I can give you another example of a mission that we completed earlier this year called Victor's Hayes where the government gave us a call up and we had 24 hours to integrate our payload, a spacecraft that we built, launch it and rendezvous with a spacecraft in orbit. And within 16 hours and 42 minutes we're already in orbit.
Wow. So, yeah, so you mean this is the new world, right? Where commercial companies can truly respond at kind of, you know, typically what you would have thought of a nation or a defense kind of cadence.
Hello everyone and welcome back to MTS. Today I am joined by Peter Beck who is the founder and CEO of Rocket Lab. Rocket Lab launches the Electron rocket, builds satellites and spacecraft components, and is developing its larger reusable Neutron rocket and is increasingly becoming a major contractor for US national security space programs. Peter, so excited to have you on MTS.
Oh, thanks very much for the time. Much appreciated.
I know you're calling in from New Zealand. I know this is exactly where Rocket Lab actually began back in 2006. I am super curious. I feel like space is just an area where more people are excited than ever before. Maybe besides the 80s, I don't know, who knows. What was the world like back in 2006? What is the world like now? What is the biggest difference in how people are talking about space in general?
Yeah. No, that's a great question. So, as you say, you know, started the company over 20 years ago. And when I first started the company, I remember everybody was talking about there would be a point in time where there would be the democratization of launch, meaning that governments would no longer be responsible for launch and it would be commercial entities responsible for launch. And then you know fast forward to today I don't think any governments are building rockets anymore. It's all commercial entities. So you know I think that the space industry has gone through massive transformation in those last 20 years. But more importantly I would say and more kind of relevant the growth in the industry right now is insane and you know I would say it's like exponential what used to be done by governments is done by commercial for sure but I mean that pace is just continuing to grow. So there's so much growth in the industry. There's nothing like it before.
And I know when people typically think of Rocket Lab. My assumption is that most people just think about the rockets because that's what you guys are largely known for. But there's so much more that you guys actually do. What you guys expand is a lot broader. And as you alluded to earlier, there's so much growth in the industry. There's a lot more commercial players actually building these things. Tell me a little bit about the whole stack where Rocket Lab actually plays a role.
Well, I mean, firstly, I probably shouldn't have called it Rocket Lab. I should have probably called it Space Lab because, you know, and the rocket always steals the show because it's this big, you know, roaring stick in the sky. So, it always steals the show. But to your point, like if you think about the space industry, you can pretty much divide it up into three kind of chunks. The first chunk being the very obvious one, you know, being rockets and, you know, that's about a 10 or 20 billion industry. And then the second chunk you can think about as being spacecraft or you know the tools in space to provide services, 20 to 30 billion kind of total addressable market there. And then the reason why you do all of those things are applications in space actually services that we provide from space down to all of us on earth. And you know space is kind of weird that it's hidden infrastructure. So you don't drive past it every day so you don't see it. So it's not like a road. But actually everybody interfaces with space every single day whether you realize it or not. So all of these services are being provided from space. But you know if you think about what Rocket Lab is trying to do here is we're trying to combine all three of those things together. So yes we build rockets, yes we build satellites. But you know more recently with our acquisition of Aridium we're also a services company from space. And I guess why that's important is because when you mix all those things together, your ability to develop and put those services in orbit is drastically improved than if you can imagine getting in line for building satellites or getting in line for a ride to space.
Let's talk a little bit about that contract with Aridium because this happened back in June, right? You guys agreed to acquire that satellite operator for roughly $8 billion. Is that correct? That's bigger than a SpaceX and bargain. And so curious what was the actual thinking behind this acquisition and what are the plans here?
Yeah. So I mean what we're looking to do is really provide something transformative to the space industry and by Rocket Lab combining with a services company like Aridium. What that enables us to do is put orbital infrastructure in space way more cost-effectively and way more rapidly than a service company in its own right. So it really is almost like a self-licking ice cream in the fact that you can pace each one of those items on top of each other to really create something pretty transformative within the industry.
This is incredible. And you talked a lot about the actual applications. As you say, space is this hidden infrastructure. People don't actually see how it gets applied in the real world, but there's all these applications that people use every single day that actually gets embedded in our daily systems. What are those applications? Maybe where are they today? And where do you see these actually going in the future?
Yeah. Well, I mean, firstly, I would preface it by I think the biggest thing to be done in space hasn't even been thought of, yet alone executed. And then if you go to the other end of the spectrum, you know, if you go and order a pizza, you might not think ordering a pizza has anything to do with space. But the only reason your pizza gets to your address is because there's a driver somewhere using GPS to find your house. And that's all coming from space. This interview, I'm sure, that we're having now, some piece along the line will be used, being beamed through or used through some space infrastructure. So it really is in our everyday lives. But, you know, look, as I said before, it's hard to see because you're not literally confronted with it. It's signals and data in the sky and whether it's, you know, am I going to go outside today? Is it raining? Well, a lot of that weather services are coming from space as well. But I think more importantly like I said before the really big opportunities haven't even been executed or even in some cases thought of simply because the way the space industry has been typically is it's been this very bifurcated industry. I mean, you have companies that just do launch. You have companies that just build satellites and you have companies that just provide services. And then this is really a new opportunity for all of those things to come together. And you can imagine that the ability to put that infrastructure on orbit and provide new services is just unparalleled at that point.
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So you're saying that the biggest opportunities in space don't even exist yet. Maybe some of the biggest applications that our kids will be talking about, we don't even know what those will be. And one of the big hurdles of why that's not happening is everything is segmented. So you have whoever's working on the launches, whoever's working on X, whoever's working on Y, and it's all separated. That is completely different from Rocket Lab's thesis though. So maybe how are you guys approaching this? And maybe why does that put you potentially at an advantage in what these large applications that don't totally exist yet might be in actually developing these?
Well, there's a couple of different things there. One is cost and one is speed. And if you think about just take Aridium for example. I think their constellation, don't quote me on this, but it's around about $3 billion for them to develop and deploy. We did a back of the napkin calculation. We reckon we could have done that for around about 350 million.
So you're an order of magnitude lower cost to start with and the time frame to actually develop the satellite and put it on orbit typically that would take somewhere 5 years plus, roll some stuff off our production line 12 months or 24 months. So, it just completely changes the game with respect to how you deploy that infrastructure. And when the cost is an order of magnitude less, you can take some risk because nobody's going to come up with a business plan, spend $3 billion and wonder if it's going to work. You can actually put new technologies in orbit and new experimental business plans in orbit that if it doesn't work out, you've lost a relatively small amount of money. You haven't lost billions and billions of dollars. So your ability to innovate drastically increases as well.
So you say your guys' magnitude is almost 10 times less than what it would take another company to actually do the same thing. Can you walk me through that number? How is that actually possible and why?
Yeah. Well, I mean Rocket Lab is a very unique company in the fact that we have completely vertically integrated. So if you take one of our rockets like 90% of everything in that rocket is built in a factory with a Rocket Lab logo on the front door somewhere and a spacecraft are the same. So I mean the obvious thing is margin stacking but the other part of it is we have scale. So if you're going to build one reaction wheel it might cost you $30,000 or $40,000 to build one reaction wheel. If you're going to build 1,000 reaction wheels, then the cost is once again an order of magnitude less. It's just a simple scale of economics. So there's a number of things there that kind of play to reducing those costs.
Yeah. Being fully integrated. One thing I wanted to get your perspective on is when it comes to reusability. I know this is a huge piece that you guys are forefront and leaders on as well. And specifically when it comes to Neutron, you designed this entire thing to be reusable. Talk a little bit about why reusability matters and why is that an incredibly difficult problem to solve.
Yeah, I mean we weren't the first to do it obviously, but it's pretty simple. There's two economic levers you can pull to reduce the cost of your rocket. One is launch cadence and one is reusability. Now if you have reusability you also have launch cadence. So it's like a self-fulfilling prophecy. So a reusable at least first stage in our case and some of the innovation that we put around that we think is going to be a pretty important lever to increase cadence and of course also reduce launch costs.
Yeah. And what's the hardest part about building for reusability? And I'm also curious to get your perspective. Why are other people doing that? I know that is the norm now. We saw I think Elon made this pretty well known about okay how do we actually catch our rockets back and launch them back into the air. But my assumption is back in 2006 at the start of this reusability wasn't even top of mind for any of these rocket scientists if that's correct. And so curious why that wasn't the case. What's changing now? And maybe what's still super hard about this problem.
Yeah. Well, I mean, I think people forget the space shuttle. The space shuttle was a reusable launch vehicle. And so, you know, I don't think there was plenty of precedence before 2006. The space shuttle was designed back in the 70s. It just unfortunate that the reusability didn't deliver on its cost targets. It was just more expensive to almost reuse it. So I mean the idea has been very consistent for a very long time. I think what's unique now is it has been demonstrated and the economics have been demonstrated and some of the techniques have been demonstrated but I mean to answer your question simply you have a giant rocket full of fuel and it puts all of that energy to go up. Now Newton's third law is you're going to have the exact same energy coming back down. So, you have to dissipate all of that energy on the way down. So, basically, it's a re-entry and control problem. And that's what makes it difficult for reusability.
But one of the unique things around how you guys are approaching reusability is the actual time and turnaround that you have in this. I don't think you actually ended up doing this, but I was doing a little bit of research and I was talking about how a little bit how you think about as an engineer and some of the constraints that you put on your team. And you asked them, you said, 'Okay, can we have a turnaround of 24 hours?' Describe where that number came from. Was that just completely was that even possible at all?
Well, I mean at the time it seemed a ridiculous constraint, but it drove all the right engineering thinking and all the right engineering decisions. Now, I think time will tell if we ever actually get there, but certainly the vehicle is designed to do that. And it's 24 hours turnaround. It's not 24 hours of inspections. It's literally 24 hours load payload and go again. Just like you would with a normal aircraft. So, we'll see if we can get there, but that certainly the vehicle is designed for that and that's the goal for the team.
And so, when you put that type of constraint as you think about this engineering problem, how does that actually change how you would design these rockets for reuse as opposed to maybe if you had 24 days to actually reuse these rockets?
Well, totally. I mean, if you had 24 days, then you have plenty of time for inspections and replacement and servicing of components. If you have 24 hours, that's only the right amount of time to be able to load the payload in and go again and fuel the rocket. So, it engineers out all of these serviceable items. So, that drives designs into things like rocket engines where, you know, the rocket engine, we can't go and service the rocket engine between flights. We just have to make it go and go and go. So, you don't pull a turbine out the front of an airplane engine every time you land. So, it really just drives that engineering discipline and the right level of decisions and putting the right level of margins in the vehicle.
I get so excited by companies like Rocket Lab and things that are just doing what was unprecedented in space. We know so little about space and what's actually happening here. I'm excited that this is actually a whole area that people want to better understand that there's a lot more innovation happening and especially we're starting to see this similarly when it comes to defense. Traditionally this has been mainly governments and government contracts but now we're starting to see a lot more commercial companies even startups in the space actually getting to innovate and what this actually looks like. And I know for you guys back last I think this is last December you guys actually won around an $800 million Space Development Agency contract. Can you tell me a little bit about that? What are you guys building with that contract? And what are the plans there?
