Investing in Space

Branson's Virgin Orbit aims to redo launch demo in December, as it seeks $150 million in new capital

Key Points
  • Small satellite launch specialist Virgin Orbit is looking to bounce back from the failure of its first demonstration launch in May, aiming to fly its next demo mission in December.
  • Virgin Orbit is in talks about further investment, with the company seeking about $150 million in new capital, which CEO Dan Hart said he "will be working on over the next few months."
  • "I am excited by the prospects of Virgin Orbit and its ability to shake up the satellite launch market with its genuinely new way of launching," Sir Richard Branson told CNBC.
Virgin Orbit

Sir Richard Branson's small satellite launch specialist Virgin Orbit is looking to bounce back from the failure of its first demonstration launch in May, aiming to fly its next demo mission in December.

Virgin Orbit, which uses a modified Boeing 747 aircraft to launch its rockets, diagnosed the failure to a high-pressure fuel line in the engine, which caused the rocket to shut down shortly after launching. But the company is nearly finished testing the rocket that will fly the second demo mission with a modified engine.

"Right now the back end of the rocket is open, with the new engine on the factory floor and over the next few days we will install that," Virgin Orbit CEO Dan Hart told CNBC. "We are going to begin pre-launch operations around the beginning of next week ... [which is usually] about a four week operation."

The company is a spin-off of Branson's space tourism company Virgin Galactic. A wholly separate company, Virgin Orbit is privately held by Branson's multinational conglomerate Virgin Group.

Virgin Orbit is developing an air launch system that's designed to carry small satellites that weigh up to 500 kilograms to orbit. Its LauncherOne rocket is carried up to about 45,000 feet altitude by the 747 jet, where it is dropped – and then quickly fires its engine and accelerates onto space.

Virgin Orbit drops a Launcher One rocket from under the wing of its modified Boeing 747 in a key test before the company's first launch.
Virgin Orbit | gif by @thesheetztweetz

Hart believes Virgin Orbit would have made it to orbit on its maiden launch if that fuel line hadn't breached.

"The systems were operating really nominally ... it was a boring flight out. The rocket dropped, everything was operating really well and if you look at how we did fly, it was right in the center of our predictions," Hart said, adding that, other than the fuel line, "everything was rock solid."

The second demonstration rocket undergoes cryogenic testing at the company's facility in Mojave, California.
Virgin Orbit

Virgin Orbit diagnosed the issue with many of its employees working remotely due to the COVID-19 pandemic. The rocket for the second demo mission, which is the third booster the company has built to date, has been fully tested at Virgin Orbit's facility in the Mojave desert. Hart said that Virgin Orbit will repeat some of that testing this month with the modified engine before the company begins pre-launch operations. But even with the setback, Virgin Orbit has been able to make progress toward its goal of offering a launch service that can quickly be available for customers.

"For what we just did with the rocket in Mojave – going through checkout – the first rocket took us about three and a half months to go through. We just did it in about two weeks" with the second demo rocket, Hart said. "We're seeing the efficiency ramping tremendously, as we also did our engine test in half the time of the engine test before that."

The rocket for the company's second demonstration mission undergoing final assembly at its factory in Long Beach, California.
Virgin Orbit

Branson, for his part, continues to back Virgin Orbit.

"I am excited by the prospects of Virgin Orbit and its ability to shake up the satellite launch market with its genuinely new way of launching," Branson said in an emailed statement to CNBC. "Orbit has spent the last few years building a fast, responsive system, that is versatile and backed by a very talented team in Long Beach and Mojave. Virgin Orbit has Governments and companies from around the world approaching it to be its partners and are poised to turn this into a company that could make a real difference."

Seeking fresh capital

Hart confirmed that Virgin Orbit is "having discussions" about further investment, with the company seeking about $150 million in new capital – a raise Hart said the company "will be working on over the next few months." The Wall Street Journal on Sunday reported that Virgin Orbit's raise could be as much as $200 million, with the company's valuation reaching about $1 billion. The company declined CNBC's request for comment on its valuation.

Richard Branson's Virgin Orbit, with a rocket under the wing of a modified Boeing 747 jetliner, takes off for a key drop test of its high-altitude launch system for satellites from Mojave, California, July 10, 2019.
Mike Blake | Reuters

Speculation has varied widely on how much Virgin Orbit has invested to date, with estimates ranging from $400 million to $500 million and even over $700 million. Hart declined to specify how much Virgin Orbit has spent, instead saying that the company's investment so far has come from either Branson's Virgin Group or Mubadala Investment Company PJSC – the United Arab Emirates sovereign wealth fund that also has a significant stake in Virgin Galactic.

As for Virgin Orbit's longer term future, since Virgin Galactic went public via a SPAC merger last year, Hart said that "everything is on the table" in terms of whether his company might IPO.

"There are some really interesting developments going on [in the market], but we're focused on obviously getting to this next flight and ramping up commercially," Hart said. "There's a lot we can do with the system, and some of it will take some more capital. So we will continue looking at our options."

Virgin Orbit's CEO noted that historically, rocket companies can take "quite a long time to reach cash flow positive." But Hart expects Virgin Orbit will show the fruits of its labors sooner than other rocket builders, as his company has been building its production facility and increasing its launch efficiency at the same time, so "that upfront investment should bring results sooner."

"We spent our money on two or three key things," Hart said. "We have a new kind of rocket and, unlike a bunch of others in the market, we're not recreating the ground launch rockets of the 60s. We've spent a fair amount of money on our factory, with [rocket] number seven right now."

Virgin Orbit's high level of investment has attracted attention from others in the space industry – most notably Rocket Lab CEO Peter Beck, whose company is currently the well-established leader in the small rocket market. Rocket Lab has raised about $290 million since its founding, with 13 completed missions since its first successful orbital launch in 2018. Beck, in comments to technology website Ars Technica, questioned Virgin Orbit's level of investment to date: "I don't see how that business case closes ... How do you spend that much money and have a return on investment?" But Hart thinks the comparison of Virgin Orbit's air launch approach to other ground-based small rockets is a "completely flawed" analogy.

"It's really great to see our competitors paying attention," Hart said. "These stories coming out [about Virgin Orbit's investment to date] are essentially interviewing our competitors, who are a bit nervous about what's happening in their world and seeing us coming down the tracks like a freight train."

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Noting that Virgin Orbit still declines to specify how much its invested in developing its system, Hart asked to instead "focus on the fact that we are bringing a new technology, liquid air launch rocketry, to the launch market."

"I focus on the capabilities that we're bringing: The responsiveness and the physics associated with air launch are very different from what our ground launch buddies offer," Hart said. "We can fly from any place to any orbit."

Additionally, Hart emphasized that Virgin Orbit has "ramped up operations significantly over the last three years," the amount of time the company has spent developing its rocket since beginning "essentially as a secondary project." Virgin Orbit has a little more than 500 total employees but is ready to begin commercial service "with a fully fledged factory" in Long Beach, California. That factory is capable of producing about 20 rockets a year. And, while "there is a lot we can do with one 747," Hart said that Virgin Orbit does plan to add more carrier jets once its launching more regularly.

"We are also talking to others who may want to have one positioned in their country or in their organization," Hart said. "And 747s are an inexpensive airplane right now, so between our investment, as well as our customers, it won't be very long until there are several 747s up and running."

The global market for small rockets

The company's first demonstration launch in May 2020.
Greg Robinson | Virgin Orbit

Virgin Orbit estimates the global small launch market has "upwards of $2 billion of launch activity over the next five years." Beyond the U.S., the U.K., Japan, and Guam, Hart says that Virgin Orbit has spoken to "a number of other countries" with interest in the company's launch services, "especially in Europe and South America."

"So many countries now have satellite producers, space agencies and exciting plans and each one of them would like have a nearby launch location," Hart said.

Because Virgin Orbit launches its rockets in remote airspace, it works closely with regulators like the FAA and doesn't have a schedule that's dependent on that of a launch facility such as Cape Canaveral in Florida.

Hart sees the small launch market split in three parts: Commercial, NASA, and national security. The commercial opportunity comes from private companies that are launching networks of satellites, known as constellations. Both for deploying and replacing satellites in a constellation, Hart said that the availability and flexibility of launches "will be key." Hart also has "been talking quite a bit with the leadership of NASA" about launch opportunities. The space agency is increasingly making use of small satellites, Hart said, for utilities such as communications with interplanetary missions and more. Finally the U.S. national security piece is "probably the biggest part of the market," with all of Virgin Orbit's rocket building competitors each providing launches for the Pentagon and its various arms.

Branson has spoken to the U.S. Air Force before, promoting Virgin Orbit as having an advantage in rapidly available national security launches. Hart also emphasized that Virgin Orbit also has the advantage of being more discreet than rockets that launch from the ground.

"If you are at a fixed launch base, and there is vapor coming out of your tank, everybody knows what is coming next and they probably kind of know where you're going," Hart said. "If you're flying a 747 from some airport somewhere, it's not quite the same thing. You can position wherever you want to go whenever you want to, and that has really caught the eye of the national security community."

Virgin Orbit in September joined a Department of Defense exercise known as the advanced battle management system (ABMS). Hart said the Pentagon chose Virgin Orbit in the middle of the exercise as the launch provider that should replace a simulated damaged satellite.

"We immediately took off from Mojave and flew over the Pacific, did our simulated deployment and then came back down," Hart said.

As for Virgin Orbit's current stake in the small launch market, Hart said the company has about a dozen launches booked. After the second demonstration flight, which will carry 11 small satellites under NASA's Venture Class Launch Services program, Virgin Orbit plans to fly about six times in 2021.

"And then we want to basically double the cadence the year after, so in 2022 we plan to go to roughly a dozen launches," Hart said. "The key this next year will be to ramp up and just get to that regular rhythm."

The NASA payloads get loaded into the rocket's fairing ahead of launch.
Virgin Orbit

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