Breaking Into Private Markets: Margins Capital Fund 1 Investment #3 (SpaceX)

[drum roll] The third investment that Margins Fund One made was into a very small company called [ graphic pops ] SpaceX.

And here's a reminder of what our due diligence framework is.

First we ask, does this make sense? Like, what's the strategy? Can I explain it to you in one or two sentences and it makes sense? Does it make sense what they're trying to do in this current macroeconomic environment? And what are the unit economics? Will this investment make money? Then we ask overarching question, can this team win? So we look at the team, we look at the competition that's out there, and then we look to see if there's some type of secret sauce or competitive advantage that this team has.

So let's go through each of these questions one by one.

First, the strategy of [ graphic pops ] SpaceX.

So SpaceX was started in 2002, and its core mission was to ensure the survival of human consciousness and civilization by building a self-sustaining city on Mars.

It's, it's funny, but anyway, girl, we cared about Starlink, [laughs] right? Like, you know, he can live on Mars, Elon and his homies, that would be amazing if they went and lived on Mars.

But Starlink was the darling of this company, and Starlink is a satellite service that provides high-speed, low-latency broadband to over 160 countries and territories, as well as to people in the sky who are [ graphic pops ] traveling on airlines, right? And so from a macroeconomic perspective, we know that the demand for [ graphic pops ] Wi-Fi and internet is not going down.

It's only going to continue to increase.

[ graphic pops ] It is the foundation of how we communicate and how we, frankly, live.

And then from a unit economics perspective, while SpaceX itself is not profitable, Starlink is.

And so we thought when we bought this company that they might just roll out Starlink and have Starlink go public.

And Starlink itself, even though, you know, it's a billion-dollar company and the revenues are $8 billion, the net profit is about $72 million, which for a big tech company that is highly reliant on hardware and they have like all of these satellites that they are putting into orbit around the United States, the fact that they're profitable is a really big thing, and their user base is absolutely growing.

All right, so let's look at the team.

So [ graphic pops ] Elon Musk notoriously hires very smart people that wanna work really hard and be in his orbit, and so we knew that the team was great.

From a competition's perspective, there are some competitors out there like [ graphic pops ] Blue Origin that's founded by [ graphic pops ] Jeff Bezos, [ graphic pops ] Relativity Space is a $4 billion company that plans to use reusable and 3D-printed rockets even though they've not yet completed a successful launch in orbit.

[ graphic pops ] United Launch Alliance is a Boeing and Lockheed Martin joint venture, and as well as there's a company [ graphic pops ] called Rocket Lab, but none of these players are even close to what SpaceX is doing, and so we weren't concerned about them at all.

SpaceX just has a massive headstart on them.

And the secret sauce, I mean, the market loves Elon Musk, they just do.

Like, they just do, right? And so the secret sauce for SpaceX is Elon himself.