The hardest part for every rocket is the guidance system. Inertial guidance systems have a really prohibitive price.
An array antenna in the rocket fins will receive guidance from ground based “radar”. The “radar” can be a 1-5 W emitter with a highly directive antenna. Also a fiber optic gyroscope alone can help maintain the original attitude.
The launch can be made on a clear sky in the night. It would be very nice to use a camera for stars on the sky, but that might be too difficult. So this one is on the nice to have list.
After reaching the needed altitude the rocket will be acted upon only by the gravitational force, which will serve as absolute reference. Any cheap accelerometer can do that. A compass and a fiber optic Sagnac interferometer can help position the last stage for orbital trajectory.
09.01.2016 Update
A GLONASS/GPS receiver will be used for guidance. A commercial unit (Telit Jupiter 32) will be reprogrammed for this task. It is way cheaper than Sagnac interferometer alone (bought three units for $8).
02.25.2017 Update
No work was performed on reprogramming the GPS, but a piezoelectric accelerometer with a fiberglass gyroscope can handle the low guidance requirements.
Alchemy team blog 