Closing Bell - Manifest Space: Race to Reusability with Stoke Space CEO Andy Lapsa” 7/25/24

Episode Date: July 25, 2024

The rocket industry is racing towards full reusability. It’s not just SpaceX’s Starship exploring the space. Stoke Space, founded by Blue Origin alumni, is developing Nova, a fully reusable medium-lift rocket. The startup also hopes to fly Nova as soon as late 2025. CEO Andy Lapsa joins Morgan Brennan to discuss the economics of fully and rapidly reusable rockets.

A fully and rapidly reusable rocket. It's never been done before. But if and when that changes, it will drastically alter the economics of space. It's what Elon Musk is doing with Starship, but SpaceX isn't alone. Four-year-old Stokes Space is building a medium-lift rocket it calls Nova. We started the company with this thesis of full and rapid reuse. Again, the reusable second stage is something that has not been figured out by the industry yet. And so to us, that was really the last missing ingredient to building this, like you said, building this holy grail.

Andy Lapsa, a Blue Origin alum, is CEO and co-founder of Stokes Space. The venture-backed startup hopes to begin flying Nova to orbit as soon as late 2025. It test-fired its new engine last month, just a year and a half after it began developing it. So far, Stokes has been pulling off a feat rare in the space industry. Meeting development milestones when it says it will. When you marry those two things, the reusability of the vehicle and flight frequency, you very viably get, you know, orders of magnitude lower cost compared to what's being done today. And so that's the interesting and compelling case to be made because those economics are so

strong. To me, that's the inevitable future of the industry and everything else is short-sighted. So if you're not working toward that, then I think you're facing a dead end. On this episode, LAPSA outlines the economics of fully and rapidly reusable rockets and how Stokes Space plans to compete. I'm Morgan Brennan, and this is Manifest Space. Andy Lapsa, the CEO and co-founder of Stokes Space. It's great to have you on here. Thanks for joining me today. Thanks, Marnie. It's great to be here. So let's just start at the beginning. Tell me about Stokes. Well, we're billing fully rapidly reusable rockets to go to space, through space, and back.

And started a handful of years ago and moving really quickly toward that end. Why did you decide that this was the market to get into? Well, I think, first of all, we're at a very critical moment in history. At a macro level, our population has increased about a factor of 15 in just a couple of generations. And that adds stressors to the world around us. I think space is a very critical pillar to our society, to our ability to continue scaling our civilization, but to be able to do it in a way that's also sustainable. So space, I think, is really, really important, you know,

just at a holistic level. At a pragmatic level, you know, we have a couple different ingredients that are all coming together for the first time. The first thing is, you know, from a technical perspective, we know how to do this. We know how to get to space. Certainly, there's a lot of innovation yet to be made, but we have those fundamentals. The second thing is satellites and electronics continue to get more powerful within a smaller volume, smaller mass, and lower cost. They follow Moore's laws just like consumer electronics. What that means is that there's some really compelling business cases to be made in space. And business cases that didn't quite close in the 90s now close just on that basis alone, on the small form factor and low cost of the asset on that basis alone.

And then the third ingredient that we have for the first time in history is the talent pool. The talent pool now has had the ability to work at other companies and build things in small teams from complete scratch all the way up through flight. And this is an opportunity to kind of take, draw from that experience and do it again the way we wish we did it the first time, knowing what we know now. And so there's a real distinct second mover advantage from that perspective as well.

All those things are coming together just in the last couple of years. I think the case to be made for space is very strong. We have some unique elements to be able to do it now. Let's talk a little bit about the fact that you're looking to design, you are designing and developing a fully reusable rocket. I mean, reusability has become synonymous for better or worse with SpaceX. We know a lot of other companies are kind of out there looking to build their own rockets as well, some reusable, some not, but it really is, when we talk about full reusability, it's the holy grail. So what is going into your design, your development?

Why is that the path to take? Well, I think when you look at the economics of launch, those are undeniable. The economics that are unveiled or enabled by fully and importantly, rapidly reusable launch just can't be argued with. Maybe I'll back up and say, you know, there are two really big cost drivers to launch. The one is the cost, the production cost of the vehicle. And that really is not surprising. You know, it's a very common analogy.

You wouldn't throw away your 737 after every flight if you had the option to reuse it, right? So obviously you're going to reuse the vehicle. And that's true in spaceflight too, right? These are high-powered, complex assets. They're capital assets. And you want to amortize those costs as much as you can. So that's number one. But number two, which I think is not talked about as much,

is the importance of flight frequency. And the reason that's important is there's a lot of infrastructure that it takes to do this activity. You need factories, you need test facilities, not only at the engine test level and stage test level, but also at all the component test levels to acceptance test and qualify these parts for flight. So you need all of that. You need launch, you know, launch complex infrastructure, and then you need the labor that it takes to do the activity. And so all of that is, you know, has to exist in order to do this. And if you're only launching a handful of times per year, then those costs then become a very significant component of the overall cost. Now, if you can launch hundreds or even thousands of times a year, now you get to more or less amort marry those two things, the reusability of the vehicle and flight frequency, you very

viably get orders of magnitude lower cost compared to what's being done today. And so that's the interesting and compelling case to be made. Because those economics are so strong, to me, that's the inevitable future of the industry. And everything else is short-sighted. So, if you're not working toward that, then I think you're facing a dead end. Just walk me through the competitive landscape because we do hear about all these different rocket companies that are developing launch vehicles. I mean, it really is, at least until maybe a couple of days ago, after a second stage was lost and launches for now, at least amid an

investigation or grounded, it did really seem like it was SpaceX and almost nobody else in terms of the launch cadence. So is the case to be made here that there's room for another competitor? And I guess with so many rockets being developed, why is that person or why is that company Stoke? Well, I think you hit a number of important threads there. Yeah, I think, you know, I mean, it's undeniable SpaceX is dominating the market right now, almost at monopolistic levels. And the reason is because they're able

to fly as frequently as they are. Now, if you look at their flight frequency, like their flight cadence profile, when they came onto the scene, initially Falcon 9 was a disposable vehicle and they got up to, you know, tens or teens of launches. And if you look at, you know, kind of how they were able to scale their flight frequency, they hit a little bit of a plateau in that tens or teens of launches. And you've seen that happen

with other rocket companies as well. United Launch Alliance, Rocket Lab, they all kind of get to that level. And it's very hard to get past that level if you need to build a new vehicle from top to bottom for every single mission. And what SpaceX was able to do is start reusing their first stage. And they've done that pretty well.

That's a couple of week turnaround now to turn around to first stage. And because of that, they're not building this massive piece of equipment for every single flight. But they still do need to build a brand new second stage on every single flight. And so as I understand it, their flight frequency is limited by their production rate capacity of second stages, second stage engines. Those things not only have to be built, but then they have to be acceptance tested, qualified, checked out, integrated, and then finally flown. And so that is their rate limiter today. And I think every other company that you've seen is either building a disposable rocket or they're building for a Falcon 9 world with a first stage reuse, but still throwing away the second stage. And I think Falcon 9 is very good at what it does.

It's going to be very hard to do better than Falcon 9 when you're just doing the same thing that Falcon 9 does. And so I think you really have to be looking ahead to a successful Starship world, which, by the way, excites me. But you have to be looking ahead to that world and you have to be ready to compete and win in that world. And, um, and I think that's why Stoke is different. Uh, frankly, we wouldn't have started the company if we saw somebody else doing this,

um, in a way that, that we thought was executable. And, um, and I think we're, you know, we're in it to win it. Um, Stoke is different and its architecture. Also, we want to build the most durable, uh, versatile rocket in history. Um, so, you know, it starts with how do you build the most robust, versatile, adaptable, reusable second stage. And that's the part that hasn't been figured out yet by our industry. And that's the part you're starting with in terms of development for your rocket. We did. Yeah. We started there. Like I said, you know, we started the company with this thesis of full and rapid reuse. Again, the reusable second stage is something that has not been figured out by the

industry yet. And so to us, that was really the last missing ingredient to building this, like you said, building this holy grail. And so to us, that was the new and interesting thing that needed to happen and made us, you know, it was kind of our differentiator early on. So that's where we put our early R&D, hold our IP in that area. And, you know, I think we've got a great architecture that's both versatile, is extremely high performing and still really, really, really durable. So where are you in the development process?

When are we going to see a rocket fly? Well, the goal is end of 2025. We've got a lot to do between there now and then. We've already, we started basically closed our seat at the end of 2020. And so we've been going as fast as we can since then we've developed this, you know, really radically new second stage high performance engine and it has an integrated metallic heat shield. That's super, super durable compared to existing methods. And we're able to show that hydrogen oxygen engine, you know, at the full scale already. We've also started our development of our first stage engine.

This is the, you know, it's kind of the most advanced booster rocket engine that can be made. It's only been tried three other times in history. Once by the Russians, they blew up, as I understand, over 20 of their engines before canceling the program. It's been tried by the Americans in the late 90s and 2000s. There was substantive progress made, but that program was also canceled.

And the first time it was done successfully is SpaceX's new Raptor engine. So we're the only other group to be able to do that. We did it in a very small period of time with a small team and that's on this test stand. And so we're developing both of those in tandem to get them ready for flight. And then building up the factory, we're building our, we're already building our first orbital vehicle in terms of tanks, structures, everything else, avionics, all of those systems.

Those are being built today. And then working also on the launch complex down in Cape Canaveral, LC-14. Do you already have customers signed on? Yeah, we have double you know, our, we have double digits, double digits of flights already booked. And, you know, we've, we've stuck to our guns and really made sure that those are real contracts that have real money changing hands. They're not glorified LOIs. And so we're pretty excited about doing that. And then, you know, always in discussions with more. Did you say seed? I think you said seed. Seed funding back in 2020. So you're moving quickly. Yeah, we closed our seed round in December. It's actually December 23rd, you know, kind of my co-founder and I had been working on this architecture, kind of used that year 2020 to, I would say, almost do due diligence for ourselves. And we also had to figure out, you know, how do we fundraise? We're both, you know, from a technical background.

And so we had to kind of learn how to do all that as well. But yeah, close the seat at the end of 2020. And that's really when things started moving. And your background before that you were at Blue Origin developing their reusable rocket engines. Yeah, I was at Blue a little bit over more than 10 years, came in as a new grad in 2009 out of grad school. And then, you know, worked really from the very beginnings of the BE4 and New Glenn program there and had some really amazing opportunities there, but decided it was time to move on in 2019. So as you grow the company, as you develop this rocket, do you find that there's an appetite from investors,

especially given the fact that you have, at least according to some folks I've spoken to, hit your deadlines and targets so far? Yeah. You know, what's really cool is we still use in our pitch deck, we had basically a program plan laid out at a high level in that seed deck in 2020, when we raised that round. And I still pull that back up and say, look, this is what we said we were going to do. And we've hit every single thing we've said on time and on budget. And so that's been pretty powerful. Yeah, I think there is appetite out in the investor world.

I think more and more, a couple of things are happening. First, people are realizing that there has to be more than just SpaceX out there in the market in order for the whole space economy to be successful. Even SpaceX needs a viable alternative for them to be successful. So there needs to be an alternative and people are understanding that more and more. And then the second thing is people are understanding that, hey, this world is moving fast and full and rapid reuse is the thing that unlocks the ability to compete and win and really unlock the overall economy. Customers really want three things. They want low cost.

They want great economics. They want great availability, which even today is not really there. And then they want great reliability. And all three of those things are kind of enabled by full and rapid reuse in a way that's fundamentally different from, you know, kind of existing legacy. And so people are starting to realize that more and more. But what I would say is that I think investors are becoming more and more discerning. They're more educated on the space ecosystem

than maybe they were five, six years ago. And so the bar is much higher than it had been. And I think that's, by the way, I think that's a good thing. I think so too. I mean, we have a lot of these conversations on a daily and weekly basis here as well. So if you're targeting the end of 2025, what does it take to get to a place of rapid reusability?

What does that launch cadence ramp look like in the years following? Well, the first thing I'll say is you have to kind of architect for it from day one. It's full and rapid reuse, even full reuse, but especially full and rapid reuse has to be architected into the vehicle from day one. It's not something that you can just back into later. And part of the reason is, you know, part of the reason is you have to design for all these things, but really the first and second stage and the ability to get to orbit,

these are very tightly coupled, highly sensitive, kind of low margin systems. And if you haven't planned ahead for all of the things that it's going to take, then it's just not going to happen. And so you have to plan for it from day one. For us, we have a pretty incremental development plan or flight development plan to reach rapid reuse. The first step is to get to orbit or a new company and to do that for the first time for a new company, I think has not been accomplished before. We'd be the first company ever to get to space on the first try if we were to be successful. And so we go in with

a lot of humility from that perspective. So our first goal is to get to orbit. The second goal is to get back to orbit and prove that we can do that. So that's the re-entry phase of the flight. We'll do similar to what's been done before, where we'll target a specific location in the ocean and target those GPS coordinates and show that we can re-enter, we can track to that location, we can restart the engines, we can do a soft controlled landing over water. And then once we've demonstrated that capability, now we have a host of different options for actually recovering the vehicle. And then once we recover the vehicle, then it's all about turnaround and how quickly you can turn it around and fly. And so, you know, we have all of those things kind of mapped out and we're going to go

through each of those phases as fast as we possibly can. So what does all of this mean for the future? I mean, Starship with SpaceX, Stoke, what does this do to unlock the space economy? How does this change the economics, the dynamics, the innovation? What's possible when you have full reusability? Yeah, well, the first thing is that the cost basis for launch is, you know, take another factor of 10 off of the cost basis. So business cases that don't close today will close readily once this capability is enabled. The second part is availability. Availability is a huge cost driver for new companies and companies trying to deploy assets. I think if you look at the history of OneWeb, that's a great example where that's a constellation

that was more or less ready to fly but couldn't get on orbit because of basically the launch bottleneck. And I think that remains true for a number of companies today. It's not just, you can't just get on any rocket and go anywhere. You need to go where you want to go, when you want to go to be viable. And so when you compare that kind of a thought process with shipping goods and services anywhere else in the world, you know, we're really at day one in this industry. We're really, really very rudimentary. And so full and rapid reuse starts to change that. That ability to ship and to create that mobility starts to resemble other modes of transportation that drive the rest of our Earth economy.

So I think you'll start to see that. There's capability that's simply not possible or simply not available today. We're talking about being able to maneuver things from one place on orbit to another, acquiring assets on orbit and bringing those things back from orbit to ground. You'll start to see those. Those are very important, not only from a commercial business case perspective, but also from national intelligence, national security and DOD use cases. So we're starting to see a whole lot of interest and that capability is kind of innate in what we're building for reusable upper stage vehicles.

And then, you know, there's I think you'll see some stratification in the market and specialization in the market. And I think that's all important and signals of a good, healthy, robust, competitive economy in space. If you draw parallels with the aircraft world, you have everything from an A380, which is probably too large for the market, everything all the way down to a Cessna. And in the middle, there's one or two kind of sweet spots for scales of vehicles, and they work together to create a healthy economy. And so that's what we're looking at doing. Something like a Starship can put up um you know really big heavy infrastructure in space but how is that infrastructure serviced

um is it serviced on a weekly or multiple times per week basis i think in the end you want that to be true for manufacturing space for you know um kind of luxury tourism in space, or even deployment of constellations. You want all of those things done in a high-cadence environment, and I think we can deliver on that. Long-term vision for Stokes Space, what is it? The first thing is to master mobility to space, through space, and back from space. And there's multiple different levels of doing that, but that's the first thing. We really want to remove the friction from basically doing commerce in space.

We have a long way to go as an industry to do that, and I think that's the first thing. From there, there are some really, really interesting and compelling, I think, businesses to be made that we may or may not look to support. But, you know, the first thing is to really grease the wheels of the space economy. I think, you know, we've got some really luminary and, you know and forward-thinking people in our industry. Talking about colonizing Mars or millions of people living in working space, those are incredible visions. and last in the long run, what you really need is a healthy and robust economy and space so that this whole thing is self-sufficient and not dependent on one or two individuals.

So we're really trying to address that and kind of fill in that gap. All right. Andy Lapse of Stokes Space. Thanks for joining me. Thank you so much, Morgan. Enjoyed it. That does it for this episode of Manifest Space.

Make sure you never miss a launch by following us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.