[UPDATE BELOW.] Earlier today, the Wall Street Journal published a compelling story about SpaceX, the space exploration company that hyperentrepreneur Elon Musk is running concurrently with Tesla Motors and that successfully launched a rocket — called the Falcon 9 – into a 155-mile orbit last Friday.
The piece provides a detailed overview of SpaceX’s past woes as evidence that privatizing space travel is a risky proposition, but it doesn’t ask a key question: whether SpaceX can continue competing for the U.S. government’s business in light of Musk’s stretched personal finances.
It was just a couple of weeks ago that Musk confirmed to VentureBeat that he has been living off the fast-dwindling personal loans of friends. The admission came after Musk revealed — in a February court filing relating to his divorce from science fiction novelist Justine Musk – that he ran out of his own money last November.
As VentureBeat’s Owen Thomas wrote at the time:
“That’s a problem not just for him but for Tesla, where he is the lead investor and chief product architect, as well as chief executive officer. Musk’s willingness to funnel his own cash into Tesla has for years sustained the faith of fellow investors and reassured would-be car buyers in 2008 when the company’s finances were in perilous shape.”
Last week, Tesla Motors, in a pre-IPO quiet period, amended its S-1 filing to make clear that Tesla is not dependent on Musk any longer, thanks largely to a $465 million loan approved by the U.S. Department of Energy, and a $50 million investment from Toyota upon its IPO (assuming it goes public).
States the filing: “While Mr. Musk has historically provided a significant amount of the funds required for our operations, we have not received any funding from Mr. Musk for the past 12 months and are no longer dependent on the financial resources of Mr. Musk to fund our expected growth given the funds available under DOE Loan Facility and the expected proceeds of this offering and the concurrent private placement with Toyota,” the company said.
Either way, Tesla seems to be on comparatively solid footing compared with SpaceX, into which Musk, who became wealthy as a PayPal cofounder, has also poured much of his personal fortune. At least, despite what the WSJ hails as the “new chapter in manned space exploration” ushered in by SpaceX last week, the impact of Musk’s financial picture on the company is far from clear.
While last year, investor Steve Jurvetson told peHUB that SpaceX was [then] profitable, the WSJ reports that today, the company “needs a cash infusion of more than $1 billion in the next year or two to reach its goal of transporting astronauts to the international space station later this decade. That’s twice the total investment by SpaceX since its creation in 2002. And while Mr. Musk tapped his own fortune for some $100 million of that [since joined by investments from Founders Fund, Draper Fisher Jurvetson, and three other investors that collectively own 20 percent of SpaceX], U.S. taxpayers are the most likely source of future assistance.”
That assistance doesn’t look likely to come soon. And unless Musk makes a killing off a Tesla IPO, SpaceX presumably doesn’t have unlimited amounts of time. (A request to SpaceX wasn’t returned today. Founders Fund and Draper Fisher Jurvetson also didn’t respond to requests for comment about SpaceX’s funding or future financing plans.)
While earlier this year, President Obama asked Congress to end NASA’s current Constellation program and instead allow NASA to outsource cargo and astronaut travel to the International Space Station, Congress is plainly in no rush to make a decision.
At a hearing in late April, Senator Richard Shelby of Alabama called the roughly $6 billion that the administration would use to bolster companies like SpaceX “a welfare program for the commercial space industry.”
It didn’t help matters for SpaceX and its competitors when astronaut-turned-NASA Administrator Charlie Bolden — who has argued that Constellation program requires too much funding and isn’t sustainable — reluctantly admitted at that same hearing that his “gut” feeling was NASA’s launch vehicles “would be safer than anything else.”
UPDATE: Peter Thiel of Founders Fund tells me this morning his firm is “really bullish on the company” and “definitely would be open to investing more capital, though it’s far from clear that SpaceX will need it.” I’m speaking with SpaceX board member Luke Nosek later today, as well, hopefully, with Musk or a representative from SpaceX, so more to come…