Richard Branson: A Billionaire On The Brink?

Sir Richard Branson is one of the world’s most interesting billionaires out there. He’s built an empire around dozens of companies that aren’t particularly related, from record labels to airlines to wineries to pretty much you name it.

He has always been known as the billionaire who likes to have fun and take plenty of risks. However, those risks recently took him down a path where three companies, Virgin Galatic, Virgin Orbit and Virgin Hyperloop, have all turned into cash incinerators that have blown up Branson’s wealth and reputation as a successful disruptor.

Today we will dive into the story of Richard Branson.

From his early days as a dyslexic, ADHD-struggling teenager, we’ll chart Branson’s course as he high-stepped his way to the Billionaires’ Club. We’ll wander the labyrinth of entrepreneurship with him, from launching a magazine to starting an airline because of one cancelled flight, to his most recent struggles.

Richard Branson: The rise to billionaire status

Lets go back to the beginning.

Picture a boy sitting in the back of a high school classroom, struggling with dyslexia and ADHD, with a teacher proclaiming his destiny – a cell or the billionaire’s club. 

That ADHD would come to define his entrepreneurial career.

At the age of 15, Branson started “Student” magazine, a magazine he co-founded with Nik Powell that focused on pop culture and criticizing hot button issues like the Vietnam war. The publication grew as a soapbox for in-depth interviews with the likes of Mick Jagger and R.D. Laing, eventually growing to a circulation of 100,000.

But it wasn’t just an outlet for star-studded conversations. Student became an advertising platform for his mail-order record business, Virgin Records, launched from the crypt of St. John’s Church in London, where his office was also located. He eventually opened a record store, and turned it into Virgin Records, which saw immediate success. He eventually signed the likes of The Sex Pistol, the Rolling Stones, and even the Spice Girls.

One of the first storefront locations of Virgin Records. Source: Virgin.

Around the same time, Branson founded the Virgin Group, which would later become a British multinational conglomerate. The name is said to be a result of the group being new to business – like virgins. This success enabled the brand to expand into a wealth of different ventures beginning in the 80’s starting with the launch of Virgin Games.

  • In 1984, they launched Virgin Atlantic, following a canceled flight for Branson from Puerto Rico.  Richard lived by the idea that flight wasn’t just a means for transportation, it was an experience.
  • Then in ‘85, the they launched Virgin Holidays and Mates Condoms, the latter in an effort to combat the spread of AIDS.
  • In ‘86 they launched Virgin Balloon Flights
  • In ‘91 Virgin Books.

This was followed by ventures in radio, vodka, cinema, a second attempt in the music industry, rail, cosmetics, banking, telecom, health clubs.. The list goes on and on, in what retrospectively looks like what one would expect from someone with ADHD.

All while the company itself paints a picture of great success throughout, but this wasn’t always the case. 

For instance, Branson was forced to sell Virgin Records in 1992 for US$1 billion as a means of raising funds to keep Virgin Atlantic, who was facing stiff competition from British Airways, afloat.

Virgin Atlantic’s success was much to the dismay of British Airways, the then-dominant airline in the UK. In a controversial bid to thwart Virgin Atlantic’s growth, British Airways resorted to underhanded tactics, such as hiring hackers to access Virgin Atlantic’s customer data. British Airways would then contact Virgin Atlantic’s customers during flight delays, falsely claiming their flights were canceled, and would cunningly offer them alternatives on British Airways. Additionally, they spread malicious rumors through the media suggesting Virgin Atlantic was facing bankruptcy.

However, when Branson discovered these tactics, he filed a lawsuit against British Airways. The result was a landmark victory for Virgin Atlantic, which was awarded a million-dollar settlement.

Virgin Galactic: The rocky journey

Branson subsequently embarked on a slew of new ventures, marking an era that somewhat dimmed his sheen as a trailblazing disruptor.

Let’s start with Virgin Galactic, a space touring company that promised to take customers into space. They began trading on the NYSE in October 2019 after a SPAC transaction with Chamath Palihapitiya. Today Virgin Galactic is down 92% from it’s all time highs. 

The company planned to be the poster child of space tourism, planning to launch it’s first commercial flight in 2007, just three years after forming. They would do this encompassing the technology of SpaceShipOne. 

SpaceShipOne was a rocket-powered aircraft originally conceived via a joint venture between Microsoft co-founder Paul Allen and aviation company Scaled Composites. The aircraft successfully completed a private, sub-orbital crewed space flight that year, and even won the Ansari X Prize competition for becoming the first non-government organization to send manned spaceflights via a reusable spaceship. 

That caught Richard Branson’s attention, and he quickly got to creating a joint venture with the firm behind the design, which would come to be named Virgin Galactic. The new venture redesigned a fresh spaceship called SpaceShipTwo. After rolling up his sleeves armed with high hopes of creating a commercial fleet for carrying passengers into space, he began advertising joyrides for any Tom, Dick, or Harry, for a hefty $200,000 per seat. 

But, lets make a very important distinction here: the projects were designed for suborbital flights. That means they get high enough to see the curvature of the Earth and the blackness of space, but they aren’t fast enough to achieve orbit around the planet. You see, for that, you need to reach speeds of about 17,500 mph. These guys, amble along at a more leisurely 2,225 mph, which, for comparison, is the speed I drive when taco bell hits me in the car ride home after eating a Spicy Gordita crunch.

But let’s not forget, space is not your average weekend getaway, and Virgin Galactic had its fair share of turbulence. The company didn’t make its maiden spaceflight until 2018 on SpaceShipTwo’s project VSS Unity, thanks to crashing the VSS Enterprise. The VSS Enterprise, which was in the midst of performing a test flight, suffered a catastrophic malfunction, crashing into the Mojave Desert in California causing the of death of a pilot.  

Yet, with stars in its eyes, Virgin Galactic wasn’t shy about charging a pretty penny for a trip to the cosmos. As of February 2022, a reservation for a cosmic joyride will set you back a cool $450,000. A steep climb from the initial $200,000 ticket price, but with around 700 brave souls booked and ready for launch, the company has its sights on ramping up to three launches per month in 2023.

However, before we get too starstruck, it’s essential to remember the dark matter looming over Virgin Galactic’s starry-eyed aspirations. 

They had their fair share of technical and financial hiccups, evident in the fate of their sister company, Virgin Orbit, which, spoiler alert, was shut down in 2023 thanks to a failed satellite mission and subsequent lack of funding. 

Lets get into that a bit more.

Virgin Orbit: High hopes, poor results

Branson’s Virgin Galactic gave birth to Virgin Orbit, a cosmic spin-off launched in 2017 to provide launch services for small satellites.

Branson’s new company created the LauncherOne rocket, which — without going into full-blown blueprint engineering detail — was basically a two-step air-launch mechanism with the capability to send up to 300kg of whatever into Earth’s lower orbit. 

Virgin Orbit rocketed onto the scene with grand plans. It hit the markets in 2021 with a SPAC merger that brought in $228 million — which was substantially shy of the $483 million eagerly expected. At the time, over 600 customers had reservations – representing around $80 million in deposits and $120 million in potential revenue. Big bucks, right?

You’d think a company with its own rocket, LauncherOne, and a customized Boeing 747 named ‘Cosmic Girl’ to launch the rockets could get a grip on the space business. Instead of the conventional vertical launch, it was all about horizontal lift-offs, a unique approach that won points for style.

However, gravity is a cruel mistress. Despite Virgin Orbit’s refreshing horizontal take on rocket launching, they’ve found themselves plummeting rather than soaring

By April 2023, the company was filing for bankruptcy protection after a fruitless search for funding, shedding about 85% of its workforce and putting out the cosmic equivalent of a yard sale for its assets.

So what went wrong? 

Things began to unravel when their UK launch, promising as it was, went up in smoke in January.The simple truth is that space ain’t cheap, and Virgin Orbit’s price tag was a galaxy away from affordability, costing about $12 million per launch

Jim Cantrell of Phantom Space pointed to high launch costs as Virgin Orbit’s financial black hole. They would need to launch 100 rockets a year just to break even— a very high mark to achieve.

On top of that, they were hit by a brutal trifecta – lack of investor interest, a stock market downturn, and not enough dough to keep operations running. Despite Branson himself pumping in over $70 million in four months, with a total investment of over a billion dollars, the writing was on the wall.

Now, they’re left with a skeleton crew of 100 employees and a forlorn plan to pay off suppliers and find a buyer for the remaining assets.

Virgin Hyperloop: The cash incinerator

And then there is Hyperloop One. 

What began as a high-speed dream centered around Elon Musk’s white paper quickly ran into reality. Founded in 2014, this company was all set to zip cargo and folks around at airline speeds. Scientifically speaking the theory was sound, trains would have reduced friction via pressurized magnetic propulsion. 

A comfy ride in a vacuum tube, cruising at 760 mph. No problem right?

They even demonstrated a proof of concept, the Propulsion Open Air Test (POAT) in 2016, reaching a zippy 134 mph in a breezy 2.3 seconds. But this was far short of the hypersonic cruise they were aiming for.

It was in 2017 that Branson swaggered onto the scene, investing and rebranding the company as Virgin Hyperloop. But the problem with the entire design is that the earth surface is not flat, and the pod would have to slow down to get around objects, defeating the purpose of the Hyperloop.

The company raised a whopping $485 million by 2019, but despite this they still needed a working, viable product. By 2020, Hyperloop had burned through all the cash Branson gave them, and took money from a Dubai group, making Branson a minority shareholder.

Their first human trial happened in the same year, achieving a speed of 107 mph, which is fast but far from the 760 mph dream. Today, the company has shifted gears, focusing on cargo transport and has let go of more than half its workforce.

The impact on Branson’s legacy

Branson, the daredevil business tycoon who once had a Midas touch, hit a bit of a snag when his recent ventures started to look more like sinkholes than gold mines. The pandemic didn’t exactly help either. While most of us were learning to bake bread and navigate Zoom meetings, Branson was sweating the small stuff, like losing his entire business empire. 

It’s all relative, I suppose.

Imagine having planes, trains, hotels, health clubs, and spaceships, and then, in a flash, you’re looking at a future where you might lose it all. With 50-60 planes grounded, hotels and health clubs shut down, and 60,000 jobs hanging in the balance, Branson was quoted as saying, he felt “slightly depressed,” 

Oh, and did we mention the personal loss of a mere £1.5 billion during the pandemic? But who’s counting, right?

Now, you might remember that Virgin Group did the equivalent of passing the hat around, asking the UK government for a £500m loan. Not a gift, mind you, just a little underwriting to ease the burden on poor old Virgin Atlantic. That request, made from Branson’s private Caribbean island, ruffled a few feathers to say the least. The British government, not feeling quite so charitable, declined to turn taxpayers into involuntary benefactors. So, Virgin Group rolled up its sleeves and plunged £200m into Virgin Atlantic as part of a £900m rescue package.

Wrapping it up

Let’s wrap it up.

The story of Sir Richard Branson is as much a rollercoaster ride as some of his business ventures.

There’s no denying that the last couple of years have been, well, a bit rocky. Between Virgin Orbit filing for bankruptcy, Hyperloop’s dreams of supersonic transport hitting a speed bump, and Virgin Galactic’s lofty ticket prices, it seems the Virgin brand has gone from a soaring high to a somewhat turbulent descent. 

But don’t count Branson out just yet. After all, he’s the guy who responded to a cancelled flight by chartering his own plane. He’s taken more risks than a skydiver with a second-hand parachute. And while his current businesses might be in a bit of a tailspin, we’ve seen him bounce back before.

Branson wrote a book in 2011 titled ‘Losing My Virginity: How I Survived, Had Fun, and Made a Fortune Doing Business My Way

Perhaps he lost his mind these last few years in a jealous rage chasing Elon Musk, perhaps record low interest rates made him lose sense of fiscal responsibility, but I don’t think it’s either of those things. I think he’s just doing what many of us would do if we had access to billions of dollars. Having a lot of fun.

Information for this briefing was found via Reuters, CNBC, Bloomberg, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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