Matthew Brown Companies confirms it's in funding talks with Virgin Orbit

Back to work on Monday? Branson and co still fighting to get funding

SpaceX and OpenAI backing venture capitalist Matthew Brown, of Matthew Brown Companies, has confirmed that his group is in funding talks with space biz Virgin Orbit.

Brown declined to go into further detail, but according to a leaked term sheet seen by Reuters, that funding amounts to $200 million, which, by virtue of the fact of the leak and the subsequent share price rise, is just $20 million shy of Virgin Orbit's current market capitalization. If the deal goes through, the VC wouldn't just get controlling interest, but become the de facto owner.

What happened to Virgin Orbit?

Richard Branson's satellite biz stopped all business ops late last week to "conserve capital" while it looked for funding to stave off bankruptcy, reportedly treating its staff to an unpaid furlough, although the business did not confirm this latter point when we approached it for comment at the time.

It did tell us that on "the ops side our investigation is nearly complete and our next production rocket with the needed modification incorporated is in final stages of integration and test."

The Virgin Galactic spinout was already burning cash when its first satellite launch from the UK failed spectacularly earlier this year after taking off from Cornwall. While Launcher One did leave Earth's atmosphere, it never made it to low Earth orbit with its payload, a mix of civil and military satellites, due to an anomaly which is still being probed.

The business does have US-based, wholly owned subsidiary Virgin Orbit National Systems - the renamed VOX Space - up its sleeve, which currently has contracts with national security organizations in the US, meaning there is potentially untapped value in those existing contracts. Many entities have been struggling for launch capability, and horizontal systems will be even more meaningful as Kazakh authorities impound property of Russia's main spacecraft launch site in Baikonur and the possibility expands potential US takeoff beyond Florida and Texas.

"We like the company. We are in active discussions to inject enough capital to make them cash-flow positive," Brown told CNBC in an interview yesterday.

Does the exec himself, a Texas-based backer of a host of other space firms, ever plan to go into space himself? "No, because, no. I don't."

We can't fault him. No is a complete sentence - and outside our atmosphere the universe can be a very unforgiving place for us meatbags. We're on the William Shatner side of the fence more than the Jeff Bezos side in this matter, and in any case it's Virgin Galactic that's the space tourism outfit, not satellite launcher Virgin Orbit.

Brown also confirmed in the CNBC interview that Matthew Brown Companies would be the de facto owner if the deal goes all the way through, and praised Virgin Orbit's main differentiator: its ability to perform horizontal launches using its LauncherOne system (hopefully more successfully than the recent attempt via Boeing 747 carrier aircraft, Cosmic Girl, in the UK). This drop-the-rocket-from-a-plane approach means the company doesn't need a fixed launchpad and opens a whole new world of trajectories that are hectically difficult, if not impossible, from a ground launch.

The surface launch takes "days" and "significant amounts of calculation by people much smarter than myself" while Virgin Orbit's takes "hours," Brown pointed out.

The Boeing can also fly above the kind of weather that can ground one of its vertically launched counterparts. Brown, who told CNBC he has "positions in over 13 space companies", described space companies as a type of "homeowners association, basically an "HOA".

Brown's investment group - which has a finger in a number of pies including OpenAI - also spoke about the impact of SVB on the VC landscape and startups. When asked about loan-tightening for VCs, Brown admitted that credit was an issue for some: "I think the credit point is the greatest. SVB was one of the largest credit providers, so I think you're seeing a large portion of the big banks pick that up....

"You see things that are happening in 2023 that didn't happen in 2008 - so where does it end? That's the question I would ask most regulators, I would ask Congress, I would ask the Fed... is literally where does it end? At what point are we a national bank? I think a lot of my portfolio companies would agree with me on that."

He also agreed with the interviewer there was a concern with bank consolidation that large banks won't have the willingness to take on risk of investing in VCs and startups.

Over in the UK, mega-bank HSBC managed to acquire the UK arm of SVB for a token price of £1, for example, seemingly doing really well out of the deal, judging from its statement that it expected to see tangible equity of around £1.4 billion ($1.71 billion) and all without exposure to the assets and liabilities of the US parent companies.

Meanwhile, techies at Virgin Orbit could be back at their desks, on the factory floor, or crouching under some hardware in a hangar somewhere by Monday. In a filing earlier this week, Virgin Orbit said it would "initiate an incremental resumption of its operations beginning on Thursday, March 23, 2023, to work on preparations for its next mission," adding that it expects the "operational pause" for the rest of its workforce would continue "through March 26, 2023."

It also appears most folks would be back at work on Monday, with the company "planning for a further resumption of operations on March 27, 2023." Virgin Orbit had not responded to our request for comment at the time of publication.

Brown confirmed to The Register that he is in talks with Virgin Orbit but was unable to make any further comment. ®