The company responsible for the first private commercial space launch in the United States has lost its main financial backer and laid off most of its employees, company officials said yesterday.

Managers of Houston-based Space Services Inc. are keeping the firm running as they try to find new financing, said company president and former astronaut Donald K. "Deke" Slayton.

"We've run out of immediate cash, so we had no choice but to furlough the majority of our people," said Slayton, one of the Mercury astronauts.

"We've got a lot of opportunities I think we'll be able to convert into something. We don't have a lot of time -- {that's} the problem. We have a {launch contract} proposal into NASA which we think is a winner. We have to convince them if they pick us that we can get to the end of the road with them."

Privately held SSI's financial backing came mostly from Development Ventures Inc., a unit of Houston Industries Inc. But the company decided to withdraw funding, Slayton said.

"Unfortunately, DVI-HII has encountered difficulties which preclude their continued support of SSI," said a memo Slayton sent employees. "Since other investors have not come forward at this time, the company is obligated to furlough its employees and put all activities in a dormant mode."

"It was not a matter of withdrawing funding," said Dan Bolla, director of financial relations for Houston Industries, an $11.5 billion conglomerate that is the holding company for a number of Houston businesses. Development Ventures, whose investment portfolio is less than $50 million, had since 1987 been investing in Space Services through loans and warrants.

"We simply reached the limit of the amount we wanted to put into that particular business at this time," Bolla said. "It's like investing in the stock market. You decide how much of your portfolio you're going to commit to each company ... We decided that we don't want to get into the commercial space business right now."

Nine-year-old Space Sciences has 23 employees in Houston and three in Washington, said spokesman Walt Pennino.

SSI in 1982 accomplished the first commercial launch of a private suborbital rocket. The company last year became the first to launch under the Commercial Space Act with a government contract.

"We've been on the cutting edge of this business since day one. That's why we're a little frustrated, as you can imagine," Slayton said.

SSI is one of a handful of companies that have jumped into the business of launching small satellites. Others include Fairfax-based Orbital Sciences Corp., which recently had a successful launch of its Pegasus rocket and completed a public stock offering, and American Rocket Co., a California firm that left the commercial launch business this March after its rocket burst into flames during a launch last fall and its founder died in a car crash.