Democracy Dies in Darkness

The Switch

Why billionaires keep pouring money into the space industry

By Christian Davenport

March 8, 2018 at 3:08 PM

President Trump meets with his Cabinet at the White House on March 8. (Jabin Botsford/The Washington Post)

During a Cabinet meeting at the White House on Thursday, President Trump became the latest booster of an upstart space industry, led in large part by Elon Musk’s SpaceX, when he lauded the recent triumphs of “privately financed” companies funded by several high-profile billionaires.

“Rich guys, they love rocket ships,” he said, with several rocket models in front of him. “That’s good. That’s better than us paying for them.”

His comments followed the successful launch of SpaceX’s Falcon Heavy rocket last month, when the company also landed two of the rocket’s three boosters back on land so that they could be used again — a feat Trump called “amazing.”

As the industry has started to attract high-profile attention, money has followed. Last year private investment continued to pour into the space industry, fueling its momentum. Investors sank more than $2.5 billion into start-up space ventures, the third consecutive year of significant private investment, according to a report compiled by Bryce Space and Technology, an Alexandria consulting firm.

While last year’s total was lower than the previous two years’, the earlier year totals were boosted by separate deals worth $1 billion each.

By contrast, more investors put their money into space last year, the report said, and there was a 70 percent increase in the number of deals — another sign that space, once deemed too risky for the business community, has turned a corner.

“It’s becoming more of a mainstream place for more financially focused” venture capitalists, said Carissa Christensen, Bryce’s founder and chief executive. “They are in it not because space is cool, but because they think this a place to generate serious return.”

For years, the industry was fueled by the vast fortunes of a few billionaires. Musk invested $100 million of his own money into SpaceX before capturing several billions of dollars in government contracts.

Last year, Jeffrey P. Bezos described the investment model for his space company, Blue Origin, this way: “I sell about $1 billion a year of Amazon stock, and I use it to invest in Blue Origin.” (Bezos owns The Washington Post.)

Richard Branson has backed Virgin Galactic and a satellite company called OneWeb, while Paul Allen, the Microsoft co-founder, is building what would be the world’s largest airplane by wingspan to “air-launch” rockets.

Related: [Why Paul Allen is building the world's largest airplane]

More recently, Mark Cuban invested $500,000 into a company called Relativity Space, which plans to 3-D print an entire rocket. Astranis, which intends to use small satellites to beam Internet to places off Earth's power grid, recently announced that it was being backed by Andreessen Horowitz, the Silicon Valley venture capital firm.

The growing market has also captured the interest of the Trump administration, which has vowed to expand the partnerships with the private sector that began under former presidents George W. Bush and Barack Obama. During Thursday’s Cabinet meeting, Trump lauded SpaceX’s Falcon Heavy and took a shot at NASA, saying that if the government built a similar rocket, it “would have cost probably 40 or 50 times” what SpaceX charges.

Despite the dig, he later acknowledged that “NASA is making tremendous strides.”

For all its hype and early success, the start-up space industry “has not yet definitively demonstrated business case success,” the Bryce report said, noting that it is now at a critical juncture.

Over the next couple of years, investors will start to expect “some of these companies in their later stages generating returns in a meaningful way,” Christensen said. “If just a few of them do that, it will significantly affect investor confidence.”


Christian Davenport covers the defense and space industries for The Washington Post's Financial desk. He joined The Post in 2000 and has served as an editor on the Metro desk and as a reporter covering military affairs. He is the author of "The Space Barons: Elon Musk, Jeff Bezos and the Quest to Colonize the Cosmos" (PublicAffairs, 2018).

Post Recommends
Outbrain

The Switch

Why billionaires keep pouring money into the space industry

By Christian Davenport

March 8, 2018 at 3:08 PM

President Trump meets with his Cabinet at the White House on March 8. (Jabin Botsford/The Washington Post)

During a Cabinet meeting at the White House on Thursday, President Trump became the latest booster of an upstart space industry, led in large part by Elon Musk’s SpaceX, when he lauded the recent triumphs of “privately financed” companies funded by several high-profile billionaires.

We're glad you're enjoying The Washington Post.

Get access to this story, and every story, on the web and in our apps with our Basic Digital subscription.

Already a subscriber?

Secure & Encrypted