Launch startups Astra and Firefly ink secret rocket engine IP deal

Astra, the small launch company that recently went public, has signed a roughly $30 million deal for the rights to manufacture Firefly Aerospace’s Reaver rocket engines in-house, according to a document seen by The Verge and people familiar with the arrangement. The agreement is part of a growing trend of consolidation in an industry of small rockets, where companies are cutting new deals to stay competitive as private capital abounds, more players take the field, and demand for small launch services shifts.

Under the deal, which closed earlier this year, Firefly will send up to 50 of its Reaver rocket engines to Astra’s rocket factory in Alameda, California, where a development engine was already delivered in late spring for roughly half a million dollars, according to an internal Firefly document viewed by The Verge and a person briefed on the agreement. Astra engineers have been picking apart the engine for detailed inspection, said a person familiar with the terms, who, like others involved in the deal, declined to speak on the record because of a strict non-disclosure agreement.

Astra’s vice president of communications Kati Dahm declined to discuss the agreement when asked by The Verge for comment on specific details, but disputed as incorrect the number of engines that the deal covers, as well as the cost of roughly a half million dollars for the initial development engine that’s sitting in Astra’s factory. Dahm declined to provide any additional information to back up those disputes.

Fusing Firefly’s engines with Astra’s own rocket technology would help Astra reach its publicly stated “500kg to 500km” goal, or the capability to send 1,102 pounds of satellites into the most popular orbital altitude for mega-constellations. The company’s current rocket — simply called Rocket, nothing else — has been test-launched through various iterations, and after three main attempts, has yet to reach orbit. The latest rocket iterations use five of the company’s own Delphin engines, which are designed to lift up to 331 pounds to low-Earth orbit.

Astra is one of a handful of new launch startups that has been drudging through the trials of starting a launch business. Roughly five years after its founding in 2016, the company reached space — but not orbit — during its second launch last year, a feat that came quicker than most rocket startups typically achieve. Its third and most recent attempt in August from its pad in Kodiak, Alaska failed after one of its five core engines shut down nearly a second after liftoff, Astra co-founder and CEO Chris Kemp told reporters at the time.

Firefly, too, has struggled to reach orbit using its centerpiece Alpha rocket, which is powered by four Reaver engines. This month, the company’s first orbital launch attempt failed when one of Alpha’s engines shutdown after a fuel valve spontaneously closed, cutting off the rocket’s ability to steer itself vertically. It started tumbling and turning sideways mid-flight before Space Force officials, who help manage launch safety, stepped in and detonated it. Alpha, as designed, can carry much more to orbit than Astra’s current rocket — some 2,204 pounds of satellites to low-Earth orbit.

The IP agreement includes a clause that aims to ensure Astra’s rocket doesn’t directly compete with Firefly’s Alpha. Astra, people involved in the deal said, is limited to using no more than two Reaver engines per rocket — just good enough to achieve the “500kg to 500km” goal. Kemp, Astra’s CEO, declined to comment on the specifics of the deal but emphasized Astra isn’t outright buying engines from Firefly. Doing so would be a major reversal for Astra’s brand of vertical integration, or the arrangement in which a company largely owns most of its supply chain to keep costs low and minimize production risks. Rather, according to the people briefed on the deal, Astra is buying the engine’s IP to manufacture them in-house and avoid being dependent on a supplier for its engines, which engineers regard as a rocket’s most important piece of hardware.

“I can’t comment on any supplier agreements that we have, but I can tell you that we have said that all IP required to produce all of our technology will be owned by Astra, licensed by Astra, or developed by Astra,” Kemp told The Verge.

A spokesperson for Firefly declined to comment.

Firefly’s move to sell engine IP to Astra, a rival, is part of a broader strategy to diversify its rocket business, and an increasingly common tactic in the industry. In August, Firefly announced a “new line of business dedicated to supplying rocket engines and other spaceflight components to the emerging New Space industry.” Without naming Astra, Firefly CEO Tom Markusic told SpaceNews last month that Firefly has a contract to deliver about 50 rocket engines to a company developing its own launch vehicle. The Firefly document reviewed by The Verge says the same, and adds that sharing IP is part of the deal. Multiple sources involved in and familiar with the agreement told The Verge that Astra is the undisclosed customer.

Swapping out Astra’s Delphin engines for Firefly’s Reaver engines isn’t as easy as it might sound. The existence of the deal between the two companies suggests Astra is planning a redesigned launch vehicle, which analysts say would have been necessary anyway to achieve its goal of sending 500kg to low-Earth orbit. But it’s unclear what rocket Astra is planning around the Reaver engines or when it would be ready to launch.

Firefly offered to sell Astra its Reaver engines directly earlier this year, people familiar with the talks said, but Astra, focused on bringing in new technology whose production lines it can control itself, didn’t want that kind of arrangement. “We would not want to be in a position where if they don’t supply us an engine, we can’t launch a rocket,” a person familiar with Astra’s strategy said. That might be the right move, as an example from the other end of the launch industry shows — United Launch Alliance (ULA), the Boeing-Lockheed Martin joint venture, is buying engines from Jeff Bezos’ Blue Origin to power the company’s next generation rocket, Vulcan. But Blue Origin’s engine development delays have held up ULA’s timeline for Vulcan’s inaugural launch.

Overall, the agreement between Astra and Firefly “seems like a natural outcome of the increasing maturity of new entrants to the marketplace,” says Carissa Christensen, an industry analyst and founder of BryceTech. The small launch industry is flooded with new entrants — roughly 100 different small launch companies exist nowadays, with only a handful making meaningful progress toward space. Rocket Lab, a California-based firm that launches rockets from New Zealand, is the only small launch firm that’s conducting routine operations, using its Electron rocket to loft satellites into space for the Space Force and private companies. Rocket Lab went public this year through a SPAC merger, or a special-purpose acquisition company that’s listed publicly only to merge with a private company and take it public. That unlocked new capital for the company’s future rocket development plans and put its valuation around $4 billion.

“Historically, it’s typical that space companies collaborate and work together as well as compete,” Christensen said, partially because launch companies require large sums of investment and don’t generate constant streams of revenue or profit. And “because of the relatively limited demand,” there aren’t tens of thousands of launches a year that would keep operations busy and revenue coming in. Instead, there are roughly a hundred launches per year.

Like Firefly, Rocket Lab has also expanded into the components business in recent months, but on a different scale. The company announced it is selling reaction wheels — tiny components that help satellites maintain position in orbit — and plans to make up to 2,000 each year. Selling IP for engines like Astra and Firefly’s arrangement, Rocket Lab’s CEO Peter Beck tells The Verge, “doesn’t move the needle” in the small launch industry. “Providing thousands of reaction wheels across a large number of platforms and large constellations — that actually moves the needle for the whole industry,” he claims.

For small launch firms, “either they’ll go out of business or I definitely think there will be mergers and acquisitions,” Christensen said. Some of those mergers and acquisitions, she added, will be the result of a convenient deal two companies reached, or a desperate tactic for a company to stay alive. “It’s a high risk business.”

Astra, founded in 2016, was the first launch company to go public earlier this year, accessing new capital by taking the route of a SPAC merger. Astra’s valuation was pegged at $2.1 billion. After its announcement to go public, the company acquired Apollo Fusion in July for $145 million, scooping up electric spacecraft propulsion technology designed to power satellite busses that Astra is planning to develop.

Firefly, founded by Markusic in 2014 as Firefly Space Systems, went out of business in 2016 after a European investor pulled out, which Markusic said at the time was due to the Brexit referendum. The company was resurrected as Firefly Aerospace in 2017 when Noosphere Ventures, an investment firm founded by Ukrainian entrepreneur Max Polyakov, bought the bankrupt company’s assets. After a funding round in May, the company’s overall valuation is just over $1 billion.

“We took Firefly from bankruptcy to a valuation of more than $1 billion in less than 5 years. We can increase that by a factor of 10 in the next 5 years,” Polyakov said in an email to The Verge.

“Putting crazies and romantics aside, some of these companies have solid tech; others may have better access to capital. The inevitable result of a market situation like this is consolidation or mergers,” he said of the overall industry landscape. “Few will make it on their own.”