Rocket Lab chief executive Peter Beck opens up on how more than 400 staff will share in his company's Nasdaq payday, allegations of workplace bullying, going head-to-head with Elon Musk's SpaceX in mid-size rockets and more.
"You don't go to Mars working eight to five, Monday to Friday," Rocket Lab founder Peter Beck says.
"You can't take on the likes of SpaceX working eight to five."
The CEO is responding to a recent allegation that staff are working "silly hours", leading to a number of "rage-quitting incidents", which emerged after the Employment Relations Authority ordered Rocket Lab to pay $100,000 to an engineer who was hired in early 2018 then sacked within a year.
Rocket Lab said the dismissal was for negligent record-keeping, non-compliance with engineering processes and other serious breaches of its policies. The ERA ruled the company had abused its power, breaching good faith by not offering remediation.
"Rocket Lab makes no apology for being a hard, fast environment," Beck says.
"I'm incredibly proud of the culture we have here. It is a very respectful culture where everybody has each other's back. And, you know, everybody works hard.
"To put what we've created into context: there is only one other company that's like it in the world. And that is Elon Musk's SpaceX.
"So what we've achieved as a company is just incredible. And it just takes an incredibly passionate and dedicated workforce to achieve that.
"The very nature of a startup is that you have to push incredibly hard to be successful.
"You can't take on the likes of SpaceX working eight to five and a Friday."
You're probably starting to get an idea of what the founder thinks of a traditional working week.
Beck has also demanded high performance. In December, he told a Blackbird Ventures podcast that in the rocket-launch business, under-performers had to go.
I'll step in if you do :P— aimee 'Max' whitcroft (@teh_aimee) July 1, 2021
"Out of all the things that you do as a company, for me personally anyway, that is, that is always the hardest thing to do. People who just have not managed to reach the bar - you have to take action and that is an incredibly unpleasant thing. But you just have to otherwise the company will die."
Beck described himself as "a walking HR disaster", and his company was dinged by the ERA for not following proper procedures with the 2018 firing that led to the $98,000 payout. Rocket Lab told the ERA in 2019 it bolstered its HR team.
Last month, an anonymous staffer told BusinessDesk the prospect of an employee being granted Rocket Lab shares was "a carrot which they would dangle in front of people to get them working silly hours" and that stock was in fact "only for the favourites".
Beck says the equity scheme is broad-based, merit-based and goes far beyond a token couple of shares.
"To date, over 400 staff have participated in the staff equity scheme. This is where we take the high-performing staff, and we actually just give them equity in the company," he says.
"So during the IPO, there is going to be a significant employee windfall."
Rocket Lab has about 600 staff, and is on a hiring drive that will bring its total complement to close to 700; around two-thirds work in NZ, the balance in the US and Canada.
The 400 with equity are a mix of past and present staff. Beck says in each case allocations were performance-based (a contrast to the usual startup model that sees first-on staff receive stock, and the tap simply turned off for later hires).
The founder says substantial rewards are in the offing if Rocket Lab lists on the Nasdaq at its anticipated US$4.1 billion valuation (something that is on the cards, given more than 3000 investors from NZ alone are climbing onboard for the listing, expected before the end of September).
A successful listing would mean more than 100 Rocket Lab employees would own stock worth more than $1 million, and 180 would have a holding worth more than $500,000.
How the US$750m will be spent
As the Herald reported earlier this week, a regulatory filing revealed Beck will be able to redeem up to US$30m when Rocket Lab hits the Nasdaq (in a reverse-listing via a merger with blank-cheque or "special purpose acquisition company" Vector Acquisition). But he will still hold 13.1 per cent of voting stock with 54.5m shares worth about US$564m ($783m).
A clutch of Silicon Valley venture capitalists will own most of the company, and the Australian Government's Future Fund will retain a 10.2 per cent stake (our Government's Super Fund passed on an early opportunity to invest).
A number of early backers including Lockheed Martin, ACC's investment arm and Sir Stephen Tindall are set to retain some of their shares but fall below the 5 per cent disclosure threshold (Tindall declined to comment; ACC has yet to respond to questions about its pre-and-post Nasdaq listing holdings). Vector will also be under 5 per cent.
All up, the Nasdaq listing will boost Rocket Lab's cash balance from US$48m to about US$750m.
Beck says part of the money will go to expanding Rocket Lab's Space Systems division - the wing of the company that makes satellites and spacecraft. The unit has already landed two high-profile Nasa contracts - one to ferry a satellite into lunar orbit later this year as a precur to resuming crewed missions to the Moon, the other to design and construct two Rocket Lab satellites that will be delivered into an orbit around Mars (by a Nasa rocket) in 2024 to study the Red Planet's atmosphere.
Then there's Beck's passion project. A private Rocket Lab mission to Venus in 2023. That mission is to validate whether possible traces of phosphine in the planet's clouds - suggested by observations from Earth - exist or not.
"And the reason why that's important is that, currently, our only understanding of the ability to produce phosphine is organic symbiosis. So: life.
"For me, the chance of actually answering one of the biggest questions in the universe - are we the only life form? - is just too alluring.
"So I'm fortunate to have the full support of the board to actually conduct a private mission, to another planet, with the express purpose of searching for life."
Going head-to-head with Space X
Beyond Space Systems, another big chunk of the Nasdaq money is earmarked for developing Rocket Lab's much larger Neutron rocket, a crew-capable launch vehicle that will be able to carry a payload of up to 8 tonnes (the Electron tops out around 300kg). All going well, the Neutron will first lift off in 2024.
"Currently, there is only one regularly-reusable launch vehicle flying in this particular payload class. That is, SpaceX's Falcon 9.
"The Neutron offers an opportunity for customers who sometimes have competing satellite platform to Starlink [also owned by Elon Musk]; it gives them an alternative to access to space.
"And if we're really serious about growing the space economy to a US$1.4 trillion industry by 2030, it requires more than just one launch provider."
The Neutron is certainly front-and-centre of Rocket Lab's financial projections, which forecast its revenue to nearly double to US$450m in 2024 as the company makes its first serious profit (US$119) as it tracks toward a US$505m operating profit on US$1.57b revenue by 2027.
Beck also reveals a third use for the listing bounty. "There's a number of acquisition targets we're pursuing," he says.
The CEO is wary of talking too much about targets, but in 2020, Rocket Lab bought Canadian satellite component maker Sinclair Interplanetary for an undisclosed sum, and Beck indicates that's the broad focus of its latest hunt, too.
"The kinds of acquisitions we're looking to do will be both revenue, accretive, but also very strategic for us. Launch is a key element, and we'll continue to invest in launch. But on the spacecraft side, that's an area that we feel very strongly about," he says.
"We've had a number of wins recently in the spacecraft part of the company. But ultimately we're looking to operate those spacecraft and constellations for our own applications in the future."
The military rationale
Rocket Lab recently ran into Green Party flak for launching the "Gunsmoke-J" satellite for the US Army's Space Missile Command - part of a programme to develop systems to better target missiles.
Beck reiterates where his company draws the line: "We don't launch weapons," he says.
His company won't launch operational military satellites, but it will launch research-based birds that could lead to military applications.
The Gunsmoke-J briefing for Space Minister Stuart Nash released to the Herald by the NZ Space Agency under the Official Information Act said, "The US Army has stated that this satellite will not be utilised for operations ... They have confirmed it will remain a science and technology demonstration over its lifetime."
Beck is not apologetic about the fact his company launches satellites for so many branches of the US military, and that key early funding came from a wing of the US Department of Defence known as Darpa (the Defence Advanced Research Projects Agency).
Military business features strongly in Rocket Lab's Nasdaq listing presentation, which says its coming Neutron rocked will be "tailored for commercial and DoD [US Department of Defence] constellation launches".
"Part of our business is to launch defence payloads. And we've been super clear about this from day one," Beck says.
"And New Zealand Government has an incredibly robust framework. I mean, it's the only framework that I know of that requires ministerial sign off for each individual payload. So anything that we've launched complies with all of New Zealand's foreign policy, all of its anti nuclear weapons policy.
"We're not going to launch contentious things.
"It's not what the company is about. When you walk in the door, you read the sign, 'We go to space to improve life on Earth'. And that's really the mandate of the company.
"But the reality is that just about every piece of space infrastructure is in some way connected to defence, whether it be GPS or weather. A lot of the infrastructure that we rely on in our everyday lives is actually owned and operated by defence forces."
Neutron's US focus
Rocket Lab's new, much larger rocket will launch from the company's recently completed Launch Complex 2 at Nasa's Wallops Island facility in Virginia.
"The Neutron will initially launch out of the United States for industrial base reasons," Beck says.
"To give you a sense of the scale, if we took all the liquid oxygen that's produced in New Zealand, we'd only fill half the tank, let alone all the other kind of logistics that are associated with these very, very large launch vehicles."
Is there scope down the track for the Neutron to launch in New Zealand?
"Never say 'never'," Beck says. "We'll certainly concentrate on getting it launched out of the US first, and then we'll evaluate the feasibility of bringing something that size down to New Zealand."
With its corporate headquarters in Los Angeles, along with its largest manufacturing complex (making the Electron's signature Rutherford engines), its pending Nasdaq listing and its plan to launch its new rocket from Virginia, is Rocket Lab leaving NZ behind?
"We made a very strategic commitment to launch electron from New Zealand because we can achieve the launch frequencies that's very hard to achieve in other places," Beck says.
"We've made tremendous investments here, both in facilities and personnel. So I don't see us wiping those investments away. There's a tremendous strength of having operations in New Zealand and, quite frankly, operations in the US."
More local investment is under way. Since opening its Mission Control and launch assembly in Mt Wellington in 2018, Rocket Lab has leased two additional sites to take its total manufacturing footprint in Auckland to 12,000sqm.
When the Herald visited this week, the assembly floor is crowded with five Electron rockets under assembly for Earth imaging company BlackSky. Rocket Lab is now eyeing the adjacent building occupied by 2 Cheap Cars, whose lease is winding down (the neighbouring business was recently pranked with a 2 Cheap Rockets sign whipped up by Rocket Lab staff). The company also recently expanded Launch Complex 1 at Mahia.
More broadly, Beck hopes Kiwis will share in his company's Nasdaq success, and be proud of Rocket Lab's achievements.
While low-key compared to SpaceX owner Elon Musk, Beck doesn't underplay his company's achievements, either.
"Not only have we created this very valuable company that's about to list on the Nasdaq, we've created an entire industry in New Zealand," Beck says.
"We bit off the hardest thing that you could go and do. It's not like - no disrespect to a software company - building software. We built a launch vehicle. We go to space.
"We did what only one other company in history [SpaceX] has ever achieved. I think this is an incredibly proud story for New Zealand. Because although we are a US company, you're sitting in New Zealand talking to me, and the majority of our workforce remains in New Zealand.
"To build in a multibillion-dollar company is hard. To do it in space is hard squared. So I hope all New Zealanders share in the success of the company."
Paying it forward
Beck has already taken some money out of the business. In March 2019, he sold US$10m worth of shares to US venture capital company Greenspring.
Some of that has gone to backing Kiwi startups, including Halter, the company founded by former Rocket Lab engineer Craig Piggott, which is on a hiring drive to increase staff from 60 to 115 as it makes the first deployments of its smart-cow collars to farms around the Waikato; HeartLab, an early-stage Auckland company that's using AI to better analyse cardiac scans; and Astrix Astronautics, developing cheaper, more efficient solar panels for satellites.
Early Rocket Lab collaborator Mark Rocket (who still owns shares in the company) has a startup developing 32m wingspan UAVs that will fly at twice the height of a commercial jetliner.
Beck sees more of the same on the way, in part thanks to his company's Nasdaq listing, which he's hoping will prove the largest ever for any company operation out of NZ.
"We have over 400 employees that have that have stock and over 100 of those will potentially be millionaires. And that fuels the continued entrepreneurial economy.
"There are two things I'm super passionate about. One is obviously Rocket Lab and space. The other is growing more New Zealand entrepreneurs.
"Because I think of I think New Zealand's ticket here to a really high-wage, high-productivity, high-value economy tech companies, relatively small footprints - many with relatively small footprints.
"I've been a super-active investor in all of some wonderful New Zealand startups, and I'll continue to do that. But this also offers in a whole new group of innovators and a whole new group of entrepreneurs possibilities to do their own thing."
Launches set to resume
First, Rocket Lab has to get back on the horse. After it lost an Electron rocket on May 15, the company quietly pushed back its Nasdaq listing time frame from "executed in the second quarter" to "expected in the third quarter," giving it time to get another successful launch under its belt.
"The Flight 20 anomaly investigation is wrapping up here very quickly. So we'll get back to the pad here pretty shortly," Beck says, though he's loath to give an exact timeframe.
(The loss of "Running Out of Toes" was pinned on an "anomaly" in the Electron's second-stage engine, which Rocket Lab engineers were able to replicate, leading the FAA to grant approval for a return to flight on June 3.)
Pandemic opportunity for economic reset
Covid crimped Rocket Lab's launch schedule, despite the company getting special dispensation to get skilled staff and a number of customers across NZ's boarder (Beck himself has been in New Zealand for the duration. He says the first year was bliss; now he's itching to get up to LA and Virginia).
Early in the pandemic, he talked about the disruption being a chance for our Government to reset the economy to be more attractive to entrepreneurs creating higher-value jobs that would boost our lagging productivity.
"New Zealand has created an incredible reputation for itself on the world stage. And I think it's time to draw down on that reputation and attract some high-value tech companies."
But he says that chance has been taken, and time is running out.
"Other countries like the US are really starting to stand back up on their feet and really starting to get going again. There was a wide window for us to do some really innovative things. That windows still exists, but it is starting to narrow."