Why Military Contracts Are Critical to Business

I get the impression that – outside of the industry – when most people hear the word “space” or think of “investing in space,” they think of science, exploration, astronauts, and maybe some Hollywood-corrupted images of alternative space shuttles.

But the reality is that space has been a “warfare domain” from the beginning, as the Pentagon calls it. The first orbital rockets, satellites, and even the Apollo architecture were born out of the military and its aerospace contractors. The U.S. Space Force, which has been around for less than five years, already has a larger annual budget than NASA, even though the latter is old enough to be the grandfather of the Space Force and holds a coveted position as one of the most beloved federal agencies.

Even at NASA, chances are you’ll find “logged combat flight hours” on astronaut resumes, just like on other resumes.

Historically, the largest defense contractors have long won the biggest space contracts—and that’s still true. SpaceX has earned a coveted spot in that role for the military, whether it’s launching rockets for Space Force or building satellites for the NRO.

The best pure-play aerospace companies get a significant, if not the majority, share of their revenue from military work under contracts with the U.S. and its allies. And often, these military space deals represent “we made it” moments for companies – a point Rocket Lab CEO Peter Beck made to me earlier this year when his company earned a spot in the $10 billion PWSA Sweepstakes.

“This is really our foray into the world of being a [defense] prime … it essentially doubles the company’s order book overnight with one contract,” Beck told me at the time.

And the importance of military contracts extends further into the future, as venture capital increasingly targets startups that win and deliver on military contracts early.

Global conflicts such as the Russian invasion of Ukraine or the rising tensions between China and Taiwan underscore the importance of space capabilities for the world’s militaries – whether the US or its adversaries.

So tomorrow, when you’re eating hot dogs and looking up at the sky for the local fireworks, it’s worth remembering why what’s happening above you is so important to the military than what’s happening down here. And that includes seemingly unrelated parts of space, like private space stations or a return to the moon.

Happy 4th of July!

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