Focus: US space startups' latest struggles marked by layoffs, shake-ups

Astra Space

15/08/2023 17:10

By Joey Roulette
       WASHINGTON, Aug 15 (Reuters) - U.S. space startups have
slashed workforces and restructured operations to survive amid
an investment drought that has grounded once-lofty aspirations.
   While more established players like Elon Musk's SpaceX and
Jeff Bezos' Blue Origin spend billions on new, bigger rockets,
rocket startup Astra Space  ASTR.O , satellite imagery firm
Planet Labs  PL.N  and privately held engine maker Ursa Major
recently laid off workers to cut costs.
    Those struggles follow the April bankruptcy filing by
satellite launch firm Virgin Orbit, which was owned by
billionaire Richard Branson. Among the factors cited by the
company were volatile capital markets and Branson's reluctance
to invest further.
    "The focus for investors in this space is very different
than what it was a couple years ago. It's less about your
potential," Ursa Major CEO Joe Laurienti told Reuters. "It's
more about how can you build a healthy pipeline ... and execute
and deliver upon the efforts that you promised."
    While a steep drop in space investments spurred by a grim
economic outlook in the past year appeared to stabilize in the
most recent quarter, startups, many of which went public through
blank-check companies to raise cash, are reeling from the
downturn's impact.
    Quilty Analytics analyst Caleb Henry called it a tough
capital market and said startups are working with what they have
rather than banking on an influx of new funds.
    "We're seeing a bit of a decrease in investor risk appetite,
and that is made worse in some cases by poor company
performance, and then more broadly, things like high interest
rates and general market uncertainty," he added.
    Astra disclosed last week it laid off a quarter of its
workforce and diverted focus from its rocket launch program,
once the core of its business. It is now focusing on its
satellite propulsion unit, a more immediate source of revenue
that it split off as a separate entity earlier this year.
    "The spacecraft engine business is a much different business
than launch," Astra CEO Chris Kemp told Reuters. "Having it all
mixed up with launch was making it harder for us to raise
capital"
    The company, which is delaying tests of its rocket to 2024
to focus on the satellite engine unit, reported on Monday it had
$26 million in cash and securities on hand. That was down from
$201 million the prior year.
    
    STEEP CHALLENGES 
    With complex technologies and explosion-riddled tests that
often spook investors, venture-backed and publicly traded rocket
businesses have faced some of the steepest financial challenges.
The industry also includes satellite imagery and analytics
firms, seen as safer bets by investors due to more predictable
demand.
    But even those satellite firms have struggled.
    Planet Labs, which went public in 2021, shed 10% of its
roughly 1,000 employees earlier this month, citing the tough
economy and the company's overly fast expansion.
    "Our business has scaled rapidly and continues to grow
apace, but the expansion of projects has also increased cost and
complexity, which slowed us down in some regards," CEO Will
Marshall told employees in an Aug. 1 note posted on the
company's website.
    Quilty's Henry said Planet Labs hired too aggressively.
"That's not an uncommon mistake for startups to make, especially
once they become flush with cash."
    The financial headwinds faced by rocket startups have
triggered pain elsewhere as well.
    Denver-based Ursa Major, whose engines are designed for
rockets and hypersonic crafts, laid off 27% of its workforce
this summer. It shifted much of its focus to government defense
programs as its commercial customers face tight capital markets,
CEO Laurienti said.
    "The hope is that shift really generated some confidence,"
he added, "and started to show that we're acknowledging this
isn't times of zero percent interest rates and venture capital
flowing like crazy."

 (Reporting by Joey Roulette in Washington
Editing by Ben Klayman and Matthew Lewis)
 ((Joey.Roulette@thomsonreuters.com; 7034696632;))