top of page
Search

SpaceX Business Model: How does the first private space business run?



What is SpaceX?

SpaceX is dedicated to space exploration. SpaceX produce rockets and satellites for communication and exploration purposes. Elon Musk; the founder of SpaceX had one mission in mind- “Making Humanity Multi planetary”.


SpaceX functions

The Space Exploration Technologies Corp., i.e. SpaceX, is an innovative leader in space transportation and aerospace services. The company's founder, Elon Musk, launched SpaceX in 2002. SpaceX has collaborated with NASA on several projects such as transportation of people and goods to the International Space Station. They made a $2.9 billion contract for construction of a lunar lander to take man to the moon again. For now the contract has been suspended due to protests from the competitors. Currently SpaceX is valued at approximately $74 billion.


Business Model

In order to dive deeper into SpaceX strategy for running their business and how the company stays profitable, let’s look at their Business Model. Business model is important because it provides the investors the knowledge about the competitive edge of the company and provides better insight into working of the company.


Here is a typical Business Model Canvas:


Let us look at each of the components mentioned in the above canvas:


Value Proposition:

A value proposition refers to the value a company promises to deliver to customers should they choose to buy their product. Questions to ask when defining value proposition:

  • What is the problem the company is solving?

  • Why would someone want to have this problem solved?

  • What is the underlying motivator for this problem?

Space exploration is no cheap business. This problem is exactly what SpaceX is tackling.

What SpaceX offers is cost-effective and reliable access to space through its reusable rocket systems. It is the only private company to send and bring back a space shuttle, to send rockets to the International Space Station and to a geosynchronous circle. Its brand is solid and is associated with Elon Musk.

It offers accessibility, performance and status. The company has shown strong performance and achieved many milestones. As it is the first private company into space exploration, SpaceX is quite famous and well established.


Key Partners:

Key Partners are a list of other external companies/suppliers/parties a company may need to achieve their key activities and deliver value to the customer. No company can achieve their value proposition alone. We need to ask, “Who else do they need to rely on to do it?”

SpaceX has key partners as the suppliers who provide the parts for the manufacture its spacecraft. SpaceX has 3000 of these supplying partners. 1100 of them make weekly deliveries. The company also has partners that help in the funding of the undertaken projects. These even include Google and Fidelity along with Sequoia Capital and Founder’s fund.


Key Activities:

Key Activities includes about “what does the company do?” Key activities are mainly focused on unique value creation.

SpaceX designs, manufactures and launches rockets and satellites with communication and space exploration as the goal. It also recovers rockets for reuse. SpaceX also focuses on research and development in order to make space exploration cheaper and to bring in new innovations in the field.


Key Resources:

Key Resources are the main inputs and assets the company uses to function effectively. Phrased differently, it is what the company ‘needs’.

The main resource for SpaceX is no doubt the technology staff. These include software, hardware, structural, and propulsion engineering employees. These employees work in the rocket development facility, rocket testing facilities in Texas and New Mexico, launch facilities and headquarters. Other resources are the reusable rocket technology, developers and designers.


Customer Relationships:

Customer Relationships is defined as how a business interacts with its customers.

SpaceX provides a dedicated personal assistance to its clients. The company works closely with clients as it oversees the launch, orbiting, and recovery of spacecraft. SpaceX generally enters into long term contracts with the clients.


Channels:

Channels are defined as the avenues through which the customer comes into contact with the company and becomes part of the sales cycle.

SpaceX business development team helps in acquiring most customers, making it the most important channel. The company also promotes its offering on its website and through its social media pages. Their launch facilities are also one of the main channels.


Customer Segments:

Things to consider when determining Customer Segments for a company include:

  • Who are we solving the problem for?

  • Who are the people that will value my value proposition?

  • Are they another business?

  • If so, what are the characteristics of those businesses?

  • Or, are those other people?

SpaceX has a niche marketing model having a very specialized customer segment. They are divided into 2 segments. The US Government and telecommunication companies, both of which need to transport something into space. Current customers include NASA, US armed forces and OrbComm. Its projects have included commercial satellite launch, space station resupply, and government national security missions.


Cost Structure:

A business cost structure is defined as the monetary cost of operating as a business. How much does it cost to achieve my businesses key activities? What are the cost of my key resources and key partnerships? What is the cost of my business?

SpaceX biggest cost driver is likely cost of goods, a variable cost. Other major drivers are in the areas of research/development and sales/marketing, also fixed costs. If we look at the structure in detail, SpaceX has a value-driven structure. They aim to provide a premium proposition through significant personal service and frequent product enhancements.


Revenue Streams:

Revenue Streams are defined as the way by which a business converts their Value Proposition or solution to the customer’s problem into financial gain.

SpaceX has one revenue stream: sales of the rockets, satellites, and merchandise it manufactures. The Falcon 9 rocket costs $62 million. The Falcon Heavy rocket costs $90 million. The company’s website includes a store where it sells SpaceX-branded T-shirts, outerwear and accessories with a wide range of prices.


How does the Future Business Model look?

As we have already seen, the future of SpaceX has been written in its mission- Transporting human beings to different planets. Therefore, the company focuses on developing and launching fully reusable space aircraft, capable of transporting people to Mars and other destinations in the Solar System. In a near future, SpaceX aims to launch its Starship (designed to deliver satellites further and at a lower marginal cost per launch than the current Falcon vehicles) with a payload compartment larger than any fairing currently in operation. A payload for more than 100 tons!

They have unveiled their plan to host a trip around the moon in 2023, and establish a city on Mars by 2050!


To learn more about valuations, financial modeling, pitch books and research report writing skill sets to answer the basic question of how to start investment banking career, checkout the Platinum Bundle offered by Wizenius, one of the best investment banking courses.


Contact Us (For Free Demo, discount offers etc.)

91-9372443303

talk2wizenius@gmail.com

195 views0 comments

Comments


bottom of page