ELON MUSK, FOUNDER AND CHIEF EXECUTIVE OFFICER, SPACE EXPLORATION TECHNOLOGIES
The Six Million Dollar Man
By Brian Berger
Reprinted with Permission from the May 12 edition of Space News.
May 12, 2003

Elon Musk is not the first person to think he can build a rocket cheaper than the big companies and change the economics of putting payloads on orbit.

The way to low Earth orbit is littered with start up ventures that could never quite raise enough money to get their low-cost launchers off the drawing boards and into space.

So why should Musk be any different? Like Dallas banker Andrew Beal, Musk is financing his rocket venture out of his own pocket. Unlike Beal, who burned through millions of dollars trying to build a heavy launcher for a heavily saturated segment of the market, Musk is attempting to enter the business at the point of least resistance by providing $6 million launches for the largely neglected small satellite community.

It is a depressed market that, by his own reckoning, will net maybe three to five launches a year. But Musk also views it as a largely uncontested proving ground that will allow his company, Space Exploration Technologies (SpaceX), to show that it can build a reliable, low-cost rocket before moving on to a more ambitious launch vehicle development effort requiring outside financing.

With parts of the rocket in production throughout the United States and the engine in testing, Musk expects the Falcon to be ready to go by the end of the year.

It is a compact schedule given that Musk founded SpaceX only last year, but it is on par with the 31-year-old’s previous ventures. The South African native is a two-time winner of the dot.com Gold Rush, having built and sold two successful businesses — Zip2 and PayPal — in the space of six years.

Musk recently discussed his ambitions and motivations with Space News editor Lon Rains and staff writer Brian Berger.

Q. What is the size of the market for the Falcon?

A. There is a secondary payload market out there that is underserved. It’s not gigantic, but I think people underestimate it.

By the end of next year we will do at least two launches and maybe three. Once people start to respond to the Falcon, three or four years down the road we are doing probably five launches a year.

There are a lot of secondary payloads out there that fly jammed onto the Ariane secondary ring. My suspicion is that even if we cost a little bit more, the Falcon is going to offer a huge advantage to people with small payloads, especially since most of them want to go to low Earth orbit instead of geosynchronous transfer orbit.

Q. Why do you think you will be able to avoid the cost and expense that afflicts all other U.S. rocket programs?

A. I don’t know how those companies work. My approach is to have a very high signal to noise ratio, meaning the number of people who are actually contributing to the development of the rocket vs. managing or pushing paper is very high.

Q. What do you think of the tourism market?

A.. It’s hard to say. I don’t really know about the market for sub-orbital tourist launches. I can only think about what I would do. I might spend $100,000 on a sub-orbital flight, but I don’t know how you would offer a flight for that amount of money.

Now if you take people to orbit, to a private station or the international space station, I think you could charge a lot of money for that. I would be willing to pay $5 million for something like that and I can think of some friends of mine who would probably do the same. But you can’t go through this six-month training stuff.

If you could make it a two-week training process and $5 million, I know a lot of people who would sign up.

Q. What is your long-term goal for this business?

A. Our holy grail? I don’t want to sound as though we have absurd aspirations, but we would love to build Saturn 6. If it ever comes to the point where we want to go beyond Earth orbit, we will need a heavy lift vehicle like the old Saturn rockets and we would like to build it at a cost that the American taxpayer would find palatable.

We want to prove ourselves first with the Falcon and its follow-on, a three-stage geostationary Earth orbit launcher.

Q. Are you employing a different financial management strategy with SpaceX than you did with your Internet ventures.

A. Keep in mind that PayPal went public after the crash, not before it. There were all sorts of terrible excesses in the dot.com era but PayPal did not succumb to those. We were initially quite aggressive in customer acquisition in order to achieve critical mass before eBay launched their own product. Once we achieved critical mass, we were extremely vigilant about costs.

With the rocket business, what’s important is closing the business case. The only way we are going to do that is by being extremely vigilant on costs. Once we close the business case on Falcon, I expect to go out and seek $50 million to $100 million to build the bigger vehicle.

Q. Before deciding to build Falcon, did you consider financing an existing venture like Kistler?

A. I looked at Kistler. Their strategy requires an enormous amount of money. I don’t think I have the resources to push them over the top, frankly. And I don’t agree with launching from Australia. The biggest advantage any U.S. launch company has is access to the U.S. government as a customer. Not taking advantage of that is a really big mistake.

Q. Who is watching your back in Congress, the Pentagon and NASA headquarters?

A. We do plan to establish a significant Washington presence. We’re interviewing people right now. If somebody tries any dirty tricks, we want to shine a bright light on that.

Q. Has SpaceX received any buyout offers?

A. We have not been approached by anyone. We’re not trying to flip the company for a quick buck. We really want to see if we can do some good by bringing down the cost of American access to space. If there were an arrangement with a big company that would allow that goal to succeed, sure, let’s talk. But if the goal would be to acquire us and then shut us down, that would be a non-starter.

Q. You flipped Zip2 and PayPal. Is there a different motive behind SpaceX?

A. Actually, no. It’s always been the same motivation. I wanted to be involved in something that has an outside chance of doing some good. If there is not something meaningful in what you are doing above and beyond any commercial returns, then I think life is a bit hollow.

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