how-does-spacex-make-money

How Does SpaceX Make Money?

  • SpaceX is a space transportation service and manufacturer of space rockets and other transport vehicles. It was founded by Elon Musk in 2002.
  • SpaceX makes money by charging both governmental and commercial customers to send goods into space. These goods include ISS supplies and infrastructure, but also people and satellites for various purposes.
  • SpaceX is also in the process of creating its Starlink network, designed to give every citizen access to fast and affordable internet.

SpaceX Origin Story

SpaceX, formally known as Space Exploration Technologies Corp., is an aerospace manufacturer and space transportation service founded by Elon Musk in 2002.

The company was created to reinvigorate public interest and investment in space exploration.

Musk sold his stake in PayPal in 2001 for $200 million, but rather than retire to a tropical island; he started work on establishing a human presence on another planet.

This initiative, with accessible internet and sustainable transportation, comprises three areas Musk deems crucial to humanity’s long-term survival.

Mars Oasis project

Since NASA had no interest in a manned Mars mission, Musk created the Mars Oasis project, where a greenhouse with seeds embedded in a nutrient gel would be landed on the red planet.

In essence, the project would send important data to Earth about the viability of transporting (and sustaining) life on another world.

Musk had to solve two major problems before he could realize his vision. For one, he needed to work out how to sustain plant life in hypobaric environments.

He also needed to develop a cost-effective solution for sending the lander into space.

The cheapest launch vehicles in the USA at the time were around $65 million, and with two extra missions planned in case the first failed, Musk found that the cost of the rockets alone would consume his budget.

Musk then made three failed trips to Russia after attempting to buy intercontinental ballistic missiles for around $10 million each.

While he was ultimately rebuffed and not taken seriously by the sellers, Musk used his experience as inspiration to start a company and build the components himself.

He saw this as a viable solution since the cost of raw materials comprised just 3% of the total price of a rocket.

Employing a combination of vertical integration and cheaper, modular, off-the-shelf componentry, SpaceX could cut the price of a launch by a factor of ten and enjoy a 70% gross margin in the process.

Falcon 1 and Dragon

Rocket engineer Tom Mueller joined SpaceX soon after the company was founded and worked for around two years to develop the first Falcon 1 rocket.

Musk contributed a third of his fortune toward the project despite many believing it was not a worthwhile endeavor. By 2005, the company had amassed some 150 employees.

SpaceX planned to launch Falcon 1 for the first time in November 2003 but suffered numerous setbacks over the next few years.

Getting the rocket into orbit proved to be a steep learning curve for SpaceX.

Thanks to setbacks caused by fuel leaks and collisions, the company took four attempts before a successful launch.

The first occurred on September 28, 2008, with another in July 2009.

Musk would later comment that Falcon 1 was the smallest useful orbital rocket that could be produced, with larger and more complex launch vehicles potentially bankrupt the company if they failed. 

Accompanying the rocket was the Dragon spacecraft, named after the 1960s folk song Puff, The Magic Dragon by the group Peter, Paul, and Mary.

Musk said he chose the name Dragon in response to the critics who believed his mission was impossible.

Today, SpaceX has an impressive list of achievements.

It has become the first privately-owned company to launch, orbit, and recover a spacecraft.

SpaceX was also the first company to send a spacecraft to the International Space Station (ISS) and re-use an orbital rocket.

After an injection of $250 million from Korean investors in August 2022, the company is worth around $127 billion.

SpaceX has managed to secure $2 billion in investment capital in 2022 alone because of its visionary ideas and leadership.

SpaceX revenue generation

SpaceX is essentially a delivery service. If an organization wants to send goods to the ISS or launch a satellite into orbit, the company uses its fleet of vehicles, including the Dragon, Falcon Heavy, and Falcon 9. 

As successful as SpaceX has been, it should be noted that it competes with several other companies for space delivery services.

These include Boeing, Lockheed Martin, and Northrop-Grumman.

With all that said, let’s look at some specific SpaceX revenue streams.

Governmental supply contracts

SpaceX has won several NASA contracts to resupply the International Space Station.

The most recent contract involves $2.9 billion in funding to build a spacecraft to send astronauts to the moon.

The company has also worked with the National Oceanic and Atmospheric Administration (NOAA), launching a satellite in 2012 to monitor global sea levels and oceanic circulation.

The cost of this launch was approximately $82 million

Similar contracts for the Air Force saw the launch of a GPS satellite in 2015. In 2020, SpaceX won a contract to provide 40% of all U.S. military launch requirements.

In more recent years, SpaceX has made more money from commercial service deliveries. Each delivery using the Falcon 9 rocket is advertised at $62 million.

Starlink 

Starlink is a satellite network designed to give every citizen on Earth high-speed internet access.

Although the project is in its infancy, SpaceX has secured government contracts to bring high-speed internet to rural U.S customers. 

Finance services firm Morgan Stanley estimate that the service will be offered for $50/month, giving SpaceX $24 billion in annual free cash flow by 2040.

Other sources of SpaceX revenue

Civilian spaceflight

On September 15, 2021, the SpaceX Crew Dragon spacecraft became the first crewed orbital mission without professional astronauts.

The mission, named Inspiration4, was piloted by confessed space geek and billionaire Jared Isaacman who only had around 6,000 hours of experience piloting various aircraft.

Inspiraton4 was powered by the SpaceX Falcon 9 rocket, and the company also ran a six-month training program for Isaacman and the three other crew members.

While considering his options in the planning stage of the mission, Isaacman noted in an interview that “there was no question it was going to be SpaceX. They’re leading the path.”

Indeed, SpaceX already had a proven track record in transporting astronauts to the International Space Station.

The company made an undisclosed amount of money for facilitating the Crew Dragon mission. However, USA Today estimates that the deal would have been worth somewhere in the tens of millions of dollars.

More to the point, the first successful mission without professional astronauts paves the way for an additional source of company revenue.

There are likely to be further missions in the future as SpaceX continues to work toward commercial spaceflight, with Elon Musk stating that these missions help SpaceX “bring the costs down and make space accessible for all.”

Rideshare program

SpaceX also offers the so-called “Smallsat” rideshare program to give companies with modest payloads affordable access to space.

Prices for this service start at $1 million for a 200 kg (440 lbs) payload delivered to sun-synchronous orbit (SSO), with rates also available for mid-inclination low Earth orbit (LEO), geostationary transfer orbit (GTO), and trans-lunar injection (TLI).

SSO missions depart approximately every four months with more frequent mid-inclination launches. 

Additional mass for any mission is charged at $5,000 per kilogram.

If the client payload is delayed for whatever reason, SpaceX also charges a 10% fee to reschedule the launch to a later date.

Since the program was launched in 2017, SpaceX has noted the logistical difficulties of being a small satellite aggregator.

In an interview with Space News magazine in 2019, the vice president of commercial sales Tom Ochinero quipped that trying to get several customers ready at the same time was akin to herding cats.

Ochinero also mentioned that individual launches would go ahead even if the Falcon 9 rockets were not carrying the maximum payload.

In 2021, SpaceX transported 231 small satellites into orbit across two flights in January and June, with clients including telecommunications company Kepler Communications and Earth-imaging business Planet Labs.

A deal was also struck with Varda Space Industries to launch its space factory aboard a mission slated for Q1 2023.

The company hopes to establish the world’s first commercial industrial park at scale, manufacturing items such as fiber optic cables and life-saving pharmaceuticals to take advantage of the zero-gravity, vacuum environment of space.

How much is SpaceX worth today?

SpaceX officially entered the hectocorn list, with a staggering valuation of $137 billion, by January 2023.

Indeed, SpaceX closed a round in January for $750 million, which valued the company at $137 billion, led by investors such as a16z (Andreessen Horowitz).

Early SpaceX investors included Founders Fund, Sequoia, Gigafund, and others.

Read Also: Tesla Business ModelElon Musk Companies, Who Owns TeslaTransitional Business ModelsTesla Competitors.

Related To SpaceX

History of SpaceX

history-of-spacex
Initially, an outsider, SpaceX has become the dominant player in the space industry. Starting in 2002, with Elon Musk’s exit from PayPal, SpaceX has changed the whole space industry with its reusable rockets and ability to bring the iterative design to a hardware-heavy industry.

Who is Elon Musk

who-is-elon-musk
Elon Musk, seen as one of the most visionary tech entrepreneurs from the Silicon Valley scene, started his “career” as an entrepreneur at an early age. After selling his first startup, Zip2, in 1999, he made $22 million, which he used to find X.com, which would later become PayPal, and sell for over a billion to eBay (Musk made $180 million from the deal). He founded other companies like Tesla (he didn’t start it but became a major investor in the early years) and SpaceX. Tesla started as a niche electric sports car player and eventually became a mass-manufacturing electric car maker.

How Does Elon Musk Make Money

how-does-elon-musk-make-money
Elon Musk is one of the richest people in the world, with his main ownership in Tesla, making him worth more than a hundred billion dollars. The companies founded by Elon Musk range from electric vehicles and renewable energies, with Tesla, rockets, with SpaceX, infrastructure with The Boring Company, and neurotechnology with Neuralink.

Tesla Business Model

tesla-business-model
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory, which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.

History of Tesla

history-of-tesla
Founded in 2003 by Eberhard and Tarpenning, eventually, the initial co-founders left the company, and by 2004, Musk first became the main investor. After that, by 2008, he took over as CEO of the company. Tesla would go through many near-death experiences until 2018. And yet, by 2021, Tesla will become a trillion-dollar company.

History of PayPal

history-of-paypal
PayPal was born as the merger of two early Internet startups, Confinity (founded by Max Levchin and Peter Thiel) and X.com (founded by Elon Musk). Both companies stumbled on a commercial killer feature (enabling Internet payments via email) and became extremely useful on a nascent auction platform: eBay. From the merger of these companies, PayPal was born. And it wrote the Internet business playbook for startups.

PayPal Mafia

paypal-mafia
The PayPal Mafia describes a group of former PayPal employees and founders who have since become involved with other tech companies. While most know SpaceX founder Elon Musk’s association with PayPal, the company also has links with YouTube, LinkedIn, and Yelp, among many others. In addition to founding these generation-defining companies, the members of the PayPal Mafia are some of the richest men in Silicon Valley. 

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