Adding more fuel to the tank

A little over a year ago, the co-founders of Vector showed up at Lightspeed’s office with an ambitious plan. They told me and my partners Adam Goldberg and Barry Eggers that, in order for the space industry to grow, rockets had to shrink.

For satellites, the “great shrinking” has been quietly progressing for over a decade. Today, 1,886 human-made satellites circle the planet, but with every additional launch the average size of a satellite gets smaller:

The segment of satellites <100 kg is essentially brand new since 2000. I discussed how this segment emerged in my original post on our investment in Vector last year. Today, satellites <100 kg are the majority of annual launches:

Furthermore, more than 70% of satellites launched annually are directed to low earth orbit (LEO), where they provide cost effective functionality that in many cases a satellite in geosynchronous earth orbit (GEO) could not:

SpaceX should get credit for much of the market expansion, since its introduction of the Falcon rocket has reduced the cost of launching to LEO by an order of magnitude in the last decade:

These cost reductions have driven analysts, including Morgan Stanley, to predict a tripling of the space economy by 2040 to over $1 trillion in annual revenue. Yet, the SpaceX model of cost reduction is limited. It relies on extremely large rockets launching many satellites simultaneously. That’s one way to lower costs, but it has diminishing returns, especially as we reach the limits of rocket size and complexity.

Another way to reduce costs is to make rockets smaller, not larger. If you had to build a rocket company with the assumption that most satellites launched in the future will be <100 kg and LEO based (which they are already), you would absolutely build smaller rockets that can be launched more frequently. That’s exactly what Vector set out to do when the company raised its Series A last year.

Vector has made significant progress against its plan and is now projecting its first space launch later in the year. It also recently added some veterans to the executive team, including Chief Revenue Officer Robert Cleve (ex-Lockheed), VP Manufacturing & Supply Chain Brian Barron (ex-BMW), and our new independent board director James Palmer (former CFO of Northrop Grumman and McDonnell Douglas).

Lightspeed is proud to double down on our investment in Vector in its $70 million Series B round and partner with new investors Kodem Growth Partners and Morgan Stanley, as well as many of our existing partners, including Sequoia Capital and Shasta Ventures. We’re excited to put more fuel in the tank, and to get to space very soon!