On first entering the headquarters of the Blue Origin Company in Kent, Washington, south of Seattle, a visitor in the latter part of the second decade of the twenty-first century would have encountered a modern reception desk in what appeared from the outside to be an undistinguished industrial building. An upstairs lobby housed various models and memorabilia. Casually dressed employees carried out various tasks in an open office environment. A modern kitchen served healthy snack food and beverages. Adjacent to the kitchen, a mezzanine allowed visitors to gaze out over a large assembly bay. The assembly room floor revealed the purpose of the firm. This was no ordinary manufacturing plant. A visitor at that time would have seen spaceships and rocket engines in various stages of production. This company was reaching for the stars.1
Jeffrey P. Bezos founded Blue Origin in 2000 in an attempt to overcome two huge challenges. First, there was gravity, the force that binds humans to the surface of the Earth. Bezos wanted to lift humans into space. Second, he wanted to do so, at least initially, without significant government help. Using the multi-billion-dollar fortune he had acquired as founder of Amazon.âcom, he financed his own spaceship firm.
Bezos was part of the new space movement, an effort undertaken in the decades surrounding the start of twenty-first century. The movement aimed to develop a commercial space industry led by private entrepreneurs. The entrepreneurs wanted to develop new technologies that would place humans and their machines in space more rapidly and creatively than the government agencies that had dominated space travel in the previous decades.
In their traditional role, aerospace giants worked under contract for government agencies carrying out assignments specified by public officials. The Rockwell International Corporation, for example, built five space shuttle orbiters for the National Aeronautics and Space Administration (NASA). North American Aviation built the second stage of the mammoth Saturn V rocket, and the Grumman Aerospace Corporation fabricated the lunar module that landed the first astronauts on the Moon.
Opinion both within the government and the aerospace agency held that government agencies like NASA had grown conservative, averse to risk, inflexible, increasingly bureaucratic and more protective of existing installations.2 Many believed that the grand goals of space, including eventual settlement of the social system, required new forms of organization led by private entrepreneurs who had learned how to innovate in the computer industry and allied fields.
The Blue Origin experience exposed two fundamental questions relative to this vision. First, could private entrepreneurs accomplish what heretofore only public officials, with their access to substantial tax revenues, had been able to do? That is, could entrepreneurs raise enough money to launch privately owned space transportation companies? The ability of business firms to build rockets was not in dispute. They had done so successfully under government aerospace contracts. Their ability to raise sufficient funds from private sources was.
Second, if they could raise sufficient capital to get started, to what extent would they need government help to keep going? The earliest business firms to build rockets and spacecraft depended wholly upon government funding to stay afloat, in the form of government contracts, from start to finish. The new space movement that Bezos represented was different. At the least, it presumed that privately financed spacecraft companies could sustain themselves by forming partnerships with a variety of entities. For some, that included government agencies. For others, such as Bezosâ Blue Origin, it meant proceeding (at least in the beginning) without significant government help.
Bezos and many other space entrepreneurs viewed themselves as part of a movement committed to the commercialization of space. Commercialization is the process of taking new technologies (and sometimes processes) and making them widely available in the marketplace. It is the business equivalent of moving something new out of laboratories where it has been undergoing research and development and into production and sales.
The idea had broad support within the government as a whole. Beginning in 2006, public officials advanced $2.2 billion through NASA to qualifying industries to help them develop spacecraft that could deliver cargo and people to the International Space Station (ISS). Public officials added another $10.3 billion that they pledged to pay the winning competitors, taking the form of agreements to buy space on the cargo and crew carriers the competitors produced.3 Qualifying firms were required to raise private capital as a condition of participation.
Interest in the commercialization of space activities dates back to the beginnings of space flight. It commenced with the Communications Satellite Act of 1962, proceeded through the White House national space policy directive of 1988 and continued through a series of space policy directives initiated in 2017.4 Interest in activities with commercial potential such as micro-gravity manufacturing provided much of the rationale leading to approval of what became the International Space Station. The 1988 policy directed all government agencies with an active interest in space to do nothing to deter the commercial space sector and, in fact, to promote it by purchasing commercially available space goods and services. By the mid-1990s, many officials believed that operation of the NASA space shuttle had matured to the point that private industries could operate it, thereby freeing NASA to concentrate on work further beyond. Concurrently, when NASA executives initiated plans to replace the aging fleet of space shuttles, agency leaders toyed with the idea of paying private companies to help them develop new spacecraft. Negotiations proceeded with the understanding that qualifying firms would raise through private markets much of the money needed to finance the finished vehicles. In 2004, when President George W. Bush directed NASA to prepare plans to send humans back to the Moon and onto Mars, the administration incorporated policies that encouraged commercial participation in transporting cargo to the International Space Station and support for missions beyond.5
Commercialization advocates foresaw space as the next business frontier and viewed U.S. policies as the way to place the United States at the front of the movement.6 They endorsed the idea that a wide number of private companies competing to develop new rocket ships would be more creative than public servants working at government installations producing oneâespecially a spacecraft that had to perform many missions. Concurrently, commercialization promised to save money. In the 12 years beginning in 1972, NASA officials had spent $10.1 billion to design and produce the space shuttle, largely through contracts to aerospace firms. That was the equivalent of $40 billion in the purchasing power of aerospace dollars in 2010.7 By passing on a substantial portion of that sum to aerospace competitors raising money in private markets, public officials hoped to accomplish the same result for a new space transportation system with a much smaller outlay of tax dollarsâon the order of the $2.2 billion for development noted above. The advice commercialization advocates provided to public officials seeking access to space resurrected an old maxim of American aviation. If you want to fly somewhere, buy a ticket, not an airline.
In the United States, the transportation needs of public officials coalesced with hopes of space entrepreneurs. The twin forces helped foster the new space movement. This book examines the experiences of five business firms in their initial stages of development as they struggled to raise enough capital to commercialize space travel. The firms are Blue Origin, SpaceX, Virgin Galactic, Orbital Sciences and the Boeing Company. Boeing, it should be noted, was a quintessential âold spaceâ firm. It operated under new space conditions after winning one of NASAâs space transportation awards, but its approach to capitalization was traditional. Each firm took a different approach to the challenges of raising sufficient funds.
Early experience from the initial stages of corporate capitalization suggests straightforward answers to the basic issues involved. Could private sector firms raise enough money to create a commercial market for space transportation? Yes, some couldânot all, but some. Did they need help outside of conventional capital markets to do this? Yes, in all cases they did. One Boeing executive noted that the market for space transportation was simply too immature for the companies to raise all the money they needed from conventional sources.8 Did that outside support need to come from governmental bodies? No, it did not. In some cases, the help came from philanthropists motivated by the vision of space exploration and enthusiasts motivated to support prizes. Outside help of some sort was essential, but government support was not.
Space travel, like aviation and various other forms of terrestrial transportation before it, is enormously expensive. The technical term is capital intensive. To build a spaceship firm, a dreamer needs billions of dollarsâmoney that the firm must spend long in advance of the profits that may (or many not) repay initial investors. It is hard to make a purely business case for such an ambitious transportation undertaking. Entrepreneurs must literally bet the companyâor someoneâs fortuneâon the hope that their product will succeed.9
Similar challenges confronted previous transportation tycoons, notably nineteenth-century railroad owners and twentieth-century aviation pioneers. Without outside help, their ambitious transportation schemes proved very hard to organize. This observation encouraged government support for a variety of undertakings aimed at the construction of roads, canals, railway lines and other forms of transportation.
Before the experience of the five new space firms appears, this book reexamines the history of two previous undertakings: construction of the first transcontinental railway, specifically by the Central Pacific Railroad Company, and the development of the Boeing 707, the aircraft that established the modern age of jetliner transport. Both raised issues of investment and capitalization. The first development established the philosophy of governmental assistance that would support the commercialization of future transportation initiatives. The second illustrates how corporate executives establish business plansâand how the presence of government support alters the risk equations involved. These histories reinforce a central theme of the new space storyâthat transportation initiatives like space travel inevitably prompt private entrepreneurs to seek out and accept outside support from individuals or entities not entirely preoccupied with return on investment.
Most of the new space entrepreneurs sought to avoid the worst features of government support: the paperwork, the odd procurement regulations, the insistent oversight, the detailed specifications and the more-than-occasional tendency to avoid risk. Yet breaking free proved hard to do. New space entrepreneurs needed the infusion of outside help that governmentâor some lesser entityâcould provide. Without it, commercial success proved elusive.
The space transportation companies examined here and others like them have embarked upon a great experiment. Some may succeed; others will certainly fail. The outcome will determine the degree to which private entrepreneurs can accomplish the long-held dream of making space flight as commercially viable as m...