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It began as a dream to take mice and plants
to Mars and ended up as the first private
company to carry NASA astronauts to the International
Space Station. And, along the way, it survived
many crashes and an almost inevitable financial
extinction.
We talk about SpaceX, and today, we dive deep
into its history, filled with crazy anecdotes
and valuable lessons, to see where the company
aims to be soon.
So let's get started with SpaceX in this episode
of Company Forensics.
You and your buddies are flying to Moscow
to buy a refurbished Intercontinental Ballistic
Missile or ICBM.
Hold up. Did you know buying used ICBMs was
a thing?
Anyways, you have one goal: to buy a used
ICBM and get closer to your purpose of sending
mice and plants to Mars.
But the sellers look at you, think you're
a rookie, and spit on you, literally. Well,
that's what happened to Elon Musk in 2001.
But he wasn't done.
One year later, he returned with more talent
and, most importantly, more cash, a lot more.
This time, the sellers didn't spit on him
and, instead, drank vodka to begin the negotiations.
And Musk was serious about business: he wanted
not one ICBM but three. His offer, however,
came up short, so again, they mocked him.
Pissed off, Musk stormed out of the building
and went straight back to the airport. On
the flight, he turned to his team and came
up with an idea: "Guys, I think we can build
the rocket ourselves."
Back then, Musk wasn't known for weird pickup
trucks and a Tony Stark vibe. Instead, he
was a young dotcom millionaire, having made
a fortune by selling companies like PayPal.
The fortune he made was now a steppingstone
for his obsession: space. With millions in
his bank account, he could finally pursue
his dreams in a way only he could. For example,
he crashed Mars Society dinners and donated
hundreds of thousands of dollars to the organization.
In these dinners, pretty much a who's who
of rich people obsessed with space, he told
everybody about his idea to create a mars
greenhouse or maybe even send mice to mars
and bring them back, with offspring included.
These were crazy thoughts, but there was one
idea that stood out: he wanted space travel
to be cheap.
With his goals clear, Musk founded Space Explorations
Technologies, SpaceX, for short, in El Segundo,
California, in 2002. Here's a quirky fact
for you: SpaceX's location was so massive
Musk could drive straight up to his desk in
his silver McLaren. That's the millionaire's
life.
But he also structured the place for complete
integration. He, and the engineering department,
worked side to side with the construction
department. Musk even unloaded cargo himself,
so he could learn all the details of what
people were doing.
Musk had also concluded that SpaceX could
build 85% or more of a rocket in-house, which
would help them free themselves from having
to deal with vendors, with their higher costs
and longer production times.
During these first stages, some called Musk
a lunatic while others stepped in to defend
him, but it's understandable why people doubted
him. When he announced their first rocket,
the Falcon 1 (a tribute to the Millennium
Falcon), he announced it would carry a 1400-pound
load for $7 million when the competition was
about $30 million.
The first launch would be in November 2003,
just fifteen months after founding the company.
He even hinted of a trip to Mars by the end
of the decade. Ambitious, to say the least.
Musk, however, had a dependable team around
him to back up his talk. He hired young, talented
individuals with similar determination, such
as Tom Mueller, an aerospace engineer who
became one of the founding employees at SpaceX.
He led the development of the Merlin engine,
used in the Falcon rockets.
And this team was relentless. One story goes
that SpaceX needed a turbopump. A company
like Boeing would take five years and $100
million to produce said pump. But Musk and
Mueller managed to get a supplier to build
one in 13 months, for just $1 million.
SpaceX also wanted to shake the industry altogether,
according to expert Chad Anderson. In 2004,
Musk protested a contract NASA gave to a defunct
company called Kistler Aerospace, as no other
company had a chance to participate. The Government
sided with SpaceX, further opening the doors
for private space transport.
But the promised 2003 launch hit bumpy roads.
The engine design was taking longer than expected,
with rising costs, and Musk had consumed himself
in yet another massive project called Tesla,
you might have heard of it.
He was investing millions into SpaceX and
also invested $70 million into Tesla, after
which he ended up as CEO. So now, he had two
companies with visionary ideas but a thirst
for funding. Musk has repeatedly stated that
both projects almost collapsed on themselves.
SpaceX didn't make the original 2003 deadline,
but this didn't deter Musk. He sent the entire
team to an island in the Pacific, which previously
used for missile testing, to prepare for the
launch. But each time they tried to send Falcon
1 to space, new technical issues came up,
so it was back to the drawing board. It wasn't
until March 24, 2006, that conditions seemed
adequate for the first Falcon test flight.
And so, Falcon 1 flew to the heavens. Things
were going great. Until 33 seconds after liftoff,
when the engine failed, and the rocket stumbled
to the ground, crashing into a fireball.
But Musk was determined to have another launch
in six months, even if the rest of the crew
felt it would be too soon. Keep in mind, SpaceX
needed to get going as fast as possible.
So, he had a team working on getting Falcon
1 up and running again. Then he assigned another
team to work on Falcon 9, a possible replacement
for the aging space shuttle program. And,
meanwhile, he was bidding to become a supplier
for NASA flights, all of this without one
successful launch.
It's important to highlight that, by then,
SpaceX received seed money coming from the
Commercial Orbital Transportations Services
(COTS) from NASA. The funding was initially
$278 million. Eventually, it would reach a
total of $396 million, but it wasn't for Falcon;
instead, it's objective was to help in the
development of the Falcon 9 project and the
Dragon Capsule.
Falcon 1 was having a tough time getting off
the ground; the second and third launches
failed, and all the while, Musk kept injecting
funds both to Tesla and SpaceX.
Falcon 1 eventually did fly. But it wasn't
easy. By the fourth, and first successful
launch, SpaceX had almost no money and hurried
so much, the first-stage component still needed
improvement and disintegrated upon reentry.
By the time Falcon 1 made its successful maiden
flight, SpaceX needed a lot of money, so did
Tesla. Sources say Tesla was burning about
$4 million a month and, Musk has said, in
retrospect, that he almost came down to choosing
one of the two, either Tesla or SpaceX.
The successful Falcon 1 launch did put SpaceX
on the map when it came to investors. After
all, it was the first private liquid-fuel
rocket to enter orbit. But, it was 2008, and
the recession hit hard. Both companies were
depleting their funds, and it came down to
the wire as Musk had just a couple of hundred
thousand dollars to spare.
It came down to the wire. SpaceX caught a
big breather when they landed a new contract
with NASA to provide a launch platform for
space cargo, for a healthy $1.6 BN. As for
Tesla, Musk managed to gain a new round of
funding with $40 million. When? December 23,
2008, just days before bankruptcy. Quite a
Christmas gift
Now, all he had to do was make his rockets
work. Easy, right?
As for Falcon 1, it had its second, and final,
successful launch in July 2009. Now, SpaceX
focused its attention on the newer and larger
Falcon 9. The first noticeable trait: it had
not one, but nine Merlin engines. But this
was a much more ambitious program: Falcon
9 would be able to carry the most cargo of
any spacecraft.
But it didn't end there. Along with Falcon
9, SpaceX worked on the Dragon Capsule, to
carry cargo to the ISS. If they accomplished
this, they would achieve yet another first
in the industry.
At least, it seemed like the lessons learned
from Falcon 1 were of great help. Eleven months
after the final Falcon 1 flight, in June 2010,
Falcon 9 successfully launched and placed
a mockup of the Dragon capsule in orbit. Then,
in December of that year, it launched a second
time with an operational Dragon capsule.
Not perfect, though, as on both occasions,
the boosters disintegrated in reentry. But
the company kept going; by 2012, its Dragon
capsule docked with the ISS, making it the
first commercial spacecraft to do so.
SpaceX now meant business. Before the launch
of the Dragon capsule, its valuation was at
about $2.4 billion. After the success, the
value jumped to $4.8BN.
Then, they landed a contract to be part of
the Commercial Crew Program, with NASA, and
develop a crew capsule for the next generation
of US human capabilities.
You see, after the cancellation of the shuttle
program, NASA relied on the Russian space
program to ferry astronauts to the ISS, at
the sum of $80 million per astronaut. Not
a bad deal for Russia. But NASA desperately
needed another option.
And SpaceX now became a commercially viable
space transportation company. By the end of
2012, it had 40 launches. In its 10-year history,
the Falcon 9 has launched 89 times with a
97.8% success rate, one of the highest in
the world.
SpaceX was so big that even another giant,
Google, ended up investing in it, as part
of a funding round with Fidelity totaling
$1bn for 8.33%, valuing the company at $12
BN. The biggest internet company joining a
space transport company sounds like space
domination to me.
SpaceX has always aimed to be the cheapest
company in space transport. It can manage
this through strategies like reusing components,
mainly the boosters. Check out the Grasshopper
tests; they're cool. Also, manufacturing most
components inhouse allowed SpaceX more control
over costs, further lowering them.
But the strive for reusability comes at a
cost, a mental one that is. Max Vozoff, a
former employee at SpaceX, recalls that this
obsession drove engineers insane and that,
But then, check out what he says:
Well, it did work. Eventually, SpaceX managed
to land the Falcon 9 first stage component,
which is big news because it can drive the
price further downward.
But, let's go back a bit: why is NASA so expensive?
Musk's view on it is exciting and harsh. He
believes the contracting system guarantees
manufacturers some profit, even if they exceed
the advertised price. Shareholders want to
make money, and a cheaper option for NASA
means less income for them. So, Boeing and
Lockheed maximize costs on the verge of cancellation.
Of course, Boeing and Lockheed have rejected
his comments.
But, he's somewhat right. The United Launch
Alliance (ULA) estimated a cost of $400 million
per launch, and the European Arianne program
costs $137 million. SpaceX, on the other hand,
has offered launches ranging from $50 to $60
million.
Now, what does this all mean? SpaceX forced
the entire industry to rethink itself. ULA
aims to redo its business model; the European
Space Agency filed for more subsidies and
now looks to lower costs; meanwhile, countries
like China are rushing to create their cheap-yet-efficient
rockets.
And, unlike the past, SpaceX has proved its
worth as of late. In the first quarter of
2020 alone, the company launched as much cargo
as China, Russia, and the European Efforts
combined.
But, of course, it doesn't stop here. SpaceX
continued with the development of the Falcon
Heavy, a bigger version, capable of more cargo;
the Starlink satellite system, a network of
12 000 satellites to provide internet all
over the world; and the Starship, a reusable
space shuttle which would lower the cost to
about $2 million per launch.
And yes, the Starship engine did blow up.
But, this isn't new to SpaceX. In fact, due
to the recent success, Musk has accelerated
Starship's development. It seems the Moon
is closer than we thought.
Our attention shifts towards the now, just
days ago, when two astronauts in really cool
suits took to space in the Crew Dragon reusable
spacecraft, the crew version of the original
dragon vehicle. Douglas Hurley and Robert
Behnken took off on May 30, amidst these weird
times. The entire world watched as Dragon
blasted to space, giving us hope for a better
tomorrow. Even if some used it as a political
opportunity.
Those two became part of the first-ever commercial
space flight to place a crew in orbit successfully.
Add another notch to the list. But you can
tell this is only the beginning. Musk has
been clear from the start: he wants to reach
Mars.
Now, SpaceX proved that it's possible. They
are Wright Brothers of commercial space travel.
But other companies are catching up, with
the likes of Jeff Bezos, from Amazon, with
the Blue Horizon project. So, we are witnessing
the second space race. And it's a private one.
There's even talk of the first tourist flight
involving a Japanese millionaire, and of course,
Musk said yes.
SpaceX has failed in the past. It probably
will continue to make mistakes, but one can
only ask: where will they go next? We don't
know.
Hope you enjoyed this episode. My space-geek comes out when I watch anything that is related to SpaceX.
So hope you enjoyed that as well.
Hit that red subscribe button if you want to stay tuned for more company failure and success stories.
See you next week
