SpaceX Case Study
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Presentation on SpaceX given in class EC 728 - Economics of Innovation by my group. It is one of the most fascinating upcoming companies. With an IPO expected in 2013, it will be interesting to see where it heads..
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SpaceX Case Study
- 1. Space Exploration Technologies Corporation WESAMHELOU PRATEEK JAIN NISHY MATHEW ANDREW ROSS
- 3. Introduction Commercial orbital transportation services Advanced rockets and spacecraft Founder: Elon Musk PayPal and Tesla Motors co-founder Invested $100 million USD of his own money in the company, SpaceX, in 2002 SpaceX today is valued around $1.3 billion USD and after 2013 when they send off COST2+ the company is estimated to be worth $2.4 billion USD 2/3 of the company owned by Elon Musk
- 4. Introduction cont. Space Exploration Technologies Corporation is also called SpaceX: Founded in 2002 byElon Musk Employees : 1800 Vice President: Ken Bowesox Headquartered in Hawthorne California Launch facilities at the Cape Canaveral Air Force Station in Florida and Vandenberg Air Force Base in California a rocket development facility in McGregor, Texas; and offices in Washington, DC. Inventions:Drangon Space craft Contracts: NASA, American government, International agencies and goverments Future projects: Falcon Heavy system, NASA‘s robotic Mars mission in 2018,
- 5. Introduction cont. • Mission: Develop space transportations, with the ultimate goal of making it possible for humans to live on other planets. • Future vision: Keep the technological advances, innovative ideas, and groundbreaking research happening. To send humans to Mars within 10 to 20 years. Creating reusable aircraft which has never been attempted successfully in the past.
- 6. Company Goals He was trying to understand why rockets were so expensive and wanted to make spaceflight routine and affordable His goal is to ―revolutionize space transportation and ultimately make it possible for people to live on other planets‖ ― Ultimately, our goal is to reduce costs by over a factor of ten, saving billions of tax dollars and helping to launch a new age of discovery,‖ Manifest of over 40 launches to deliver commercial satellites to orbit. Announced its plans for Falcon Heavy, the most powerful rocket in the world Current endeavors involve ‗reusable rocket‘ concept Falcon Dragon
- 8. Customers/Market Falcon family launch vehicles Medium and heavy lift launch capabilities Any inclination and altitude (low Earth orbit to geosynchronous orbit to planetary missions) $4 billion in contracts and more than 40 launches on its manifest Over 60% commercial
- 10. Patents and IPRs They DO NOT file patents, Musk says, because ―we try not to provide a recipe by which China can copy us and we find our inventions coming right back at us.‖ But he talks freely about SpaceX‘s approach to rocket design, which stems from one core principle: Simplicity enables both reliability and low cost. Think of cars, Musk says. ―Is a Ferrari more reliable than a Toyota Corolla or a Honda Civic?‖
- 11. Financial Situation First 10 years of operation $1 billion in funding Private equity: 20% Elon Musk: 10% Investors: 10% Founders Fund, Draper Fisher Jurvetson Long-term launch and development contracts: 50% 40+ contracts for launch missions Down payments at signing Progress payments
- 12. Pricing What sets SpaceX apart? Prices Falcon Heavy expectations ―Our performance will increase and our prices will decline over time,‖ he writes on SpaceX‘s Web site, ―as is the case with every other technology.‖
- 13. Marketing Plan/Competition Small market with HIGH risk HIGH reward Relies completely upon past performance First-mover market advantage/Economies of Scale? COTS program Commercial launches ―Red Dragon‖ Mars mission concept? Orbital Sciences, Andrews Space, Boeing, Planet Space, SpaceHab, RocketplaneKistler, Venturer Aerospace, SpaceDev, t/Space, Constellation Services International, Lockheed Martin
- 14. IPO? The decision to take SpaceX public depends on having a ―highly predictable revenue stream,‖ Musk said at the company‘s headquarters in Hawthorne, California. ―SpaceX doesn‘t absolutely need to go public, so it‘s best to delay going public until we have a steady stream of launches occurring,‖ he said. Late 2013 is the most likely timing, he said.
- 15. Organization Structure Silicon Valley tech firm Workforce at SpaceX- average age is around 30 Flat organizational structure Unorthodox approaches Corporate structure Manufacturing responsibility is organized Atmosphere of collaboration
- 16. Business Model Rewritten the rules by adopting a new business model and cutting-edge technologies Simplicity, low cost, and reliability go hand in hand. Speed in decision making and delivery Majority of manufacturing in-house Simple, proven designs with a primary focus on reliability Higher product quality - tight collaboration between design and manufacturing NASA made its expertise and specialized facilities available to SpaceX
- 17. Innovation First commercial company to recover a spacecraft returning from orbit True engine out reliability World's first fully reusable launch vehicles. Replace expensive government vehicles as a way into orbit. Reusable Dragon cargo capsule is set to become the first private spacecraft to visit the International Space Station.
- 18. Products The Falcon Launch Vehicle Family provides breakthrough advances in reliability, cost, flight environment and time to launch. Falcon 1 is a two stage, liquid oxygen and rocket grade kerosene (RP-1) powered launch vehicle Falcon 9- wider diameter Falcon Heavy- heavy lift launch vehicle Dragon is a free-flying, reusable spacecraft
- 19. Engine Technology Merlin 1-D engine, Kestrel engine- clean sheet design, both been developed from scratch PICA heat shields Friction Washer Technology Advanced composite materials to enhance the performance of its Falcon rocket and Dragon capsule Developed a launch pad release system
- 21. Why did NASA exit from this? NASA conducted an internal study. Private firms can develop and operate more efficiently and affordably than a government bureaucracy. Without COTS agency cannot achieve objectives of the Vision for Space Exploration.
- 22. Incentives by NASA to promote In 2006 NASA announced Commercial Orbital Transportation Services (COTS) program First round consisted of $500 Million of funding by NASA. SpaceX and RocketplaneKistler (RpK) won Phase I June 18, 2007, NASA signed separate non- reimbursable Space Act Agreements with four firms No financial support, only information
- 23. Incentives by NASA to promote In Dec 2008, SpaceX contracted for resupply services for the ISS. 12 missions for SpaceX While NASA spends 500 million on one flight, SpaceX marks it at $54 million.
- 24. How will they make money? Betting on NASA giving enough business in the next 10 years. Other commercial customers able to use these rockets SpaceX has billion dollars of private contracts with satellite operators to launch their satellites.
- 25. Challenges for Space X Seven launches since its inception, three of which were catastrophic failures Can they transform from boutique space development firm into essentially a production house? Heavily dependent on NASA contracts and will continue to be for many, many years.
- 26. Challenges for Space X Government oversight and regulations Company is banking on combination of increased demand and cost avoidance to under-price competitors. Company relies on vertical integration — pulling parts and component production in-house
- 27. Management Lessons ―Numbers will never compensate for talent in getting the right answer. It will tend to slow down progress, and will make the task incredibly expensive.‖ – Musk ―Rocket engineering is not like ditch digging‖ – Musk Need one person to do it right, rather than 100. Make workplace enjoyable
- 28. Management Lessons Triple sign-off for all major critical operations Lessons from SpaceX applied on Tesla Only all aluminum car in North America
Notes de l'éditeur
- WesamHelou:Space Exploration Technologies Corporation was founded in 2002 by the entrepreneur Elon Musk. Elon Musk received a B.A. in physics and a B.S. in economics from the Wharton School of the University of Pennsylvania. A couple years prior in 1998, Elon Musk, a South African born American entrepreneur, had cofounded the presently worth over 4.4 billion dollar PayPal company. PayPal permits businesses to complete money transactions worldwide in an online manner. This new innovative method accelerated the way businesses deal with money transactions. PayPal saves the companies time when compared to the traditional methods of money transactions like checks or money orders. PayPal was then purchased by eBay for over 1.5 billion dollars. Elon Musk was also recognized for cofounding Tesla Motors. At Tesla Motors, Elon Musk helped develop the first electric car. Tesla Motors started off by building a new and innovative sports car, called the Tesla Roadster, which proved to be very successful in the local and international. Telsa Motors carried on developing a four door Model S sedan and Model X which will be produced in 2014. Elon Musk is currently CEO and CTO of SpaceX, chairman of Solar City, and CEO of Tesla Motors. His most successful business is currently SpaceX worth over 1.3 billion dollars and is one of the leaders in outer space expeditions.
- WesamHelouKen Bowesox: Vice President and former NASA astronaut1st private owned company to:On December 9th 2010, the launch of the COTS Demo Flight 1 mission, SpaceX successfully launched, orbited and recovered a spacecraft.On 22 May 2012, Send unmanned Dragon capsule into space. The unmanned, cone-shaped capsule became the first privately built and operated vehicle to ever dock to the orbiting outpost.NASA awarded SpaceX a contract in which it sends a crewed Dragon/Falcon 9 flight in 2015Future plans:Falcon Heavy, most powerful rocket in the American inventory. Used to send a modified unpiloted Dragon on a Mars landing mission.______________________________________________________________________________________________________________________________________________________________________________________Aerospace engineering was first introduced around the late nineteenth or early twentieth century. This type of engineering entails everything from the design, to the manufacturing of new products that fly in our atmosphere and outer space. Often people confuse the two types of aerospace engineering which are aeronautical and astronautical engineering. Aeronautical engineering is the study of aircraft that stays within the earth’s atmosphere, whereas astronautical engineering is the type in which the aircraft is designed to function outside the earth’s atmosphere. Many companies have tried to enter the field of astronautical engineering, but only a few succeeded. From the few succeeding companies was the organization Space Exploration Technologies Corporations, also known as SpaceX.
- WesamHelou:The headquarters of SpaceX are located in Hawthorne California. Elon Musk invested over a million dollars of his personal wealth in SpaceX to get the company started and soon after proved to be one of the most successful decisions made by this one-of-a-kind entrepreneur. SpaceX houses more than 1,800 employees at its facilities and is expanding as time advances. This company’s mission is to develop space transportations, with the ultimate goal of making it possible for humans to live on other planets. SpaceX developed a rocket called Falcon 1which was the first private company that developed a liquid fueled rocket to reach orbit. Afterwards a more advanced version called Falcon 9 was launched in 2010. This launch increased SpaceX’s fame since it made it the first commercial company to recover a spacecraft after orbit to earth safely. SpaceX created the Dragon spacecraft which also added to SapceX’s fame. The Dragon spacecraft was the first commercial craft to successfully attach to the international space station, only previously done by four governments. SpaceX is contracting from major governments and companies around the world. NASA awarded SpaceX a 75 million dollar contract to have Dragon carry astronauts aboard.SpaceX has achieved a lot given that it was founded recently and has even greater goals lined up for the future. Plenty of technological advances, innovative ideas, and groundbreaking research have taken place at this institution leading to its success. One of the goals that SpaceX would like to achieve is creating reusable aircraft which has never been attempted successfully in the past.
- The company was founded in 2002 by Elon Musk to revolutionize space transportation and ultimately make it possible for people to live on other planets. Today, SpaceX is advancing the boundaries of space technology through its Falcon launch vehicles and Dragon spacecraft.Looking to the future, SpaceX has announced its plans for Falcon Heavy, the most powerful rocket in the world, second only to the Apollo-era Saturn V. Falcon Heavy will be able to carry payloads weighing over 53 metric tons to orbit, offering more than twice the performance of other commercial launch vehicles and making possible missions that were previously unachievableLong term, SpaceX is working to build vehicles that are fully and rapidly reusable, a key element to radically reducing the cost of spaceflight in order to truly revolutionize space exploration. The Dragon spacecraft can be used for multiple missions to space. SpaceX is also working to make reusable rockets, something that has never been done before and is the most important element to radically reducing the cost of spaceflight.
- With the Falcon family of launch vehicles, SpaceX is able to offer a full spectrum of light, medium and heavy lift launch capabilities to their customers. They are able to place satellites and other spacecraft into any inclination and altitude, from low Earth orbit to geosynchronous orbit to planetary missions. And they offer open and fixed pricing for such services that is the same for all customers. SpaceX is producing the most advanced launch vehicles in the world, and the international launch market has responded -- commercial launches now represent over 60 percent of the company's upcoming missions. In total, the company has approximately $4 billion in contracts and more than 40 launches on its manifest, making SpaceX the world's fastest growing launch services provider. As a result of these successes, the company has been cash flow positive for the last five years.
- As of May 2012, SpaceX has operated on total funding of approximately one billion dollars in its first ten years of operation. Of this, private equity has provided about $200M, with Musk investing approximately $100M and other investors having put in about $100M (Founders Fund, Draper Fisher Jurvetson, ...). The remainder has come from progress payments on long-term launch contracts and development contracts. NASA has put in about $400-500M of this amount, with most of that as progress payments on launch contracts. SpaceX currently has contracts for 40 launch missions, and each of those contracts provide down payments at contract signing, plus many are paying progress payments as launch vehicle components are built in advance of mission launch, driven in part by US accounting rules for recognizing long-term revenue.
- A Falcon 9 launch costs an average of $57 million, which works out to less than $2,500 per pound to orbit. That’s significantly less than what other U.S. launch companies typically charge, and even the manufacturer of China’s low-cost Long March rocket (which the U.S. has banned importing) says it cannot beat SpaceX’s pricing.By 2014, the company’s next rocket, the Falcon Heavy, aims to lower the cost to $1,000 per pound. And Musk insists that’s just the beginning.
- Musk says he runs his rocket company like a Silicon Valley tech firm. "That's the operating system that I have in my head of how to run an organization. And that's how I've created SpaceX," says Musk. "NASA is obviously coming from a different heritage.“For example, the workforce at NASA is generally older. Many top managers cherish their childhood memories of watching the Apollo astronauts on TV.Not so at SpaceX, where Musk says the average age is around 30. "At age 40, I'm relatively old," says Musk, who notes that he was born after the moon landing.Like other tech companies, SpaceX tries to have a flat organizational structure, says Musk. The idea is that everyone can talk to everyone else, without having to go through chains of command. Michael Horkachuck, a NASA official who has been managing work with SpaceX, has noticed cultural differences."They're a little bit different in that they like to build the hardware and test it, and if it doesn't work and breaks, then they'll build another piece with a little change and test it again, and not do quite as much documentation and detailed analysis as necessarily NASA would typically do," says Horkachuck, who notes that it reminds him a bit of how the Russians approach space technology. SpaceX has a corporate structure that, according to sources, supports collaboration and efficient decision-making. A designer with an idea can walk over to the manufacturing engineer, talk about it, and then go to the floor to see if it will work.Thompson added that this couldn't happen without another unorthodox strategy: in-house manufacturing. The 500-plus-employee firm doesn't require high volumes; in its early years SpaceX found outsourced jobs delayed as job shops gave priority to larger contracts. So the company, mostly an assembler in 2002, since has brought 90 percent of its manufacturing, including almost all of its metal fabrication, in-house.On SpaceX's vast floor, workers perform bump forming on press brakes. Tank sections are rolled on a massive four-pinch rolling system with an 18-in. throat. There are the typical arc welding processes along with some less common joining methods, including friction stir welding of some exotic aluminum and aluminum-lithium alloys for rocket tanks . The circumferential friction stir welds are done using a retractable-pin head from Nova-Tech—the same kind of weld head used for the Shuttle program—while SpaceX engineers designed the fixturing and drive mechanisms in-house. The longitudinal welding system, from Transformation Technologies Inc. (TTI), doesn't have a retractable pin and so welds run into a sacrificial tab. "We weld anywhere from 0.063 inch up to more than half-inch material," Thompson explained.But he does promote an atmosphere of collaboration. A video tour of the engineering facility on SpaceX's Web site, for instance, shows Musk, in a polo shirt and jeans, walking through the company offices, only there are no offices—just an expanse of low-walled cubicles."That's my office over there," he said, pointing to a cube area in the corner. "We try to minimize the number of offices we have. Doors limit communication. Everyone at the company, with the exception of those in HR and finance, are in cubes, including the vice presidents."The VPs include Thompson and Ringuette, and both said they appreciate the lack of bureaucracy.
- For the better part of five decades, commercial access to space has been limited by the high cost of flight operations. However, Space Exploration Technologies Corp. (SpaceX) has rewritten the rules of the game by adopting a new business model and cutting-edge technologies to enhance reliability and reduce the cost of space access.SpaceX’s business model is derived from the philosophy that simplicity, low cost, and reliability can go hand in hand. By eliminating the traditional layers of management and subcontractors, the company has reduced costs while speeding decision making and delivery. Keeping the vast majority of manufacturing in-house, SpaceX reduced costs, kept tighter control of quality, and ensured a tight feedback loop between the design and manufacturing teams. Concentrating on simple, proven designs with a primary focus on reliability, the company has reduced the costs associated with complex systems operating at the margin.
- SpaceX is the first commercial company to recover a spacecraft returning from orbit, a feat achieved by only a few nations in the history of space travel.The Falcon 9 and Falcon Heavy are the only US launch vehicles with true engine out reliability. They are also designed such that all stages are reusable, making them the world's first fully reusable launch vehicles. Its spacecraft and rockets could replace expensive government vehicles as a way into orbit.Key innovation: The reusable Dragon cargo capsule is set to become the first private spacecraft to visit the International Space Station.First launched last year, the Falcon 9 is a two-stage rocket designed to carry satellites as well as SpaceX's cargo and crew capsule into space.
- The Falcon Launch Vehicle Family provides breakthrough advances in reliability, cost, flight environment and time to launch. In providing our launch and placement services, we recognize that nothing is more important than getting our customer’s satellite or other spacecraft safely to its intended destination.Falcon 1 is a two stage, liquid oxygen and rocket grade kerosene (RP-1) powered launch vehicle. Designed in-house from the ground up by SpaceX, Falcon 1 was the first privately developed liquid fuel rocket to achieve Earth orbit. Read more about Falcon 1's history making flight. Like Falcon 1, Falcon 9 is a two stage, liquid oxygen and rocket grade kerosene (RP-1) powered launch vehicle. It uses the same engines, structural architecture (with a wider diameter), avionics and launch system. The Falcon 9 rocket delivered back-to-back successes with its first three debut launches. All three flights achieved 100% of mission objectives and the third flight made history, making SpaceX the first commercial company in history to visit the International Space Station. Falcon Heavy, the world’s most powerful rocket, represents SpaceX’s entry into the heavy lift launch vehicle category. With the ability to carry satellites or interplanetary spacecraft weighing over 53 metric tons (117,000 lb) to Low Earth Orbit (LEO), Falcon Heavy can lift nearly twice the payload of the next closest vehicle, the US Space Shuttle, and more than twice the payload of the Delta IV Heavy.
- TIGER-TIGHT CORP., a subsidiary of Precision Aerospace Components, Inc. (PINK:PAOS), had its proprietary friction washer technology used by SpaceX (Space Exploration Technologies) on the Dragon spacecraft launched atop a Falcon 9 rocket from Cape Canaveral Air Force Station in Florida on May 22, 2012.The Tiger-Tight technology operates on a micro-topographic scale. Industrial diamonds embedded in an electro-less nickel matrix penetrate and interlock with the mating surfaces to create an extremely high retaining force and prevent loosening under vibration and shock. Because the interaction is at the micro level, there is no critical damage to the affected surfaces. Tiger-tight washers and shims promote safe, effective joints under static and dynamic load conditions by resisting loosening from external transverse loads and/or distributing the joint pre-load. Developed a launch pad release system that keeps the rocket safely on the ground until all first-stage engines are at full power and trending safely. Once released, the Falcon 9 can suffer a first-stage engine failure and still make it safely to orbit.The main engine, called Merlin, was developed internally at SpaceX, drawing upon a long heritage of space proven engines. The pintle style injector at the heart of Merlin was first used in the Apollo Moon program for the Lunar Excursion Module (LEM) landing engine, one of the most critical phases of the mission.Propellant is fed via a single shaft, dual impeller turbo-pump operating on a gas generator cycle. High pressure kerosene fuel flows through the walls of the combustion chamber and exhaust nozzle before being injected into the combustions chamber. This provides significant cooling, permitting the engine to operate at a higher level of performance. The turbo-pump also provides the high pressure kerosene for the hydraulic actuators, eliminating the need for a separate hydraulic power system. Additionally, actuating the turbine exhaust nozzle provides roll control during flight.Kestrel, also built around the pintle architecture, is a high efficiency, low pressure vacuum engine. It does not have a turbo-pump and is fed only by tank pressure.Kestrel is ablatively cooled in the chamber and throat and radiatively cooled in the nozzle, which is fabricated from a high strength alloy. The nozzle exhibits high strength at extreme temperatures and is highly resilient to impact. Thrust vector control is provided by electro-mechanical actuators on the engine dome for pitch and yaw. Roll control (and attitude control during coast phases) is provided by helium cold gas thrusters.A highly reliable and proven TEA-TEB pyrophoric system is used to provide multiple restart capability on the upper stage. In a multi-manifested mission, this allows delivery of separate payloads to different altitudes and inclinations.
- It is an important question, why did NASA exit from the space shuttle flying business. During the presidency of George W Bush after the Columbia disaster NASAS vision was shifted. They realized the problem with the foam tank which lead to the disaster and decided to work on new technology to create space shuttles. But the technology would take till 2015 atleast to come into existence. Also an internal investigation by NASA found that private companies can launch space shuttles at a fraction of cost then, NASA itself. Hence, they decided to commision COTS.http://www.comspacewatch.com/news/viewsr.html?pid=22396
- The incentive structure sort of follows the middle ground policy. NASA gave initial funding to these firms to start developing their competencies. Also they provided them with access to labs and other facilities. Other incentives like competition money was also provided to assist with the process.
- SpaceX is able to do the development work for NASA at fraction of the cost which NASA charges. This can be attributed to a number of factors, in house integration and manufacturing. Another important factor is lack of oversight as of now. But this might change in future.
- The biggest source of revenue planned by SpaceX is contracts from NASA. They are hoping to get plenty of contracts from NASA in the coming future. Also they are planning on helping in the launch of commercial satellites into space for which they have about 1 Billion Dollar worth of contracts from firms within and outside of US. They are also hoping to get onto private passengers being carried to space. The cheapest ticket for one such ride is as of know US $95000.
- There are multiple open challenges for SpaceX. Their success ratio isn’t very noteworthy. Of the 7 missions they have launched, 3 have been major failures. The recent one has been a major success, but the other ones have had limited success. They also need to find a way to convert their firm into a proper business and production house. While they are heavily dependent on NASA as of now for their business, they will have to find other ways to generate their money soon. Especially ones NASA is able to develop the new technology for space shuttles.
- The company is not regulated by government oversight yet. But ones they become a properly running buisness, it is one of the issues which might come in and slow down their advancement.
- http://www.evancarmichael.com/Famous-Entrepreneurs/1610/Lesson-5-Tap-Into-Todays-Top-Talent.html