Who is Making Money in Space?

Greedy capitalist that I am, when I watch a SpaceX rocket launch my first thought is usually, “Who is making money off of this?” And although I’ll happily admit that my question is somewhat short-sighted and misses the majesty of mankind breaking gravity’s hold, that doesn’t mean it isn’t totally valid. 

When a new market is formed, it is incredibly rare to have insights at its embryonic stages. Only once it has reached a sufficiently developed state will the lights be turned on and the public markets get to take a look. The delegation of profits within a space (dumb pun, sorry) are usually fully decided by that point. 

Because of the SPAC boom, we now have a chance to see a market grow up in real time, right in front of our eyes. There have been a multitude of companies that have hit the public markets over the last year that rely on access to the cosmos. By examining these freshly born companies, we can gain insights into the space market and start to get a sense for who is making money, who isn’t, and why.

To write about this, I’ve teamed up with Ryan Duffy, editor of Payload. The team at Payload writes exclusively about space, and just launched a daily newsletter. Niche media publications are my jam and I love space so worth checking them out if you are into that sort of thing :) 

And with that, lift off. (If you don’t like space puns, too bad, this piece is full of them.) 

To Bankruptcy and Beyond

Momentus Space

“What SpaceX has successfully done—lower launch costs, and thus, barriers to access—but for getting around space once you’re up there.” That’s essentially the pitch for Momentus Space, a Y Combinator alum and publicly traded company as of August. 

Momentus’ product is *theoretically* transporting satellites and payloads between orbits. Though this is a nascent vertical, orbital transfer vehicles have already evolved conceptually to the point that multiple logistics analogies have cropped up to describe the core job: Space tug and tow truck are our favorites. 

As an idea, space tugs make intuitive sense. Someone needs to shuttle satellites from their rocket drop-off spot to a rendezvous point elsewhere, transfer satellites to a different orbit entirely, and thereby extend the lifespan of aging, expensive spacecraft rather than replacing them. 

The catch: Others are building this too and it’s not yet entirely commercially viable. Only one large space contractor—Northup Grumman—has successfully demonstrated tug/tow capabilities in space. And twice, to boot. 

One differentiator for Momentus, supposedly, is its proprietary water plasma thruster. The technology helped the company raise tens of millions in VC funding. In late 2019, the company claimed a successful test of the water-based propulsion system in space. Note: Spoiler, they lied.

In October 2020, the company announced its intent to merge with Stable Road Acquisition Corp (SRAC). Not only does SRAC rhyme with SPAC, it also is one! 

The initial SRAC SPAC would value the combined entity at ~$1.2 billion. Seeing that Momentus was a pre-revenue deep tech bet, this was a leap of faith that the company would be able to execute on its product roadmap, which is no easy thing in space, quicker than similar startups and larger aerospace incumbents. 

Things started to go wrong at the beginning of the year. In January, Mikhail Kokorich, serial space entrepreneur and Momentus’ founder-CEO, resigned from the company. Momentus was being probed by the US government on national security grounds, due to Kokorich’s Russian nationality and foreign Momentus investors with ties to sanctioned Russians. The investigation could slow Momentus’ merger, at best, and mothball it at worst. So Kokorich walked away from the company and eventually sold his stake (along with another one of the company’s Russian cofounders). 

But geopolitics weren’t the only holdup. The product roadmap as an issue, too. In July, the SEC charged Stable Road, its sponsor, its sponsor’s CEO, Momentus, and Kokorich for misleading claims ahead of the proposed merger. That’s a lot. Let’s unpack:

1. According to the SEC, Kokorich soft-pedaled the extent to which his birthplace and nationality could stymie Momentus’ ability to operate and obtain key licenses in the US.
2. Contrary to what Momentus told the public and investors, the in-space propulsion test was not successful. In fact, the test “failed to achieve its primary mission objectives,” the SEC said. 
3. Stable Road essentially rubber-stamped Momentus’ claims in filings and failed to perform obligatory due diligence. 

All parties settled except Kokorich, who started a new space company and now resides in Switzerland.

This summer, Stable Road’s revised filing with the SEC cut Momentus’ post-merger valuation from $1.1 billion to $567 million. Momentus, which forecasts no 2021 revenue, projects a $5 million haul next year, and a 440x increase to ~$2.2 billion in five years. 

While this is less categorical cautionary tale and more one-off peculiarity, it nonetheless illustrates the risks of pre-revenue, deep-tech bets tapping the public markets for cheap capital. 

Momentus very well may not be a Nikola in sheep’s clothing. The company had inked a partnership with SpaceX, reserved five Falcon 9 rideshare missions, and apparently, signed contracts with customers. But much of that had been undone by this summer. As of June, Momentus claimed $66 million in contracts, down from $90 million last November. 

Assume a counterfactual world without national security probes or SEC enforcement actions. Momentus would still need a lot to go right. It’d need to validate its water thrusters, in space, and began showing a path to commercial viability for its tugs. While orbital transfer services will likely be an integral contributor within a new space economy, it’s no surefire bet they’ll be a multibillion dollar market within five years. With an entirely clear new sector it is likely there are multiple technological approaches that will be successful, likely driving commoditization. It’s definitely not clear one company would be able to corner the entire market so early in its existence.