The successful launch of SpaceX’s Falcon 9 rocket underscores the transformation of the US space industry from a government-controlled national program into a profit-driven private sector operation.
Yesterday’s astronauts may have had “The Right Stuff,” but compared to today’s breed of space capitalists, they were almost entirely without swagger. Take, for example, these recent comments by PayPal and Tesla motors founder Elon Musk, whose venture is called SpaceX.
“The United States has been uncompetitive in the international launch market for a long time,” Musk told an audience at the National Press Club in Washington. “Except in the last few years where the United States has done the best, and that’s due entirely to SpaceX.”
Musk’s unkind words for the monopoly held by national space programs are reflective of the broader disdain among space capitalists for the expensive, infrastructure-intensive, buzz-cut-and-horn-rimmed-glasses culture of NASA. Space ventures these days are modeled more on the Silicon Valley ethos of can-do capitalism. It’s no surprise that many of the ventures are bankrolled or headed by one-time tech wunderkinds, who have transformed commerce and communication, such as Musk, Amazon’s Jeff Bezos and Microsoft’s Paul Allen. (Virgin’s Richard Branson, while no less confident, is an exception).
There is also a confidence – one might call it hubris – that earlier successes in digital technology will translate to space. Allen, whose company Stratolaunch Systems, aims to loft commercial payloads by the end of the decade, predicted that private capital would bring “a radical change in the space-launch industry.” Allen could invest as much as $250 million of his own money to support Stratolaunch.
But the question remains, what does escape velocity have to do with IP addresses? A lot, according to Andrew Nelson, chief operating officer of XCOR Aerospace, a Mojave, Calif., space startup that is a few months away from initiating test flights of its two-seater Lynx spacecraft.
Nelson, who jumped from a career as an investment banker on Wall Street to XCOR Aerospace in 2008, likens commercial space travel today to the early days of the Internet, when it was a discreet government communications network.
“We’re talking about having our own Netscape moment,” Nelson said in an interview with The Financialist, referring to the search engine’s 1995 game-changing IPO, which launched the nineties dotcom boom. “We feel [our Netscape] moment might be two or three years away.”
And just as in the heady days of the tech boom, there is a lot of talk regarding the size of markets that can be tapped. The global aerospace market is worth about $235 billion per year, according to Nelson.
Still, the commercial space market lacks clear definition. This means some space entrepreneurs are seeking to create demand where none currently exists, not unlike what Starbucks did for coffee.
Branson is marketing his Virgin Galactic program as the go-to source for thrill seeking space tourists. So far the company has collected $60 million in deposits from 500 customers, each willing to pay $200,000 for a seat and a peek out the porthole to space. (XCOR is a relative bargain at $95,000 a pop.) Like other players in the space market, Virgin Galactic doesn’t want to serve merely as a supercharged site-seeing vehicle.
“Space tourism was the first and perhaps only readily available market to us when our project was first announced and has been the key to getting us to where we are today,” a Virgin spokesperson tells The Financialist. ”Early success will allow us to push further – perhaps to orbital or even trans-continental space travel.”
Musk, meanwhile, is trying to do what NASA did, but better. SpaceX is seeking to make money by lofting satellites and other commercial payloads using manned or unmanned vehicles. This segment, today largely controlled by government agencies, like NASA or the European Space Agency (ESA), is gradually opening up. Indeed, the mothballing of the U.S. shuttle program last year means that there is an acute need right now for low-cost, dependable vehicles (particularly since the Russian Soyuz rocket has proven to be undependable).
SpaceX is already profitable thanks to the more than $3.5 billion in launch contracts it scored in the past four years for its unmanned Falcon spacecraft. Company spokeswoman Kristin Grantham tells The Financialist that more than half of its contracts are with commercial companies and foreign governments seeking to put satellites into orbit. NASA has also signed on for 12 launches, the first of which took place on May 22.
By 2014, SpaceX anticipates its manned Dragon spacecraft will carry astronauts for $20 million a seat, ”a far better deal for U.S. taxpayers,” Musk points out, when compared to the $63 million Russia’s Soyuz program currently charges NASA to carry astronauts to the International Space Station. Musk’s relatively low-cost option underscores how market forces are at the doorstep of the last frontier and poised to make space travel more affordable.
XCOR’s Nelson agrees: “Private capital is going to create the economies of scale that so far have been missing in space.” But, much as the tech landscape has shifted dramatically in the last two decades, commercial space flight will no doubt have its own shakeout. Where, for example, is Netscape today?