One of the few bastions of British commercial space activity, OneWeb, has collapsed. After failing to secure a further $2bn investment from its main backer, SoftBank, OneWeb has filed for bankruptcy protection in the US. 90% of its staff has been laid-off, leaving only a skeleton crew to maintain the current 74 satellites in orbit.
send up 648 satellites into low-Earth orbit, in order to provide high-speed internet access across the globe
Their original mission was ambitious: to send up 648 satellites into low-Earth orbit, in order to provide high-speed internet access across the globe. This plan led OneWeb into inevitable competition with the two of the biggest players in the rapidly growing commercial space sector: SpaceX and Jeff Bezos’s Project Kuiper.
inevitable competition with Space X and Project Kuiper
Of these, SpaceX, with its Starlink satellite constellation, has been the most successful by far. It has launched 362 satellites, with plans to launch up to 12,000 although they still have some way to go.
Project Kuiper has not yet launched a satellite into space. However it is possible that they are waiting for Blue Origin, Jeff Bezos’s other pet project, to finish the development of the New Glenn rocket so that the satellites can be launched in-house rather than contracting out launches.
The gulf between OneWeb and these competitors is stark. SpaceX’s founder and owner, Elon Musk, is a multi-billionaire and has numerous other corporations and projects to draw resources from if needed, such as Tesla. Likewise, Project Kuiper, and Blue Origin, can draw from the resources of Jeff Bezos, the world’s richest man and first centi-billionaire, and his numerous other companies, the most successful of course being Amazon. OneWeb, in contrast, was founded and is run by Greg Wyler, who is ‘only’ a multimillionaire, with no other significant sources of income to supplement OneWeb.
Every bit of profit is reinvested into further development
Commercial space activity is an expensive business. It requires a huge amount of sustained upfront investment before it can even begin to turn a profit. SpaceX has only recently begun to turn significant amounts of revenue after a decade and a half of engine and rocketry development, which, as you can imagine, is incredibly expensive. Blue Origin has been in development for 20 years, with Bezos admitting that, from at least 2015, he was funding it with $1bn per year from Amazon stock sales.
Now seems a fitting time to introduce Richard Branson’s Virgin Galactic, which fits soundly into the same category as SpaceX and Jeff Bezos’s space efforts, with a multi-billionaire founder-owner and a pool of other companies to rely on if needed. It has similarly been in development for 16 years and even suffered a fatality in 2014 in a rocket crash. The amount of funds necessary to sustain these companies, and the setbacks they face, until they eventually do begin to turn a profit is tremendous. Even once they begin turning profits, as SpaceX has been doing since around 2017, every bit of profit is reinvested into further development.
investors demand profits, and these companies take a long time and huge investments before they turn profits
Thus, OneWeb needed investors like SoftBank in a way that SpaceX and Project Kuiper/Blue Origin does not. This aspect of OneWeb makes its future prospects volatile, as investors can pull out and refuse further funding in a way that the other players need not worry about. Similarly, investors demand profits, and these companies take a long time and huge investments before they turn profits, an unattractive feature for investors.
Given this need for investors, perhaps the only way out for OneWeb may be to sell the entire business to a larger conglomerate in order to sort out their financial position. The Virgin Group, one of OneWeb’s investors, seems a likely buyer, given Branson’s interests in space activity and British development thereof. While making OneWeb a subsidiary, this option would at least allow them to continue their work to provide fast internet access across the globe.
OneWeb planned to derive its profitability from the extensive network of satellites
Perhaps, through this lens, the collapse of OneWeb was inevitable. Unlike other companies that send up satellites to expand an already established business OneWeb planned to derive its profitability from the extensive network of satellites, which would only turn a profit once all 648 satellites were up and integrated into the network. This would be remarkably expensive – indeed, OneWeb had $3.4bn already invested before they sought an extra $2bn and would likely need more later on.
Securing this funding would have been a tremendous feat for a company with not even $1bn to draw upon. One which would not have been profitable for years. Given the competition from the much more established players, SpaceX and Amazon/Blue Origin, perhaps it may never have been profitable.
Maybe it is no surprise that it failed to secure more funding, demonstrating again that, at least for the foreseeable future, commercial space activity remains the domain of multi-billion-dollar conglomerate-backed companies.