- Parabolic Arc
- March 30, 2023
Henry Vanderbilt on XCOR’s Bankruptcy
Space is hard. Space startups immensely so.
XCOR’s decision to file for Chapter 7 bankruptcy on Tuesday marks the end of a company that seemed to be in perpetual start-up mode since its founding 18 years ago. Lacking a billionaire backer with deep pockets and a thick Rolodex, the company attempted to develop revolutionary rocket engine technology and a suborbital space plane with funding that would be a rounding error for the giant aerospace primes.
So, how far did it get? What might bidders find valuable when XCOR’s assets are auctioned off? And what problems might have helped to cause the company’s fatal plunge into insolvency?
Henry Vanderbilt has a few ideas on these subjects. Henry is an XCOR shareholder who worked at the company back in the day. He went on to found the Space Access Society, whose conferences were a highlight of the year for the New Space community until recently.
Space Access Update #148 11/9/17
copyright 2017 by Space Access Society
Since announcing my retirement from organizing Space Access conferences last winter, I’ve given serious thought to walking away from this field altogether. At least compared to most of the last thirty years, things are in fairly hopeful shape.
However, the field’s ever mounting total of bad policy, wasteful foolishness, and occasional outright knavery begging to be written about has recently been convincing me otherwise. (There are also a lot of good things happening, too often completely overlooked.) The only remaining question was, where to start?
The question then unfortunately answered itself this morning. It’s a relatively small matter, but ties directly into some of the larger issues of the moment. It’s also something quite personally important to me, from a number of different angles.
What follows is an expanded and lightly rewritten version of my initial comment at Parabolic Arc this morning to the news of XCOR Aerospace’s bankruptcy filing.
Executive Director, Space Access Society
(Chief of Staff, XCOR Aerospace, 2006-2009)
Contents This Issue:
– XCOR Intellectual Property Opportunity – For Someone
XCOR Bankrupt, IP On The Block
Today’s news: Parabolic Arc: XCOR Files for Chapter 7 Bankruptcy
(For a quick chronology of public info on the company’s downfall, scan down the headlines listed at Space News for search “XCOR”.)
OK. I’ve been keeping my mouth mostly shut while this all played out. But in order to head off the most common public misconceptions I’ve seen in previous discussions of this:
The company’s technology was not the problem. Quite the opposite.
– The (patented) rocket engine configuration has a remarkable combination of high reusability with inherent extremely high combustion efficiency and combustion stability. (Usually, it’s pick one: Trade away efficiency to get enough stability.) Also, (patented) cheap efficient piston pumps at a small-to-medium size where turbines don’t scale well. Also, the package applies really well to hydrogen and thus high-energy upper stages.
– Regarding Lynx, meanwhile, a quick refresher: The basic mission is, fly from a normal runway to Mach 3/300,000 feet with a payload, then either send the payload on its way or return it intact to the runway – multiple times per day, at costs comparable to (other) high performance aircraft.
The key thing about Lynx is, the aerodynamics close. IE, from takeoff through Mach 3 climb through vacuum coast, reentry, high-performance glide, and landing, the configuration has been thoroughly wind-tunneled and is flyable and controllable throughout.
And the company’s expertise at flying winged rockets at ridiculously high op rates and low op costs was very real, and is thoroughly embedded in the design.
And the fly-from-an-airport operational concept scales up very nicely to medium-airliner size, with ability to put tens of thousands of pounds of payload out of the atmosphere, then either bring it back again to a soft landing, or send it on its way downrange or (with sufficient propulsion) on to orbit. The minimal size (two seats) of the initial Lynx was a development cost choice, not a technical constraint.
Yeah, I was never that impressed with the (announced target) suborbital tourism market either. But there were other, considerably larger markets for larger, more capable versions. (Not least the various obvious theater defense applications.) But enough on all that for the moment.
The problem was management.
There is a tech-startup phenomenon that’s happened often enough before that there’s a name for it: Founder’s Syndrome, where as a company grows the tech visionaries who began it are too slow to recognize that they’re not as good managers as they are techies and that they’re running beyond their management limitations. Some companies survive it. Some don’t.
My opinion: This whole mess has been a particularly prolonged, painful, and peculiarly convoluted example of Founders Syndrome. (More detail? Maybe some other time. It’d take a book. But as an employee, then stockholder, and with an ongoing personal investment in the company’s goals, I’ve followed this matter quite closely.)
(For what it’s worth, it looks to me like Jeff & Dan, bless their brilliantly difficult souls, eventually learned their limitations and are now implementing a characteristically ingenious workaround for these at Agile Aero. Meanwhile, it’s a major shame that the numerous other extremely talented people still at XCOR after they left never got either the credit they deserved or the chance they’d earned.)
To sum up, XCOR getting all this technology done, including about 2/3rds of the system integration and construction of the first Lynx prototype, plus the previous flight vehicles, plus the various engine developments (including Lynx engines running closed-cycle at reduced power ((full power was cash-limited, not tech-limited)) plus a subscale hydrogen engine demonstrator running closed-cycle at full power) for a total burn over the years that I’d estimate at about $50 million, is nothing short of a miracle of technical vision and skill by a LOT of very smart dedicated people.
The IP Opportunity
Which all begs the question: What happens to that XCOR technology now? Who will end up with all that intellectual property – “IP” – the collected patents, prototypes, engineering drawings, design data & notes and other company proprietary info – now that it’ll presumably be up for auction?
It’s my understanding that a considerable amount of company effort over the last year went into getting the IP organized and recorded. It is not, after all, as if this outcome has not been one of the obvious possibilities for a while now.
Many of the people involved are also no doubt hireable. Probably not cheaply, after the roller-coaster ride they went through to gain their expertise, but hireable.
I see two major chunks of XCOR IP that may be of interest out there: The mass of data that defines and enables Lynx-type vehicles, and the patents and data that enable XCOR-type engines. (There are other useful bits – a non-toxic storable high-performance RCS system here, a low-noise lightweight electronic igniter there… Far too many smaller slices of good design to list here.)
ULA could obviously use the engine IP, to get them away from (I’ve heard) paying more for upper stage engines from the Aerojet monopoly than they do for main booster engines. (Do they already have “march-in” rights to the tech from their development association with XCOR? I’ve heard conflicting stories on that. I don’t recall them getting that in the original cryo piston-pump demo contract I negotiated with them back in ’08, but I can’t say what might have happened since.)
Aerojet might also bid for the engine IP, if only to deny use of it by others to compete with existing Aerojet products. (Aerojet’s performance as the sole remaining major US dedicated rocket engine house has been less than stellar, with negative effects across a wide range of US space activities – but that’s a different piece.)
SpaceX could undoubtedly develop pump-fed restartable hydrogen upper stage engines for themselves, providing a significant enhanced capability in an area that’s one of ULA’s remaining competitive edges. But they don’t have unlimited development bandwidth and the XCOR engine IP would be a significant shortcut. (Hydrogen engine usefulness to them aside, they also might be interested merely to deny the IP to others, if they wanted to play hardball.)
Orbital-ATK or Sierra Nevada might also be interested in a pre-packaged head start on their own hydrogen upper stage engine capability.
As for the Lynx IP, any of the three major US government aerospace airframe houses – Boeing, Lockheed-Martin, Northrop-Grumman – might well be interested. Routinely-reusable fast-turnaround medium-lift from runway to Mach 3/300,000 feet and (maneuverably) back to runway is a niche mission, but it could well be a useful and profitable niche. The initial conceptual and aerodynamic heavy lifting is done, and much of what’s left is exactly the sort of nitpicking-detailed integrating-complex-systems-into-constrained-packages work these companies specialize in.
And then the wild-card: Someone with deep pockets and a strong interest in getting a fast start into the rocket propulsion and/or airport-ops reusable first stage business, who’d been put off till now by all the apparent baggage that came with investing in XCOR as it was. The baggage is shed now. Could be the time to make a move.
It’ll be interesting to see who comes away with the IP when the auction ends.
Me, I hope it ends up somewhere it can be useful to the country’s space interests and industries, rather than just being squatted on. We’ll see, possibly quite soon. Chapter 7 proceedings, as I understand them, can move fast.
DISCLAIMER: I own a modest amount of XCOR Aerospace common stock, from my time there as Chief of Staff 2006-2009 (CoS was an experiment in expanding XCOR’s management bandwidth, highly successful in a number of particulars but ultimately rejected by the organizational immune system) and from an opportunity arising out of that afterwards. I consider it highly unlikely anything I say here will positively influence the (now effectively zero) value of that common stock (but you never know.)
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