Inside Rocket Lab w/ CEO Sir Peter Beck: Record Earnings, Neutron, Flatelittes

0:00Rocket Lab. Rocket Lab. Rocket Lab. Rocket Lab.

0:02Sir Peter Beck:You know, we rang up Sinclair into Planetary at that stage and said, Doug, we need some reaction wheels. Doug said, that's great, Pete. It'll be nine months. And I was like, Doug, I haven't got nine months for anything. So the way to solve that problem is we just went and bought Doug. You know, now we make over 2 ,000 reaction wheels a year. Recently did the launch for the Space Force, the rapid call-up launch. And they gave us 24 hours to integrate a satellite into a rocket, push it out to the pad and launch. You know, we did it in 16 hours and 42 minutes. We go after those big crime contracts.

0:27Sir Peter Beck:Even if we lose, we still win. And when we win, we win twice. You know, we won an$800 million contract. There was two other primes that also won contracts, but actually that turned into over a billion dollar contract for us because the primes needed their stuff. The nose cone shape of Electron, it's not actually the optimum aerodynamic shape. The optimum aerodynamic shape looked inappropriate in my view. Some people did the opposite of that and made it more inappropriate.

1:00All right, Sir Peter Beck, we are here yet again. We just completed a pretty comprehensive tour of your facility here in Long Beach, California. Yep. Thank you for having us.

1:13Sir Peter Beck:Oh, super. Great pleasure. Awesome to be able to show you around. And we're here just after a record earnings. So what happened this quarter? Well, I mean, we pretty much put nearly a billion dollars of backlog in the books. had record revenue and a whole bunch of growth everywhere and acquisitions. And yeah, so it's been a busy old quarter. We're going to get into all of that. But what I think was really interesting and amazing is you continue to make more acquisitions. You're strategically placing yourself far out of what people used to brand you as as a launch company, but into an entire space ecosystem company.

1:55So what is your plan there?

1:57Sir Peter Beck:Yeah, I mean, when we kind of started that, you know, the space systems team, the first thing we did was try and go and buy a reaction wheel. And, you know, we rang up Sinclair Interplanetary at that stage and said, Doug, we need some reaction wheels. Doug said, that's great, Pete. That'll be nine months. And I'm just like, Doug, I haven't got nine months for anything. Like, we need way, way faster than that. And so the way to solve that problem is we just went and bought Doug. and then you know now we make over 2 ,000 reaction wheels a year and we just basically repeated that if you took a satellite and you laid it out on the boardroom table we just pointed all the things that were were really painful and went out and acquired the very best companies or in some cases created the technology ourselves and then just scaled it and that puts us in a really unique position because yes we can build you know platforms at scale for other people but you know we can also do that for ourselves.

2:53What do you think the moat is now?

2:55Sir Peter Beck:Well, launch is always a huge moat. So, you know, launch is like probably the biggest moat. But I would say the second biggest moat is those components to go into those spacecraft because you can have infinite capital. It doesn't make any difference. You still need some star trackers and some reaction wheels, and they're just not available at scale. What has it been like for you as you scale this company out, moving into this more manufacturing components era of Rocket Lab? Well, it doesn't feel like anything's changed because if you take our first real product being the Electron launch vehicle, everything in that launch vehicle we design and we make.

3:34Sir Peter Beck:So every engine, every avionics box, every piece of software. So we kind of cut our teeth about how to be a manufacturing company during that process. And then we hired our COO, Frank Klein, who came from Mercedes and bought a whole bunch of that expertise as well. And now I'd say we're at a scale where, you know, we have all the ERP systems and the MRP systems and like, you know, the Rocket Lab system where, you know, even if we go and acquire a new company, we literally just pick that system and people up and just wonk it in. And it's like, you know, scale at a button sort of a thing. What was the initial process for going and doing so many strategic acquisitions as a way to grow?

4:17What was your thinking behind that?

4:19Sir Peter Beck:Well, it was as you say, they're strategic. I've always viewed the large space companies are going to have the ability to build their own satellites and launch them. And if you're beholden to someone else providing you all the critical components, then your ability to scale is governed by their ability to scale. And that's not a place where you want to be. So for us, it was just sensible. and um you know at the time i i remember a lot of folks were saying well why are you buying this this company in albuquerque and this company in in like toronto and that makes these little things these little widgets and then i think you know it's very obvious now that those are the widgets are the things that truly enable you know sensor scale for some of this some of the space infrastructure let's talk about iridium because that was a big recent acquisition yeah why did you make that acquisition and how does that change the future state of the company?

5:12Sir Peter Beck:Yeah it's funny because I thought everybody would have picked that well early right and I was I was surprised that people were surprised that we would be doing that because if you just think about it logically and you stand back and you go okay what is the biggest TAM in the space industry it's comms okay if you ignore broadband because you know two really well capitalized people are taking care of that if you ignore broadband what's the next logical thing to do in comms and it's like you know safety critical defense critical services that is iridium and you know it's a super quintessential rocket lab deal like we don't we don't come with hopes and dreams and bore a big hole in the pnl like iridium you know adds profitability to the entity straight away it also buys us time to put up a new constellation so it's like it's it's literally the quintessential rocket lab deal like We don't buy companies that are like startups that maybe they'll do something one day.

6:07Sir Peter Beck:It's like you have to be proven and successful and then you're the right kind of target for us. What's really amazing is you're pretty much one of three companies now that is doing successful commercial launches. And you're expanding out into new territories. What does this mean for you against Blue Origin and SpaceX? Well, I think they've both got their own ambitions and some further along than others. I think it would be very difficult to go and play in the broadband market. I think, you know, you see the amount of capital that's required to be successful there. And so, you know, like I said before, where is a good place to play?

6:50Sir Peter Beck:And, you know, in that L-band spectrum that, you know, penetrating through rain and weather and buildings, you can just do stuff. is physics like you can just do stuff that like the more broadband spectrum can't do so you know acquiring that spectrum super important acquiring their business super important and it really gives us a great platform to go and scale and and really provide you know a lot of applications but I think Rocket Lab is not the L-band safety critical comms company like that is number one and there'll be many many more after that you've been I mean I think like not to hammer on this too much, but you've made several, what is it, seven acquisitions at this point that have well integrated into the company and been successful.

7:34So what is your process with that? How do you create such like a seamless motion?

7:39Sir Peter Beck:Well, I'm glad it looks like that. It's like the duck on the pond, you know, with the little feet flat out. It feels a little bit like that. No acquisition and integration is easy. Like there's no small one, but it does help in the fact that we're extremely picky and we like to we like to acquire companies that we've worked with you know all of the the component companies we've basically used them in the past in our own systems and you know so those relationships and the understanding of those teams if you look across all of those component acquisitions there's one thing that is like all written on the top of their boards and that is 100 mission success there's no like you know let's be fast and there enough it's always a hundred percent mission success like you know Celero Solar never had a solar panel fail in orbit in 40 years Doug Sinclair and reaction wheels same again PSC never had a failure separation system failure so you you have to be of that mindset to be able to integrate with Rocket Lab from a diligence perspective I guess generally we know the team there's been a couple of times we knew that know them less well but typically it's like we've selected them for a program or we've worked with them for many years so in that respect like the diligence doesn't take a huge amount of time um we know we know sort of a little bit what we're getting um and then um the integration playbook i would say has evolved over time uh you know at the very beginning we um we were very very light touch and i would say now i think we have a much much more well-oiled machine where day one like there is a literal a day one in the playbook and day one the walls are black the snack machines are in rocket lab t-shirts shirts are on and we go you know throttles wide open i mean we we were we've been kind of we've been touring the building we've been driving around in the golf cart everybody's wearing your merch is this required no no no you have to like you get a set of merch when you come but um most of the most of the team buy it yeah really yeah and i think that's a great a great kind of metric for a company.

9:43Sir Peter Beck:It's like, how proud are your employees to work here? I think all the successful companies, in my opinion, at least, their employees feel like they're really part of it and they're really, really proud of it. We talked about this in the tour, but this is one piece of many pieces. Many pieces. Of Rocket Lab globally. Yeah. They're an international rocket sensation. Yep. And galactic. Yeah, the lawyers hate me saying it, but global domination is definitely part of the plan. We love global domination. Yep, yep, underrated. So we start off in New Zealand. So there's the Electron Factory in New Zealand, there's the launch pad in New Zealand, well the launch site where there's two launch pads.

10:24Sir Peter Beck:And then we have a small team in Australia, and mainly in business development. And then we start off here in California, we have these two facilities in California. Then we have Rocket Lab Optical Systems in Tucson. And then Albuquerque, we have our solar plant. And then Toronto, we have our reaction wheels. Stennis, we have our engine test facility. Middle River, we have a neutron facility. Maryland, we have separation systems. Virginia, we have a launch pad. Germany, we have our optical terminal business. and I'm sure I've forgotten one or two but yes. Were these through acquisitions or like?

11:08Sir Peter Beck:Somewhere yeah some yeah most of those were acquisitions like Stennis obviously not and Middle River obviously not but but somewhere yeah. I want to go back to the beginning of how you built this all out because the top three countries for launch are the US, China and New Zealand and you created a monopoly on launch in New Zealand so what was that process like for you how did you I will say write the laws there well I mean at the end of the day it was if you have a small launch vehicle and you turn up to a large launch pad the reality is that you know the fees don't change and when you're trying to sell a rocket for like eight million dollars you can't have a million and a half dollars worth of launch fees on a 50 million dollar rocket it doesn't make any difference right so um we were really like we were very early on it's like in order for this to be financially viable we need our own launch site and um you know building your own launch site in the states was was non-trivial um it was non-trivial in New Zealand as well but um but you know ultimately we felt it was you know easier to do that in in New Zealand and to your point um new zealand had no space industry so sometimes it's easy to start something from scratch and formulate it in a way that best makes sense than to try and integrate with a whole bunch of rules that don't don't fit is this why you got nated um one of the one of the reasons yeah creating a space industry and what was that like very weird really yep super weird why well I mean I'm look I I'm just I just like to build rockets and um uh it's great for your mum and stuff like that but um uh you know a lot of people do a lot of amazing things and and you know it's it's it's like it's it's an amazing thing I the way I look at it it's like really for the whole team and and entrepreneurs in New Zealand um but um you know great for restaurant um reservations but yeah, I think it's a very humbling experience.

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14:02It's time to get Brex AF. Learn more at brex.com slash sorcery. That's B-R-E-X dot com slash S-O-U-R-C-E-R-Y. Bye. Turing is training the next generation of AI with tasks that require real expertise and real world judgment. That's why companies like NVIDIA, Anthropic, Salesforce, and Gemini partner with Turing. Turing builds realistic reinforcement learning environments and data systems based on real operational traces. the kind of infrastructure Frontier Labs need to train superintelligence. Visit Turing.com slash S-O-U-R-C-E-R-Y. Why is New Zealand geographically advantageous for launch?

14:50Sir Peter Beck:So, I mean, the launch LC1 is a very unique position that we can launch sun synchronous and also sort of out to mid inclination out of the one site. So here in the States, if you want to go sun synchronous, you generally have to go out of the West Coast. and if you want to go mid-inclination you have to go out of the east coast so we get a huge swath of um you know of azimuth and there's one plane uh one one plane every three days that we have to worry about really that's it whereas in the u.s here of course you're shutting down the trimmer airspace and it's a big deal and everyone you know it's like it's a real thing so in new zealand there's just nothing there so it's very easy to you know to launch and we're able to do things like you know we recently did their um their launch for the space force the rapid call-up launch and they gave us 24 hours to call you know integrate a satellite into a rocket push it out to the pad and launch um you know we did it in 16 hours and 42 minutes that's insane and there's nothing below you but antarctica no no there's there's nothing at all like chile is the when we're out mid-inclination sun synchro it's like it's antarctica or chili so yeah it's Chile actually that close?

16:00Sir Peter Beck:No it's miles away like it's halfway around the planet so yes there is nothing there's absolutely nothing which is great but also you know we had to build an entire industry from from scratch in New Zealand like there was no suppliers no infrastructure nothing we had to build absolutely everything. Is it more expensive there because of that? No I would say we control our own destiny very very well so um no. No? Did you find the pyramids in Antarctica yet? No, I haven't had a good look to be fair. Okay. So it might be under the snow, I don't know. Amazing. Because you had such a big earnings, you had record earnings this quarter if you didn't know that.

16:37Sir Peter Beck:Yeah, but we had the record last earnings as well and probably the one before that. Well, I guess before we get there, you went public before other space companies. One of them that recently went public. I don't know if you know SpaceX. I heard of them. Well, what was it like and why did you make the decision? to do something before Elon for once that's for sure. Well what was the process and why did you choose to go public when you did? Yeah so for a number of reasons one you know if you can reach a certain level of maturity and go public the capital markets enable you to do things you couldn't do in private markets.

17:14Sir Peter Beck:Buying Iridium like we could have never yet have ever done that as a private company so you know it was it was the right time for us to become a public company And then the other part of it, which is a little bit selfish, is I didn't want to build a space company that just lives for the lifetime that I'm running it. It needed to be multi-generational and go on and on and on and on. And being a public company really enforces that discipline of profitability. And profitability is survival. You know, the rockets and satellites, it's all cool. But at the end of the day, it's all for nothing if your economics aren't there and you're not profitable.

17:49So for future founders that are thinking about going public and trying to time the markets, which I've learned from our partnership with the New York Stock Exchange, is not something you can really do.

18:00Sir Peter Beck:You can't do, no. Do you have any advice for founders? Yeah, I mean, do it for the right reasons. Like the worst thing you can do is go public because you can't raise capital privately. We never had an issue raising capital privately. I mean, we couldn't have raised the quantum of capital privately, so there needs to be inflection point but I think a lot of public a lot of companies went public during that SPAC time because they they were just crap companies and they couldn't raise capital privately so their only option was to be a public company that's never a good reason to be a public company and you like being a public company is is like it's a lot of work and there's a lot of constraints come on you and it's it's like probably way less fun but it gives you a set of resources you didn't have before.

18:47Sir Peter Beck:So make sure you need those resources. If you don't need those resources, then don't do it. So yeah, that'd be my advice is do it for the right reasons and make sure you're ready to do it. How do you handle the ride and the swings of the public markets, especially when you do so well and they punish you for it? Just go home and cry a little bit. No, I mean, look, I'm focused on the longer term and like, you know, neutron delays are always, you know, a question that that always and rightly so people should be should be riding as hard for that but the end of the day i'm not going to say it doesn't matter but you know how late was electron to the market i don't know nobody knows because it doesn't matter um it was late too but the the point being is like um the most important thing here is is like what happens in the next five to 10 years because that that is that is like that is where we we go from where we are today to being really really big and you know making sure all the pieces of the puzzle are lined up all the pieces of chess and the chess board are in the right place is super important and that's why you know as we started acquiring these component companies for satellites it's like each piece of you know each chess piece on the board to make sure that when it came time to do something like iridium or more we're ready to go.

20:05On the tour you did walk us through the engines you walked us through Electron. We saw the machines. This is the number one question a lot of people have been asking me and I'm sure you're probably tired of getting asked it but why is Neutron still facing delays?

20:20Sir Peter Beck:Yeah it's a great question. I mean it's a rocket program and I think every rocket CEO is probably inflicted with the same you know optimism than reality but I would say that I'm being really strategic about how we bring Neutron to market. So it's one thing to put a rocket on the pad and just fly it once. I mean, that's super important, don't get me wrong. But I guess the question that investors and analysts should be asking me is like, Pete, when's the 10th rocket going to be on the pad? How quick can we get the 10th rocket on the pad? Because by the time you get to rocket 10, your reusability is sorted, all your production is sorted, you're banging out whole stages, and all the launch infrastructure is just cranking and all the rest of it.

21:10Sir Peter Beck:And your first rocket on the pad is hard, but making sure you can scale quickly after that first rocket is the most important thing. Because it would really be bad if we put the first rocket on the pad and then it was like two years before we went and put the next one on the pad, which happens more often than not. I just don't want to be there. So I want to make sure that after flight one, we can really scale and rent quickly because you know launch is constrained for everybody else launch is constrained for our you know government customers i'm now my own user of launch for iridium i need launch too so i'm like my harshest customer so um you know making sure we can get through that scaling quickly is really really important and so with archimedes which is going to be powering neutron you're using a different design for this one versus your competitors Why did you make that decision?

22:02Sir Peter Beck:Yeah, so the neutron vehicle is composite. And so it's like everything is a giant engineering compromise in the rocket world. And if you fill a room up with engineers from every discipline, if one of those engineers from one of those disciplines is happy, you have failed. Like everybody needs to be equally as miserable. Then you know you've got the right design because it's just this giant compromise. and one of the compromises we made is like you know we want the Archimedes engine to be incredibly reliable and we don't want to have to service that engine you know from multiple flights so we make super lightweight structures and and like super low stressed engines now if you make heavy structures then you have to make super high performance engines so you'd be lazy on your structures and like really difficult on your engine or you can be really lazy on your engine and really difficult on your structures.

22:57Sir Peter Beck:So, you know, we build everything out of carbon. So naturally, our propensity is to be super high-performance structures. And, you know, we have a lot of experience with the material. So it was sort of the natural choice to make Neutron out of composite. You stressed this a bunch on the tour when we were looking at the engines and what kind of factors you had to lay into the reusability and how you're going to design that differently because you have to use it. Again, it doesn't just burn up for five seconds and then go away. Yep. So what kind of decisions did you make there? Well I mean I made a constraint in the very early part of the program where I think I lost a lot of credibility with the engineers and I said look guys we need to be able to turn this vehicle in 24 hours which is I'll admit is a stupid constraint but what that constraint did is it drove a whole bunch of really really important design decisions like propellants, engine lights, structures.

23:53Sir Peter Beck:The Hungry Hippo fairing came out of that because it's like, guys, we don't have, you've got 24 hours to fish a fairing out of the ocean, recondition it, blow all the salt water out of it and get it back on a rocket. It's like, that's not going to work. So that one requirement drove the design for the Hungry Hippo fairing. So we never throw away a fairing. So sometimes you've got to be cruel to be nice. And that was an example where we put this unrealistic constraint on the team, but it drove a whole lot of goodness throughout the vehicle. This is a very difficult business you found yourself in.

24:26How do you handle all the challenges?

24:28Sir Peter Beck:Well, I think if you want an easy life, you do not become a Rocket CEO. That is a far easier pathway to a low-stress life than that. But no, it's super fun, super meaningful. I mean, it's like every founder. They do it because they believe in the outcome of the business. And I think one of the cool things about space is that you get to touch so many people. And, you know, people don't realize that how much they rely on space infrastructure. And, you know, if you order a pizza, the GPS got it there. Like your Tinder date knows where to turn up because your GPS got them there. So there's a tremendous amount of space infrastructure in our everyday lives that everybody uses and just doesn't realize, you know, that they're using it.

25:11Sir Peter Beck:So it's kind of ridiculous that you can put a little box of electronics up in the sky and really have so much impact to everybody down on Earth. And at the end of the day, you know, that's probably what gets me out of bed the most is like the only thing my parents said growing up is you can do whatever you want, but have the most amount of impact with your life possible. So, you know, that's how I feel like I can deliver on that. You've talked about building this as a multi-generational company. Do you envision your kids taking over? Absolutely not. No? Absolutely not. Why? No nepotism in the Beck family whatsoever.

25:43Sir Peter Beck:No, they have to go on paths, chart their own paths. There's absolutely not. What are they going to do? Well, we'll see. I mean, my son's very much into motor racing and, you know, my daughter into performance. So, you know, none of them have chosen boring paths themselves. So we'll see how they go. What if they get interested and they turn around and they're like, oh, wait, I want to take over the rocket company. This is pretty cool, Dad. Well, it's just way too tough. This is not happening. Absolutely not. That's great. Today's episode is sponsored by VCX by Fundrise, the public ticker for private tech, allowing investors of all sizes to invest in venture capital.

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