I thought I would share a little bit of how we as investors think about SpaceX. The number one driver correlated to the valuation of SpaceX is cadence of launches, which intuitively makes sense. If your business is the launch business, the more you launch, the higher your value should be. So, I think we see that in the data.
The number one driver correlated to the valuation of SpaceX is cadence of launches β which intuitively makes sense. If your business is the launch business, the more you launch, the higher your value should be.
But, there's another fundamentally different ratio that I'm going to point you to, which is what if we took the valuation, we divided it by the number of launches, what would that look like? Well, you can see it was kind of in a fixed range for a while, and then it really started up. And we believe that markets are rational, and so we started thinking, well, why is it that the market is valuing SpaceX higher on a per launch basis when it's launching more than when it was just starting out?
Why is it that the market is valuing SpaceX higher on a per launch basis when it's launching more than when it was just starting out? Markets are rational β so something has to explain it.
And my fundamental view, and we'll kind of call this our code two framework, is that the reason is that the quality of SpaceX's business model increases the more you launch. So, in phase one, which we call pre-constellation, you're just trying your rockets. And we know rockets are hard, and maybe you have a few government customers, and that's a one-time revenue business, and it's unpredictable.
Then you get into your initial ramp, and now you might have one constellation. So, why is a constellation important? Well, it's an end market, and it's a recurring revenue business. The more satellites you put up, the more subscribers you have, the more revenue, etc.
The quality of SpaceX's business model increases the more you launch. Phase one is pre-constellation β one-time, unpredictable government contracts. Phase two, initial ramp β a constellation is an end market and a recurring revenue business.
Now, you can move from ramp into scale. Now, you don't just have one constellation, you have multiple constellations. So, now you move into being a scale business, which ultimately becomes a platform.
And we know how valuable these platforms are in this technology age. And platform means not only do you have many more customers in your core business, but you also have new businesses. It could be space data data centers, it could be the optionality of the moon and Mars and other space applications.
Platform means not only do you have many more customers in your core business, but you also have new businesses β space data centers, the optionality of the moon and Mars and other space applications.