Why Richard Branson’s Newest Space Company Could Be a Lucrative Venture

March 2, 2017, 9:23 PM UTC

Virgin Group’s commercial space venture, Galactic Ventures, has spun off one of its projects into a new company called Virgin Orbit. And it could end up being its most lucrative.

Virgin Orbit will focus on launching small satellites into space using its LauncherOne orbital launch vehicle. This vehicle is essentially a 747-400 airplane designed to hold a rocket under its wing. Once the aircraft reaches a certain altitude, the rocket would be fired off into space to deliver small satellites for companies that want to take images of Earth, providing Internet and other communications services.

Galactic Ventures has largely focused on commercial space tourism through its company Virgin Galactic, and The Spaceship Company, which is working on future spacecraft and designed and built SpaceShipTwo—the craft that will carry space tourists.

This new company reflects two trends: the development of mini-satellites and the growing demand by companies to gain access to space in a more cost-effective way.

Richard Branson, the billionaire entrepreneur who founded Virgin and has been the driving force in launching its space tourism company, said that LauncherOne was created with the same philosophy as SpaceShipTwo.

“Let’s open space to many more missions by dramatically decreasing the price of each flight. We’re doing exactly that with LauncherOne—but with satellites instead of people,” Branson wrote in a post announcing the new company.

Dan Hart, a 34-year Boeing (BA) veteran, will head up Virgin Orbit as president. Virgin Orbit’s design and manufacturing facility is in Long Beach, Calif. George T. Whitesides will remain CEO of Galactic Ventures, which is owned by the Virgin Group and Aabar Investments PJS.

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“By offering low cost and frequent service to space, the team is revolutionizing the small satellite market within the promising space economy. And so it makes sense to support their growth by giving them their own company,” Branson wrote.

The burgeoning space industry is no longer just a playground reserved for billionaires like Branson, SpaceX founder Elon Musk, or Amazon CEO Jeff Bezos, who owns a private spaceflight company called Blue Origin. Nor is the industry centered solely on space tourism or sending large satellites into space.

Sending small satellites into space has become a new emerging area in space commerce. And companies like SpaceX have indirectly helped create the opportunity due to its focus on other ventures such as going to Mars, putting up large satellites, delivering cargo to the International Space Station, and sending people around the moon—Musk’s latest goal.

Companies like Vector, a micro-satellite space launch company based in Tucson, Ariz., and Rocket Lab are pursuing this area that SpaceX is not.

“I think small sates is ‘the’ opportunity that’s emerging in space,” said Jim Cantrell, CEO and founder of Vector. “We think it’s the most exciting and lucrative opportunity. From where we stand it resembles the PC revolution of the 80s and 90s when the size and cost of highly complex, highly capable systems are coming down, and that lowers the barrier of access to more people, and more ideas, more money, more innovation, and more value creation for society and business creation.”

These so-called microsatellites weigh as little as 22 pounds. Other, tinier satellites can be even lighter.

Smaller satellites don’t require rockets designed to carry heavier payloads. Virgin Orbit, for instance, says it will be able to launch satellites weighing 200 kg (440 pounds) into orbit for below $10 million. The standard payment plan to launch a bigger satellite on SpaceX’s Falcon 9 is $62 million.

Vector sees a broader opportunity beyond just launching small satellites, said Cantrell, who describes the business as a space access company. Vector’s long-term plan is to launch satellites that can be easily programmed by individuals and time shared. In theory, users would be able upload their own apps like a mobile phone to a network—a service that might cost hundreds of thousands of dollars, and not tens of millions of dollars.

Vector is scheduled to begin launching small satellites into orbit for customers beginning early next year. Cantrell said the company has more than 100 launches sold.