Reaction Dynamics rocket engine attracts investment while meeting major milestone

Montreal-based startup Reaction Dynamics recently completed installing its core hybrid rocket engine, the largest such 3D printed engine in the world. The company eventually aims to put the engine on to an orbital launch vehicle in a larger bid to reduce the costs of sending payloads to space. While engine development is costly in the short term, Reaction Dynamics decided to take the challenge on to be more competitive in the long term, as the company explained in an interview and a recent LinkedIn post. In a market crowded with rocket startups, Reaction Dynamics' differentiator is an eco-friendly launch vehicle that has a hybrid propulsion system capable of sending payloads to orbit for a third the price of the competition, according to CEO/CTO Bachar Elzein. And investors are quickly flocking to the engine technology. "This summer we received an additional $1.5 million CAD from the Canadian Space Agency, bringing our total from the CSA to $2.2 million – the most the CSA has ever awarded for launch vehicle development," Elzein told SpaceQ. Reaction Dynamics 3D printed hybrid rocket engine. Credit: Reaction Dynamics. "I'm also pleased to say that, at this time, we have secured a major investor for our $5 million USD Series A financing round, and we expect a full close of the round by early next year. We have firm commits for about half the amount, and we are in the process of negotiating the remaining." The company was founded in 2017 and has doubled its employee base in the past year to 10 full-time equivalents and five interns. Its main office is in St-Jean-sur-Richelieu, Que. (just southeast of Montreal) with a new site for rocket engine testing in Joliette, Que., which is about an hour north of Montreal. Previous to this latest milestone, Reaction Dynamics tested a subscale engine regularly to figure out which critical combustion parameters were needed to develop its hybrid rocket engine. In the next five years, it hopes to provide regular orbital flights in commercial satellite service for Canadian and international customers, Elzein said. Neil Woodcock, COO said "we hope to complete the engine and have it ready for flight. In addition to this, we will be working towards our demo flight, which will mean developing the other aspects necessary to perform a first orbital flight." Woodcock also did a mini-analysis of the competition in a recent LinkedIn post, including some discussion on the importance of engine technology to rockets. Factors such as fuel, size and performance must all be taken into account when performing cost estimates, he said in the post, but in the long run, it is better to insource such a critical technology. "The engine … affects the rest of the vehicle and the costs thus allocated," he wrote. "The size of the tanks – and therefore their cost – is driven by the engine performance. The cost of the operations and the cost of propellants are driven by the propellants that the engine needs to run. The testing, ground support equipment, and facilities needed are driven by the engine selection too. If an engineer were to choose an engine running on hydrazine, they would also need to address the toxicity of this propellant by employing strict safety measures and incurring extra costs." Knowing the cost of creating an engine may make a company tempted to buy it from a supplier rather than to build it itself, Woodcock added, but added he is confident Reaction Dynamics made the right choice in insourcing the build. "Our first clue came when we were trying to court customers. Large customers with mature products were wary of integrating new solutions, and we received little interest from them, but we were successful in getting interest from small launch startups like ourselves," Woodcock wrote. "However, these [startup] companies had vehicle design programs [that] were less advanced than our own, and they didn’t have the funding to buy our engines. Letters of intent from customers like these wouldn't be worth much. This led us to ask, what made the engine resale model unattractive to small launch players?" Reaction Dynamics' conclusion, he said, was that engine development programs do take a long time and cost a lot, but there are other factors to consider. Often the financing for the engine build comes from grants and external investments, reducing the need for a company to bootstrap the work. So once the development is accounted for, all a company needs to worry about is the recurring cost of producing an engine. If you produce the engine yourself, you do not need to take a supplier's profit margin into account, he explained – and the engine will therefore cost less. Insourcing engine production also allows Reaction Dynamics more control in adverse circumstances; for example, if an external engine supplier runs into financial or logistical difficulties, "your entire vehicle is doomed," he wrote. Investors will also be more likely to support a company willing to put in the time and investment to insource the engine, he said. "A company that buys an engine will have a shorter development cycle, but they will need more funding sooner, they will own less intellectual property (IP), and they will not build up critical experience in rocket propulsion before needing the funding," he added. "This could make an investor nervous: they would need to fork over a significant amount of cash to a potentially inexperienced team, and if the company fails, there will not be as much valuable IP to liquidate.” Taking these factors into account, he said, it was relatively easy for Reaction Dynamics to decide what to do: "vertically integrate and build your own engines." Updated: To attribute some comments to CEO/CTO Bachar Elzein.