The era of cheap money is gone, and that could mean tough times ahead for the space industry.
“We’re at a perilous time for space startups, because for a long time with low interest rates they have been living with basically free money,” Eric Berger, senior space editor at Ars Technica, told Yahoo Finance Live.
“Now we’re seeing capital availability dry up and it’s more expensive to borrow and raise funding,” said Burger, who is also the author of Liftoff: Elon Musk and the Desperate Early Days That Launched Space said,
That’s part of the problem facing Virgin Orbit (VORB). The Long Beach, California–based satellite launch startup recently filed for Chapter 11 after failing to secure funding.
“A lot of these companies, Virgin Orbit included, were still pretty far away from delivering profits, or certainly positive cash flow,” said Berger. “It becomes more difficult to convince investors to part with money, when you have 675 employees and are launching two or three rockets a year, that’s just not financially sustainable.”
Virgin Orbit was also facing stiff completion from SpaceX, the industry powerhouse founded by billionaire Elon Musk.
“They [SpaceX] can fly much more frequently and at lower cost than all their competitors in the United States and abroad,” said Berger.
Industry watchers expect SpaceX to eventually spin out its satellite internet operation, Starlink. However the rest of the company is unlikely to ever go public, said Berger.
“The long term vision of SpaceX really was to settle Mars, as kind of crazy as that sounds,” said Berger.
“There is not much profit in that, so having to answer to shareholders probably is not something Musk wants to do with SpaceX," he added.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
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