Mark Whittington doesn't seem to understand the differences between SpaceX and RpK:

Charles Lurio has an interesting explanation why Rocket Plane/Kistler couldn't raise funding for its COTS space craft and is now in great jeopardy of imploding. it's [sic] all NASA's fault. Of course that doesn't explain why Elon Musk's SpaceX seems to have no trouble raising private capital for the very same COTS competition that RP/Kistler seems to have failed at.

Well, actually, it does. SpaceX has no trouble raising private capital because a) it needs a lot less money and b) it has an angel investor, named Elon Musk. SpaceX has not been raising outside investment to date, whereas RpK has to. In addition, SpaceX anticipates other markets than COTS (and would be continuing to move forward in its absence, just as it was before COTS occurred), whereas it's not clear if RpK (at least the "K" part of it) has a business plan that closes without it. So, yes, obviously, if NASA appears to be potentially fickle about whether or not it will eventually purchase COTS services at all (which it has), let alone from RpK, it will scare off needed institutional investors.

The real concern, though, as Charles pointed out, is that this can have a wider negative effect on space investment in general, even though there may be no logical relationship between the RpK deal and others.

And this is more of his typical nonsense:

Nothing is quite to irksome [sic] than to see people who pretend to be big boosters of commercial space who expect NASA or the government in general to guarantee the success of each and every commercial space company.

As usual, he does not (because he cannot) provide an actual quote or citation to support the assertion that there is anyone who has any such expectation. Because the only kind of arguments that he's capable of knocking down are ones that no one actually makes.

First of all, Rand, thanks for making my point. The difference between SpaceX and RpK is that SpaceX is run by a better businessman who understands that relying on a single market for something as expensive as--well--a space craft is folly. Musk knows that, while a COTS contract to supply ISS would be pretty good, the ultimate success of commercial space is dependent on commercial markets.

As for your last point, let me quote Charles:

"But in the face of the actuality of the need for assurance to _real_ institutional investors of early enough payback, NASA was not willing to bend to reality with contracts up front - which could have been canceled later for non-performance, but in any case would have gotten the private development dollars."

In other words, Charles wants NASA to assure the success of enterprises that do not have a launch vehicle, a space craft, or--in the case of RpK--a sound business plan. I submit that it is a strange kind of commercial oriented space policy that totally relies on government support.

Oh, by the way, while Musk has been providing SpaceX's part of the financing, if you had read one of Clark's other posts, you would have known that he has ready access to other sources of cash (which is being offered unsolicited) if he needed it.

In other words

Yes, Mark. In your (nuttily misinterpreted) other words. There is no rational way in which Charles' words could be construed to mean that he expects "NASA or the government in general to guarantee the success of each and every space company." But we know that, based on history, you'll continue to fantasize that that's what he means, and repeat the straw-man slander.

"In your (nuttily misinterpreted) other words."

Thanks for conceeding the point again, albeit through pointless name calling and insults.

I conceded no points, Mark. Once again, you display your inability to read English with comprehension.

Rand, perhaps you should only report when Mark doesn't misunderstand, misquote, mislead, or fabricate.

That would be real news.

More insults and name calling, not only from Rand but from anomylous people who are afraid to post under their own names that Rand permits on his blog. Again, my point being made by people who have nothing but ad hominen attacks with no facts to support their position.

More insults and name calling

What "name" did I "call" you, Mark? I simply described (accurately) your comments.

I don't know why you so revel in proving that you can't read, but if nothing else, I have to concede the point that I (and I suspect we) find it endlessly amusing.

More insults and name calling, not only from Rand but from anomylous [sic] people who are afraid to post under their own names that Rand permits on his blog. Again, my point being made by people who have nothing but ad hominen [sic] attacks with no facts to support their position.

Unlike you, Mark, I've supported my position quite ably. And without misspellings.

Get Firefox. It has a spell checquer. Your arguments won't be any better, and you may still use the wrong words, but at least they'll be spelled right.

"I've supported my position quite ably."

Actually that is rather debatable. Along with your recent support for a government built "space infrastructure" that sounds like a redo of the space shuttle, I think that this exchange proves that your credibility as a commercial space supporter is about shot. Supporting commercial space implies a recognition that some (in fact many) companies are going to fail. That is the nature of emerging industries like private space launch. In that vein I've found it amusing to read scenarios of thirty years, forty years, fifty years in the future that have pretty much the same commercial space companies extant that are now. In fact, decades from now, very few of the current commercial space startups will exist decades from now; there will be a few extant in the future that don't exist in the current era.

Support for commercial space does not mean screaming for government support or subsidies when companies start to implode. It means that failing companies must be allowed to fail. Now, I have no ill will toward RpK (or any serious commercial space endevor). I hope RpK manages to pull a rabbit out in the next thirty days. But I have reason to doubt it can and I will not shed any tears or point any fingers when the inevitable happens. I certainly am not prepared to demand that NASA give RpK something it didn't earn or change the rules of the COTS agreement just to satisfy the need of certain commercial space posers to prevent failure.

"I've supported my position quite ably."

Actually that is rather debatable.

I suppose that's possible, in theory, but based on the exchange so far, and a long history, it's certainly not debatable by you.

Ignoring all the obfuscation and changing of topic and irrelevance (and new strawmen--who ever claimed no commercial space company should ever fail?) in your latest comment, we're still waiting for a cite and quote of someone who expects "NASA or the government in general to guarantee the success of each and every commercial space company."

I understand that we will wait until the end of time, despite all your flailing.

You know, Mark, smart people know that when they're in a hole, they stop digging. It would be amazing, and unexpected, but worthy of respect, if you'd simply admit, "OK, I was wrong, and in my hyperbolic overstatement, attributed attitudes to people that they don't actually have."

But (again, based on history) we won't hold our collective breath.

Mark does raise a valid point, Rand, if only peripherally. I think that the quality of the discourse in your comments section would be improved if people could not comment anonymously.

On the flipside, these arguments between the two of you, while entertaining, would probably be better if Mark enabled comments on his blog, too.

Now let's put ourselves in the position of a venture capitalist, looking for a business in which he can reasonably expect to make a profit in the short term with his money. Such an investor would look at a company that only has NASA as its revenue stream, and would absolutely insist on a guaranteed source of revenue - either a firm contract for launches (which apparently NASA is unable or unwilling to do), or some additional revenue stream. This puts us back into the classic chicken-and-egg problem that has plagued so manyspace companies over the last 50 years. It is no wonder that RpK was unable to raise the capital necessary to satisfy the COTS requirements - what VC is going to pour his money into a company without any guaranteed revenue stream? Answer: none. Until a company like SpaceX demonstrates that the market is larger than NASA, we're stuck to the mudball.

Uhh, Mark? The complaint, at least the way it looks to me, is that NASA was offering up some seed money but refusing to promise a dime in real ISS delivery contracts even *if* RpK met all of their cost and performance goals. Why should I drop a time on them if it looks like they might not be allowed to compete even if they succeed?

SpaceX has a degree of immunity to this, because Elon *could* fund the whole thing, and had planned to do so before COTS. That, paradoxically, boosts the interest of others in replacing some of his cash with they'res(sic; Rand, bwah?)--after all, if he's willing to risk a lot of his own money... the end result is that it doesn't matter if NASA flat out shuts them out of ISS flights, because they have the capital available to keep going until they can grab *and hold* enough private business to turn a profit.

I thought that was... kinda obvious. Guess I could be wrong.

Very few things are obvious to Mark. That is, other than things that aren't true, or supported by reality...

The challenge SpaceX faces is not financial, its technical. Will it be able to get the Falcon XI operational and fly its required COTS missions with the time frame required (3 flights by the end of 2009)? Expecially given the problems they have had getting the much smaller Falcon I going. The next two years will be interesting.

Charles Lurio has a point, but I don't believe he communicated it well.

NASA says they took the position of "investor" in selecting SpaceX and RpK. If so, they did a good job with SpaceX, and a **VERY** poor job by choosing SpaceX.

Sophisticaed investors are quite risk adverse, and are very good at minimizing risks. Even VCs are very risk adverse, and they are professionals at avoiding and minimizing risk.

So, what did NASA do? In picking RpK, they picked a company which had tons of risk remaining, technical, financial and market risk. NASA failed to take an "investors" view of the risk.

TECHNICAL: RpK has very large amounts of technical risk remaining. Developing a new LV is hard enough, and history demonstrates that rocket explosions are extremely common in the first 2-5 flights. Investors can see the 4 decades of videos. Developing a totally reusable two-stage system, which has never been successfully done before, is even more risky.

FINANCIAL: RpK was asking for $500M. But they already spent over $500M before this. RpK had originally stated they would develop the entire system for $500M. Additional cost overruns was clearly a major risk to any investor.

MARKET: Even if RpK succeeded on the technical side, and did so within budget, the investors had no guarantee that RpK would sign up enough customers at a sufficiently high price to deliver an adequate ROI.

The KILLER -- all of these risks were self evident to somebody who was sufficiently knowledgeable about how sophisticated investors view and analyze risk. Anybody with this knowledge of sophisticated investors would have known that RpK was likely to fail to raise the necessary capital.

Because NASA did not recognize these facts, and did not understand how sophisticated investors think, is why NASA failed.

NASA received many other proposals that were MUCH less risky from an investor's perspective (in technical, financial, and market) risk. NASA failed to choose those alternatives.

Fortunately, it cost less than $30M to learn this lesson. Although this is a lot of money, it is a LOT less than NASA spent on the X-33 and the Orbital Space Plane programs.

For this reason, at the end of the day, I count this as a success.

It might turn out to be a significant success if NASA learned how sophisticated investors view the world in the process.

- Anon

I meant to say:

"... they did a good job with SpaceX, and a **VERY** poor job by choosing RpK."