While most of us are aware of the famous SpaceX and the viral videos of their rocket launches, let’s take a deep dive into what the company is and how exactly SpaceX makes money.
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What is SpaceX?
SpaceX or The Space Exploration Technologies Corp is one of the most prestigious and valued companies that work with the aim of reducing costs for space travel. Founded by the brilliant Elon Musk in 2002, the company has made significant progress towards its goal. Elon Musk chose to focus mainly on space travel as a first step in the colonization of Mars. The company, centered in Hawthorne, California, has manufactured numerous spacecraft such as the Dragon and satellite constellation.
SpaceX is widely famous for being the first aerospace company to have launched spacecrafts into space and successfully landing them back on Earth. That too, being done on a private budget. Elon Musk also claims to land astronauts on the surface of the Moon one day, which is a significant thing to say for the company, the reason being that not even NASA has made such a declaration yet.
SpaceX launched NASA astronauts into space on May 30, 2020, another thing only this company has the honor of getting done. The initial set date was May 27th, however, the project was delayed three days until the thunderstorms cleared the Kennedy Space Station in Florida. SpaceX tweeted from their account, “Standing down from launch today due to unfavorable weather in the flight path. Our next launch opportunity is Saturday, May 30 at 3:22 p.m. EDT, or 19:22 UTC,” The report was also published by CNBC, affirming the bad weather conditions of the coast of South Carolina as a factor for the delayed launch date as monitored by both, SpaceX and NASA.
Brief History of SpaceX
- The first space expedition carried out by SpaceX was to Mars in 2001, an idea of a ‘Mars Venture”. The project involved the migration of a small nursery from Earth to Mars. The aim was to analyze whether plant habitation was possible but even more so, to encourage space travel.
- In 2002, Elon Musk set out to buy an Inter-continental Ballistic Rockets (ICBM) for the journey of the nursery to the Kosmotras. The cost he received was $8 million which seemed costly to the millionaire at the time.
- The incident led Elon to establish his own rocket organization after carefully understanding how the business world of rockets goes about which ultimately lead to the development of the SpaceX.
- By 2008, with the funding of numerous stores and about $100 million from his own pocket, Elon Musk with the help of his rocket designer, Tom Mueller was able to create the Falcon 1, the first rocket that was able to take the tiny nursery to the surface of mars and finish the mission.
- In 2009, the first payload the rocket took to space was a Malaysian satellite RazakSAT.
- Later, Falcon 9 was the first rocket that enabled space travel. Dragon and Falcon Heavy were the next two rockets that were developed for the same purpose.
- Currently, SpaceX is said to deliver a $1.6 Billion payload with NASA, one of its major contributors along with numerous other private entities. SpaceX is under contract with NASA to dispatch almost 70 payloads.
How does SpaceX makes money through its space technology?
As SpaceX is a multi-billionaire dollar company that works solely to lower the expenditures of space travel; it is no surprise that it owns multiple rockets and spacecraft. Following is a breakdown of the revenue of the company in terms of hardware and its products:
Rocket Engines
- Merlin is the engine designed for the Falcon and its successors.
- Kestrel is a LOX/RP-1 pressure-fed rocket engine and works as a second engine for the Falcon.
- Draco is the hypergolic liquid-propellant rocket engine that uses monomethyl hydrazine fuel and nitrogen tetroxide oxidizer.
- SuperDraco as the name suggests is just a better version of the Draco engine.
- Raptor is a methane-fueled full-flow staged combustion cycle engines, designed for the future Starship launch system of SpaceX.
Spacecrafts
- SpaceX Dragon is the ballistic capsule-shaped as a blunt cone and has the tendency to carry cargo or around 7 astronauts into orbit and beyond.
- Dragon 2 or Crew Dragon is the successor Dragon aircraft but has wider windows and has the newest technology fitted such as the flight computers, redesigned solar arrays, avionics, and a modified outer mold line.
Launch Vehicles
- Falcon1 is the first rocket of SpaceX and is comparatively a small rocket that can carry hundreds of kilograms of load in the low earth orbit.
- Falcon9 is an EELV-class medium-lift vehicle and the successor to Falco1 that could place up to 22,800 kilograms (50,265 lb) to orbit.
- Falcon Heavy as the name suggests is the heavy-lift rocket whose configuration is done by the conglomeration of three Falcon 9 first stage cores alongside a propellant crossfeed and 27 Merlin 1D engines.
How does SpaceX make money to afford space expeditions?
As mentioned, SpaceX pays privately for the space travel they carry out and works in the hopes of reducing the cost of space travel. Someone invested with space news would wonder how Elon Musk manages to remunerate for these space expeditions. But since the company is privately owned, and is not answerable to anyone else only a handful of people actually know how it generates its revenue. According to Motley Food, SpaceX remunerates its income by launching satellites into space. A finance outlet in 2018 stated that that the company is most likely to make around $1.3 billion per year but according to a Quora user, Haseeb Ahmed, who has some reasonable points, suggests the company very likely makes much more than that considering they are already in a $4.2 billion contract with NASA and the 60 launches they have successfully undertaken are worth $7 billion.
The Motley Fool reports, “The company charges commercial customers a standard rate of $62 million per launch for this service,”. It also charges the government “perhaps $20 million more for complicated government space missions such as resupplying the International Space Station, putting science satellite into orbit for NOAA, or launching a GPS satellite for the Air Force.”
Based on some facts, it’s difficult to estimate the amount of money SpaceX makes today, not just because of numerous successful launches but with large sums of money invested by billionaire companies such as Google, who invested $900 million as per certain reports. According to Forbes, in 2018 SpaceX valued at $32 and it’s one of the reasons wall street hopes that one day the company would go public. This is so people can invest and buy stocks in the company. This is another way SpaceX could potentially make money, but for now, there is no such news from the company with regards to that.
How is SpaceX operating efficiently?
A few reasons why SpaceX has managed to keep such an efficient stance with its business model is due to a few factors:
- The first and foremost are the large and famous investors of the company. This includes the US military, NASA, and Google to name a few and reportedly the company has over 3000 notable accomplices and 1100 which are known to fund every week.
- The SpaceX generates most of its money by launching satellites to space and offering rockets as well as by the stock that builds up. The Falcon 9 costs about $62 million whereas Falcon heavy costs about $90 million.
- SpaceX has an active business improvement group that handles all of its clients and is always active on their social media and websites.
- The key to their business model is a close relationship with its clients. A better commitment to them leads to a stable company.
So, how does SpaceX make money through its business model?
We can find out how SpaceX makes money through the breakdown of their entire business model, and evaluating the following two financial ratios.
Price-to-sales ratio
Since the company is private as described earlier, hence very little is known about the entire working of the company’s finance. It is obvious that the company remunerates a large sum of money by launching satellites into space and two of the largest customers the company has are NASA and the US military. However, there are a few facts that can help give an estimate. Some of which are:
- The company has a standard rate of launching satellites of $62 million per launch.
- If there is something more complex than just a mere satellite, the price varies. For example for a GPS launch of a company would cost them $20 million more.
- SpaceX has announced this year a ratio of 60:40 of missions for government missions and commercial missions. If the company is to launch 18 missions this year and with a start of $72 million, the company’s revenue would become a total of $1.3 billion.
- The price to sales ratio ends up being 9.2 or even lower considering the given facts.
Price-to-earnings ratio
The next part of the analysis would be the price-to-earnings ratio.
- The first stage cost of the Falcon 9 is $30-$35 million which adds up to 75% of the total cost that took to manufacture the missile.
- The fuel and the rocket part of the missile add up to 0.3% according to Elon Musk. The 0.3 of $62 million except from the $50 million of the cost of the rocket construction would mean $12 million.
- The $12 million is used as a payment for the company’s overhead and for generating a profit, which leads to a gross profit margin of 19% which is more than any aerospace company.
- With a gross profit margin of 19%, their company generates annual revenue of $1.3 billion and operating profit comes out to be $195 million. The “operating profit ratio” becomes 61.5 in stocks.
Why is SpaceX a Worthwhile Investment to make Money?
Now that we’ve established how SpaceX makes money, is it really worth to invest in it? SpaceX is the largest and the most successful aerospace company which is worth billions. Since the company is private, there are no stocks that the interested can buy or invest in anyway whatsoever. As already discussed, a little investment can go a long way for the shareholders and the Wall Street is patiently waiting for the day. But what makes the company so successful and worthy of investment? Following are a few reasons:
- The first and foremost thing would be the offers of the company, accessibility, status or brand, and performance which are the major attributes for the company’s success.
- SpaceX is the only organization that is private and has successfully launched, circled, and landed a shuttle back.
- It is a dominant private firm to have launched a rocket to the International Space Station as well as sent a satellite to the geosynchronous circle.
- The most notable reason for the company’s success would be its CEO, Elon Musk. The owner has immense fame not just because of his wealth but his witty personality and appearances in some shows as well. The CEO is also the owner of well-renowned companies such as Tesla and Paypal