The business of space: Exploring the new commercial space economy

Today space innovation is increasingly driven by private industry. It’s an economy that’s growing quickly: 4 percent in 2013, to a record $314 billion. Billionaires, venture capitalists and even NASA are contributing to the soaring growth. Growth that’s tempting more entrepreneurs to get in early on an industry that is expected to double in the next 10 years.

“Space is about two things. It’s about exploration, and it’s about how do you go out and exploit it and profit off of it,” said John Thornton, CEO of Astrobotic, a company building a lander to carry cargo to the moon.

Space is the new frontier of innovation — rockets and spaceships, nanosatellites and asteroid miners, spaceports and zero-gravity 3-D printers. In the last four years, the U.S. commercial space industry has experienced a boom, with the commercial sector growing as global government spending on space is decreasing. (That’s still a significant amount, with the U.S. accounting for $74 billion of last year’s $314 billion, including $17 billion that went to NASA.)

The U.S. commercial space industry got a big boost on April 15, 2010, when President Barack Obama promised NASA $6 billion over the next five years to seed private space companies.

“That opened up a lot of opportunity for clever people, ambitious people, business people who thought they could do things cheaper or faster or better,” said Rusty Schweickart, an Apollo 9 astronaut.

So far, NASA has disbursed about $2.5 billion of the $6 billion seed money. In the name of creating a competitive market, NASA has pumped an additional $7 billion into contracts with two companies — SpaceX and Boeing — to build spaceships to take American astronauts to the International Space Station by 2017. NASA hopes to become one of several customers that buy trips to space from these companies. That will support the commercial industry and reduce dependency on Russia, which the U.S. pays approximately $70 million per seat to take American astronauts to the space station.

“When the shuttle retired, a lot of people saw that as a retreat, but it hasn’t been that way at NASA. It’s just now, the things we’re doing just haven’t been as visible as before,” said McAlister.

“In the future we can imagine these kinds of partnerships extending to other locations in the solar system,” said Alex MacDonald, a NASA space economist. “It’s many decades out, but we’re starting to understand the model by which we can expand our economy in space.”

NASA has also spent billions on contracts with SpaceX and Orbital Sciences to launch cargo to the International Space Station — kind of like a low-orbit space freighter.

“They’re really engaging the private sector, not only the schedule and cost discipline of the private sector but also reliability,” said Barron Beneski, vice president of public relations for Orbital Sciences. “I think what we’re doing today is a big goal. It’s not to be underestimated how hard it is.”

But it doesn’t always work. October delivered a one-two punch to the commercial space industry. Orbital Sciences had a massive setback on Oct. 28, when its Antares rocket exploded just seconds after liftoff, with 5,000 pounds of cargo set for the space station. Al Jazeera America was there that night, cameras rolling. The explosion roared and echoed throughout the launch site in Wallops Island, Virginia.

Three days after the Antares explosion, Virgin Galactic suffered the death of a test pilot and the crash and destruction of its SpaceShipTwo.

Space is dangerous. But it’s not deterring commercial space entrepreneurs. Virgin Galactic has already begun working on another version of SpaceShipTwo. And many in the industry metabolize the failure as a necessity for advancement.

As technology gets better and smaller, many see exponential growth in the commercial space economy. “I believe that the first trillionaires will be created in space,” said Bob Richards, CEO of Moon Express, another company looking to carry cargo to the moon. The impetus is not just money. It’s exploration.

Most entrepreneurs in the space industry share a vision that was one relegated to space-age cartoons: to one day colonize other planets, like Mars. Many believe the commercial space industry of today will provide the building blocks for achieving that goal tomorrow.

“I am 100 percent certain that everybody will have a chance to go to space,” said Jason Dunn, CTO of Made in Space, a company that has built a 3-D printer that is on the International Space Station. “It seems far off. It seems expensive, like only the richest people in the world can afford it. But the same thing happened with aviation.”

Just as aviation was expensive and unreliable in its infancy, so is the commercial space industry. The biggest hurdle of all: reducing the cost of launch. The cheapest option to date is SpaceX’s Falcon 9 rocket, which costs about $60 million per launch — half the cost of its competitors.

“We still launch things into space using essentially the same technology that Sputnik was launched to space on,” said Dunn.

But SpaceX is working on a rocket that lands after liftoff and is reusable. It could revolutionize the commercial space industry by lowering the barriers to entry and dramatically reducing the cost of launch.

But critics say much of what the commercial space industry envisions is the stuff of dreams, not reality.

“There have been a number of possibilities that people were promising would be wildly successful, and it has not come to pass,” said Billings.

But many entrepreneurs say it’s a different game now. Technology is better and cheaper. Americans got to the moon with less technology than is in a typical iPhone. “We almost wear more computers than we had to get to the moon,” said Schweickart.

And with the space race is in the hands of private companies, the sky is by no means the limit.