Convertible Notes and Startup Funding
February 12, 2025
It is a myth that financial ratios are to be used only by investors and analysts in deriving a fair valuation for the firm. In reality, financial ratios are used by a wide variety of people for a wide variety of reasons. A common usage is by the sales department. Usually sales departments in large […]
The Finance Function and the Project Office Contemporary organizations need to practice cost control if they are to survive the recessionary times. Given the fact that many top tier companies are currently mired in low growth and less activity situations, it is imperative that they control their costs as much as possible. This can happen […]
Corporate America is flush with cash! Collectively, the Amazons’, Apples’ and other such publicly traded mega corporations account for close to $2 trillion in cash. This excessive hoarding of cash in unparalleled in financial history and hence has left a lot of economists flummoxed. In this article, we will try to understand why American corporations […]
We have studied the various discounted cash flow valuation models in this module. These different models need to be applied in different situations. We have studied these situations as well. However, regardless of which model is being applied, one thing remains constant. In the end, the growth rate of the company plateaus down at a […]
The Black Wednesday of 1992 refers to the momentous day when the British Pound was under attack by currency speculators. This day created history in the Foreign Exchange markets because of the fact that the Pound was considered to be one of the strongest fiat currencies in the world. In fact it was the reserve […]
The world has seen many unconventional start-ups. However, almost all start-up companies derive their revenue from the earth. It is Elon Musk’s SpaceX that has opened up the investing community to a different dimension. Most of the businesses SpaceX is running and plans to run are related to outer space.
Research related to outer space has always been a grey area. On the one hand, it requires a lot of money. Any space-related mission requires hardware worth millions of dollars. On the other hand, any space-related mission also carries a lot of risks. There is a very high likelihood that the entire investment might be completely lost. Because of this high investment, high gestation period, and high risk, the job of managing outer space-related endeavors is generally taken care of by governments across the world.
Elon Musk’s SpaceX has revolutionized this space. It has created a commercial industry where one did not exist. Even though very little data is available about the financial numbers of SpaceX, it is known to be a mega success already. Top Wall-Street investment bank Morgan Stanley has stated that the firm could be looking at a valuation of more than $100 billion! This is a huge number for a company that was a start-up in the year 2002, with a seemingly impossible business idea.
However, since the company was being led by Elon Musk, investors had shown some interest in the firm. The firm was able to raise more than $20 billion scattered over several funding rounds. This article explains how SpaceX makes money and why is it considered to be a financially viable business model.
SpaceX has several different revenue streams. As the technology behind SpaceX has matured, the company has been creative enough to find different ways to monetize its core idea. The core idea of SpaceX is that it is a leader in outer space-related technology.
SpaceX aspires to be the company that can send its rockets to space at the cheapest cost possible and in the most efficient way possible. Some of the ways in which SpaceX earns revenue have been mentioned below:
We are all aware of the fact that government spending can be inefficient and wasteful. As a result, these companies had to shell out a lot of money to pay for these expensive satellite launches. Elon Musk’s SpaceX has given them a cost-effective alternative. SpaceX is able to generate a revenue of $62 million and a net profit of $12 million per launch. The company has been averaging between twenty to fifty launches per year!
SpaceX has signed several contracts with the Pentagon wherein it is making missile-tracking satellites that will be used for the national defense. SpaceX is able to generate a handsome profit margin on these contracts as well. This is what makes government contracts an attractive alternative source of revenue.
SpaceX has created rockets that can be reused seven times! Hence, even if SpaceX offers steep discounts to their customers for using second-hand rockets, they can still increase their profitability a lot by using these reusable rockets.
The satellite-based communication method will be an alternative to the fiber optic cable-based global internet network. The satellite-based network will be a game-changer and will be able to provide high-speed internet connection in the most remote parts of the world.
SpaceX is planning to use space technology to change the face of the telecommunication industry. Morgan Stanley has estimated that this business itself is likely to be worth $52 billion i.e. over half of Tesla’s projected net worth, that too within the next five years.
Right now SpaceX is charging more than $20 million per person for their space tourism program. However, the company plans to reduce the cost exponentially over time so that such travel is affordable for the upper-middle class as well.
The bottom line is that SpaceX is at the forefront of space technology. They are using technology to solve several problems in telecommunications and even tourism. This is the reason why SpaceX has become one of the fastest-growing start-ups in the history of the world.
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