SpaceX Sells 10% Stake to Google, Fidelity for $1B

http://www.bloomberg.com/news/2015-01-20/musk-s-spacex-sells-10-stake-to-google-fidelity-for-1-billion.html?hootPostID=e032d9a22131660ad2c3ecfaa1639a46

by hodgesmr • 12 years ago

339 154 12 years ago

bloomberg.com

bronz• 12 years ago

Before anyone mentions that Satellites can only deliver inferior internet service, previous threads have taught us that with low earth orbit satellites latency is not a problem.

foobarqux2• 12 years ago

Satcom data rates and reliability are definitely going to be inferior to fixed lines and I assume terrestrial wireless.

rst• 12 years ago

Depends what market you're targeting. Google's "Project Loon" (data delivery from antennas stationed on high-altitude blimps) was explicitly targeted at third-world areas without much on-the-ground infrastructure.

krschultz2• 12 years ago

But crappy sat network is better than no network. If I can build a log cabin 1000 miles from anywhere and access HN, or log into HN from my sailboat offshore, I will finally be able to never be productive from anywhere.

devindotcom• 12 years ago

Plus, inferior/high-latency is fine if it's global. I'm guessing people won't generally be trying to play Call of Duty on these universal links, but rather getting essential services like wikipedia, email, etc.

carbocation• 12 years ago

The latency is like 11ms. It's not going to substantially worsen my COD ping.

Cogito• 12 years ago

Down thread there are a lot of numbers thrown about, some slightly wrong or only in miles, so let me summarise them! The values are taken mostly from wikipedia, with some data double checked against [1]

Low Earth Orbit (LEO)

altitude: 160 to 2,000 kilometers (99 to 1,200 miles)

orbital period: ~88 to ~127 minutes

latency: 20 to 40 msecs

Geosynchronous Earth Orbit (GEO)

altitude: 42,164 km (26,199 mi)

orbital period: 1 day (approximately 23 hours 56 minutes and 4 seconds)

latency: 240 milliseconds

[1] http://iml.jou.ufl.edu/projects/Fall99/Coffey/INDEX.HTM

benihana• 12 years ago

So if the orbital period is about an hour and a half to two hours, does that mean that you can expect to hold on to a single satellite's signal for about 40-50 minutes? Longer? I wonder how much power a cell phone will have to use to track a satellite that's moving through the sky - if the tracking will dominate power usage, or sending and receiving the signal will and we won't see much change.

I wonder how this will be different (if at all) from GEO satellites when it's cloudy. Could you presumably find a satellite near the horizon to use to bypass the clouds?

mtrpcic• 12 years ago

This is very exciting. While Google might have strayed from their original "Don't be evil" mantra a little bit, I couldn't think of a better partner for SpaceX to work with on this. Not only does Google have the drive and deep pockets, they've got the incentive. If this works out as well as everyone is hoping, not only will it upset the internet industry, I can see this having benefits for the telco/cell carrier industry as well. With cheap, fast internet available worldwide, nobody is going to pay $30 for a 2GB cap on their mobile phones.

Florin_Andrei6• 12 years ago

While Google might have strayed from their original "Don't be evil" mantra a little bit

I don't know. I'm getting more and more the impression that Page is cut from the same cloth like Elon Musk. Both seem to be balls-to-the-walls visionaries who accept nothing less than the utmost limits of what's possible - and then aim a bit higher than that.

I'm starting to think that, for Page, "evil" means "anything less than the greatest possible good for the largest number of people, over a very long term".

freehunter2• 12 years ago

But the thing that makes it hard for some people to believe is not the long term vision, but the short term actions. Musk isn't really doing anything that people could call harmful. However, there are a lot of people who would disagree with that if you said the same thing about Google.

wavefunction• 12 years ago

This seems quite charitable in every way. I don't know if it's just that I'm an Elon fanboi but I don't see the comparison.

Sure, Page has accomplished quite a bit, but I find it hard to compare to Elon Musk's track record in founding multiple cutting-edge firms in several wildly different domains. Perhaps I assign too much to the production of physical goods and not enough to software but that is a bias I must admit.

jackgavigan• 12 years ago

I dunno... The first thought that ran through my head was "Jeez, I hope they don't screw it up."

By which I mean that I hope that SpaceX's mission to lift the human race out of Earth's gravity well, colonise Mars and explore the galaxy doesn't end up playing second fiddle to some elaborate ploy designed to sell more online adverts.

moca• 12 years ago

SpaceX would drive the product and Google will be a great partner and investor. It is a good match. If Google drive the product, that would raise a lot of concerns across many governments - like EU - as if they didn't have enough problems already.

apaprocki• 12 years ago

I find it fascinating that through the business lens, Google is competing with Facebook to sell more ads by going into low earth orbit. We didn't get flying cars like they promised in the Jetsons, but that sounds pretty futuristic.

TeMPOraL9• 12 years ago

While this is something Google earns most its money on, I don't think it's the sole reason for its actions, nor that it wants to stay in that business forever.

JustinJBM• 12 years ago

"Selling ads" puts it harshly, but it's entirely what this is about. More information, more organization, more people online, more ads :)

mbesto• 12 years ago

When your trying to grow you either make the glass bigger or add more water. By providing more internet to people who don't already today, you're simply making the glass bigger, which means more ads can be served up.

nl• 12 years ago

An alternative view is that "selling ads" is is just a means to an end.

There seems to be plenty of evidence that Google's top leadership is more focused on finding alternate revenue streams that just "selling ads".

lochieferrier• 12 years ago

We did get flying cars. They just haven't delivered them yet.

YokoZar• 12 years ago

This is a bit like claiming that Google is investing in radical medical technology because people will watch more ads over their newly extended lifespans.

lumpypua• 12 years ago

And if the financial incentives lined up and they actually did extend lifespans, would that be a bad thing?

ihsw• 12 years ago

Traveling to Mars will now require a Google+ account.

maaaats• 12 years ago

And if something break down while there, it is no way to get support.

walru2• 12 years ago

Once, long ago, I thought Google would have bought Radio Shack and installed wireless network hubs in all ~5000 of them to bring internet to the masses. I guess this is a subsequent option.

That said, on the verge of bankruptcy, Radio Shack currently only has a Market Cap of 25MM.

elberto342• 12 years ago

but the debt...market cap is meaningless in these situations

walru2• 12 years ago

You know, I was going to add a bit about the debt, but I knew this comment was off topic enough/

I couldn't advocate an actual purchase now, but at one point it seemed interesting. I just wasn't thinking big enough.

gaius2• 12 years ago

So let me get this straight... SpaceX is worth half of WhatsApp? Does anyone else feel like they're living in Bizarro-world?

_pferreir_• 12 years ago

Yeah. That seems to be the case.

stdbrouw• 12 years ago

Same reason diamonds are worth more than water.

wuliwong7• 12 years ago

Unless you are stranded on a desert island of course.

jacquesm6• 12 years ago

SpaceX is water and whatsapp is diamonds?

Tossrock• 12 years ago

Not sure why you're being downvoted, that was my first thought as well. Sure, I understand the concept of defensive acquisitions, valuation as what people are willing to pay, per-user value, developing world markets, etc. But rockets are still rockets, and a messaging app is still a messaging app. I think it's the incredible disparity in total embodied energy for WhatsApp vs SpaceX that makes this intuitively hard to accept.

3pt14159• 12 years ago

To be fair whatsapp is not just a single messaging app, it's hundreds that work on all sorts of shitty phones in all sorts of languages.

tsotha6• 12 years ago

But rockets are still rockets, and a messaging app is still a messaging app. I think it's the incredible disparity in total embodied energy for WhatsApp vs SpaceX that makes this intuitively hard to accept.

The hardest thing I ever did as an investor was let go of thinking there's some correlation between the things I like and market value.

tsotha6• 12 years ago

Stock valuations are based on what investors think the earning potential of a company is. While rocket companies are beyond cool it's a pretty difficult business in which to actually make money.

wuliwong7• 12 years ago

I think messaging apps are even more difficult, right? SpaceX has made around $4 billion on contracts so far which I would guess is more than whatsapp.

krschultz2• 12 years ago

No. WhatsApp is used by billions of people daily. SpaceX is a really good government contractor.

What % of AT&T's market cap ($175B) is its SMS business? What % of Lockheed Martin's market cap ($65B) is its space business? Think about the incumbents WhatsApp & SpaceX are trying to dislodge. Generally speaking the ones WhatsApp (now Facebook) are larger by market cap than the ones SpaceX is targeting. That reflects the fact that something everyone uses a little bit every day is generally worth more than something used by very few people, intensely.

teraflop• 12 years ago

WhatsApp is used by billions of people daily

To be pedantic, more like hundreds of millions of people monthly.

TeMPOraL9• 12 years ago

I think maybe Musk should consider releasing a social app and then selling it to bankroll the future of humanity.

absherwin• 12 years ago

No one knows what the demand curve for space looks like. Those who feel SpaceX is crazily undervalued implicitly assume two things: A steep demand curve* and that SpaceX will continue to drive down prices by large amounts.

*This is equivalent to: There are tons of people who think space is cool or useful and do nothing because it's too expensive and that won't be true with SpaceX's costs in 10 years.

wuliwong7• 12 years ago

Whatsapp isn't used by billions of people everyday. Their install base was like 700 million? http://en.wikipedia.org/wiki/List_of_virtual_communities_wit...

Even if each one of them was paying the $1 annual fee, that's still less than a billion dollars in revenue.

Also, often valuations are based on the number of employees. SpaceX has 3,000 plus billions of dollars in capital equipment. Whatsapp had 55 I believe and basically zero dollars in capital equipment.

I think that there is more to this deal than "Google gets 10% for $1 billion". There is no way SpaceX is only worth $10 billion.

bfe• 12 years ago

Gov't contracts are only something like one-third of SpaceX's revenues.

Udik2• 12 years ago

I saw many people using this argument of the "small value but for many people". But I think we should take in account also the replaceability factor: the hundreds of millions of users of Whatsapp could switch at any time, with no effort and no loss, to any other messaging application. There's plenty of them. As for the actual revenues of Whatsapp, they're approximately 0.

Florin_Andrei6• 12 years ago

That reflects the fact that something everyone uses a little bit every day is generally worth more than something used by very few people, intensely.

Yup. Toilet paper is a massive industry, too, worth a lot of money.

No snark, just reality.

samstave2• 12 years ago

Sorry, but how in the world will WhatsApp dislodge AT&T? The ONLY way it could do so is if FB and Musk/Google create the space-based inet access for the globe- then transition the entirety of the WhatsApp user-base to that system.

This isnt a bad idea actually - "if you want access to WhatsApp-X, then you must use Space-X inet service"

TeMPOraL9• 12 years ago

gaius, we've been through this discussion today :).

https://news.ycombinator.com/item?id=8915524

EDIT: but to answer your question - yes, I very much feel like that.

rcchen• 12 years ago

One thing that needs to be considered is that SpaceX is operating in a space that has far higher risk for a (relatively) indeterminate reward right now. A single accident could severely damage the company's reputation and revenue stream, and I think their valuation might reflect this cautious approach to their business model.

TeMPOraL9• 12 years ago

I agree; though as a side point - after 3 failures in 2008 and that famous "optimism, pessimism, fuck that" quote, I want to believe it will take more than just a single accident to damage SpaceX's reputation.

robbiep• 12 years ago

You could replace spacex with whatsapp in that paragraph and it would still be true- more so even- the barrier to change with messaging apps is almost zero however everyone knows rockets are hard and no one expects a failure on the pad to destroy what is looking like a good launch track record.

If whatsapp start charging or introduce ads I can't see why people would stick around, considering the Huge number of whatsapp users who also have viber/snapchat/basis sms also installed

api• 12 years ago

It is. The fact is that we really don't spend much on space.

ProAm6• 12 years ago

The ROI is debatable.

mliker• 12 years ago

Taking a basic economics course would answer your question.

tsunamifury• 12 years ago

Don't confuse market value with intrinsic value. Money is not the arbiter of all things.

Florin_Andrei6• 12 years ago

Finally, a comment that makes sense. Thank you.

SilasX• 12 years ago

Had a similar realization when I caught up with my old boss at a big aerospace/engineering conglomerate. I looked it up and it had an $11 billion market cap. He (being in a smaller town) hadn't heard of Uber, which has ~$16 billion market cap.

eitally• 12 years ago

And the company I work for, which employees about 45,000 people in 25 countries, mostly in factories building complex electronics, only has a $2b market cap.

jccooper• 12 years ago

SpaceX has tremendous potential, but most of what will make them lots of money has yet to be proven--both technical and economic.

It's possible they'll never figure out launcher re-use, or get it working well enough to matter. It's possible they will and no one will care that space launch is now 10% what it was, and flight rates will stay the same, and they'll just end up dominating a relatively small and stable niche. It's possible the incumbents will quickly copy their techniques and push them aside. It's possible they'll fail in enough launches to drive off every customer and bankrupt the company.

I don't believe any of that, but it's possible and you have to take the uncertainty into consideration of value. Whatsapp has users and works and will continue to work. You know what you're getting there.

wuliwong7• 12 years ago

Yea but you could make arguments that whatsapp could suffer any number of ill-fated results. There's no business without risk. Technical risks are difficult but whatsapp has only shown that it can charge $1/year. $19 billion is a bet (and a risky one) that they will be able to squeeze more money out of those 700 million users.

gaius2• 12 years ago

WhatsApp could go MySpace overnight. Or I guess more accurately, go BBM. If they had a multi-day outage, how many users would they have on the other side?

wuliwong7• 12 years ago

This is what I wondered too. I think there must be something we are missing. SpaceX has 3,000 employees and tons of capital equipment. They have contracts worth billions of dollars and loads of proprietary technology?

I thought they were already profitable? But is that incorrect? It would seem disingenuous to claim that they lowered the price of space travel by 90% if they actually weren't even breaking even? hahahha.

robotresearcher• 12 years ago

The investors also believe that their 10% stake is worth more than $1B. That's why they invested. Maybe SpaceX could have got more. But at this valuation they closed the deal and now have $1B to play with. Both parties happy.

threeseed• 12 years ago

That we are having this exact same discussion AGAIN.

Yes I believe we are living in Bizarro-world.

danielha• 12 years ago

Let me borrow your valuation calculator for a sec...

Oh it says here that my dream to solve world hunger is worth north of a gazillion dollars.

elberto342• 12 years ago

I would much rather be an investor in whats app than spacex. It may be decades before spacex develops anything beyond the prototype level, whereas whats app can quickly scale and become the next Facebook or Google with a few years.

jacquesm6• 12 years ago

whats app can quickly scale and become the next Facebook or Google with a few years.

Whatsapp got bought by Facebook, they will definitely not become the next Facebook and I sincerely doubt they'll ever become the next google. Try as I might, living without Google is hard, living without Facebook is stupidly easy.

ekianjo• 12 years ago

Yeah, and most quality watches are worth more than computers which are infinitely more complex. Do you have other questions about Value ?

jacquesm6• 12 years ago

Yep:

https://news.ycombinator.com/item?id=8914756

onewaystreet• 12 years ago

The WhatsApp acquisition was an aberration. Zuckerberg was desperate and the WhatsApp founders knew it. Trying to rationally justify it is a bad idea that just leads to wrong conclusions. Nothing should be compared to it.

jgreen10• 12 years ago

I guess this is an old discussion, but WhatsApp seriously threatened the dominion of Facebook, a company that is valued at $209B simply for owning a significant amount of the daily attention span of consumers world-wide.

Essentially, the value of WhatsApp is based more on what it could have destroyed than on what it could have created. Advertising is kind of funny like that, since it's not a product that consumers actually want. No value is lost to consumers by switching to a platform without advertising, even though the economic damage to advertisers can be huge.

shenoyroopesh• 12 years ago

The difference is straight forward - Facebook "owns" Whatsapp, and the deal was paid majorly through stock, if I remember correctly, vested over a period of time.

SpaceX still has it's independence and fresh infusion of $1billion in cash. It would probably fetch much more than $10 billion if it sold out now, but I doubt Musk would want to do that.

sillysaurus3• 12 years ago

Does that mean 100% of SpaceX is currently worth $10B? Isn't that surprisingly low?

I know nothing about these sorts of things, so sorry if that's a stupid question.

tsotha6• 12 years ago

No, you're right. That's the math.

cperciva• 12 years ago

This sounds about right to me. If they're successful they'll be worth a lot more, but they're only a couple exploding rockets away from being worth nothing at all.

simonh• 12 years ago

Google must think Spacex is worth more than $10bn or they probably wouldn't invest in it. Right now SpaceX stock is not publicly traded so we have no idea how much it would be worth if it were priced to market.

A lot of people are comparing this to Whatsapp. But Whatsapp wasn't publicly traded either. All we can say is that Mark Zuckerberg thought Whatsapp was worth at least $20bn to him and 10% of Spacex is worth at least $1bn to Google. How much they might be worth to other people is unknown.

sandstrom• 12 years ago

There is this fairly sparse press-release on the SpaceX website:

    Space Exploration Technologies (SpaceX) has raised a billion dollars in a 
    financing round with two new investors, Google and Fidelity. 
    They join existing investors Founders Fund, Draper Fisher Jurvetson, 
    Valor Equity Partners and Capricorn. Google and Fidelity will collectively 
    own just under 10% of the company.  
    
    SpaceX designs, manufactures, and launches the world's most advanced 
    rockets and spacecraft. This funding will be used to support continued 
    innovation in the areas of space transport, reusability, and satellite 
    manufacturing.

http://www.spacex.com/press/2015/01/20/financing-round

james33• 12 years ago

I feel like in the long run this could be one of Google's best investments to date.

BigChiefSmokem• 12 years ago

At $10B, SpaceX is beyond undervalued.

Think about it this way, if they truly are the first company to start laying claim to mineral deposits (or provide service to whatever govt does lay claim) on asteroids, satellites like the Moon, and other planets the amount of value in this company - even over the upcoming centuries - is going to be greater than the East India Company, General Electric, or Apple ever where.

Now that's an investment well worth leaving to our kids.

stevenjohns• 12 years ago

I'm sure that once they actually begin to do any of those things that their valuation will increase.

aetherson2• 12 years ago

No, "laying claim" to mineral deposits not on Earth is valueless. Even if, in a rather fanciful world, said claim was in some way legally enforceable.

"Having technology able to recover said deposits and deliver them to an area of meaningful economic activity without costing several multiples of the value (or, more realistically, several thousand multiples of the value) of the minerals in question" would certainly justify a very high valuation for SpaceX. But they do not have such technology, and it is far from clear that they are on the path to having that technology anytime soon.

And nothing has much present value today based on its prospective value in centuries. In 100 years, we could be superintelligent nanotech swarms. Or extinct. Or anything in between. Only a fool would place much certainty on the value of a mineral deposit that far out.

beambot• 12 years ago

I imagine it would be difficult for earth-based entities to enforce jurisdiction in far space. If you already have possession of an asteroid, it doesn't seem like there's much terrestrial governments could do shy of import tariffs. And whomever holds to material has one massive advantage in terms of MAD: they're sitting high up in the gravity well.

Certainly SpaceX has an air of "tool builders" about them -- they'll build the shovels and pick axes of the space economy. As evidenced by their current economic successes, they're banking on the evolution of the industry -- not a quantum leap 100 years hence.

A great (related) scifi novel: The Moon is a Harsh Mistress by Heinlein

untog• 12 years ago

That's the optimistic view, yes. But if they aren't truly the first company to start laying claim to mineral deposits? That's the nature of investment.

If I set up a company tomorrow claiming to have solved cold fusion, I'd argue it was beyond undervalued. Until I deliver on that promise an investment would remain a risk. Not that I wish to demean what SpaceX have done so far - it's fantastic. But rocket science is, well, rocket science. And a lot can go wrong.

asuffield2• 12 years ago

SpaceX is all about getting into Earth orbit. It has no capacity or projects to go beyond there at present. Elon Musk has expressed a desire to do such things, but the company is not yet engaged with them. Doing so would likely involve fresh investment (for much larger amounts of money) and revaluation.

Earth orbit is hard in terms of energy costs, but relatively easy in other terms: you don't need to solve the long-term independent life support problem, manufacture things off-planet, or figure out how to do supply lines in space.

DavidSJ• 12 years ago

Slight correction: SpaceX is leaving Earth orbit in three weeks: http://en.m.wikipedia.org/wiki/Deep_Space_Climate_Observator...

jacquesm6• 12 years ago

Google's next internet broadband distribution project: Leon.

ourmandave• 12 years ago

Maybe SpaceX can use the Google Barges for landing platforms?

SpaceX Sells 10% Stake to Google, Fidelity for $1B

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