Relativity Space CEO, Tim Ellis, has responded to comments made by Peter Beck, the CEO of Rocket Lab, regarding the value of launch contracts for un-flown rockets. While Beck referred to these contracts as “basically worthless,” Ellis strongly disagrees and argues that building a backlog is crucial for validating product market fit.
Key Takeaway
Building a backlog is crucial for launch companies to validate product market fit and demonstrate customer confidence. Relativity Space has signed contracts worth over
.8 billion for its Terran R rocket, highlighting the significance of a substantial backlog. Pre-sale contracts offer valuable insights into customers’ needs and expectations while allowing transparency between launch providers and customers.
The Importance of Building a Backlog
According to Ellis, deciding not to build a backlog is a failed business strategy that fails to validate pricing and product capabilities. He believes that collecting upfront cash from customers demonstrates their confidence in the product and its ability to solve their problems effectively.
Relativity Space has already signed contracts worth over $1.8 billion for its Terran R rocket, which is set to fly in 2026. This substantial backlog sets Relativity apart from competing launch companies, such as Rocket Lab, which has yet to announce any pre-sales for its Neutron rocket.
Launch Capacity and Market Dynamics
The Terran R rocket has a payload capacity of up to 23,500 kilograms in a reusable configuration and 33,500 kilograms in an expendable configuration. The Neutron rocket, on the other hand, has a payload capacity of 13,000 kilograms. Both rockets aim to meet the increasing demand for higher payload capacity and high-flight volume rockets, particularly from customers involved in mega-constellations.
Disputing the Value of Pre-Sale Contracts
Ellis strongly disagrees with Beck’s characterization of pre-sale contracts as insignificant and cancellable anytime. He emphasizes that Relativity Space’s launch services agreements (LSAs) are extensive contracts stretching over sixty pages. These contracts involve a sales cycle lasting between 6-18 months and require regular discussions between the customer and the company’s engineering teams.
Moreover, these contracts include upfront payments, making them non-cancelable as long as Relativity fulfills its agreed-upon obligations. Ellis points out that these LSAs offer valuable insights into customers’ technical plans and requirements, enabling Relativity to identify market needs early on.
Benefits of Building a Backlog
Building a backlog also allows prospective customers to gain transparency into a launch provider’s capabilities. They can visit factories, meet teams, examine infrastructure, and assess launch site progress. This process is crucial as both the launch provider and the customer’s credibility are at stake.
Ellis stresses that customers only care about a company if it genuinely solves their problems and offers the best choice. He argues that dynamic pricing is essential and reveals that the pricing for Relativity Space’s Terran R has increased by 50% in the past two years due to shifts in supply and demand.
Relativity Space’s Success against Competitors
In a final rebuttal to Beck’s comments, Ellis asserts that Relativity Space has a 100% win rate against competitors, including Rocket Lab, in several contract deals. This statement contradicts Beck’s claim that Rocket Lab is not focused on building a backlog. According to Ellis, Relativity Space’s victories against Rocket Lab demonstrate the importance of building a robust backlog.
