The archive · Space, Robots, Defence · Financial decision · 2018
SpaceX's 2018 raise bet: $500M at a $30.5B valuation while launch demand softens
As commercial satellite launches stagnated, SpaceX raised $500M at a $30.5B valuation — pricing the future Starlink broadband business, not 2018 revenue.
SpaceX
What the business is
Private launch company known for reusable rockets: by 2018 it flew the Falcon 9 and Falcon Heavy for commercial and government customers, and was developing the Starlink satellite-broadband constellation and the next-generation BFR rocket.
How it started
SpaceX's 2018 position came from a decade of reusability: six years of Falcon 9 flying with only two failures and one partial failure out of 65 flights, a cadence that let it undercut incumbent ULA and lock in what commenters called a $12B launch manifest. But the launch market that paid the bills was flattening, and the company's next acts — Starlink and the BFR — needed capital beyond what launches were producing.
What happened
On December 18, 2018, the Wall Street Journal reported SpaceX was raising $500M at a $30.5B valuation. Discussion on HN put the step-up at roughly $3B over the previous round despite a flat launch year — about 20 launches by mid-December against a 30-launch target. A WSJ passage quoted in the thread said SpaceX expected Falcon 9 launch declines in 2019 and perhaps 2020 as global demand for commercial satellites stagnated, with some manufacturers and customers looking to exit the segment. The bull case in the thread was Starlink: a possible multi-billion-dollar recurring-revenue business that one commenter estimated at more than $5B a year, but one that could not be economically deployed without the BFR.
No ending yet — it is still running.
Background
SpaceX entered December 2018 as the cost leader in launch: commenters on the news thread noted Falcon 9 had flown 65 times over six years with only two failures and one partial failure, the company held what one called a $12B launch manifest as of IAC 2018, and its pricing was undercutting incumbent ULA. But the core business was softening — 2018 was tracking near 20 launches against a 30-launch target, roughly flat with 2017.
On December 18, 2018, the Wall Street Journal reported SpaceX was raising $500 million at a $30.5B valuation. The WSJ article, quoted in the HN thread, said SpaceX expected declines in Falcon 9 launches for 2019 and perhaps 2020, with global demand for commercial satellites stagnant and some manufacturers and customers looking to exit the market. Commenters put the valuation step-up at roughly $3B over the previous round despite the flat launch year.
The debate in the thread was whether the valuation was justified by the future, not the present: Starlink, SpaceX's satellite-broadband constellation, was framed as potentially a larger and more profitable business than rockets — one commenter estimated it could deliver more than $5B in yearly recurring revenue — but also as dependent on the next-generation BFR rocket, since Starlink could not be economically deployed on Falcon 9.
What has to be true
- Launch revenue was plateauing — 2018 tracked near 20 of a 30-launch target — so a rising $30.5B valuation had to rest on a business that did not exist yet.
- Starlink was the credible future: a satellite-broadband service that commenters argued could become a multi-billion-dollar recurring-revenue business, dwarfing launch income.
- The BFR dependency made the bet compound: Starlink's economics required the next-generation reusable rocket, so the round was funding both halves of the same wager.
- SpaceX's track record — 65 Falcon 9 flights with two failures and one partial — gave investors a reason to price risk lower than the flat revenue year suggested.
What can be applied
A company can be valued on its next business before the current one peaks: SpaceX's 2018 round priced Starlink's potential while launches stalled, so the financing worked only if that revenue arrived.
Aftermath
As of December 18, 2018, SpaceX was still raising: the WSJ-reported $500M round at a $30.5B valuation was in progress, roughly $3B above the company's previous round per commenters, even as 2018 launches tracked near 20 against a 30-launch target. The WSJ article, quoted in the discussion, said SpaceX expected declines in Falcon 9 launches for 2019 and possibly 2020 as commercial satellite demand stagnated. Commenters argued the valuation rested on Starlink becoming a large recurring-revenue business — some estimated $5B+ a year — which in turn depended on the next-generation BFR rocket.
Sources
- HN discussion: SpaceX Is Raising $500M at a $30.5B Valuation
- Elon Musk's SpaceX Is Raising $500 Million in Funding
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