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Boom (YC W16) signs $2B letter of intent with Virgin, $5B total
- nerdy 11y agoThey got $5bn in LOIs, a new YC record: https://twitter.com/sama/status/712705887853383680 https://twitter.com/sama/status/712705887853383680
- deleted 11y ago[deleted]
- ryana 11y agoThat's awesome. $200M per delivery seems a little tight to design and build 25 planes from scratch (the latest version 787 is ~$300M for comparison) but I'm sure they have smart people working on it.
- Jtsummers 11y agoThe 787 was almost as bad as the F-35. Somewhat different problem, though. Theirs was the issue of too many subcontractors with subcontractors with subcontractors and poor control over manufacturing. They literally bought companies that made the parts because they: 1) didn't have the manufacturing means themselves; 2) couldn't control the quality enough via contract measures. That significantly drove up the cost of the 787 project. Someone really needs to do a good write-up on these two projects as today's version of the Mythical Man Month and similar texts.
- bazqux2 11y agoA subcontractor can make way more money by internally making parts of substandard quality to ensure they get bought.
- Jtsummers 11y agoThis was not deliberate in the cases I'm thinking of. This was a lack of quality control due to the extreme distributed design and development approach Boeing chose with the 787.
- nerdy 11y agoUnfortunately we aren't done finding out just how bad the F-35 will be. Or have I missed recent news?
- Jtsummers 11y agoNope, we aren't done yet. I was just trying to compare it to a project people (here in particular) are probably more familiar with.
- BinaryIdiot 11y agoKeep in mind a 787 can carry 242 to 335 passengers. The first Booms are going to carry about 50. Significantly smaller plane.
- rory096 11y agoThis is awesome. Great counterpoint to all the naysayers and middlebrow dismissals on Monday. I'm pumped to see this thing fly.
- cylinder 11y agoLOI is nothing, they're non binding.
- rory096 11y agoSo? Show me another startup with billions in non-binding commitments from customers saying they'd love to buy their product if it existed. It's a founder's dream.
- JonFish85 11y agoI think the criticism is that it's not much of an achievement to get a non-binding commitment to sell what some people think is $20b worth of work for $2b. Yes it's a flashy number to throw around (whoa, $2b!) but at the end of the day, the real challenge hasn't even begun yet. Edited: Revised the numbers to better reflect the article.
- rory096 11y agoI'd call those criticisms spurious. First off, the Concorde had a unit cost of £23 million in 1977 - about $130 million in 2016 dollars – for a plane 2.5x the size. An early-bird unit price of $200m doesn't seem all that unreasonable. Secondly, why should they have to amortize all their development costs on the very first sale? Yes, there's still a ton of technical work to be done. But it's a hell of a lot easier to hire smart people and raise the funding you need to build stuff when you've decisively proven the business case for your product.
- timr 11y agoThe Concorde cost ~£1 billion to develop in the 1960s. That's something like £17 billion, inflation adjusted. Also, not for nothing: "An advertisement covering two full pages, promoting Concorde, ran in the 29 May 1967 issue of Aviation Week & Space Technology. The advertisement predicted a market for 350 aircraft by 1980 and boasted of Concorde's head start over the United States' SST project. The consortium secured orders (i.e., non-binding options) for over 100 of the long-range version from the major airlines of the day: Pan Am, BOAC, and Air France were the launch customers, with six Concordes each. Other airlines in the order book included Panair do Brasil, Continental Airlines, Japan Airlines, Lufthansa, American Airlines, United Airlines, Air India, Air Canada, Braniff, Singapore Airlines, Iran Air, Olympic Airways, Qantas, CAAC, Middle East Airlines, and TWA. At the time of the first flight the options list contained 74 options from 16 airlines." [1] Guess how many they sold? 14. LOIs for unbuilt, undesigned airplanes are meaningless. [1] https://en.wikipedia.org/wiki/Concorde https://en.wikipedia.org/wiki/Concorde
- oniony 11y agoLetter of intent. Not a contract. The article is speaking like it's a done deal.
- tewarbit 11y agoThe article explicitly states: "Now, this doesn’t mean that Virgin has bought the planes — it’s a bit too early for that. They’ve signed a letter of intent, meaning that, having seen the nitty-gritty specs of the plane and the company’s plans for moving forward, they intend to buy 10 planes if everything comes together as planned."
- dandermotj 11y agoThe article first states that they've optioned a purchase - so I assume they've purchased some sort of call option and Boom are the issuers which would mean that some money has changed hands.
- D_Alex 11y agoI doubt any money has changed hands (if it has, Boom would trumpet the figure). This is a pure publicity move for both Boom and Virgin. I doubt, tbh, that Virgin rates highly the chances for this to succeed, but they lose nothing by saying that if the plane is as magnificent as promised, they will buy a bunch.
- dandermotj 11y agoIf they purchased an option then Virgin paid for it. Optioning purchases is a common instrument traded in aviation finance. The option to buy this aircraft at some point in the future at a price specified today is worth a lot. The fact that it's a moonshot only means the price of the option would be reduced. If the plane is as magnificent as promised, Boom's order books will be filled for decades and other airlines will be second in line to Virgin.
- maxxxxx 11y agoI would be extremely impressed if they could pull this off. Developing a supersonic passenger plane must possibly be one of the most expensive and complex things to do. Probably harder than what SpaceX does.
- johndevor 11y agoWhy would you think it's harder out of curiosity?
- RickS 11y agoWell, for one, the "when it explodes, there are people in it" problem is likely arise much earlier in the process than with the SpaceX rockets
- twoodfin 11y agoMaybe this is a dumb question, but why? If you were building an aircraft like this from scratch, why design it to require a present human pilot? Satellite latency too long?
- Jtsummers 11y ago> Satellite latency too long? Yes. Also, regardless of the human pilot, this is intended as a passenger aircraft. That necessitates people on board for it to operate as intended.
- twoodfin 11y agoSure but "earlier in the process"? SpaceX is trying to become passenger-safe as well, they just have the luxury of being able to sell something human-less in the meantime.
- learc83 11y agoMeaning that they can then use the money they're making launching satellites and restocking the ISS to pay for the development of passenger rockets. Boom can't do this. Unlike SpaceX, they need enough investment money to take them all the way to passenger-safe. Also passenger safe for a few highly trained and risk aware astronauts is a lower bar than passenger safe for the general public.
- nbevans 11y agoThe article describes Concorde as "ill-fated". Is that accurate?
- mikeyouse 11y agoI mean, they only built 20 planes in total, so 5% suffered catastrophic failures with complete loss of life. Over the life of the program there were numerous 'near-misses' with rudders and control surfaces breaking off the plane at >Mach 1. The tire problem that brought down AF4590 wasn't an isolated incident whatsoever, there were dozens of blown tires including at least one other one that punctured a fuel tank and nearly brought down that plane. So yeah, 'ill-fated' seems fair.
- Retric 11y agoOnly 14 entered airline service, but they made it from 1976 to 2003 which is not that bad. For comparison 3% of 747's (53) have been a total hull loss. But, the Boeing 707's had 17% hull-loss occurrences and 246 major aviation occurrences out of 1,010 built (172) which is arguably a better comparison.
- Pitarou 11y agoI'm sure there are many engineers who are extremely proud of their work on Concorde, but overall it could hardly be called a successful programme. It was just about profitable at the margins, but only after the enormous development costs had been written off entirely. As the fleet aged and safety fears mounted, it became uneconomic to run, and was retired.
- TheOtherHobbes 11y agoConcorde was a brilliant corporate welfare boondoggle that might have become profitable if the US aerospace corporates hadn't tried quite so hard to kill it by lobbying - successfully - for limited access to US airports. It helped give Airbus a technological start, which was probably the only thing that allowed Airbus to become globally competitive. So politically it wasn't necessarily a failure at all. It's not easy to assess the true economic return on a megaproject, especially one that lasts for decades. Something that looks like a disaster on the profit and loss account can still provide big benefits. The US space program is a more obvious example. The direct economic return on bringing a few rocks back and developing giant booster rockets wasn't great. But there were significant spin-off multipliers that provided a significant lift to whole sectors of the economy. If you try to imagine the state of US computing and aerospace without Apollo, and British and French aerospace without Concorde, it should be clear the money wasn't just thrown away for nothing.
- vonsydov 11y agoawesome...another hard tech
- brenschluss 11y agoWow, who's doing the marketing? Pretty savvy. If they had launched with this notice, we'd be thinking, "Oh cool, Virgin's making a supersonic airplane with some company!" Instead, with this tiered announcement: Three days ago, nobody knew about Boom. Within the last two days, they have lots of new press, and and thus lots of skepticism. Today, they 'announce' an effective endorsement with Virgin. Brilliant.
- jypepin 11y agoYeah! I guess the bad name that was criticized here a few days ago didn't stop them! I think it's very nice to see that kind of involvement so early from virgin and co!
- xanadohnt 11y agoYeah, I didn't agree with the name criticism either. For the small sample of us techies, sure, it has some negative associations (but even still not significantly so). For most, however, it's positive: Boom, drops the mic; Sonic boom, something good in the technical advancements of achieving great speed; and great for a simple, easy to remember, evocative brand name.
- Someone 11y agoThere's also the example of Steve Jobs. He used the word 'boom' quite a bit in keynotes (silly compilation at https://www.youtube.com/watch?v=Y38Sb3FOYmY https://www.youtube.com/watch?v=Y38Sb3FOYmY), always with the positive connotation of 'get results fast'. I don't remember anyone ever making a remark that it had negative connotations. On the other hand, if this becomes a successful company, it is inevitable one of their planes will go boom in a negative way one day, and that day will see quite a few bad jokes. Will that permanently damage the brand? That, I think, is anybody's guess, and may not be caused by the name. 'MH' didn't have any connotation positive or negative a few years ago, but I expect it will be a few years before anybody considers using that airline abbreviation again.
- jessaustin 11y ago
- samfisher83 11y agoJust for some context 787 cost $32billion dollars to develop.
- sargun 11y agoThe Concorde was developed in £1.134 billion[1], in today's dollars that's about £7.37B[2]. [1] http://www.concordesst.com/faq.html http://www.concordesst.com/faq.html [2] http://inflation.stephenmorley.org/ http://inflation.stephenmorley.org/
- samfisher83 11y agoThat is only development costs. That is about 10billion dollars. If the margin on the plane is 50% which is just to breakeven they would need to sell 20billion dollars worth. If they can sell each plane for 300 mil they would need to sell 67 to break even. There were 20 concordes that were ever made. Margins on aircraft are never 50%. For 787 its like 10-15%.
- twistedpair 11y ago10% Margin? They wish. Boeing is losing $25 million for every 787 it delivers [1]. Boeing investors would be ecstatic to get a 1% margin right now. [1] http://www.seattletimes.com/business/boeing-aerospace/will-787-program-ever-show-an-overall-profit-analysts-grow-more-skeptical/ http://www.seattletimes.com/business/boeing-aerospace/will-7...
- dredmorbius 11y agoHow much of that is fixed-cost accounting loss? Aircraft have high design costs (figure for the '87 is above), but the actual manufacturing costs should be ... somewhat reasonable. I have a hard time imagining Boeing would be selling the aircraft if they weren't recovering their marginal costs.
- mikeyouse 11y ago
- rdl 11y agoBoom is probably my favorite new company in a long time. I wish there were infosec concerns :)
- deleted 11y ago[deleted]
- jessaustin 11y agoI can picture the Mandiant APT press release already...
- ethnicify 11y agoDid they just call an air travel company "Boom"!? Associations 101.
- paulsutter 11y agoTitle misleading. The relationship is opposite what's implied. Boom will be hiring Branson's "The Spaceship Company" to do engineering, and Virgin gets an option to buy the first ten planes. Granting an option means Boom has given something to Virgin, not the other way around. > a Virgin Group spokeswoman confirmed their plans to The Guardian: “We can confirm that The Spaceship Company will provide engineering, design and manufacturing services, flight tests and operations and that we have an option on the first 10 airframes. It is still early days and just the start of what you’ll hear about our shared ambitions and efforts.” EDIT: Let's hope that we hear Virgin is making a big investment in Boom soon, that will be a stronger indicator. If Virgin really had substantive interest in the planes, and Boom was actually experiencing demand, Virgin would have had to PAY MONEY for an option.
- nostrademons 11y agoMy interpretation is that this is pretty standard LOI-speak. The reason it's an option is because Virgin is under no obligation to buy the first 10 airframes: LOIs are usually non-binding and contingent upon the company actually delivering what they've promised, which means Virgin can back out if Boom can't actually deliver on the promised specs. But the money is still flowing from Virgin to Boom. The bit about the Spaceship Company seems to be systems-integration, not hiring out the full engineering department. If you've ever sold enterprise software, usually a deal with a big company includes a commitment on the part of the customer to provide engineering & testing resources to integrate the new product. For something huge like an SST, they need to ensure it meets Virgin's safety specifications, they need to make sure it can interface with Virgin's maintenance department, they may need to alter the design to meet noise requirements from airports Virgin operates from, and all other sorts of little engineering tasks. These all require engineering resources from the customer, not just the seller.
- timr 11y ago"LOIs are usually non-binding and contingent upon the company actually delivering what they've promised, which means Virgin can back out if Boom can't actually deliver on the promised specs. But the money is still flowing from Virgin to Boom." ...unless the deal is an LOI on something so far in the future than it's (effectively) meaningless, coupled with an agreement to pay the LOI-signer for real-world engineering services, today. Then the money is flowing the other way, as the OP said. The finances aren't actually clear from this announcement, but the TechCrunch headline (and some of the reaction here) is certainly credulous. A LOI for an unbuilt airplane is essentially just validation that airline companies would like to have an cost-effective supersonic airplane, if it's possible to create one. I think most reasonable observers know that's true -- they just disagree on whether it's possible.
- kafkaesq 11y agoSo what's the carbon impact (per passenger-mile) of the service Boom is proposing (compared to regular air travel) again? I'm not sure this is something to cheer, just because it's new and shiny (and because it appeals to tech types who fancy they'll finally get to afford a ride on one of these contraptions, some day).
- elbigbad 11y ago$5,000 for the trip isn't a huge leap for typical business class to London. Economy alone is usually like $1,200-1,500rt. This isn't some huge exorbitant leap like costing $30k for a first-class trip. It certainly doesn't come close to elite "tech types" being able to afford it "some day" like trips on the Virgin SpaceShipOne will. I think many companies depending on situation will consider this worth it for the quick flight. It certainly doesn't strike me as something that people are excited about just because it's "new and shiny." It adds actual utility to get key players to certain locations on short notice. In any case, despite it holding fewer passengers than a Boeing 787 or something, I would bet that drastically decreasing flight time goes a long way toward bringing the carbon impact more in line with a typical flight of the same length.
- kafkaesq 11y agoDid you understand my question? I was referring to CO2 impact, not price.
- bencoder 11y agoMy uninformed understanding/guess: Flight is low margin and fuel is the primary cost. So you can make an estimate of the CO2 impact; if the average seat price on a normal airliner for that journey is $1000 and the average seat price on this aircraft is $5000 then I think you can say it's approximately 5x the impact. Happy to be shown wrong, this is complete conjecture.
- kafkaesq 11y agoThat would seem to make sense, to a first order approximation. But there may be other factors to consider: type of fuel that gets burned (and how it is burned); how long it stays in the upper atmosphere (possibly at higher altitudes), etc.
- forrestthewoods 11y agoYesterday: Hahaha what a stupid company name! What a bunch of idiots! Today: Oh shit
- Certified 11y agoMaybe I am misinformed but I was under the impression part of the reason concorde was retired is because at those speeds you tear up the ozone. "From their particle measurements, the authors of the Science study calculate that a future possible fleet of 500 supersonic passenger aircraft will increase the surface area of particles in the atmosphere by an amount similar to that following small volcanic eruptions. In mid-latitude regions, such emissions have the possibility of increasing ozone loss above that expected for nitrogen oxide emissions alone. The increase in the number of particles may also affect the ozone-related processes occurring on wintertime polar stratospheric clouds (PSCs) in the polar regions." -http://www.publicaffairs.noaa.gov/pr95/oct95/noaa95-65.html http://www.publicaffairs.noaa.gov/pr95/oct95/noaa95-65.html
- ghaff 11y ago>Maybe I am misinformed but I was under the impression part of the reason concorde was retired is because at those speeds you tear up the ozone. That really wasn't a reason for the Concorde's retirement. It was an old plane. It was marginal economically. It had a fatal accident. And then, just as it was returning to service, the travel slump after 9/11 happened. Environmental opposition was one factor in the cancellation of the Boeing SST program. Although the bigger one was almost certainly that it didn't make economic sense.
- Certified 11y ago>It was an old plane. It was marginal economically. It had a fatal accident. And then, just as it was returning to service, the travel slump after 9/11 happened. I agree that all those are the primary retirement factors but I did not want to bring them up as they where being discussed elsewhere in the comments. I'm interested to see that people where complaining about the potential of Concorde stratospheric pollution all the way back in 1972[1]. Maybe it was not so much a reason for retirement but one of the many reasons the concorde received such a poor public reception in the 70s. I think Boom has some serious hurdles ahead of them in this regard. Environmental regulations have done nothing but grow since the 1970s and many countries where outright banning the concorde from their airspace then. [1]https://upload.wikimedia.org/wikipedia/commons/6/61/ACPTimes.jpg https://upload.wikimedia.org/wikipedia/commons/6/61/ACPTimes...
- rgovind 11y agoWhat is the importance of an LOI? Its non binding. So why does it matter, except as a PR exercise?
- inopinatus 11y agoThey're not completely useless, because they can move a negotiation along a step e.g. by ensuring exclusivity, or agreeing on language in subsequent negotiations. PR side effects aren't empty either: investor confidence can keep a struggling firm alive; or for manufacturers, having a LOI in hand may be beneficial to your supply chain relationships. A word of warning though. Anyone who thinks a LOI violation isn't actionable hasn't met bigco lawyers. I was taught long ago to basically treat LOIs as purchase orders. They are hard to make completely nonbinding. Whether an LOI, a MOU, or a HOA; all such preliminary agreements fall into basically the same category of potential legal time bombs. An imperfectly drafted LOI may be treated as billable by some parties, with all the actionable response this implies if you withdraw from the arrangement. So someone asking you to sign a LOI or similar preliminary agreement who suggests "Oh it's just a letter of intent" is probably taking you for a chump. Do not sign without very good legal advice, and (unless you are an excellent lawyer) never attempt to write one yourself.
- rgovind 11y agoInteresting. Thanks for the clarification/inputs.
- onion2k 11y agoAwesome as this is, there's something largely outside of Boom's control that could derail their plans. When Concorde was ready to fly the British and French governments (who paid for the plane's development) had to negotiate with New York for permission to land there. There were concerns about the noise - not sonic booms, just general plane noise, because Concorde was "loud". The problems were actually political ones because Concorde wasn't American. Boom will have to do the same, but London has some really bad NIMBY issues with airports and the expansion of Heathrow at the moment. Problems that will probably continue for decades. If the anti-expansion environmental lobby groups can block this, and they see it as politically useful to do so, there will be a lot of negotiating to wade through.
- meddlepal 11y agoThis could be a gain for other cities though. If NY puts up a fuss then what about Boston instead? Same problem for London. Just don't go to Heathrow.
- oh_sigh 11y agoThe amount of business traffic from boston to some place that isn't heathrow is miniscule compared to NY-heathrow.
- alextgordon 11y agoThis has the same problem as hyperloop, then. Sure the main part of the journey is quicker, but if you have to take a connecting flight from New York to Boston, and a train from Luton to London, it's overall slower than a subsonic plane.
- frenchman_in_ny 11y agoI love what these guys are doing, but I find it odd that they're using an actively registered tail number (N22BT) in their mockup images.
- vannevar 11y agoIf building a supersonic passenger plane with an existing engine was viable, it seems like somebody would already be doing it. Which means it's probably not viable, in which case Boom is an aircraft engine company first and foremost; once they have the engine, wrapping a plane around it should be the easy part, relatively speaking. Developing a new engine costs on the order of $1B, so the development cost for the whole plane would probably be between $1.5-2B. So they'd pay for that with their first 10 planes to Virgin, with maybe some money left over to change their name.
- andy_ppp 11y agoCan you not just make the plane smaller and lighter and more aerodynamic and use a larger engine? You may also be able to show that current engines can operate at higher energy levels for longer?
- ethank 11y agoDoesn't work like that. They want to use a J28D engine modified for super sonic flight. That engine was designed to power MD80's.
- neurotech1 11y agoIts the intake design that makes the difference for supersonic performance. JT8D [0] is based on the J52 engine that powered the A-4 Skyhawk, and a related design is the RM8 [1] that powered the M2.0+ SAAB Viggen.[2] [0] https://en.wikipedia.org/wiki/Pratt_%26_Whitney_JT8D https://en.wikipedia.org/wiki/Pratt_%26_Whitney_JT8D [1] https://en.wikipedia.org/wiki/Volvo_RM8 https://en.wikipedia.org/wiki/Volvo_RM8 [2] https://en.wikipedia.org/wiki/Saab_37_Viggen https://en.wikipedia.org/wiki/Saab_37_Viggen
- diskcat 11y agoEngine is generally optimised for max efficiency at a cruising speed. A airliner engine is optimised for transonic cruising, you can't just half the plane and double the speed.
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- haberman 11y agoI don't know the first thing about how a business in the space operates. Can someone fill me in on why a startup like this would go through YC? How are $120k and Silicon Valley connections going to help a startup in this space in the slightest?
- jzwinck 11y agoWe are all here reading and thinking about it. And SV taken as a whole eats its own dog food: I was amazed the first time I worked with a YC company how many other nearby startups they used as vendors. If you think about Boom as part of an ecosystem, they will eventually need a large number of companies to buy seats on their planes. As with Concorde, only a minority of seats will be saleable to individual consumers. Now Boom, they're here, getting name recognition at hundreds of SV companies, some of which will have offices in London, Singapore (where Concorde also briefly flew), etc.
- tim333 11y agoI don't have details but the Boom CEO is positive: >YC has been awesome and supportive in so many ways, far beyond money. 5 stars, would do again!! :-) YC have a lot of knowledge, connections and name recognition
- abalone 11y agoI'm disheartened there's no mention of carbon footprint or sustainability. With all the great focus in our community on sustainable land transport (Tesla), data centers, solar and neo-nuclear power, etc., here we have a startup that markets this: "imagine leaving New York in the morning, making afternoon meetings in London, and being home to tuck your kids into bed." That is a terrible thing to enable from an environmental impact standpoint. While air travel can be somewhat more efficient per mile than driving alone in a gas car[1], the distances it enables you to travel are vastly greater. Further upping the convenience factor would no doubt encourage more "binge flying". Perhaps Boom is more efficient than typical airplanes. Perhaps it's less efficient. Perhaps it could make planes that travel at the same speed but at half the carbon footprint. We wouldn't know from this. It's not part of the story. Let's change that. Let's make sustainability as important a consideration with airplanes as it is with cars. [1] http://www.yaleclimateconnections.org/2015/09/evolving-climate-math-of-flying-vs-driving/ http://www.yaleclimateconnections.org/2015/09/evolving-clima...
- T2_t2 11y agoHmmm... Aren;t the two separate? Carbon neutral is going to be almost impossible with flight. Why don't we split the two (carbon output and input) into two fields?
- mathattack 11y agoIn a prior thread I asked about how they would get the funding they need straight out of YC. I guess this is the answer!
- altotrees 11y agoRead about Boom a few days ago, thought this could be a cool idea years into the future, with the right backing. Today, realize that most things happen a hell of a lot faster than I expect.