Yes, we are investing in a space rocket company!
PLD Space, a Spanish Company based in Elche, is disrupting the private aerospace industry by democratising the launch of nano and micro-satellites into the space through small rockets.
At first glance, PLD may seem the antithesis for a Venture Capital: highly CAPEX intensive, long periods of development, enormous technological risk, no revenue for several years… Venture capital investments have some requirements that I would summarise in one word: Scalability, that is to say, being able to grow very fast within a small time horizon (5–7 years). Capital intensive hardware companies are much more difficult to scale that software companies.
So why a VC would stand up for this project??
1.Unserved increasing market:
As we started to dive deep into the aerospace sector, we could realize how the demand-supply relationship was completely unbalanced. Global Cubesat market is growing at a 33% CAGR, but in Europe there is a serious shortfall of alternatives to launch these gadgets. There are no private launchers, and public ones are so focused on big projects, that small sats have around 2 to 4 years waiting list to launch, with no guarantee on when this would happen.
In the US there are several companies (VC funded) already deploying their firsts rocket launches, such as Rocketlab, Blue Origin (Jeff Bezos), or Vector. However, legislation makes it difficult and expensive for a European company to get their satellites launched in the US.
2. Real disruption of the industry, as they are:
· Impressively shortening the time-decay to launch.
· Enabling to shift from public to private service.
· Democratizing the access to space launchers.
· Opening the possibility for the development of new business/ideas/actions around PLD services, never imagined before, ie. expanding the TAM.
3.Technological and institutional support:
PLD achieved to partner with two relevant players in aerospace sector, who trusted the project and decided to invest in the company. Furthermore, PLD has important institutional support from Spanish and European institutions. Even the current Spanish Science Minister is a fan of the project!!
3. Timing:
Despite the long period of development that this kind of projects requires, the company is planning to launch their first rocket by the end of next year, so we firmly believe that if the launch succeeds, we will be able to achieve our expected return within our time frame.
The countdown has already started!
4. Capital intensive:
Notwithstanding the considerable amount of investment that this project requires, PLD is managing its operations in an admirably capital efficient way. After an in-depth analysis, we have concluded that the unit economics of this business are highly attractive once the subsequent rockets will be manufactured. This will offset the initial investment efforts. After all, we have in our portfolio some marketing-dependent projects that are as capital intensive as hardware companies.
5. Optionality:
Despite the enormous risk we are taking, we have substantial grounds to consider that in the case that we don´t achieve to launch the rocket successfully, this project has a relevant residual value, hence, low downside risk. Additionally, we consider that the attractive unit economics plus the poor competition landscape in Europe will give us a high upside in case we succeed.
6. Outstanding team:
We totally freaked out when we met the 43 members of the team, form 7 different nationalities, most of them with outstanding backgrounds (European Space Agency, CERN, Airbus…). As an anecdote, during the last 5 years only one person has abandoned the company, and several employees have invested their own (cash) money in the company. That is the best proof of leadership that a manager can give.
Are we crazy? Well, just the minimum required to think different.
