Astra’s Apollo Fusion acquisition followed by delays and desertion

Date:

Share post:


Two years ago, Astra hailed its acquisition of satellite propulsion startup Apollo Fusion as a strategic move that would round out its launch business and bring expert engineers into the fold. But under Astra leadership, Apollo Fusion quickly disintegrated, with the majority of the original team resigning, leaving few people to staff the one part of the business that had substantial customer demand and the promise of revenue.

An August 14, 2023 settlement agreement between Astra and Apollo Fusion holders, LinkedIn data showing an employee exodus, internal company documents, as well as interviews with multiple sources, exposes what will likely become a canonical cautionary tale on aerospace acquisitions. Astra did not respond to TechCrunch’s multiple requests for comment on this story.

Astra was flying high in 2021 when it announced its plans to acquire Apollo Fusion. The company was busy iterating its Rocket 3 launch vehicle and in the middle of closing a merger with a special purpose acquisition company, or SPAC, that would furnish the combined company with a war chest topping around $500 million.

“Becoming a public company is the next milestone in our mission to improve life on Earth from space,” Astra CEO Chris Kemp said in a press release about the merger at the time. “This will scale our business and make space more accessible.”

The Apollo acquisition, announced a little more than a month before Astra went public, appeared to be the first step in a plan to vertically integrate its core launch business with space services. When the SPAC was announced, Astra said it was going to develop a “modular spacecraft platform” for its rockets. A few months later, Astra also filed an application with regulators to deploy more than 13,600 broadband satellites, so a spacecraft engine business seemed sensible. In May 2022, the company told investors it would “power the space economy” with its Astra constellation, launched on Astra rockets, in 2023. There has been no subsequent public update regarding this project, and it has launched none thus far.

Behind the scenes, the combination of the two companies led to a number of problems.

“There were no hires” 

Astra’s internal organization structure — and how Apollo Fusion staff fit into it — was one of the first areas that sowed discontent. 

Like many aerospace firms, Astra uses a “matrix” organization chart, where employees report to a traditional manager that’s vertically above them in the org chart, and an additional person, like a product manager who might manage teams across many departments. When implemented well, matrix structures facilitate collaboration across teams working on complex projects. But when speed of execution is paramount, it can often slow decision-making and prevent teams from executing quickly.   

One source, who spoke to TechCrunch on condition of anonymity, described how, post-acquisition, none of the Apollo Fusion team members continued to report to Apollo CEO and co-founder Mike Cassidy. Nor did they report to the same few managers; instead, they each reported to someone different within Astra’s organization.

It was an “unusual structure,” the source said, “that all of the Apollo Fusion employees were reporting to someone different at Astra.”

Decision-making at Astra was also impaired by complex budgeting and approval processes. There would be long debates over decisions like job titles and reporting structures. As a result, sometimes the propulsion team wouldn’t get parts ordered quickly enough, or they were unable to hire people to work on the spacecraft engines, sources said.

“It was a very schizophrenic thing where part of management was saying, ‘We have to invest, we have to do great things with Apollo,’ but there was no investment there. [There were] no hires,” the same person said, speaking of the months after the acquisition closed.

Internal documents reviewed by TechCrunch appear to support these claims. One document lists a number of roles within the spacecraft engine team, spanning engineering and operations, that would need to be filled in order for Astra to stick to its delivery schedule; sources with first-hand knowledge say these went unfilled for months after the requested start dates.

The string of chronic issues bred frustration, ultimately leading to all but two of Apollo Fusion engineers and staff leaving the company, LinkedIn data and interviews with multiple sources show. 

These frustrations were clear even to people outside the company, according to another source who dealt with Astra and Apollo Fusion as a customer. They described how it became more challenging to communicate with the Apollo Fusion team post-acquisition, with Astra injecting its own business development people, who knew relatively little about the product, into existing relationships.

Apollo Fusion team members started planning their departures, the customer said, referring to what he heard directly from those employees: “People from Apollo Fusion were essentially planning their exits left, right and center, as soon as they were able to do so financially.”

A separate source said Astra displayed little interest in retention. “There was no interest in keeping talent,” the source said while describing the spacecraft engine business. “There were a lot of Apollo people that were looking to parachute out and more excited about getting out.” 

“It’s important to remember, with Astra, everything is about the rocket,” this source continued. “[The spacecraft engine business] has always been a stepchild. It only became important last fall when they realized that was going to be where the vast majority of their revenue was going to come from.” 

As time went on, the in-space propulsion team shrank while the launch side swelled, an issue that was compounded by Apollo Fusion members quitting and not being replaced. The majority of the Apollo Fusion team had cleared out by October 2022, less than 18 months after the acquisition closed. LinkedIn data shows that Astra eventually lost nearly every Apollo Fusion staffer, including the engineers that took the spacecraft engine product from clean sheet to flight heritage.

“There were fewer people working on [the spacecraft engine] a year after the acquisition than before the acquisition, because some of the Apollo people either left or they were pulled in to work on [Astra’s satellite project],” the source said. “So there were fewer people even though that business was booming.”

The public got its first intimation that there may be issues between the two newly-merged companies on August 14, when Astra unexpectedly announced it was entering into a settlement agreement with Apollo Fusion holders “to settle and resolve any and all actual or threatened disputes” over the acquisition. The firm representing Apollo holders in the agreement declined to answer TechCrunch’s questions about the dispute, and there are scant details into the exact nature of the conflict in the filing Astra submitted to the U.S. Securities and Exchange Commission, but it appears to be related to performance-based payments entitled to Apollo shareholders following the close of the deal. 

Per the terms, Apollo shareholders will likely walk away with $7 million in cash to settle its disputes – a steep drop from the up to $95 million in cash-plus-stock performance-based earnouts the two firms agreed upon back in 2021.   

Slow deliveries, outpaced competition

Two years on from the acquisition, the company has been slow to deliver spacecraft engine systems. Astra’s space systems business pulled in $3.4 million in revenue in 2022 and just $700,000 in revenue so far this year (all of that made in the second quarter), according to public statements.. Astra says that it has a 278-engine backlog, worth $77 million in revenue; assuming from those figures that each propulsion costs around $250,000, that would total around 16 deliveries to-date. 

To solve this problem, Astra recently announced that it would make a “strategic reallocation of its workforce,” reassigning 50 workers from its launch division to work on spacecraft engines. With this additional talent, Astra said “a substantial majority” of these orders are expected to be delivered by the end of 2024.

However, internal documents viewed by TechCrunch show that Astra provided  customers with much more ambitious timelines. In the fall of 2022, the company said it was aiming to deliver 42 propulsion systems each to Airbus and another customer by the end of 2023.

In a separate document, Astra assured Earth observation firm Maxar that it would have delivered around 80 propulsion systems for other customers by August 2023. Astra told a separate customer it would put 125 systems in space this year.

It’s possible that supplier issues or problems with customers’ internal timelines contributed to the late schedules, but regardless of contributing factors, it’s worth noting just how delayed the programs are: Astra anticipates delivering just 8 to 12 propulsion systems by the end of the third quarter of this year, according to its most recent financial guidance. 

In contrast, other electric propulsion providers have made significant strides. Electric thruster developer Busek now has more than 100 systems operating on-orbit for OneWeb; ExoTerra Resource gained flight heritage just this month for its Halo Hall-effect thrusters. 

Astra seems determined to catch up, but they face a number of headwinds, including a delisting notice from Nasdaq (which was extended for six months in April) and a rapidly dwindling cash reserve. The company said it had $26.3 million of cash and cash equivalents as of the end of the second quarter this year. 

The company is currently “actively focused” on finding investors for its launch and spacecraft engine businesses, Kemp told the media earlier this week. 



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Related articles

Everything You Need to Know About Getting Your Genome Sequenced

In comparison, whole-genome sequencing determines every single base pair of DNA, and is much more expensive as...

Khosla-backed HealthifyMe introduces AI-powered image recognition for Indian food

Indian health and wellness startup HealthifyMe has introduced an AI-powered feature that recognizes Indian food from images...

Khosla-backed HealtifyMe introduces AI-powered image recognition for Indian food

Indian health and wellness startup HealthifyMe has introduced an AI-powered feature that recognizes Indian food from images...