two years agoAstra 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’s leadership, Apollo Fusion quickly disintegrated, with the majority of the original team quitting, leaving few people to hire the only part of the business that had significant customer demand and the promise of revenue.
August 14, 2023 settlement agreement Between Astra and Apollo Fusion holders, LinkedIn data showing employee migration, internal company documents, plus interviews with multiple sources reveal what is likely to become an essential cautionary tale about aerospace acquisitions. Astra did not respond to TechCrunch’s multiple requests for comment for this story.
Astra was flying high in 2021 when it announced its plans to acquire Apollo Fusion. The company has been busy iterating the Rocket 3 launch vehicle in Mid-close merger With a special purpose acquisition company, or SPAC, that would provide the combined company with a war chest of about $500m.
“Going public 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 expand our business and make space more accessible.”
The Apollo acquisition, announced just over a month before Astra’s IPO, appears 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 would develop a “modular spacecraft platform” for its rockets. A few months later, Astra also submitted a request to regulators to deploy more than 13,600 large-scale satellites, so spacecraft engines seemed reasonable. In May 2022, the company he told investors It will “support the space economy” with the Astra constellation, which will be launched on Astra rockets, in 2023. There has been no subsequent public update on this project, and no update has been released yet.
Behind the scenes, the merger of the two companies led to a number of problems.
‘There were no appointments’
One of the first areas to sow the seeds of discontent was Astra’s internal organizational structure—and how the Apollo Fusion staff fit into it.
Like many airlines, Astra uses a “matrix” organizational chart, with employees reporting to a traditional manager who sits vertically above them in the organizational chart, and an additional person, such as a product manager who may manage teams across many departments. When implemented well, matrix structures facilitate collaboration between teams working on complex projects. But when execution speed is paramount, it often slows down decision making and prevents teams from executing quickly.
One source, who spoke to TechCrunch on condition of anonymity, described how after the acquisition, none of the members of the Apollo Fusion team 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 a different person within the Astra Organization.
“It was an unusual structure, with all Apollo Fusion employees reporting to a different person at Astra,” the source said.
Astra’s decision-making process was also affected by complex budgeting and approval processes. There will be long discussions about decisions such as job titles and reporting structures. As a result, sometimes the propulsion team does not get the required spare parts fast enough, or they are unable to hire people to work on the spacecraft engines, the sources said.
“It was very schizophrenic that part of the management was saying, ‘We have to invest, we have to do great things with Apollo,’ but there was no investment there. [There were] “No appointments,” 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, which include engineering and operations, that must be filled in order for Astra to meet its delivery schedule; Sources with first-hand knowledge say that these remained vacant for several months after the required start dates.
A chronic series of problems led to frustration, eventually leading to all but two of Apollo Fusion’s engineers and employees leaving the company, LinkedIn data and interviews with multiple sources show.
Those frustrations were evident even to people outside the company, according to another source who had Astra and Apollo Fusion as a client. They described how communicating with the Apollo Fusion team after the acquisition became more difficult, as Astra integrated its business development staff, who knew relatively little about the product, into existing relationships.
Members of the Apollo Fusion team have begun planning their exits, the client said, referring to what he heard first-hand from those employees: “The people at Apollo Fusion were basically planning their exits left, right and center, once they could do it financially.”
A separate source said Astra had shown little interest in keeping it. “There was no interest in retaining talent,” the source said while describing the spacecraft engine business. “There were a lot of Apollo astronauts who were looking forward to parachuting in and were more than excited to get out.”
“It’s important to remember that with the Astra, it’s all about the missile,” the source continued. “[The spacecraft engine business] He has always been the husband’s son. It only became significant last fall when they realized this was where the vast majority of their revenue would come from.
Over time, the space propulsion team shrank while the launch side swelled, a problem exacerbated by the resignation and failure to replace members of Apollo Fusion. The majority of the Apollo Fusion team was cleared by October 2022, less than 18 months after the acquisition closed. LinkedIn data shows that Astra eventually lost nearly all of its Apollo Fusion employees, including the engineers who moved the spacecraft engine product from clean slate to aeronautical legacy.
“There were fewer people working [the spacecraft engine] A year after the acquisition than it was before the acquisition, because some Apollo employees either left or were pulled to work on [Astra’s satellite project]said the source. “So there were fewer people even though this business is booming.”
The public got its first indication of possible problems between the two newly merged companies on August 14, when Astra unexpectedly announced that it would enter into a settlement agreement with the Apollo Fusion holders to “settle and resolve any and all actual or threatened disputes.” on the acquisition. The company representing Apollo holders in the agreement declined to answer TechCrunch’s questions about the dispute. There are few details about the exact nature of the dispute in Astra’s filing with the SEC, but it appears to be performance-related. – Payments due to Apollo shareholders after completion of the transaction.
Under the terms, Apollo shareholders will likely receive $7 million in cash to settle its disputes — a sharp drop from the up to $95 million in cash-plus-equity performance-based earnings the two companies agreed to in 2021.
Deliveries are slow, outpacing the competition
Two years after the acquisition, the company has been slow to deliver spacecraft engine systems. Astra’s space systems business pulled out $3.4 million in revenue In 2022 and only $700,000 in revenue So far this year (all done in the second quarter), according to public data, Astra says it has 278-engine accumulatorwith $77 million in revenue; Assuming from those numbers that each payment costs about $250,000, that would total about 16 deliveries so far.
To solve this problem, Astra recently announced that it would undertake a “strategic workforce reallocation,” reassigning 50 workers from its launch division to work on spacecraft engines. With this additional talent, Astra said the “significant majority” of these orders is expected to be delivered by the end of 2024.
However, internal documents seen by TechCrunch show that Astra has provided customers with more ambitious timelines. In the fall of 2022, the company said it aims to deliver 42 payment systems to both Airbus and another customer by the end of 2023.
In a separate document, Astra confirmed to Earth observation company Maxar that it would have delivered about 80 propulsion systems to other customers by August 2023. Astra told a separate customer it would put 125 systems into space this year.
It is possible that supplier issues or issues with internal customer schedules contributed to the delay in schedules, but whatever the contributing factors, it is worth noting the extent of the software delays: Astra expects to deliver only 8 to 12 payment systems by the end of the third quarter. this year, according to its most recent financial guidance.
In contrast, other electric payment service providers have made great strides. Electric propulsion developer Busek now has more than 100 systems in orbit for OneWeb; ExoTerra Resource gained Flight Legacy just this month thanks to its Halo Hall effect engines.
Astra appears determined to catch up, but is facing a number of headwinds, including a Delisting notice from the Nasdaq (which was extended by six months in April) and a rapidly dwindling cash reserve. The company said it had $26.3 million in cash and cash equivalents as of the end of the second quarter of this year.
company currently “actively focus” Kemp told the media earlier this week about finding investors for the spacecraft launch and engine business.