Old tricks in NewSpace

NewSpace is the slightly derisive name given to the host of young private companies that are competing to launch rockets into space. If nothing else, at least they have made space cool again.

Andy Beal seems to be a colorful character. Googling him these days mostly defines him as that Dallas businessman who donated lavishly to Donald Trump's 2016 presidential campaign and was rewarded with an advisory role. Before becoming a Trump fan he was famous for playing poker in Las Vegas with very high stakes. He went up against some of the world's best poker players betting tens of millions of dollars, sometimes winning, sometimes losing. He has also formulated a mathematical problem called the Beal conjecture which remains unsolved, despite having a one million dollar prize attached to it.

But this is only what Mr. Beal has been doing in his spare time. During office hours he started out as a real estate investor. From there he continued to start a bank, Beal Bank, one of the most profitable in the United States. He also invested money in some side businesses. One of them was Beal Aerospace, founded in 1997, which aimed to develop and operate rockets able to reach orbit.

Beal Aerospace grew quickly after its founding, reaching 200 employees at its peak. It built and successfully tested the largest rocket engine since the Apollo program and it had ambitious plans for a space launch center in the Caribbean from where its rockets would take off on its way to orbit.

Then, in 2000, it suddenly ceased operations. The official reason was that NASA bankrolled Beal Aerospace's competitors. NASA had, at the time, just announced the Space Launch Initiative, a project for developing new space launch vehicles to replace the aging Space Shuttle. Several contracts had been awarded for rocket engine development. All of them had gone to Rocketdyne corporation, the same entity that had built nearly all of NASA's rocket engines since the 1950s.

The bad old days

The 1990s is not so far away, I remember it vividly despite not being what one would call old (at least not old old). In the 1990s I even watched a space shuttle launch at Cape Canaveral. It feels like yesterday. But in the space industry the 1990s is ancient history. At the time space was handled very much like in the 1960s. The practices used in the 1990s were basically the same as when America sent six men to the moon. 

This old way of doing spacy things was centered around NASA, the giant organization historically controlling space in the United States (and spending a fair amount of money doing so). The basic premise was that NASA decided everything. In NASA’s multiple offices and research facilities sat very respectable scientists and decided what needed to be done. Then they proceeded to actually do them. NASA’s legions of engineers designed rockets and spaceships able to achieve the objectives set for them. When all this was sorted out private business was called in. A select few companies, usually from the military-industrial complex, were assigned some low-level design work and the actual production of the hardware. 

This system worked, sort of. It did take man to the moon. Albeit at the cost of nearly 5% of the federal budget at its very top in the middle of the 1960s. In the 1990s NASA still sucked up 1% of the federal budget (today the same number is less than 0.5%). The system was ripe for a change. Maybe Andy Beal sensed this. If he did he sensed wrong, because his timing was off. 

Beal Aerospace might have died. But the idea of new business practices in the space industry did not die with it, rather the contrary. Even after the demise of his space company Andy Beal continued, at least for a couple of years, to be a vocal critic of NASA and a strong supporter of more market-oriented practices in the space industry. His efforts may not have been decisive but through his actions he helped pave the way for what was coming. 

Andy Beal was also the forerunner of later space entrepreneurs in a more direct way. Beal Aerospace developed and tested its rocket engines at a testing facility in McGregor, Texas. It was a former air force base that had been used by a number of companies, ironically including Rocketdyne, to test rocket engines before Beal Aerospace acquired the abandoned site in the 1990s. After Beal's closure in 2000 the facility was dormant until 2002 when it was taken over by a recently started company called Space Exploration Technologies, better known as SpaceX.

X for space

SpaceX is by far the most famous proponent of NewSpace, the private companies currently shaking up the space industry. Its meteoric rise and the galactic ambitions of its founder Elon Musk have boosted interest in space from both starry-eyed cosmic dreamers and more level-minded terrestrial investors. Space is big and this has spurred both interest and investments in it.

It was not always like that. In fact, there is much indicating that SpaceX owes its position to a series of lucky circumstances. SpaceX was founded in 2002, when interest in space was low and NASA and other governmental agencies ruled the roost, to the chagrin of Beal Aerospace and its supporters. Had SpaceX launched a rocket in 2002 it would most likely have been ignored and Elon Musk treated as just another eccentric millionaire wasting his money on fancy toys.

Of course, SpaceX did not launch any rockets in 2002. It would take years of research and development for them to even come close to space. And during those years many things happened. In 2003 the space shuttle Columbia burned and crashed on its return from space, once again showing the world that the government was not always the best custodian of space flight. This was also a time of very visible drift at NASA and in space politics in general. Objectives were unclear and means to achieve them even more unclear. Something that was vividly illustrated by the exorbitantly expensive and perennially late Constellation program which was finally canceled in 2009.

SpaceX received its first government dollars in 2004. Not from NASA but rather from the defense department which wanted low-cost intercontinental missiles and thought SpaceX looked serious enough to warrant some seed funding. SpaceX never received any substantial sums from the defense department. But the money was still welcome. Not only did it make an economic difference for the scrappy start-up but it was also good for morale. The support from the defense department was so important that SpaceX named its rocket after the DARPA Falcon Project from which SpaceX received the money, a name that has stuck to this day.

$ for NASA

SpaceX did not win the Falcon Project competition. It did not matter very much, real space and the serious money were not at the defense department but rather with NASA. And reality was beginning to catch up with the NASA leadership.

Commercial enterprises had always been a big part of the American space program. The major American defense contractors all had large space divisions ready to supply NASA with hardware. But NASA had always been the one who called the shots. The commercial enterprises were expected to take the money they were given and do exactly what they were told. This way of doing things was expensive and not necessarily producing the best outcome either. 

In the early 2000s even NASA was beginning to doubt the wisdom of their earlier strategy. Slowly a new approach was taking form. An approach where NASA would not buy hardware from the private sector but rather services. Instead of buying a custom-made car NASA would buy a taxi ride.

This switch from being a rocket designer to a purchaser of launch services was slow and is still far from complete. A major step on the road was taken in 2006 when NASA announced its COTS program to help the private sector develop technology to deliver crew and cargo to the International Space Station.

Since there were no private companies in 2006 with an ability to launch cargo into space the COTS program was not intended to purchase launch services (that would come later) but rather hand out money to companies who seemed able to develop such an ability. SpaceX, which had worked tirelessly for four years developing its own orbital rocket, was well-placed to compete and in the end won a substantial chunk of the COTS money being offered.

It would take SpaceX until 2008 before they succeeded in launching the small Falcon 1 rocket into Earth orbit. Had they not been able to reach orbit on that try (the fourth launch) the company might have collapsed, but reaching orbit meant that a new batch of NASA's COTS money was released securing the company's future.

Meanwhile in a better part of town

Elon Musk is known as one of the billionaires in space. But he was no billionaire when he started SpaceX. His involvement in Paypal had netted him a few hundred million dollars, quite a bit short of a billion. This money was enough to start a company but hardly enough to conquer space. To achieve his goals he was dependent on other financing and by luck (or maybe foresight) the American government was happy to oblige.

The other well-known space billionaire of today is Amazon's founder Jeff Bezos. Mr. Bezos started his space company, Blue Origin, already in 2000. In contrast to Elon Musk the Amazon founder was already a billionaire when he decided to take on space. Even more importantly, Mr. Bezos was still the main shareholder of a rapidly expanding business which could be expected to (and indeed turned out to) generate substantial profits in the future. While Mr. Musk had the money he received when Paypal was sold Mr. Bezos could expect to tap a steady stream of cash for the foreseeable future.

Blue Origin did mostly the same thing as SpaceX, developing rocket engines and rockets for space flight. But given Jeff Bezos' limitless financial resources Blue Origin felt no need to advertise their progress. On the contrary, they kept very much to themselves and the public was largely unaware of whatever progress they made.

The reason for this secrecy is not obvious to an outside observer. It might just be a mis-calculation on the part of Mr. Bezos. When he founded Blue Origin private space flight was not really on the agenda. The very notion of a billionaire aiming for space would at that time probably give more associations to Bond villains than to world-improving utopists. In the years after Blue Origin's founding perceptions of private space flight would change dramatically leaving Mr. Bezos' company looking like the odd man out.

Secrecy comes with its own disadvantages. Even though money has never been a problem for Blue Origin, it is still dependent on highly qualified and motivated staff to make reality of its boss' space dreams. And it is easier to find qualified staff if you have a high profile rather than shrouding yourself in secrecy. This might be the reason why SpaceX is the undisputed leader in private space flight while Blue Origin has still not made an orbital space launch.

Let a thousand flowers bloom

Mr. Musk and Mr. Bezos are not the only ones interested in private spaceflight. Quite the contrary. There are a multitude of private companies all providing orbital launch capabilities. Especially during the last few years the number of contenders has more or less exploded.

The best known is probably the very flamboyant Richard Branson and his Virgin Orbit. Virgin Orbit is a technological outlier. Instead of using ordinary rockets they use a "mothership" (currently a Boeing 747) that takes a small rocket to an altitude of 10 km where the rocket is released and fired into space. The reason for this unusual method is that Richard Branson, unlike Mr. Musk and Mr. Bezos, has not developed his own technology, instead buying the entire concept from the experimental aerospace company Scaled Composites in the early 2000s. Nevertheless, Virgin Orbit has to date launched four rockets into orbit.

Another, even more successful, private space launch company is Rocket Lab from New Zealand. Rocket Lab is specialized in the launch of very small rockets with a payload often not exceeding 50-100 kg. Being from New Zealand they were also the very first entity, private or governmental, doing an orbital launch from the southern hemisphere. To date Rocket Lab has launched 29 rockets into orbit.

Firefly Aerospace is an American company that was founded comparatively recently, in 2014. They did go bankrupt in 2017 but managed to reconstruct and continue developing rockets. Space is hard, however, and its first (and hitherto only) successful orbital launch was not until October 2022. Firefly does have great ambitions, not only developing new rockets and rocket engines but also lunar landers and doing contracting work for other space companies, specifically Northrop Grumman.

Northrop Grumman is a big defense contractor but can be counted among the NewSpace companies thanks to its 2017 acquisition of Orbital Sciences Corporation. Orbital Sciences Corporation was in many ways a forerunner to SpaceX, a small private space company developing rockets for orbital launches. Orbital Sciences Corporation was also the other main recipient of NASA's COTS money. And while they could not keep up with the rapid growth of SpaceX, they never ceased to develop and launch rockets.

Orbital Sciences Corporation developed the Antares rocket which is designed to take cargo to the International Space Station (ISS). It has made 16 successful launches, 15 of them bringing supplies to the ISS. The Antares rocket had one weakness, its engines were procured from Russia and after the Russian invasion of Ukraine in February 2022 this source of engines has been unavailable. This is the reason for the contract with Firefly Aerospace but until new engines come from this new source the Antares rocket is grounded.

Rounding off the list of space start-ups is Astra, a rather stealthy American company that seems to have good connections in the financial industry, being backed by private equity and a number of well-known investors. At least this shows that there is real interest in the space industry, even from representatives from the old economy. Astra has done two successful orbital launches (and a number of unsuccessful ones).

The power of the dark side

SpaceX is the undisputed master of NewSpace. Their Falcon 9 rocket has done a very impressive 196 launches, 194 of which have been successful. That is an almost unprecedented level of success and Elon Musk's company has done more than most to make transportation to space seem mundane.

SpaceX might seem unassailable in its role as leader of the space pack. Reality is slightly more complicated. If you look at a recent list of space launches, for example Wikipedia's list of orbital launches from the second half of 2022,  SpaceX has a dominating presence with 34 launches. But they do not rule space alone. Another company, called CASC, performed almost as many orbital launches, 33, during the same period.

The reason I have not mentioned CASC earlier in this article, and the reason you have probably never heard of it, is that CASC stands for China Aerospace Science and Technology Corporation. CASC is the Chinese state-owned enterprise tasked with launching most of China's satellites into space.

The hype around SpaceX and other NewSpace companies have largely drowned out the fact that the entire world has seen a rejuvenated interest in space. Outside America this development is largely government-led. China might be in a league of its own but in the last decade the governments of Japan, India, Israel, Iran, North Korea and South Korea have all launched satellites into orbit using their very own government-built rockets (as has Russia, but that is probably not a surprise to anyone).

South Korea is worth mentioning specifically. In 2022 they launched their new Nuri rocket into orbit for the first time. Nuri is a comparatively large rocket able to carry more than three tonnes of cargo. Nuri was designed and built by KARI, the South Korean equivalent to NASA, showing that government-led space launches are alive and kicking. Even more impressive is that Nuri was developed more or less on time and budget and will probably be a low-cost competitor on the space launch market in the future.

Space bargains

This could make you question if NewSpace has really contributed that much to humanity after all. Elon Musk likes to brag about how he has increased access to space by significantly lowering launch costs. This is probably true, or at least not completely untrue. According to Wikipedia's (admittedly messy) article on the space launch market, getting commercial cargo to orbit with SpaceX today only costs 30% of what it cost twenty years ago with Arianespace (the then market leader).

This is impressive but might not only be thanks to Mr. Musk. SpaceX is undoubtedly a price leader, but the Chinese Long March rocket is almost as cheap when it comes to launching cargo to orbit. Even Arianespace has cut its costs so that launching with them is now only 50% more expensive than using SpaceX.

And SpaceX's pricing is opaque. The commercial launch cost is well-known since SpaceX has lots of commercial customers. Buying a complete Falcon 9 launch from SpaceX will set you back 67 million dollars according to SpaceX's own price list. But NASA is paying SpaceX 133 million dollars for each supply flight to the ISS. Admittedly, this includes the capsule holding the cargo as well as the actual rocket launch, but it is unlikely that a single capsule could cost 66 million dollars. More plausible is that SpaceX has made NASA overpay and is using their money to subsidize commercial launches.

Elon Musk is undoubtedly a business prodigy and SpaceX has done some clever engineering to lower the cost of space launches, most notably landing and reusing the entire first stage of its rockets. But there have also been shortcuts, for example SpaceX has been able to use, often very cheaply, a fully developed rocket infrastructure. From the rocket engine testing site in McGregor, Texas, to its current launch facility at Cape Canaveral, Florida. Mr. Musk also shares a character trait with Steve Jobs, another famous engineer/entrepreneur, namely a willingness to ruthlessly exploit his employees.

Chasing the wrong rocket

Lowering costs by working your employees hard might not be sustainable in the long run. But NewSpace has a more fundamental problem. Increasing access to space by lowering launch costs only makes sense if there is a demand for more access to space. This seems to be far from certain. Last year SpaceX launched 60 Falcon 9 rockets to orbit. No less than 34 of these launches were of Starlink satellites, SpaceX's own satellite-based internet provider. Starlink is of course not useless, but it still speaks legions that more than half of SpaceX's launch supply is used up by demand it has to create for itself.

Even though access to space has become cheaper, it is still not cheap. Placing a kilogram of cargo in Low Earth Orbit (LEO), the lowest practical level of Earth orbit, costs almost 3000 dollars with SpaceX, the current cost leader. No one can deny that this is still a lot of money. Space is not yet for everyone and many exciting things in space are still impossible due to the launch costs.

Elon Musk himself still seems intent on the longer term goal of colonizing Mars (which I have dismissed as a terrible idea here). That will require some space launches. But actually not that many. And colonizing Mars is ridiculously expensive any way you look at it. Paying a few billion dollars more or less in launch costs only has a minor impact on the bottom line.

In fact, for most projects in space, the launch is not the main cost. According to this study by McKinsey a large communications satellite costs 50 000 - 60 000 dollars per kilogram of satellite. With prices like that it does not make any meaningful difference if the launch cost is 3000 or 6000 dollars per kilogram.

The real challenge is not so much launching equipment into space as manufacturing space-worthy equipment. This area has seen significantly less investment than the more ostentatious launching of rockets. Planetary Resources, an American company founded in 2009 with the aim of mining asteroids, never really got off the ground due to trouble finding investors. The rump of it was acquired in 2018 by a blockchain company.

Planetary Resources shows the difficulties of raising money for wider work in space. Space has a fearsome reputation but there is no nature law stating that anything put into space needs to have an astronomical price tag. Cubesat development has shown what can be done if some flexibility is allowed.

If the same cost-cutting techniques that NewSpace entrepreneurs have perfected for launching things into space were also used to build things for space, things would really start to get interesting. Things like mining the asteroids would suddenly look realistic. Mining the asteroids would mean creating new resources in space. And with resources created in space comes manufacturing in space. That would open up space for humanity like no number of SpaceX launches will ever be able to do. 

I got the impulse to write this article after reading the book Space Barons by Christian Davenport. In the end this article is about a lot more than Mr. Davenport's book. But all information in the article not explicitly sourced from somewhere else can be expected to be from there.