Against the bleak backdrop of 2020, many (including myself) have expected the nascent space industry to have a difficult year. Indeed, the year has claimed a number of casualties - Bigelow Aerospace and OneWeb being notable examples, though the latter has successfully emerged from bankruptcy with the help of the British government. However, space as a whole has seen strong growth in 2020, with SpaceX launching their first manned missions to the ISS and startups like Astra completing their first ever flight to space. Relativity Space, an LA-based smallsat launch provider, is another one such startup, having raised $500 million from investors on a massive $2.3 billion valuation in November 2020. This puts the company ahead of Rocket Lab, the current frontrunner in the smallsat launch industry, in terms of valuation and behind SpaceX (albeit by a lot - SpaceX was last valued at $46 billion in August 2020) as the second most valuable private space company. It is worth asking whether this is a reasonable valuation for a company that has yet to host a single launch attempt of its Terran 1 rocket in comparison with startups like Astra, which has staged a number of launches and is progressing toward a successful orbital launch in 2021. I believe the valuation is justifiable given the strong projected growth of the smallsat market within the next decade and especially if one accounts for the future potential applications of Relativity’s manufacturing technology, which relies on 3D-printing the vast majority of components, in areas such as space-based manufacturing in orbit or on future planetary colonies. The manufacturing of spacecraft components for maintenance will inevitably move into orbit to save on launch costs, and Relativity and others’ additive manufacturing technologies may prove critical for such move.

Before looking at future potential, let’s first examine Relativity’s competitive advantages in comparison with its fellow launch companies within the smallsat launch market, which is where the company’s Terran 1 launch vehicle sit. The rocket is a two-stage launch vehicle that uses nine methane-LOX Aeon 1 engines on the first stage and one Aeon 1 engine on the second, with an advertised payload capacity of around 1.25 tons to low Earth orbit at a price tag of $12 million per launch. This puts it in between Rocket Lab’s Electron rocket - capable of launching 225 kilograms at $5.7 million - and Virgin Orbit’s LauncherOne - capable of launching between 300 - 500 kilograms, also at $12 million. It is immediately clear that, on paper, Relativity provides the cheapest launch service in terms of per-kilogram launch cost, at just shy of $9,600 per kilogram, whereas Virgin Orbit is double that at best and Rocket Lab almost three times as expensive. Of course, these figures are based upon publicly advertised costs and do not factor in discounts frequently given to launch purchases and potential future reuses (Rocket Lab has begun experimenting with recovering the first stage of Electron), but they do explain how Relativity has secured seven paying customers before having flown a single flight. It is also worth noting that while SpaceX, being the towering giant in the launch industry, has even lower per-kilogram launch cost with its reusable Falcon rockets. Their massive payload capacities - more than one magnitude higher than the Terran 1 for the Falcon 9 - means any SpaceX smallsat launches will be big ride-sharing missions, though SpaceX is offering the service at rock-bottom prices. The bottom line is that Relativity’s low prices has a place in the market for dedicated smallsat missions, just like its competitors, but it remains to be seen whether the market is large enough to accommodate the whole host of startups if SpaceX and other larger launch companies capture market share via large ride-share missions.

3D-Printing and the Relativity Advantage

As with other launch startups, Relativity is focusing on innovations on the manufacturing side to streamline productions and bring down costs for its launches. Unlike other companies that have focused on relatively more traditional (and often more labor-intensive) manufacturing techniques, Relativity is looking to utilize additive manufacturing - known popularly as 3D-printing - to build almost every component for its Terran 1 rocket. Its goal is to eventually 3D-print the entire rocket, from start to finish, within 60 days.

There are several advantages to this approach. The first is that additive manufacturing allows for vastly less components and a simpler rocket design overall, as components that may traditionally require assembling several separate pieces into one, complex design - such as a rocket engine - can now be 3D-printed together in one go. Additive manufacturing also allows for rapid prototyping and iteration as engineers can rapidly produce new prototypes by digitally tweaking the design and manufacturing it right on the spot without the need for new specialized tools. To manufacture parts as large as an entire rocket, new 3D-printing machines had to be developed in-house - the company unveiled the “Stargate,” a building-sized metal 3D-printer, that Relativity claims is the world’s largest. The machine utilizes selective laser sintering to accurately 3D-print metallic parts based on sophisticated three-dimensional models with a custom alloy. While all these technologies - the machinery, metal alloy, and manufacturing software - must be developed internally, the company believes the reduction in complexity and increase production rates more than make up for the investment: “We have to make the technology itself. But, we believe that once it actually exists, it will be much faster to scale up and produce rockets at scale,” says Tim Ellis, the CEO of Relativity, in an interview in 2018. The company claims that the Terran 1 uses 100 times less components than a similar-sized rocket as a result of these advances.

The advantage of this approach actually manifested, unexpectedly, during the pandemic this year, when whole swaths of the country came to a stop to slow the spread of COVID-19. Relativity Space emerged largely unaffected, however, as the company relies mainly on its 3D-printing machines for manufacturing that only require a small workforce to be present to monitor and run the machines. The “autonomous manufacturing” approach, as described by Ellis, is an incredibly strong competitive advantage when other launch startups have suffered setbacks in 2020, notably with Virgin Orbit and Astra’s numerous failed launch attempts this year. It is the promise of additive manufacturing that has driven investor confidence and its massive $2.3 billion valuation this year, and given the projected $29 billion global smallsat launch market size by 2029, this is not an unreasonable valuation. However, I believe the company has strong growth potential beyond the launch market, namely within the space manufacturing segment that could become a growth driver in the near future with the establishment of permanent human colonies on the Moon and Mars.

Space Manufacturing

Every piece of space equipment has to be manufactured on Earth and then launched into orbit, from large space station segments all the way down to replacement parts as small as a screw. As I have illustrated earlier, these parts become incredibly expensive as soon as launch costs are factored in - even the cheapest possible per-kilogram launch cost on SpaceX rockets come with a price tag in the thousands of dollars per kilogram. This is unsustainable if a viable space economy is to develop, with commercial space stations and lunar colonies that all require regular maintenance and upgrades to sustain smooth operations and the safety of the crew.

This is where Relativity’s additive manufacturing technology really shows its potential - if whole commercial modules and parts, such as airlocks and crew cabins, can be manufactured on the Moon or Mars with materials sourced locally, then only the 3D-printer itself will need to be launched from Earth, massively lowering the associated costs for these parts. Ellis himself alluded to this market during Relativity’s most recent funding round: “[Our Mars ambitions] really stems from the 3D-printing technology, which which we can actually start [delivering to Mars] by launching smaller pieces.” Closer to the present, 3D-printing machines can manufacture replacement parts for spacecrafts on demand from orbit, reducing the need to launch new hardware whenever new parts are needed for maintenance; considering the space hardware industry as a whole is a $120 billion industry, a sizable chunk of this market can be addressed by introducing on-orbit repair shops that can support the maintenance of expensive satellites, which is itself a growing industry - earlier this year, Northrop Grumman docked a mission-extension vehicle to a communication satellite to extend its service life. This is a new market that Relativity can diversify into, whether it is through partnership with an established aerospace giant like Northrop or by itself. Both SpaceX and Rocket Lab are diversifying themselves away from pure play launch providers, with the former entering the satellite internet market with Starlink and the latter entering the satellite manufacturing segment with its Photo satellite bus. Relativity would be foolish to not eye a complementary segment, such as the space manufacturing segment, to diversify into.

Conclusion

Relativity has emerged as one of the success stories of 2020 in an incredibly tumultuous year, raising huge sums of capital to fund its push to launch its Terran 1 vehicle by 2021. The latest funding round - led by institutional investors such as Fidelity and Baillie Gifford - represent a significant vote of confidence in the young company that has yet to perform a single launch. Yet this investment decision is neither erroneous nor overvalued - the company’s 3D-printing-based manufacturing technique increases simplicity and lowers cost that can be adopted into other highly lucrative industries in the near future. The company’s goal of industrializing Mars - not unlike SpaceX - is surely an encouraging sign for investors looking to find the next space unicorn that is capable of bulldozing through R&D schedules to achieve rapid growth.

The company still has a long road ahead toward achieving its goals, however. While Relativity’s Aeon 1 engine has been test-fired over 300 times, the company has yet to demonstrate launch capabilities with these methane-LOX-based engines in a nine-engine configuration. Multi-engine vehicles, like SpaceX’s Falcon 9 and Rocket Lab’s Electron, have proved to be reliable, but Relativity still must prove that its flight software is as capable and sophisticated as its manufacturing techniques. If the company succeeds with its first launch attempt next year, I am really excited to see the competition dynamics between Relativity, Rocket Lab, SpaceX, and other startups like Astra that may potentially begin commercial services in 2021. Every one of these companies bring unique approaches to their manufacturing and rocket designs, and it remains to be seen which of the bunch are the most effective at putting satellites into orbit.

Ellis, for his part, isn’t focused on the short-term competition: “I’m hoping Relativity’s continued success inspires and emboldens more entrepreneurs to found companies that have both very lucrative near-term business opportunities, but also can build towards building a sustainable society on Mars.”

Derek Jiang, December 27th, 2020