Final Boss: The CEO of the world’s biggest public pure-play space company has a plan to compete with SpaceX

Peter Beck took a highly unusual route to riches in rocketry.

A lifelong tinkerer from a family with a knack for engineering, Beck, a 47-year-old from New Zealand, never graduated from college. Instead he began his career as an apprentice at high-end appliance manufacturer Fisher & Paykel. A space enthusiast, he used access to the company’s tooling and materials to help build his own rocket-powered bike. He went to work for a government-supported industrial research institute before founding his own company in 2006, Rocket Lab, to produce inexpensive rockets to take small payloads to space for university researchers.

Now, nearly two decades on, Rocket Lab USA — which went public via a SPAC in late 2020 and is now based in Long Beach, California — has positioned itself as perhaps the world’s second-largest commercial space company (Elon Musk’s SpaceX is the top dog, but private), and emerged as a favorite of retail traders with a fetish for future-focused firms.

But while its shares have gone stratospheric this year, up more than 300% with most of the gain coming in the past three months, the company continues to post sizable losses and burn cash.

Beck, whose shareholdings recently rose above $1 billion in market value, recently sat down with Sherwood News to talk about prospects for the company, whether he worries about Musk’s influence over the incoming administration, and his outlook for Rocket Lab turning a profit anytime soon.

This interview has been edited for clarity and length.

Sherwood: The stock’s up something like 300% this year. Do you have a theory why?

Peter Beck: There are a lot of companies that’ve gone public within the space industry, and almost exclusively they’ve performed very poorly with respect to execution. But for us, we just kind of methodically executed as we always have. Quarter after quarter, year after year, we just did what we said we were going to do, and executed and executed and executed.

Sherwood: Do you mean in terms of successful launches?

Beck: Yep — successful launches, winning of contracts, growing the revenue, growing the backlog. The financial metrics, but also the technical achievements. Pretty much everything has tracked to where we said it would be, within reason.

Then, I think the other part of it is that, if you look at our competitors, one competitor is — as you know — the wealthiest person on the planet. But if you look at that company, its current valuation is somewhere between $250 billion and $350 billion. If you’re looking for a space company that is, you know, looking like it’s going to be an analog to that company, it really is us.

So as we continue to execute, the gap between our two businesses continues to shrink more and more and more. We’re currently valued at less than 5% of SpaceX, but give it a few more years.

Sherwood: Can you lay out the broad structure of the company? As I understand, there are two business lines: launch and then space systems. What are they? What are their strengths? How do they fit together?

Beck: OK, if you look at the space industry, you can dissect it into three elements. Firstly is launch, and that’s about a $10 billion to $20 billion total addressable market [TAM]. Launch is the keys to space, right? That’s super, super fundamental. Very, very few people on this planet have launch capability.

Sherwood: And that’s essentially shooting the rocket into the sky? Having all the equipment, all the infrastructure?

Beck: Yep. So there are only two commercial companies flying at cadence right now, and that’s SpaceX and us, flying at any sort of flight rate. That’s the launch space.

Then there’s the second element, which is satellites, the actual physical satellites and infrastructure in orbit. We call them space systems, but think of it as the infrastructure and satellites. And that’s a $20 billion to $30 billion TAM.

Then, finally, there are all the services that come from that infrastructure in space. So, your DirecTV, internet, and communications, Earth observation, all those things. That’s a $320 billion TAM.

If you look across those three verticals, what we’re trying to build is an end-to-end space company that does all those things.

Launch is super important. If you have unfettered access to orbit, then you have a significant advantage over somebody who doesn’t own their own rocket, for example.

Then, the second pillar is being able to build the satellites that provide the services.

The third pillar, of course, is providing the service from space. And our intention is to be that. That’s kind of the next step for us.

A good example of this is StarLink. If you’re trying to provide internet from space, the only way you can be competitive with StarLink is to build all your own satellites and have your own rockets to launch. In the future, the really, really large space companies of the future, it’s going to be blurry. Are they a space company, or are they a services company?

Sherwood: And that’s the entity you want to be, correct?

Beck: Correct. But the key here is the rocket. The key is having low-cost reusable rockets to access space. That’s why we have our Electron rocket, the third-most-frequently launched rocket in the world, and why we’re developing a Neutron rocket, which is a 13-ton vehicle to provide us that multiton capability.

That’s why a lot of people are focused very much on our Neutron rocket and its development, because not only does it enable us to compete in that rocket TAM, it opens up this much bigger opportunity for us to deploy services in orbit.

Sherwood: It seems as if there’s been a shift in the space industry toward an emphasis on low-Earth orbital constellations of satellites. Why did that change happen, and how is your business related to it?

Beck: Exactly right. So, two reasons. I’ll give you the government reason and then the commercial reason.

The government reason is that the US government has a lot of national-security assets, which they typically put in very high geostationary orbit. The trouble is that there is a small number of them, and they’re the juicy targets. So the US government is disaggregating that into a larger number of low-Earth orbit assets. Obviously it becomes pointless to try to remove any of those assets because there’s just more.

Sherwood: And that’s sort of a national-security imperative. We want to have duplicative satellites so that the Russians or whoever don’t just knock out our one satellite that we rely on for GPS or whatever.

Beck: You can imagine you had a particular communications satellite in geostationary orbit — there’s like three of them. You knock all three out and you’ve got no comms. Whereas if you have 300 in low-Earth orbit, and you can launch more at any time, it’s just pointless. That’s why the government has gone into low-Earth orbit.

Now, why commercial has gone into low-Earth orbit is fundamentally because the cost of getting to orbit has dramatically reduced.

Sherwood: Is there a technical reason low-Earth orbit became cheaper, or is it just Musk and SpaceX?

Beck: It's just that the cost of getting to orbit dramatically reduced, through us and through SpaceX. That kind of changes the paradigm.

Sherwood: I was looking through your 10-K from last year. It looked like roughly a third of your business was from US government or related contracts. Is that still the case, that government makes up roughly a third of sales?

Beck: Actually more than that, probably over 50%.

Sherwood: This may be a little bit of a sensitive topic, but given that roughly 50% of the business is government contracts and your top competitor is Elon Musk, and given his sort of influence in the incoming administration... If I were in your shoes, I’d be worried about that. Are you worried?

Beck: Look, at the end of the day, the country will always put national security first. And Elon would be the first to tell you that having healthy competition makes everybody better. So, no. I think that makes a great headline. But the reality is, the practicalities of doing that are very difficult. You know, America is a place where we’re commercial and competition rules supreme. So no, I really don't see that as being a likely outcome.

Sherwood: I read a little bit about your background and have been really struck. You’re not a university graduate. You essentially started as an apprentice tool and die maker. Is that right? How is this possible that you founded and run a $14 billion space company?

Beck: My plan was always to work in the space field. And there was zero space industry in New Zealand. I knew that my approach here was going to have to be a little bit nontraditional.

So yeah, that’s exactly what I did. The plan was always to go to university, but opportunities kept presenting themselves such that I never got there. Now I ended up being made an honorary professor, so I’ve got a piece of paper on the wall. But look, I’ve always said there are two ways of learning stuff. You can sit in a classroom and learn about how a shaft breaks in a machine, or you can go into industry and break the bloody shaft.

This plastic space shuttle [Beck picks up a miniature space shuttle and shows it through his laptop camera] has been on my desk since I got it at school. This has been the inspiration for my entire life. My goal was to go and work for NASA. And, you know, I ended up working at a government research institute as a research engineer and doing superconductors and advanced composite structures.

I went on a bit of a rocket pilgrimage, where I went and visited all the companies that I had corresponded with over the years and visited a whole bunch of NASA facilities. Following that trip, basically two things became very apparent.

One, a foreign national with no university degree and no knowledge in the space industry was not going to get a job at NASA. There was zero possibility of that. Secondly, the same guy didn’t want a job at NASA because the average age was 52 and they were doing nothing interesting. So really, when you think about it, what were my options? I mean, I’m not going to get a job in America. But I knew how to do all this stuff. The only logical option was to start my own company down in New Zealand and do it that way.

Sherwood: Tell me about the Neutron rocket. You’ve described it as a sort of focus of your plan to break what you’ve described as a medium-load monopoly — that is, the fact that the US government is relying essentially completely on SpaceX at the moment. Why is it important? What can Neutron do?

Beck: Well, firstly, no monopoly has survived the test of history. There are a number of reasons that both the US government and the commercial providers would love an alternative solution to get to orbit, for various competitive reasons. That’s kind of point one.

Also, there is a tremendous number of constellations, both government and commercial, coming to market in the next few years, and they all require launch. There is a massive deficit in launch. If one company can’t fill all that deficit, there has to be more capacity brought on in the market. So we think we can bring a vehicle that is very competitive, designed to be reusable from day 1, to really disrupt that medium-lift class of launch.

Now, the other reason that Neutron is important to us is that we will launch everybody else’s stuff and create a great business doing that. As we pointed out, we also need to launch our own stuff. So Neutron is just as much about providing alternatives and competition into the medium-lift market as it is in having capability to lift our own stuff in the future.

Sherwood: To go back to the company’s performance, the sales have been growing nicely. You had $104 million in sales last quarter. But there have been consistent losses, around $50 million on a GAAP basis last quarter. What’s the plan for profitability?

Beck: Look, it’s all about Neutron. You know, it’s a large sucking sound everywhere, but it’s just such a transformational product that we have to invest in it. If you look across the rest of the businesses, it’s all in the green and looking good. We were very clear when we went public and we started that project that it’s a multiyear project; it’s going to consume somewhere between $300 million and $350 million. This is tracking exactly as we said it was going to be. So this shouldn’t be a surprise to anybody.

Sherwood: But as a rough estimate, in terms of getting to profitability, have you thought that far? I mean, I assume you have since you started the company.

Beck: Yeah, of course. It’s all when Neutron starts flying commercially. That’s where the P&L flips pretty quickly. The Neutron is a $55 million sticker price, so it’s a pretty meaningful sticker price per launch. It all comes into focus when Neutron starts flying.

Sherwood: The first commercial flights would be, as envisioned, in 2026. So I guess the question is, from just the financial perspective, I looked at your cash and cash equivalents, and you had something like 350 million bucks?

Beck: $500 million.

Sherwood: I’m looking and I see $340 million, but maybe that’s the wrong number.* Do you feel confident you have the cash you need to get to where you need to go?

Beck: Well, look, the whole program is costing — call it $300 million. So if you’ve got $500 million, you could do a whole other rocket program — not that I’d ever recommend that. But no, we’re fine in that respect.

*Rocket Lab reported cash and cash equivalents of $341 million at the end of Q2, and $292.5 million at the end of Q3. The company also reported a separate Q3 cash figure of $503 million that included cash, cash equivalents, and marketable securities.