Entrepreneur tries his midas touch in space

Science whiz Elon Musk is hoping to revolutionise the space industry with a low-cost, reliable satellite launcher that could take off as early as December


In his native South Africa, science whiz Elon Musk struck his first business deal when he made $500 selling the code for a Space Invaders-style video game he invented.

He was 12. It took only another decade or so for him to make some real money: Musk banked $22 million in 1999 when Compaq Computer bought his first significant company, Web software maker Zip2. And in 2002, he pocketed about $150 million in ebay Inc. shares when the Internet auction giant acquired PayPal, the online payment company he had co-founded three years earlier in Silicon Valley.

Now, the tall, soft-spoken Musk is on to his third major venture, risking much of his fortune – along with his reputation as an entrepreneur with a golden touch – by setting his sights once again on space. But this time it's no game.

Musk, who last year left Northern California for the aerospace hub of Southern California, is bankrolling an upstart rocket maker in El Segundo called Space Exploration Technologies Corp., or SpaceX for short, with a commitment of $50 million.

Revolutionise

The boyish-looking 31-year-old vows to revolutionise the space industry with a low-cost, reliable satellite launcher that charges $6 million a flight – less than half the going rate for small payloads.

SpaceX's Falcon rocket could take off as early as December if the customer, a government agency he won't identify, has its satellite ready and SpaceX clears regulatory hurdles, said Musk, the company's chairman and chief executive. He wants the maiden launch to coincide with the 100th anniversary of the Wright brothers' flight at Kitty Hawk on December 17.

Ultimately, Musk said, he hopes to help make human space travel more affordable through new launchers and exploration vehicles.

"I like to be involved in things that change the world,'' he said. "The Internet did, and space will probably be more responsible for changing the world than anything else. If humanity can expand beyond the Earth, obviously that's where the future is.''

Besides, he added, "Rockets are cool. There's no getting around that.''

Whether Musk becomes a space industry visionary – or the latest in a string of delusional Don Quixotes – remains to be seen.

Doubters call Musk's vision pie in the sky, a gross underestimation of the technological and commercial challenges SpaceX will face.

"He's a young, smart guy who has made a ton of money, but we have a saying in the launch business: The way to become a millionaire is to start with $1 billion,'' said Marshall Kaplan, a former rocket engineer who is director of space programmes for consulting company Strategic Insight Ltd. in Arlington, Virginia.

What's more, with the collapse of the telecommunications industry, few contracts are available even for small commercial satellites, noted Charles Vick, senior fellow at GlobalSecurity.org, a defence and aerospace think tank. For the moment, the market is primarily driven by government contracts, particularly for military and NASA payloads.

Musk is undeterred by the odds. He figures he has beaten them before. "Elon thinks bigger than just about anyone else I've ever met,'' said David Sacks, former chief operating officer at PayPal and now head of an independent film company in Los Angeles. "He sets lofty goals and sets out to achieve them with great speed.''

In 1999, after Compaq bought Zip2, Musk formed X.com, which morphed into PayPal after acquiring the competitor that originated the brand name.

The original business plan focused on allowing people to transfer money electronically via the Palm hand-held computer. But Musk quickly saw that the "killer'' application would be a system that allowed the secure e-mailing of payments using any type of PC, according to Sacks.

As soon as PayPal saw that so-called early adopters were using the system by the thousands to pay for purchases on ebay, Musk developed a "viral marketing campaign,'' Sacks said. The company paid $10 to every new PayPal customer as well as anyone who referred a new user. The campaign fuelled exponential growth.

Despite the tech-sector implosion, PayPal went public in February 2002 with a market capitalisation of $1.2 billion. Just five months later, ebay snapped it up for $1.5 billion. Musk's ebay shares now are worth about $200 million.

Musk's payoff has left him with the ability to dream – and live – large. He owns a six-bedroom house in Bel-Air, which he bought early last year with his wife, Justine, an aspiring novelist.

Huge challenges

But can success on the Net translate into success in outer space?
One early PayPal investor who enjoyed a windfall from that venture says Musk's SpaceX faces huge challenges. "It's going to be a highly risky and capital-intensive business at the same time. That's not a combination venture capitalists like to see,'' said John Malloy, managing partner at Nokia Venture Partners in Menlo Park, California.

Still, he said, big investors with deep pockets and an interest in aerospace might be attracted to SpaceX, given Musk's reputation as "a prototypical Silicon Valley entrepreneur with a knack for being in the right place at the right time''.

As he pondered his next project while the ebay deal came together, Musk said he wondered why space exploration hasn't moved faster.

"Its peak of success came with the Apollo programme in the late 1960s, and for the last 30 years it has moved sideways at best,'' he said. "One of the major reasons is the launch cost.''

Musk said he and his team are holding down costs on the Falcon project by sweating every expense line – which starts with keeping the design and technology basic.

"I had several other opportunities, but when Elon approached me I could see he was different,'' said Tom Mueller, who joined SpaceX at its founding last June after 14 years at TRW and its new parent, Northrop Grumman Corp.

"The others always had a gimmick, like a helicopter blade or some miracle technology,'' said Mueller, SpaceX's vice president of propulsion. "Elon just wanted to take the best technology already out there, build a simple vehicle and use the right propellants.''

The 68-foot-long, 28-ton Falcon, designed to carry a payload of up to a half-ton into low orbit, will have no wings, will fire in two stages instead of the usual three and will use fewer moving parts than rockets of established competitors such as Pegasus from Orbital Sciences Corp.

In addition to its supposed cost edge, the Falcon's streamlined design will mean less risk of malfunction, according to Musk.

A spokesman for Dulles, Virginia-based Orbital Sciences declined to discuss his company's pricing structure or SpaceX's plans.

"We don't comment on competitors directly,'' said spokesman Barron Beneski.

Headquarters

SpaceX's headquarters, a converted 25,000-square-foot warehouse, feels like a throwback to the Internet heyday with its open cubicles, breezy camaraderie and a lounge offering free