SpaceX is seeking $750 million in new capital at a reported valuation of $137 billion. That comes after Elon Musk’s space conglomerate took in $250 million from investors in 2022 and $1.5 billion in 2021.
“SpaceX is almost like a sovereign entity in their ability to raise capital endlessly,” says Chris Quilty, a space industry analyst.
The reason wouldn’t surprise Peter Thiel, the SpaceX investor and Musk collaborator, who has argued that the best business model is a monopoly. SpaceX dominates most sectors it plays in, but in a few—human spaceflight and launching large satellites—it’s the only game in town.
Investors are handing Musk their money to fund ambitious projects like Starlink, the company’s satellite network, and Starship, its next rocket (more on that later). But one reason they can feel secure betting on those frontier technologies is how reliant the US government is on SpaceX.
This weekend, the company will launch its Falcon Heavy rocket for the fifth time. The rocket, boasting three reusable boosters, is the second most powerful operating launch vehicle in the world after Boeing’s Space Launch System debuted last year, but it costs about ten times less. This weekend, SpaceX will use the rocket to launch classified spacecraft for the US Space Force.
The most important satellites used by the US military to coordinate its forces around the globe live in high orbits some 27,000 miles above the Earth. It’s difficult to get there, by design—that keeps the satellites safe from attacks from the ground. And right now, only SpaceX’s Falcon Heavy can deliver those big satellites to geostationary orbits. The SLS is way too expensive, Boeing retired the Delta IV rocket that used to do that job, and the United Launch Alliance Vulcan rocket still has yet to fly, though it is expected to do so later this year.
For the foreseeable future, then, the US military is dependent on SpaceX for heavy lift. And SpaceX is taking advantage: While its first Falcon Heavy launch for the US military in 2019 cost just $130 million, this mission cost $316 million. Inflation and the complexity of the mission are part of the reason for the increase, but the other part is simply what a one-provider market can bear.
There’s a similar situation when it comes to flying astronauts for NASA on the Dragon spacecraft. The space agency is waiting on Boeing to deliver its troubled Starliner vehicle to provide a second option for American space travelers. Until it does later this year, though, SpaceX is the only option. When the Russian Soyuz spacecraft currently at the International Space Station started to leak late last year, NASA turned to SpaceX in case it needed an extra spacecraft on station.
Now, Russia is sending up an uncrewed replacement Soyuz, but if an emergency occurs before it arrives, NASA is counting on a Dragon currently docked at the ISS to carry five people safely back to Earth instead of the standard four.
SpaceX’s market position is akin to that of Tesla a few years ago. The only provider of electric cars on a mass scale, it was able to dominate its industry. In many ways, it still does. But other automakers are starting to catch up with their own electric vehicles. That, as much as Twitter controversies, is driving the recent plunge in Tesla’s stock price.
SpaceX, meanwhile, is operating in an industry in which competing rockets are on the horizon. United Launch Alliance, the joint venture of Boeing and Lockheed Martin, plans to launch the Vulcan rocket for the first time later this year; it began its journey to Cape Canaveral from the factory in Alabama today. Blue Origin, Jeff Bezos’ space company, has similar plans to debut its New Glenn vehicle in 2023. Those two rockets could offer stiff competition for the Falcon Heavy if they live up to their billing. In addition, companies like Rocket Lab and Relativity Space are developing new rockets that could compete with SpaceX’s workhorse Falcon 9 rocket, which launched a record 60 times in 2022.
That’s why so much of SpaceX’s attention has been on its next rocket, the Starship, and its reusable booster.
Starship would be even larger and more powerful than the Falcon Heavy or the SLS, and because it is built to be fully reusable, would be one of the most efficient rockets ever made. Musk said this week that he expected the first test flight of this vehicle to take place by early March, which is not an unreasonable assumption.
Still, rocket development is slow, and any number of surprises could delay the Starship. If and when real competitors arrive for SpaceX’s existing launch vehicles, Musk could take a different page out of the Tesla playbook: Today, the carmaker said it is cutting prices as much as 20% across its line of vehicles. It won’t be good for the company’s profitability, but analysts think it could help protect the company’s market share. As SpaceX’s prices have grown steadily in recent years, it’s easy to imagine Musk turning up the heat on rocket rivals with a Falcon fire sale.