PARIS — You know the power of New Space and the New Economy — as ideas, if not as business models — has reached a high-water mark when the former director-general of the European Space Agency seeks to explain the fact that a startup launch operator has a higher market valuation than Europe’s Arianespace.
Jean-Jacques Dordain, who is now on the advisory board for the Luxembourg government’s space-mining initiative, spaceresources.lu, did not defend the fact the valuations themselves, but rather to defend their ultimate value to society.
“This is the characteristic of the New Economy, to invest in businesses of the future, not in current businesses,” Dordain said here during the Paris Air Forum conference, organized by Groups ADP and La Tribune.
“It’s extraordinary that we assign a much higher value to future businesses than than to current business. Take the company Rocket Lab. It has conducted one launch, which was a failure. It has been valued at $1 billion.
“Arianespace, which launches 10-12 times per year with success, is valued at much less than $1 billion as we saw from the sale of shares between CNES and Airbus. We assign more value to a business’s perspectives than to its current value. And space is not an exception to this rule.”
Rocket Lab’s May 25 inaugural test launch did not achieve all is objectives but the U.S.-New Zealand company brushed aside the shortfall as an inevitable part of a test campaign.
Rocket Lab closed a financing round in March that brought the company’s investment to $148 million from multiple venture capital firms including Khosla Ventures, Bessemer Venture Partners, Data Collective, Kiwi and Promus Ventures.
The company said the latest funding round brought Rocket Lab’s value to more than $1 billion.
By comparison, the French space agency, CNES, agreed to sell its nearly 35 percent share of the Arianespace launch-service provider to Airbus for about 150 million euros, for a formal valuation of less than $500 million.
Arianespace’s work-horse vehicle, the Ariane 5, completed its 79th straight success on June 1. The vehicle is failure free since 2002.
The sale of the CNES shares to Airbus is not a standard valuation event, and extrapolating Arianespace’s market value from the transaction is hazardous. But Dordain’s point was that New Space, like the New Economy, assigns a higher value to perspectives and promise than it does to demonstrated performance.
And while some investors may pay a high price, Dordain said the New Economy is no bad thing.
“I dont think so,” Dordain said when asked if the Rocket Lab/Arianespace equation was not upside down. “There are lots of business cases that end in failure. But the real benefit is that they generate a movement that develops technologies — and these technologies remain. There is always a tangible result from this activities.”
Dordain’s said Luxembourg’s decision to invest in space mining likewise is a bet on the future whose returns, in the ROIC sense, are many years away. But along the way, value will be created.
“Yes, it’s far off as a business,” Dordain said. “But I’m sure this business will permit the development of technologies that will be important, including for terrestrial resource extraction. A certain number of sensors being developed to characterize asteroids can be used to look at terrestrial resources.”