Closing Bell - Manifest Space: Terran-R on the Horizon with Relativity Space CEO Tim Ellis 7/12/24

Episode Date: July 12, 2024

Relativity Space is a CNBC Disruptor 50 company, backed by BlackRock, Baillie Gifford and Fidelity. After launching its Terran-1 rocket, it’s now turned to its medium to heavy-life rocket, on pace to fly for the first time next year. CEO Tim Ellis joins Morgan Brennan to discuss the new rocket, the intersection of generative AI & 3D printing and more.

Relativity Space is a CNBC Disruptor 50 company, touting an investor list that includes BlackRock, Bailey Gifford and Fidelity. The space startup is led by Tim Ellis, a Blue Origin alum who founded Relativity on the premise of 3D printing rockets. We're building a reusable rocket, which is really an alternative to what SpaceX has built with Falcon 9 and now with Starship. So they have continued to be very successful with Starlink, which is their own satellite network, but the commercial launch industry needs there to be another quickly moving disruptive player in launch to launch Amazon, other companies that are building satellite networks. So Relativity is the largest company that is working to be that second great American launch provider.

After launching its smaller Terran 1 to space for the first time last year, Relativity pivoted to developing the more powerful Terran R. Ellis says the medium to heavy lift rocket is still on pace to fly for the first time in 2026, and that the company has doubled its backlog in a year to more than $2 billion. But investors have been enticed not just by the launch business. Relativity has pioneered 3D printing technologies that could be applied to manufacturing across aerospace and other industries. It's the reason the U.S. government has awarded tens of millions of dollars to the startup to implement software and data science into large-scale metal 3D printing.

This investment from the U.S. government is helping us further that technology in a way that already supports the core business. But it is very clear to us that with 3D printing at this application layer, we're building end products that can be leveraged across other industries. And so this is just a very small toe in the water to that. I think it's going to grow significantly larger over time. But right now, we're just focusing on helping the U.S. government prove that this technology does work in other industries. On this episode, Ellis shares updates on Relativity's new rocket and goes into detail regarding the intersection of generative AI and 3D printing. I'm Morgan Brennan, and this is Manifest Space.

Joining me now, Tim Ellis, the CEO and founder of Relativity Space, which is a CNBC Disruptor 50 company. It's great to be sitting down with you. Yeah, awesome. Good to be with you, Morgan. So I just want to start very basic here. How is Relativity Space disrupting the space industry? Yeah, so Relativity, which I founded eight and a half years ago, started with 3D printing rockets. We did a launch to space last year, and now we're building a reusable rocket, which is really an alternative to what

SpaceX has built with Falcon 9 and now with Starship. So they have continued to be very successful with Starlink, which is their own satellite network. But the commercial launch industry needs there to be another quickly moving disruptive player in launch to launch Amazon, other companies that are building satellite networks. So Relativity is the largest company that is working to be that second great American launch provider. Terran R, which is our reusable rocket, is 40% bigger than Falcon 9. We're still using 3D printing significantly more than any other company has in history in order to iterate our product very quickly.

So because of our 3D printing technology, we can develop not only a better rocket, but do it much faster with a very quick pace of change in the product. So we get test data, upgrade the rocket very quickly. And so that's led us to even develop what is a 268,000-pound thrust rocket engine, in-house developed several years faster than anybody has ever done. We've already gotten to a full-power, full-flight duration engine test, and we're on track to launch from our launch site in Cape Canaveral in the coming years. When are you going to launch,

or when are you on track to launch? Is it still 2026? 2026, yes, still on track for that. The engine will actually be finished with flight engine qualification at the beginning of next year, so we've already done 2,000 engine tests, which is a pretty high number this early in the program. The rocket flight design, we're releasing all the flight designs now. So we'll have a full first stage propellant tank structure built towards the end of this year, beginning of next year. And so the rocket is really on track for launching in 2026. And it's going to be reusable from the very beginning. So this is also a very unique thing, is it's quite a large vehicle, 18 feet diameter, almost 300 feet tall, but we are actually reusing it from the very beginning.

So it doesn't mean we'll get reuse right on the very first flight. We're budgeting for it to take a few flights to get reusability, but it'll have landing legs, fins, and everything on the first flight. So really getting to reuse is also the name of the game for building a very disruptive rocket, because not only does that save on cost, but reusable rockets are really how you get to a very high flight rate. And that's what solves this big customer problem, which is there needs to be a second commercial launch company that is really providing a large quantity of flights because there's a global launch shortage currently today and that we see

persisting over the next decade. Far more demand from everything from Apple which just announced the iOS 18 direct to cell text messages to Amazon Kuiper which is their satellite network competing with Starlink which is SpaceX's so really the demand side has just grown massively and there's not enough supply on launch. And so that's the key customer problem that Relativity is solving. There's a lot that you just said there that I want to unpack. But first, talking about customers, do you already have a first customer lined up for this maiden flight? So we haven't down selected exactly which customer is going to fly. We have sold well over $2 billion of launches.

So this is up nearly 100% as it was under a year ago. So we've continued to build a multi-billion dollar backlog. And we're actively negotiating almost $10 billion in deals together with the backlog we've signed. So there's an incredible amount of demand. We have a few customers that are going to be on the first launch. We just haven't announced who they are yet. Okay. If I take a step back, when did you see this first opportunity to create 3D-printed rockets?

Why was 3D-printing your rockets so integral to the founding of this company? Yeah, so I started my career as a propulsion engineer. So I would go from blank sheet of paper to the first working version of building different rocket engine sub-assemblies and products. So that was at Jeff Bezos' company, Blue Origin. That was, gosh, I guess 15 years ago or so that I first started getting into rockets. That was at USC where we were the first students in the world to launch a rocket into space. So I've really been into rockets for quite some time.

And then when I went to work at Jeff's company, I actually did get to know him personally and I used metal 3D printing in my products, which is the very first time Blue Origin had used metal 3D printing. Then I worked nights and weekends, started the metal 3D printing division and brought metal 3D printing in-house to Blue Origin, which nobody asked me to do. I just really saw how much cheaper and faster it was for parts of a rocket. And so I thought this was clearly going to be very disruptive technology. But then when I started Relativity, that really was realizing that 3D printing, while it was

a key part of building parts of a rocket engine, if you're really going to be disruptive, you have to design the whole rocket and the whole supply chain, factory, material science, analysis tools, like everything changes with 3D printing. So I had to start the company from scratch. I was also honestly really inspired by watching SpaceX, which was a 13-year-old company when I started Relativity eight and a half years ago. They were landing rockets successfully. They had docked at the International Space Station. But they were still the only company that was quickly moving and commercially disruptive in the world.

They also were the only ones that had this mission to put a million people on Mars. I thought it was pretty depressing that despite 13 years of that level of inspiration and success, SpaceX was still the only company in the world that had this mission to go to Mars. I thought there really need to be more like a dozen to a hundred companies working to make Mars happen, if that's really going to happen in our lifetime. And so for me, 3D printing was inevitably required to one day build things on Mars and on another planet. Really, that was the key system. I think together with AI and other improvements is necessary to make Mars happen. And so somebody was going to build this second company that was working to make humanity multi-planetary. And I thought, well, why can't that just be me?

So that's why I started Relativity Space. So you're on board to go to Mars? Yeah, 100%. I think it's really important. I think AI is required for this to happen. I actually fundamentally disagree with this idea that an asteroid is going to destroy Earth, so that's why we need to do it.

We are far more likely in the next 100 years or less to destroy ourselves than an asteroid destroying us. So I think we actually just live in this really narrow window of time where AI and robotics aren't so good yet that only sending AI and robots are going to make going to other planets and building a permanent presence possible. I think this is a small window of time where it is possible for humans to do it. And I think that's just something that's inspiring. It's important to me.

And so I think we should go do it. How are you implementing AI at the company? And what does that mean for building out these reusable rockets? Yeah. So Relativity uses a lot of AI and data science, especially on the 3D printing technology. Everything from the material alloys, which we developed in-house, we used AI to actually discover what materials are only possible with 3D printing. They're very novel material chemistries. That's using AI. We also have won tens of millions of dollars of U.S. government contracts.

We haven't talked about until today this interview, but we have won tens of millions of dollars of U.S. government contracts specifically for implementing AI software and data science in large-scale metal 3D printing. So this is really actually a pretty big investment. All of that is revenue this year. We see this growing quite massively to where the US government really actually needs to stimulate an industrial base

in manufacturing in the US. 3D printing is a very big part of that, not just for rockets and what we're building with Terran R, but for other products, whether it's submarines, commercial aircraft, drones, other products. And so we actually have gotten quite a bit of R&D money because AI is necessary for catching all of the potential flaws, making sure that our products are built with no cracks or pores

or other things that are going to be defects that won't make them work. And since we demonstrated this technology in our first flight to space a year ago with the launch of Terran 1, which is our first rocket, it was 85% metal 3D printed, this really started to be an inflection point because a lot of people did not believe that a 3D printed rocket was possible, especially when I started the company. I wasn't even sure it was going to work. I thought it was just worthy to go after. But we have since proven this technology does work and function. And now it's becoming more and more clear it's critical to the U.S. staying on top of global manufacturing. So to work with the U.S.

government on this R&D, to be awarded these defense dollars to do so, does that mean that the capabilities you design and you develop in-house then get leveraged across other industries? Would you work with other companies? Is it a new revenue stream or how does this look? Yeah. So today really it's 3D printing technologies that we know we need to develop for Terran R anyway, our large reusable rocket. Terran R is using significantly more large scale 3D printing, especially on things like our engine. So the engine, you know, it's 268,000 pounds of thrust. This is much larger than our first engine that flew.

We have 13 of them on Terran R, so over 3.3 million pounds of thrust. So we needed these advanced large-scale 3D printing technologies to make that possible. This investment from the U.S US government is helping us further that technology in a way that already supports the core business. But it is very clear to us that with 3D printing at this application layer, we're building end products that can be leveraged across other industries. And so this is just a very small toe in the water to that.

I think it's gonna grow significantly larger over time. But right now, we're just focusing on helping the U.S. government prove that this technology does work in other industries. And then we'll go from there. As far as specific business models or what that looks like, I'm excited to talk about when we're ready. Okay. When we talk about 3D printing in general, additive manufacturing, it's still somewhat of a nascent industry. To your point, the fact that you were the first company to really go out and almost fully 3D print a rocket and then launch it to space, how do you do that in a way that you know that it's going to be durable for spaceflight? How do you make sure quality control is in place? And how do you

expand that as you look to a more powerful rocket that you design now? Yeah, so when I started Relativity Space, this was a really big problem because the biggest thing that we could 3D print, the biggest thing I ever printed at Blue Origin, was about one cubic foot. So this was, you know, the kind of exciting capability at the time is you could build something that's a foot by a foot by a foot. Our first rocket, Terran 1, was 110 feet tall, seven and a half feet diameter. Terran R is 300 feet tall almost, 18 feet diameter. So we had to build the world's largest metal 3D printers. So that was all developed in-house at Relativity. It took a lot of feats of material science. I did not expect how hard it was going to be to build a 3D printer of this scale. I think we're very confident.

We knew what it took to build the rocket. Building a rocket is a very hard problem, but it is a solved problem at this point. It doesn't mean it's easy, but we felt we had the team to do it and we were able to get the capital to do it. But building the 3D printer is much harder because there was just not a clear path forward. So we had many false starts where we did the wrong technology approach, everything from the physics of the printing,

like how to actually melt and solidify the material reliably over what is hundreds of miles of print area for the first rocket we flew. We had hundreds of miles of print, you know, basically print area. And so because of that, you can't really have any substantial flaws. Like if there's one flaw that's large enough in that hundred miles of printing, you end up ripping the whole rocket apart. It will literally just explode and tear itself apart. So we had to create a lot of software as well as the printing process to be robust enough for a rocket.

This was a really challenging first application, but again, once we solve this application of printing a rocket, it means we have created a lot of value that can be used in other places. And so lessons learned from Terran 1, which reached space but didn't reach orbit. Correct. So you had the single launch and then you pivoted and you said, we're now going to develop a much more powerful rocket and focus on this market. Why? Yeah.

So these are always kind of a bit of a case of, you know, dramatic irony. I don't know if that's the right word. But Terran R had been in development for two years before we even launched Terran 1. A year before we launched Terran 1, we started moving customers off of Terran 1 onto Terran R. So we had almost every customer of Terran 1 move on to Terran R and sign bigger deals. The biggest reason is we saw pretty early on that there needed to be a second SpaceX-like launch company. Like SpaceX has been phenomenally successful. I think it will continue to be phenomenally successful. There's rumors they're raising it at a $210 billion valuation now.

But really, they are vertically integrating more and more with Starlink. So Starlink is continuing to be the business that SpaceX is focused on. And it was clear to us that if they are launching Starlink satellites via SpaceX and their own launch vehicles, that there really does need to be a company that's not going into satellites, that's really focused on launching everybody else. Amazon, about 18 months ago, bought $9 billion of rocket launches, which was effectively the world's global launch capacity outside of SpaceX that was commercially available. Those are all new rockets that

hadn't yet flown yet. Vulcan now has successfully flown. Ariane 6 is supposed to fly later this year and the New Glenn still hasn't flown yet at Blue Origin. So it's really still an unclaimed prize to be the second quickly moving launch company. For me, it was very clear from the early stages of relativity that Terran 1 was going to be, you know, we thought it was going to be a business on its own, and it probably could have been. Like, we certainly had customers for it. But the addressable market for Terran R is just so much larger.

When we started in Y Combinator, I actually almost wanted to cancel Terran 1. Sam Altman, who now runs OpenAI, was our direct mentor at YC. And I remember we sat down with him and told him, hey, what if we just don't do a small rocket and we do something Falcon 9 sized right away? And he thought we were absolutely insane to do that. In hindsight, he was totally right.

There's no way we could have gotten here without doing Terran 1 first like that was a smart move to prove the 3D printing tech at a smaller scale. It was also the first methane fueled rocket to ever attempt to fly to orbit in the world outside of the Chinese space program which did it only three months before relativity and we got as far as they did in that first flight. So making it to space on a first launch was pretty unprecedented, especially with the level of ambition that Terran 1 had. So we felt we had proved enough. And then customers really actually needed Terran R more than anything. So we've signed several billion of deals since making this switch, which I think is very strong validation that that was a good move.

And I think at the time, it seemed very bold to not reach orbit on this first rocket, but move on to Terran R. But we had already started testing the engine, Aon R, for Terran R. And when we talked to customers, they said we were already very impressive and proved enough that they felt confident we could go execute Terran R. As you mentioned, Sam Altman, are you still in touch with him, especially as you do apply AI across the company? Yeah, yeah. Me and Sam are definitely still close. Yeah, we talk a lot. It's interesting to hear what you have to say about SpaceX because for the last several decades, SpaceX has been seen as the disruptor in the space industry. Now you're looking to disrupt the disruptor. Yeah. I mean, I think there need to be multiple disruptors, and I think they'll continue to be

successful. None of Relativity's plans expect SpaceX to slow down or falter whatsoever. I think it's really just this fundamental idea that in 10 years, looking backwards, do we want to see one person and one company have such powerful access to such a valuable resource as space and the future of humanity in space? I think having one dominant company own all of the launch, all of the satellite capabilities is really not the future that I think anybody wants. I think having a robust ecosystem of many players in space is important. But it's worth pointing out that where we currently sit in the industry,

unless somebody steps up and actually is executing aggressively and is very audacious in their plans, that is not going to happen. We are actually on a path to a monopoly or to a potential very stronghold in space just because I think SpaceX is so dominant and they've been so far ahead of everybody else.

So I think for me, that's more of an inspiring challenge and something that we're very spiritually aligned in our long-term vision. We also want to go to Mars. We want to help them make that happen. I personally think it's really important that there's inspiration for dozens to hundreds of companies to work to go to Mars.

So we're excited to collaborate and also be working on the same long-term mission together with them. But yeah, there's got to be another company that steps up to the plate and actually moves quickly and is inspiring and does actually get a lot of payloads into space and reuses rockets and iterates the product at this kind of frenetic pace that we've come to see from SpaceX. Somebody else has to do that and I believe what Relativity is doing is got the chance to do that better. How do you prepare for SpaceX bringing Starship online? Yeah, so Starship of course which has been in development the last couple years, really we expect to be quite successful. It's really something that we see launching a lot of the Starlink 2.0 satellites, which

have been publicly talked about as very large spacecraft. What we're really seeing this dynamic increasingly where satellite companies are also building new capabilities. So direct to sell is very exciting. You saw from Apple and iOS 18, they're now doing direct-to-sell text message. We know Starlink has also announced that capability, as well as voice and data and text. I believe they're rolling it out with T-Mobile later this year. Amazon has partnerships they've announced with Verizon, Vodafone, Orange. So to your

question on Starship, though, we do think second stage reusability is a big part of the eventual equation, even for what we're building with Terran R. When we originally announced Terran R, it was fully reusable as well. We since de-scoped that and made that just first stage reuse. That's just for the initial design. It was really something that became the case that, of course, when you have lots of smart engineers at the company, it's 1,200 people now, but we wanted to focus them on the first priority, which was first stage reuse. That's where you get most of the economic benefit. So for us, it's more to go as quickly as possible.

We wanted to focus people on reusing the first stage. It's an expendable second stage initially, but we do have plans to look at what fully reusable rockets look like. So it's not something that we expect to slow down on our innovation. We just want to make sure that it's really grounded and customer-focused. Starship is something we see potentially like the A380 in commercial aviation. Just like in commercial aviation, there's different sizes of aircraft and different economics that those planes provide.

A380, in theory, was so huge that it was going to be very low cost per person. That's only true if it flies completely full. When A380 actually got in a service, it either flew empty or certain routes it would have flown empty, so it wouldn't have been as economically viable. We're really seeing this dynamic play out just from hearing customer feedback, which Terranar has really designed around customers. All we do and all we've done for the last four or five years have just talked to customers

about what the most ideal large-scale rocket looks like, and that's really what Terranar is. So what's next for Relativity Space, and what's the long-term vision? Yeah, so of course we're very excited to execute on Terran R. I believe we're, you know, several years ahead of the competition as far as building new engines, so we've already tested the engine 2,000 times. We'll finish flight qualification of the engine at the beginning of next year. The vehicle is coming together well, so we're planning to launch 2026. We now own two-thirds of NASA's Stennis Space Center.

So we're building out a first stage test stand. We got one of the old space shuttle engine test facilities called the A2 complex at Stennis Space Center, so that will be for first and second stage testing. So we'll do full testing of the vehicle on the ground before flying. This also contributes to the rapid iteration pace so that by the time we fly, the vehicle really should be quite mature and rapidly reusable. We're building the launch site in Cape Canaveral right now. So we have LC16, which is the same concurrent site where we launched Terran 1.

We're building a new pad right next to it. That's been under construction. We have hundreds of trucks of dirt coming every single week the last couple months to build that site out. And then we've got the old Boeing C-17 manufacturing plant, which is in Long Beach. So this is a million-square-foot factory. All of our infrastructure we have now is really attuned for about a launch a week. So we're planning for initially a cadence of a launch a week. That's over the next couple of years that will scale to that point. But we expect the demand

and what we sold is certainly significantly beyond that. So we're very laser focused on building this quickly moving, disruptive launch company. I think the longer-term future is realizing, of course, as I hinted a little about today, the investment in the 3D printing technology, we think, is continuing to pay off. We're certainly engaging with U.S. government customers at all levels, really understanding that to build domestic production and U.S. manufacturing and really bolster a lot of the supply chains for critical components that the US relies on. That 3D printing is really a key enabling technology. That is not one we are having to push, that is much more a pull. Like we were being asked to develop a lot of

these things, it's almost all inbound not outbound and so those are opportunities we're just taking strategically and selectively right now. But I do see that growing significantly in the future. And it speaks to what I've heard from so many investors in the company over the years, which is one part space company, one part 3D printing company. Any plans to go public eventually? I'm not against going public. We have a lot of investors from Fidelity to BlackRock to institutions that would certainly expect an exit at some point in time. But yeah, right now we're private, expecting to stay private. There's plenty of investor interest even being a private company right now.

So we're feeling good about it. It's a malice of relativity space. Thanks so much for joining me. Yeah, thanks, Morgan. Appreciate 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.