SpaceX or Space Exploration Technologies Corp. is an American aerospace manufacturer and space transportation services. It is one of the most popular and valuable private companies on earth. With the mission to colonize Mars and reduce space transportation costs, SpaceX was launched by Elon Musk in 2002.
SpaceX played a dominant role in space technologies as it is the first-ever company (private company) that launched satellites and landed rockets back on the earth safely. It attracted the attention of people all over the world when it successfully launched two NASA astronauts to space in May 2020. This was not just an ordinary moment, as NASA had never attempted to land its astronauts in recent years. A collaboration of a private firm with a government organization (NASA) is definitely noteworthy. Of course, SpaceX is not an average company, it is the most celebrated company in the world that is a dream for many investors.
SpaceX has made many achievements since its inception, right from manufacturing rockets, spacecraft, to launching vehicles to space and exploring undiscovered space, it has been creating great impacts on space travel.
Manufacturing rockets, spacecraft, and space transportation are much more expensive than they sound. Hence, this definitely leads to the question of how SpaceX makes money and what exactly is its business model. Well, if you are looking around for the answer, you have come to the right place. This article walks you through SpaceX’s business model and how it makes money. Before that let’s discuss its short history to understand better about the company. So let’s get started…
The idea of designing an own firm for manufacturing rockets and spacecraft started when Elon Musk tried buying rockets from Russia to transport nursery to Mars. He discovered the prices were not practical, hence he believed he could manufacture and launch vehicles to space at lower costs on his own. That is how SpaceX had seen the light.
With the help of a rocket designer known as Tom Mueller who is now the Propulsion CTO of SpaceX, Elon Musk created Falcon 1 in 2008. The best part is the founder funded $100 million of his own money. In 2009, SpaceX sent its first payload (a Malaysian satellite RazakSAT) to commercialize its creation.
SpaceX’s Dragon spacecraft is the first commercial spacecraft to visit NASA’s international space station in 2012.
SpaceX had launched Falcon 9 and Falcon Heavy successfully into space from June 2010 to January 2016. This acted as fuel to the company as Falcon 9 became the primary shuttle for space travel.
Falcon 9 costs over $62 million and Falcon Heavy costs around $90 million. Also, SpaceX is backed by investors who make most of its profit.
The company launched one of the noteworthy projects Starlink, a satellite internet constellation in 2015. In 2018, the US Air Force came into contract with SpaceX for using test services on Starlink for $28 million. By 2035, Musk estimates that Starlink would make 35 billion.
Starlink, one of the major projects of SpaceX though contributes to flying people to space, is crucially used for creating a network of satellites around the globe to provide high-speed internet to all corners of the world.
Okay, by now you must have understood that there are multiple projects under SpaceX that would bring money. Let’s now see what exactly is its business model.
Business Model of SpaceX
SpaceX, a private multi-billion dollar company whose primary goal is the colonization of Mars, has to wait for decades to reach its goal. However, in its journey, it is monetizing well by manufacturing rockets and launching vehicles into space for commercial projects as making space travel accessible as well as affordable almost to everyone is its other goal. Moreover, every achievement is a milestone as the company has done something that no other space travel organization did in history.
Okay now talking about its business model, SpaceX makes a big part of its revenue from investors. SpaceX’s investors include Legendary Ventures, Meyer Equity, NASA, Gigofund, and Space Angels. In recent funding held in August, it has raised over $1.9 billion in a single funding round. This is the only largest single fundraising round to date.
This expensive company is around 70 dispatches under contracts with NASA estimating a $1.6 billion payload. Thus it is no wonder making a huge sum of money from NASA contracts.
Also, it’s incredible project Starlink whose valuation is estimated to $30 billion by 2025 also brings significant revenue for the company. Though it is in its initial stages now, it is still able to make money with its testing services and funding. In fact, Elon Musk believes that this mission could bring 10 times more profit than what SpaceX is bringing now with launching and manufacturing. Of course, the mission is going to change the internet system in the world as it offers high-speed internet for the same costs.
How SpaceX Makes Money?
Musk’s goal is to make space travel accessible to everyone. Thus SpaceX has launched commercial, and sometimes military satellites into space for lower prices. However, that is not the only way SpaceX makes money. Like SpaceX operates multiple projects, it has multiple revenue streams.
Let us see those and learn how it makes money both to cover operational costs and brag profits to work on its Mars mission.
SpaceX is one of the most valuable companies in the world. It was valued at $36 billion in the last round of funding held in March 2020 according to CNBC. Moreover, it is about to launch 15 commercial missions this year.
Moreover, SpaceX recently surpassed other companies such as Blue Origin, Northrop Grumman in winning the military satellite launch contracts with Pentagon. Of course, it has been in the eyes of investors after the Crew Dragon Capsule (first crewed test flight) and launching astronauts to space on a commercial spacecraft for the first time. Hence, it also secured a contract to provide launch services for U.S national security missions with the United Launch Alliance from 2022 to 2027. The company is already paid $316 million for a mission, it is to launch 40% of missions as part of the contract.
Thus there are many other commercial and also military missions in contract with SpaceX to provide launching services. As the company charges around $62 million per launch and up to $20 million extra for complicated missions, it is clear it bags billions of dollars with these missions.
The main reason why SpaceX has become popular and successful as well is it manufactures reusable rockets, thus reducing the costs. Of course, Elon Musk who also founded Tesla and co-founded PayPal grabbed the attention of people towards his SpaceX.
The low launch prices of SpaceX, especially for communication satellites flying to geostationary orbit made its competitors drop prices.
SpaceX makes most of its money from selling rockets, satellites, and other manufacturers.
Funding & Investors
The company has raised more than $1.9 billion in funding in August funding. This is the largest single fundraising round to date. Nearly 75 investors made equity investments in the company making it a $46 billion worth company.
As already mentioned, SpaceX earns major revenue from its investors as per a report. Hence, funding and investments play a key role in SpaceX’s business model.
On October 18, 2020, SpaceX launched 60 more Starlink satellites moving a step closer to offering high-speed broadband internet. Though the project is in beta testing, the founder estimates that it would bring billions of money to the company.
It is estimated that SpaceX charges around $80/month for Starlink internet services. Moreover, Musk estimated that Starlink could bring about 10X the SpaceX’s highest revenue and make $30 billion a year. Although it takes time to make such money from Starlink, it still makes some dollars with its testing services.
Future of SpaceX
“Making Humanity Multiplanetary” is what Elon Musk dreams about. Hence, he is working on fully reusable launch vehicles that carry humans to Mars and other planets in the solar system. Starlink is a huge mission that is going to bring significant changes to our internet system. Moreover, the company is partnering and getting into contracts with commercial and government missions to provide launching services. Most importantly, it is backed by valuable investors.
Thus the future of SpaceX and its current business model is a success to the company, as it had never looked back since inception. All credits to its founder as he believed in something that everyone said impossible.
So, that is how SpaceX makes money. It has a different business model that really works for it. What’s more interesting is that the company provides the launching services and manufacturing at lower prices making itself the most valuable. In fact, it has changed the space industry in many ways and is recognized as a brand. Moreover, it keeps its customers providing the best service and maintaining a good relationship with them, and secures contracts.