'Elon Musk Is Not A Lunatic': Revisiting The Dawn Of SpaceX

This article was previously published in the May 12, 2003 issue of Forbes.

With SpaceX’s historic private launch of astronauts into orbit, here is the first Forbes profile of Elon Musk from 2003, shortly after the company was founded—and five years before the first Tesla rolled off the line.

Elon Musk made a fortune from the Internet. Now he wants to deliver payloads in space—and save mankind by colonizing Mars.

By Seth Lubove

^Let's get this straight: Elon Musk is not a lunatic. "I'm one of the least flaky guys you'll ever meet," he insists. Flaky guys generally haven't pocketed $200 million by age 31 as Musk has, thanks to two internet successes—Zip2, sold to Compaq in 1999 for $307 million in cash, and PayPal, bought last October by Ebay for $1.5 billion in stock.

There's nothing kooky about his latest venture, which is backed by what he describes as "tens of millions" of his own money. Assuming he runs the gantlet of government approvals, his Space Exploration Technologies, or SpaceX for short, will be ready to launch low-cost rockets by the end of the year. The plan for now is to ferry light satellites and other smallish payloads weighing up to half a tonne for $6 million per flight, significantly less than the $20 million for Orbital Sciences' workhorse Pegasus rockets.

It's when he talks about the future of SpaceX that you start to hear the Star Trek theme song ringing in your head. Musk is more than a little worried that the human race will come to an end. "There's always the risk of some catastrophe such as what happened to the dinosaurs or global nuclear war," he says darkly, sipping on a diet Coke in his El Segundo, California, office, across the street from a tire repair shop. "The notion of planetary redundancy is defensible as the most powerful thing to ensure long-term survival."

Redundancy, as in making the planet Mars habitable for humanity—and reachable through rockets Musk dreams about building. "Mars has the possibility of being terraformed," he says, referring to the theory that by releasing greenhouse gases on the planet, you can trap heat and create a liveable environment. "We could change the climate of Mars and make it quite Earth-like." Never mind that NASA's Jet Propulsion Laboratory recently declared that radiation on the red planet could cause "significant long-term health risks" to anyone who ever visited the place. Like his fellow Mars Society members (some 6,000-odd strong), Musk is a believer—and a big benefactor (he won't disclose how much). His money has helped underwrite ventures such as the Musk Mars Desert Observatory telescope located within a simulated Mars environment in southern Utah, where Martian acolytes try out waste-incinerating toilets and homemade space helmets reportedly fashioned out of trash can lids.

"We're not attempting to find out what life is like on Mars by running around with garbage can lids on our heads," snaps Robert Zubrin, the testy founder of the Mars Society. "We're attempting to find out what field tactics would work while operating under simulated Mars conditions."

None of this is found in Musk's pitch to potential SpaceX customers. Advertising the design of the company's rockets recently in El Segundo before military brass and assorted space bureaucrats, Musk, self-taught in aeronautics, deftly parried questions about "pintle injector geometry" (referring to the rocket engine's nozzle) and "Merlin turbo-pump assemblies" (fuel pumps).

No denying there's need for low-cost launch alternatives to the sky-high offerings of Boeing and Lockheed Martin. James Benson, founder and chairman of SpaceDev, a $3.4 million (2002 sales) maker of "affordable" microsatellites, rockets and other space paraphernalia, says he is "trying to bring the microcomputer way of thinking to a space industry that is bogged down in a mainframe, bigger-is-better way of thinking." Alas, progress has been slow, and SpaceDev has struggled. The company, which trades on Nasdaq's Bulletin Board, narrowed its loss last year to $376,000 from $1.9 million—but only by shaving $3.2 million in costs.

Born in South Africa, Musk migrated to Canada as a kid when his mom and dad divorced; later he got undergraduate degrees in business and physics from the University of Pennsylvania. In 1995 he began graduate work in physics at Stanford but lasted all of two days before getting bitten by the internet bug and dropping out. His bright idea was to write software that would help newspapers move listings and other content to the internet. Financing in those days was tough, especially for someone with neither tech nor media experience. He convinced Mohr, Davidow Ventures to invest $3.6 million in his fledgling Zip2 in exchange for majority control.

"Our beginnings were quite humble," he recalls of times when he showered at the neighborhood YMCA. "Jack in the Box was a splurge." The scrimping paid off when Compaq bought the company four years later to combine with AltaVista, the search service it then owned. "The irony was they didn't want to give us stock, because they thought it was undervalued," he smiles. Musk got $22 million for his 7% share.

His next venture proved little easier. Musk made things harder for himself by getting into a business about which he knew practically nothing: an internet-based, one-stop financial-services firm called X.com that would eventually sell mutual funds along with banking, mortgages and loans via affiliated banks. Skeptics predicted hard times for Musk.

As a financial supermarket, X.com was a flop. But one of its benefits, payments from one account to another via email, proved brilliant. "A trivial feature," Musk says. It happened that another company, Confinity, had the same technology, which it called PayPal. After designing their product to allow PalmPilots and other wireless devices to "beam" money elsewhere, the service became a favorite on the Ebay internet auction site. Musk acquired Confinity for an undisclosed amount in March 2000, renamed the entire company PayPal and instituted successful marketing schemes such as giving new users $10 if they signed on for an account.

Payback time. Even though Musk's company went public in the teeth of the tech wreck, PayPal's shares soared 55% on the first day of trading in February 2002. Ebay bought the company eight months later, paying an 80% premium to the initial offering price. As PayPal's largest individual shareholder, with 6.5 million shares, Musk walked away with Ebay stock that would now be worth $220 million if he hadn't sold any (he's held on to most of the stake).

By then Musk already had his head in the clouds. After talking with friends about the glacial progress of manned space exploration, Musk commissioned a feasibility study about sending a sort of biosphere to Mars, consisting of plant life that would germinate from a nutrient gel and take root. Though Musk could easily afford the estimated $20 million price tag for the life-support system, the Delta rocket built by Boeing to get it there—70 million kilometers away—would cost another $50 million.

"That was unpalatable," he says. So Musk went to Russia to buy himself a cheap rocket. He even negotiated a deal at one point—he refuses to disclose price or the characters he dealt with—but backed out when the risks of dealing with squirrelly Russians began to outweigh any anticipated discounts.

Why not just build the thing himself? He ordered up a study led by fellow Mars maven Michael Griffin, the former chief technical officer of Orbital Sciences, and now president of In-Q-Tel, a CIA-funded venture capital outfit that invests in spying technologies. "It was clear there was a need for a reliable, low-cost method of getting to space," says Musk, who is single-handedly covering the initial $20 million to $40 million in costs.

"From the perspective of ensuring the survival of humanity, the most powerful thing we could do is establish a second, self-sustaining civilization outside of Earth, and the only place that's really feasible is Mars."

Musk dismisses comparisons with the many failed private rocket ventures that have preceded his, most notably Beal Aerospace. Like Musk, Andrew Beal was a rich space enthusiast who made his fortune in another business, in this case Texas banking.

With plans to spend $200 million of his own, Beal set out to build small, reusable rockets to deliver satellites to low-earth orbits—much like SpaceX. But the venture came crashing to earth in October 2000, following Beal's complaints that NASA was subsidizing his competition.

Can't happen here, insists Musk. His rivals failed, he says, because they didn't have the technical talent or sufficient capital. With engineers from TRW and Boeing, Musk figures he's got the technology nailed. Ebay stock willing, he has enough dough. He even claims to have two firm (unnamed) clients lined up.

Beyond implicit customers lies insatiable curiosity—and ultimate survival. "Long term, if we are going to go up there and understand what the universe is all about, it will entail leaving the planet Earth," says Musk, on his way to Colorado Springs, where he's speaking at the National Space Symposium, the preeminent space trade show. "From the perspective of ensuring the survival of humanity, the most powerful thing we could do is establish a second, self-sustaining civilization outside of Earth, and the only place that's really feasible is Mars."

Feasible? It sounds utterly loony. But then digital money sounded pretty loony a decade ago.