[avichal]

Obligatory quarterly post from me about optimism (or lack thereof on HN)! :)

It's unfortunate that so many people come out of the woodwork to tell people their ideas are terrible or won't work without actually understanding the idea, technology, or risk-adjusted return that investors may be considering. It's far far more interesting to consider how things may work or what you may be missing. I've listed a mini-FAQ at the bottom about Boom. I'm an investor in every Boom round, from before they were in YC so am clearly biased, but also know the company very well.

Props to everyone in the thread who is asking genuine questions and actually trying to understand what the team is building.

References

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Dropbox launch: https://news.ycombinator.com/item?id=8863 Coinbase launch: https://news.ycombinator.com/item?id=4703443 A 2012 thread discussing comment negativity where: https://news.ycombinator.com/item?id=4363717 A classic thread from 2012 where PG talks about negative comments: https://news.ycombinator.com/item?id=4396747

Mini-FAQ

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1. Isn't the most important part of reducing flight times the pre-flight experience (security, airport delays, etc.)? Yes, you are correct. However, the long haul international market that is about 10% of the overall number of flights in the world is still a HUGE opportunity where the bulk of time is spent in the air. Boom is most effective in these longer 8-hour+ flight situations like SFO-Tokyo, LA-Syndney, etc. On these routes you would save a day round trip. For many people an extra day in the office or an extra day with family is a tremendous win.

Most people don't realize but travel to Hawaii 10x-ed in the decade after the jet engine became common because Hawaii became a five hour flight from the West Coast instead of an eight hour flight. Imagine if you could get from SFO to Japan or China as fast as SFO-NYC.

2 - How can do this for so cheap? It will be capital intensive to get to the final plane, probably ~$2B. Most of this can be financed with debt, however, because there are many billions in pre-orders from airlines already. This round gets you to fly a one-third scale version of the plane and be ready to raise an even bigger round to build the full scale plane and get to FAA certification in the series C.

The Boom team has been very smart in their go to market by maximizing the amount of already FAA approved technology that goes on the first plane. For example, the carbon fiber composite is the same as that used on the 787. Fast tracking the components because they're already FAA approved dramatically reduces costs.

3 - What qualifications does this team have? How can they possibly pull this off? The team includes 80 technical experts and leaders from Airbus, Boeing, SpaceX, Gulfstream, NASA, and Lockheed. Collectively, the team has made key contributions to 40+ successful air and space vehicles the SpaceX Falcon 9, Airbus A380, and the SR-71 Blackbird. The team has led the development of many planes that have gone from 0 to FAA approved and launched.

Hope the above is helpful to people reading through and wondering how this makes any sense. I think Boom is a once in a lifetime, category creating company (like SpaceX or Tesla). Happy to answer more questions if you have any.

[notahacker]

Appreciate conservative industries like aerospace need optimists like yourself to back ambitious projects that Airbus and Boeing have commercial reasons to avoid trying for themselves even if they thought they might be viable, but point 2 of your FAQ alarms me.

~$2bn is a ludicrously small sum of capital to get a "final plane", even compared with airframe programmes that took the 737 as a starting point and had the relatively straightforward objective of being a 737 but a few percentage points more fuel efficient and with a nice new cockpit. And no, you really can't debt-finance a new aircraft research programme with outstanding orders. Most of the money in an aircraft transaction changes hands at the delivery stage (deposits are a small fraction of the aircraft cost, pre-delivery payments are also a small fraction and are made in the months immediately prior to an aircraft delivery, not as r&d funding). The airlines usually need external financing to actually manage these payments which comes from the asset finance arms of conservative financial institutions looking to earn steady ROI from having assets with predictable residual values on their balance sheet, not a punt on a research project which may or may not actually deliver an aircraft. Boom's going to have to raise VC-type funding themselves; the airlines can't and won't do it for them at any scale. (I used to speak with senior executives at airlines involved in aircraft finance on a day to day basis so I'm not just being cynical here). And please correct me if there is undisclosed information and I am wrong on this point, but at the moment as I understand it Boom does not have "many billions" in orders, it has non-binding LOIs for an entirely notional 76 aircraft and $10m in equity investment from JAL is the only financial commitment from any airline.

So I'd be extremely worried if this was the basis from which investors in general were considering their risk-adjusted returns. I suspect this is more your attempt at an HN-friendly summary of the prospects based on casual conversations with employees, as someone who yourself backed the project for other reasons at a much earlier stage. But if they were making claims about funding much of their r&d from their order book in representations to investors (as I said, I suspect they aren't) I'd start viewing it a Theranos-level heist as opposed to yet another well-intentioned aerospace project full of good engineers trying something wildly ambitious (which is where I think they actually are).

[avichal]

Thanks for the thoughtful response. Obviously I won't be able to do justice to an entire business plan in a few sentences.

They are definitely not representing their order book as the basis for a full debt financing. I appreciate your assuming best intent as I use broad brush strokes in the parent comment and below.

A few thoughts: + I think the history of startups is also one of teams succeeding with far less capital than the incumbents. They're on track to build the fastest civilian aircraft ever built for less than $100M raised which speaks to their accomplishments to date. Aero is notorious for cost overruns but their capital efficiency to date is impressive.

+ Of course, the biggest risk is that there are cost over runs due to unforseen issues, e.g. Bombadier's C-Series estimated to cost $2B and that ended up closer to $5B (though that was also for multiple planes and configurations). At the same time the A320-NEO was done for below $1.5B I believe. Time will tell how much it actually costs but I think it's probably much closer to $2B than say $20B.

+ You are correct that these are not pre-orders. I shouldn't have used that term and should have used LOIs (and now I can't figure out how to edit the comment). As I understand it, the LOIs are of varying levels of commitment. The earliest LOIs were non-binding and with no skin in the game. More recent LOIs have more teeth. The strategy has been very clever. Each batch of LOIs has terms more favorable to Boom, so there is an incentive to move before the LOIs become less favorable to you (the airline). And there is a competitive dynamic that is at work that engages companies, e.g. JAL vs ANA, via incentives such as exclusivity on certain routes or deal sweeteners like the opportunity to invest. I think it's unlikely that 100% of these LOIs convert as external circumstances will always be a factor (e.g. airline gets a new CEO who has a different strategy) but the newer LOIs also have significant executive, CEO, and board buyin from the airlines, so they're certainly not throwaway. As you noted, airlines are very conservative about basically everything. The reason these LOIs are managing to get board level approval is that the math makes a ton of sense if the planes fly. You're essentially replacing less profitable narrow body jets with a Boom jet on certain routes so you stand to make more money as an airline if you get one of these.

+ It's much harder to debt finance the entire thing as an R&D endeavor at once but there are multiple ways to traunch this and phase it in over time. And not all of the costs need to borne by Boom directly. It's pretty standard for suppliers (not the airlines, as you noted) to put up significant commitments as part of the development process and bear those costs and risks. Many of the existing partners for major components of the Boom plane are bearing these costs directly already, because the math behind unlocking supersonic makes sense and even if the plane doesn't launch they stand to benefit from the R&D on these new components. Sharing these costs such that the partners benefit from the upside in a success case (huge new market the supplier is a leaders in) and in a failure case (IP that makes their existing components much better), while also bearing the capital risk helps reduce the capital and debt burden on Boom itself.

Anyway, your read that this is a well-intentioned aerospace project full of great engineers trying to do something wildly ambitious is correct. Anything I've misstated that might imply otherwise is a failure on my part, not Boom's. I also think they are as savvy on their business as they are talented at the engineering, which is why they've even made it this far.

[ghaff]

The transPacific and Pac Rim routes do seem interesting if the range is there. For a lot of those routes even flying in comfort on an A380 or 787 is still just a long time to be mostly sitting down even if the food is great and you can sleep in relative comfort. And they're routes that a lot of executives and other highly-paid business people routinely drop >$5K on today. At least from my perspective, it's a lot more interesting than US East Coast to Europe where the flights are short enough that it's not that big a deal so long as you're comfortable.

I have no idea about the economics or practicality of this particular effort. But one place I agree with the criticism of the criticism is that I do think it's silly to operate from a premise that supersonic commercial flight will never make sense. In fact, it seems almost obvious that it will some day even if it takes a long time.