires us to press all our density onto the very few most worth it.

(For the full statement of our directions, see "Core Areas of Focus" in the Archive, direction 03: commercial space and space infrastructure.)