On Aug 2, 2008, SpaceX launched its third Falcon 1, a small expendable orbital carrier rocket. Immediate after stage separation, complications ensued and the mission failed. It wasn’t until the company’s 4th launch, when capital was nearly drained, that SpaceX was able to perform its first successful mission.
Now, SpaceX has successfully completed a dozen launches and is poised to complete another one (AsiaSat 6 commercial communications satellite) in short order. The press has reported that the company is also on the fundraising trail to add significant capital to its corporate coffers at a reported $10 billion valuation. Back on Planet Earth, many people think that this valuation is astronomical.
At the end of the day, a company’s valuation is always calculated on the future cash flows of the company discounted to present day. A high valuation generally implies greater confidence in a company’s future. So the question is what is the future of space and the market opportunities?
Today, we rely on space for many daily activities such as communication and navigation. The near term opportunities in space are in satellites and tourism.
The world launched 197 satellites into orbit in 2013, a significant jump from the 119 satellite launched in 2012. An important factor driving this is the miniaturization of satellites from companies including Planet Labs, Spire, and Skybox Imaging.
With satellites ranging from the size of a small shipping box to a refrigerator, these companies are building and launching a constellation of satellites to track essentially everything on the planet. The applications are nearly endless from agriculture monitoring to ocean asset tracking to piracy detection to disaster response.
On the tourism front, World View Enterprises ($75K per ticket) and Virgin Galactic ($250K per ticket) are exploring ways to take people into suborbital space for an experience of a lifetime. The novelty of space tourism will certainly garner meaningful interest. In fact, Virgin indicates they have 600 seats reserved already, which equates to about $150 million of (future) revenues.
Today, the global space industry is a $314 billion market with the bulk of it in commercial, rather than government, spending.
Intermediate to Long Term
In 2013, humanity completed 81 launches, slightly higher than the five-year average of 79 launches. To significantly increase our forays into space, the industry needs to improve the economics of space flight.
The most critical driver of economics is reducing the launch cost and the most critical driver of reducing the launch cost is making rockets reusable. Today, we have single use launch vehicles which is analogous to flying a plane once and then having to discard it and building a new plane — not exactly cost efficient or scalable.
SpaceX and Jeff Bezos-backed Blue Origin are two of the more well known companies working on reusability. Blue Origin hasn’t revealed much about its progress, but the goal is to develop reusable vertical take-off and vertical landing (VTVL) carrying astronauts into orbit.
SpaceX, on the other hand has been aggressively discussing and achieving milestones. Most recently in July 2014, the company stated that they are “highly confident of being able to land successfully on a floating launch pad or back at the launch site and re-fly the rocket with no required refurbishment.”
If successful, SpaceX’s systems could drive low Earth orbit launch price from around $56 million down to $5 million per launch—a 10X cost improvement.
And that’s just the beginning. Elon has publicly stated his dream of retiring on Mars—presumably getting there with a reusable SpaceX launch vehicle.
To further optimize the economics (by reducing more costs), companies such as Planetary Resources and Deep Space Industries are developing the capability to mine resources from asteroids. The minerals and water mined from near earth objects can directly supply the new space economy without having to spend $10,000 per pound to launch resources into low Earth orbit and beyond.
These are just the seeds of a much broader space economy (see 8 space verticals below). The near term activities in tourism and launching satellites are building blocks for a much larger space economy. This economy will depend on reusable rockets and reduced payload as asteroid mining provides a greater balance of necessary resources.
Is all of this too difficult to imagine?
One century ago, on January 1, 1914, the commercial aviation industry began with one single flight in Florida. Since then commercial aviation has transformed the world in ways unimaginable in 1914.
Now, the private and public world is committing significant intellectual and financial resources to develop new business in space. This generation of inventors and builders are pursuing infinity and beyond.
Will humanity continue to explore new frontiers as we have always done? Will we become a multi-planetary species?
When it comes to space, the limitation isn’t rocketry or market size. The only limitation is our collective imaginations.
Select list of space companies and investors.
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