Why demand is not a problem
You might already know why if you’re a space investor but some people unfamiliar with the industry might get unreasonably scared off by this eventuality. This, is for you.
There are two drivers in the launch economy :
Government
Private
Private
A private space business is extremely hard to pull off because of its capital intensive nature and technological complexity. It’s hard to make, hard to iterate on and has all around bad economics except for one proven model, Starlink. Everything else is either doodoo (imagery, pharmaceutical) or has yet to prove its potential (D2C).
All of these factors make for a nightmare of a case for entrepreneurs who want to build their own space start up. They’ll need to go through many rounds of capital raises and the odds of success are very limited. It will take so much time and effort to even have a working, revenue generating product, that many won’t even bother trying.
2. Public
Public space programs also have bad economics but the main player doesn’t care. Its goal isn’t profit, it’s national interest. The final product doesn’t even have actual tangible economics, it just makes a country safer and more powerful. You must have guessed it by now but the player I’m referring to is the United States Department of Defense, which has both deep pockets and unlimited ambitions.
There are many reasons for them to need a proliferation of space programs and the healthy pool of launch providers associated with it. But the biggest and most important one is the fact that the next Defense frontier is being built in space, and that the control of space infrastructures like the Golden Dome will be an incredible advantage over other nations.
Having multiple reliable launch providers only enhances DoD capability and responsiveness for such a project, but it’s also a catalyst to find new innovative ways to serve its best interest. The cargo mission signed by $RKLB is a good example of an extremely promising avenue that could give a significant advantage to the US forces on the field by providing critical suborbital technology.
This need for reliability and creativity alone makes a great argument for the DoD to keep pushing for more launch providers for the foreseeable future, by offering juicy incentives (e.g NSSL program). Other reasons include the fact that DoD’s current best asset, SpaceX, is led by the most astonishing entrepreneur who has ever lived, who also happens to behave more and more erratically. Making his next move all the more unpredictable and causing some people in the Defense Department to sweat bullets. This issue that has emerged rather recently and is still unfolding, has opened many eyes in the finance community and led investors to find a new potential for space stocks.
The emergence of new launch providers will be an extremely important factor to help develop the next space infrastructure, mitigate the risk associated with having too few of them, and help find new ways to deliver the most efficient solutions for everyone involved. The more players DoD has at its disposal, the more flexibility and responsiveness it gives them. Competition has this incredible power of making everyone involved work harder and better. All stars are aligned to help the best in class succeed by giving them the necessary demand to develop fully functional and reliable rockets, and $RKLB is definitely on this very short list.