Financing SpaceX's Mars plans

[Hyperion5]

There's been a fair bit of head-scratching up till now as to how Spacex is going to finance its Mars colonization plans.  The initial bills alone are quite substantial.  Estimates from Spacex several years back show the massive Mars colonial rocket alone would probably cost 2.5 billion dollars.  Given inflation and the immense lifting power of the prospective BFR (somewhere around 300 tonnes to LEO (150 reusably), we can safely revise this to 3 billion dollars.  This doesn't even get us the development costs of the Mars Colonial Transporter that will land on Mars, which may add another billion dollars to the price tag.  Then there are the various bits of infrastructure that need to be designed for Mars, like ISRU extractors and habitats. 

A quick glance at the bills sees Spacex potentially needing around 5 billion dollars in startup costs just to feasibly get the equipment to go to Mars.  It's cheap by NASA standards, but Spacex does not yet have the funding required to finance all of it.  One further problem is this does not count the costs of missions, which undoubtedly will cost millions more.  Nor will it guarantee that the effort can be sustained. 

Luckily, we have many NSF members with quite a few ideas as to how to finance all of this.  Now I have some fuzzy ideas as to how to pull it off.  Using Spacex's profits to help do it undoubtedly will be a substantial portion of it.  However I have my doubts that NASA would be paying for much more than a modest share.  Venture capitalists would be unlikely to finance the setup, as the payoffs would be unknown and the risks enormous.  What you need to help secure financing is collateral, and lots of it.  So what kind of collateral could Spacex offer to prospective financiers like Mars One or eccentric billionaires?  Certainly you could offer the company's assets, but that seems a recipe for possible disaster.  So what do you use as collateral?  How about Mars?!? 

Now a whole bunch of you are going to jump up and down and scream, "They can't do that!"  In international relations, we have a saying that "possession is 9/10ths of the law".  When the Russian Federation violated international law by conquering Crimea from Ukraine, it was strictly illegal under international law.  Yet today the first conquest of a portion of another state by a major power since WWII has largely been tacitly recognized.  After all, what state on Earth would want to fight a nuclear-armed, oil-producing powerhouse like Russia over Crimea?  Similarly, the US was not hindered by international law in invading Iraq in 2003, so clearly the great powers can get away with breaking the law more than anyone else.  If Spacex wants to grant Martian land in exchange for financing or paying for a trip, most US politicians would likely back the efforts.  Which is really all the protection Spacex really needs. 

Now I don't doubt that paying for a trip would likely finance quite a bit of Spacex's endeavors, but I think offering Martian land as collateral would help a lot.  After all, it's the one thing they'll have exclusive access to, and we all know Mars is likely worth trillions to humanity in the long run.  That's my guess on how the financing might be accomplished.  Now it's your turn to sound off and have fun! 

[meekGee]

Venture capitalists would be unlikely to finance the setup, as the payoffs would be unknown and the risks enormous.

Owning a piece of Google is nothing compared to owning a slice of a future economy, and I am sure that this is what Elon Musk has been pitching to VCs and other types of investors for the last 10 years.

The ROI on investing in a Martian colony is inherent in the growth in value of the entire enterprise. A colony does not have to sell anything back to Earth, or even be fully self-sufficient.  It simply needs to grow.

For example, the value of the US economy is really independent of the sum total of goods it exported to Europe and Asia.  It has inherent value.

The cost of the colony (which is incurred on Earth!) is paid for by investors (on Earth) paying for a piece of the growing pie. This type of financing can't continue forever, but it can continue as long as the Mars economy is growing, and that's a very long time.

The key is that none of the investors would ever dream of doing this if they had to solve the problems of getting to Mars.  But once "the generics" are being taken care of, a company like Alcoa can take interest in producing Aluminum on Mars, and a company like Mitsubishi can take interest in industrial process equipment, etc.  These are companies that understand investments that only pay of in tens of years.

And this is before politics kick in and governments and religions become interested in pushing their various agendas onto Mars.

This is pure sci-fi stuff, except IMO Musk is convincing enough people that he can cross the threshold beyond which it will become reality....  Musk is "The Man Who Sold Mars".

--

Otherwise, honestly, I can't see a case for a colony, or a base, or anything. 

In a way I'm relying on my estimate that Musk is not "bluffing".  If they're going for the huge investment that's associated with their stated goals, they much have told their investors something, and that's the only thing I can think of.

[FutureSpaceTourist]

According to Bloomberg Elon was worth about $12B in March this year, mainly due to his stake in Tesla. Elon can put billions of his own money into SpaceX if he wants to. He's not been shy about committing significant proportions of his personal worth before. Of course he wouldn't have to do this in one go.

I do expect him to look for other sources of income, my point is that they're not essential. If push comes to shove, I think Mars colonisation is more important to Elon than his other endeavours.

[meekGee]

According to Bloomberg Elon was worth about $12B in March this year, mainly due to his stake in Tesla. Elon can put billions of his own money into SpaceX if he wants to. He's not been shy about committing significant proportions of his personal worth before. Of course he wouldn't have to do this in one go.

I do expect him to look for other sources of income, my point is that they're not essential. If push comes to shove, I think Mars colonisation is more important to Elon than his other endeavours.

Even if he had $100B, he could only finance a mission or a small base, not a colony.

What he needs for a colony, beyond working capital (which as you say, he has or can get), is a viable financial model.  Otherwise, it is just money down the drain.

[FutureSpaceTourist]

Even if he had $100B, he could only finance a mission or a small base, not a colony.

Fair point. I wasn't thinking long-term enough.

Elon seems to think people will pay to go, be it to settle or visit. I can believe that once a small colony is safely established and looks sustainable (may be a few years after first permanent settlers?). I guess the tricky bit is bridging the financial gap between people first arriving at Mars and having an established settlement.

It's hard to imagine though just how big an impact the first people to land on Mars might have on people's thinking. (Assuming it's not flags and footprints and the plan from the start is a permanent presence.)

[KelvinZero]

Fan young people like to believe Elon Musk has the full blueprints for mars colonization and is just choosing to reveal them in a sort of strip tease.

My bet is SpaceX will never do anything like go out on a $5b limb. The tempo from Falcon 9 to falcon 9R while staying competitive is incredible enough. Just keep doing that.

I don't think you can have a super detailed plan before having experience with actually running F9R and before the markets begin to respond and perhaps produce entirely new opportunities. I think the world in which Elon can begin colonizing mars is a step or two after a world where the F9R is getting the sorts of flights a reusable demands. That would already be an huge transformation from today.

If that world doesn't eventuate, well in my experience Elon Musk has always been careful to qualify his claims.

What could justify an F9R at a sufficient flightrate that you are still building them rapidly also? Space Tourism? I dunno.. if that were clear Boeing and all the rest would be pursuing it also I expect.

[GregA]

Even if he had $100B, he could only finance a mission or a small base, not a colony.

What he needs for a colony, beyond working capital (which as you say, he has or can get), is a viable financial model.  Otherwise, it is just money down the drain.

I do think that's the working assumption though. There's a certain base amount ($20B? $100B?) just to get things rolling. If you have an ongoing transport system to a small base with power, oxygen and water - then there will be many companies willing to invest $100million to explore.

The problem is that there aren't many companies willing to invest $10billion to explore. Or $10 billion for a small research station. Etc.

Make that cost 2 orders of magnitude smaller and things become possible.

Elon seems to think people will pay to go, be it to settle or visit. I can believe that once a small colony is safely established and looks sustainable (may be a few years after first permanent settlers?). I guess the tricky bit is bridging the financial gap between people first arriving at Mars and having an established settlement.

Yes, I think that's what EM wants to accomplish. Bridge that gap.

Which brings us back to the original question. How can that gap be bridged? Is it a matter of a leap of faith that it will be worthwhile to humanity, and getting a few individuals to donate, plus a few nations to chip in? Or can it be an investment with a possible huge return one day?

I certainly think an investment in the plausible future is a way of doing it. I'd pay some amount to buy a piece of land. I'd rather buy a share of "future mars". I think there'd be investors if people believe he can make it happen.

Does it need to be given away to get things kick started? The donation prospect may be more appealing for many reasons. Easy access to Mars without strings attached will gain interest and could take off, so to speak. Use of the "cheap Mars transport & base" could possibly come with some form of contractual open agreement (for individuals and corporations) to have some form of responsibility and commitment to an ideal, though not sure how that would go down. Still have to find enough entities to donate that initial huge sum though!

[Cruncher]

Musk has no cash at all, he has millions in debt. see:
http://www.businessinsider.com/elon-musk-borrows-150-million-to-buy-tesla-2013-5

His net worth is purely based on his share in Tesla, Solar city and Spacex.

So if he needs to invest money to get this mars colonizing effort going, he needs to sell some of those shares.

Musk is famous for setting highly ambitious goal, and saying that he will commit himself and his assets towards completing those goals. for Tesla this is "accelerate the advent of sustainable transport". In the latest shareholder meeting musk was asked how long he expected to remain CEO, and he indicated stepping down after the successful introduction of the gen3 aka affordable Tesla, which should be somewhere around 2018. Apparently his thinking is that the gen3 car will be enough to accelerate the advent of sustainable transport.

for solarcity the goal is to get the sustainable electricity production going. the strategy is to drive down the price, to achieve parity with conventional energy production. When will this goal be reached? I would say around 2018 when the big solar plant (http://www.businessinsider.com/elon-musk-just-made-the-same-huge-bet-on-solarcity-that-hes-making-with-tesla-2014-6) is operational, so you can buy cheap and efficient solar cells, combine those with batteries from the Tesla gigafactory and achieve something close to grid parity.

so around 2018 Musk will sell significant parts of his shares in Solarcity and Tesla. he will have a lot of cash to invest...

Until 2018 SpaceX will work on the BFR. with the profit from ongoing operations they can finance the development of the methane engine, design the rocket and MCT. Around 2018 SpaceX will need cash to build the BFR and MCT factory and start building that hardware. Instead of investing directly in SpaceX, musk will leverage his money.

He will start a new company (MarsX ? ), with the goal to "create a sustainable industrial base on mars". He will get a consortium together of chemical companies, mining companies, and probably some company able to supply nuclear reactors (like the ones used on subs and aircraft carriers). This company will design and build the hardware they need on Mars. Like NASA provided the commercial cargo contract that helped fund the F9, this company will provide SpaceX a contract to provide cargo services to the surface of mars. with a business case for the BFR, and the profits from the F9 and FH launches SpaceX can get the cash it needs on the financial market, and build the BFR and MCT factory. Musk will put 20B of his own cash in MarsX, the consortium will invest 10B and venture capitalists will also provide 10B. so MarsX will start with 40B in capital, should be enough to get some hardware to Mars.


This new company will start with the hardware needed to create O2 and methane. It will be the first product they will have a customer for, SpaceX! (and again, a company with a healthy amount of investment, a launching customer, a huge future potential, and most importantly have Musk involved, will be a magnet for capital, it will have no problem at all getting more money if needed). Also with methane, O2 and energy you can create a lot of the basic hydrocarbons we use today at the basis of our chemical industry. so with that in place it is easy to start producing a variety of plastics than can be used to built the first greenhouses and habitats.

once the BFR has proven itself by transporting cargo, it is ready to start transporting people. O2, H20, and some type of plastic is waiting on Mars. Now it is time to send the first batch of people to start building this colony. Some of it will be financed by the different space agencies that will want to do science on Mars. Most of it will come from marsX, they will send people to speed things up on mars, and start the next phase, mining and producing iron, aluminum, etc. Initially MarsX will be the biggest employer on Mars. around this time MarsX will do an IPO and get an additional 40B in capital.

When the first 50 or so people are on mars, Other companies will jump on this emerging economy, drawn by the huge potential. Cargill will finance its own mission to build and develop food production on mars. Coca Cola and SABMiller will team up to be the first company on mars to provide those healthy drinks to the colonists, promptly followed by pepsico/inbev who don't want to be left behind. The spaceX manifest will show an ever increasing amount of crew and cargo transports to Mars.

The first 10 transports to mars will probably be around 1-2B each, most of them bought by MarsX. but once the reusability of the MCT is established, prices will drop and spaceX will continue to improve MCT and decrease the price, eventually getting to the xth iteration of MCT which will approach the 500K/person price Musk talked about.

[Mader Levap]

Now a whole bunch of you are going to jump up and down and scream, "They can't do that!"  In international relations, we have a saying that "possession is 9/10ths of the law".

"Access to" is not "possession". Unless you suggest SpaceX deploys machineguns, tanks and soldiers (mencenaries? I see new business oportunites for Blackwater aka Xe Services aka Academi) to Mars. 

[Avron]

Musk has no cash at all, he has millions in debt. see:
http://www.businessinsider.com/elon-musk-borrows-150-million-to-buy-tesla-2013-5

His net worth is purely based on his share in Tesla, Solar city and Spacex.

Shame, last year he needed 150 mill now work out that that is worth today..  I hope we are not suggesting that only musk will finance the mars push.. 

[su27k]

How about Mars?!? 

Note Bigelow is trying to do this to the Moon, but SpaceX doesn't seem to be interested. Also note when Gwynne Shotwell was asked about Moon vs Mars, she said she hope the "nation" will commit to Mars instead of the Moon.

So I guess they will develop Raptor and MCT using their own resources (it's 10 to 12 years at least, so it's not a lot per year), and will try to convince NASA to fund missions and the initial base construction.

[Robotbeat]

There's this: http://www.nbcbayarea.com/blogs/press-here/Larry-Page-Would-Rather-Give-His-Money-to-Tesla-Than-Charity-251289371.html

Also, I think $100 billion will go a lot further with a focused SpaceX with their own BFR and MCT than it would with the usual contractors. You can pay for the actual cost of building the hardware instead of testing new ideas all the time. Whenever NASA does something, they always make sure the mass of the spacecraft and rocket are outweighed by the paperwork.

[meekGee]

In a different thread someone asked the obvious question - if SpaceX can put people on Mars in 10-15 years towards a colony, why even bother with more limited proposals that cost more?

The missing link in this line of reasoning is for SpaceX to convince enough people that they are indeed doing it and not just talking about it - which is a process that's happening in front of our eyes.

So if SpaceX has enough funds to convince people that they're serious, I think they'll also have a large amount of support from the USG, since the USG will want to make sure the SpaceX effort is 100% covered by the flag.  From their perspective, rather have SpaceX be purely an American effort than a multinational corporation.

I think this convincing will reach critical mass when SpaceX lands the first payload on Mars.  Which I hope will be 2016, since both FH and DV2 will be ready by then.

[guckyfan]

I think this convincing will reach critical mass when SpaceX lands the first payload on Mars.  Which I hope will be 2016, since both FH and DV2 will be ready by then.

I believe that point will be reached when the launcher lifts a stage with more than 100t payload to LEO, refuels  and returns the second stage to earth after dropping the payload in some lunar orbit. At that point it will be very hard to ignore.

[meekGee]

I think this convincing will reach critical mass when SpaceX lands the first payload on Mars.  Which I hope will be 2016, since both FH and DV2 will be ready by then.

I believe that point will be reached when the launcher lifts a stage with more than 100t payload to LEO, refuels  and returns the second stage to earth after dropping the payload in some lunar orbit. At that point it will be very hard to ignore.

Without getting into the exact dates and mission profiles, let's say that there are acts that demonstrate capability (as the one you suggest) and ones that demonstrate intent - and maybe both will be required.

Assuming SpaceX will convince their early investors (and also re-invest their profits) to get through those missions (Let's say the first Mars landing and the first BFR flight) then the big dollars (relatively speaking of course) will be required to scale things afterwards.

[guckyfan]

Without getting into the exact dates and mission profiles, let's say that there are acts that demonstrate capability (as the one you suggest) and ones that demonstrate intent - and maybe both will be required.

I would think intent cannot be doubt even today or at the latest when a first stage has done a test hop. But you have a point. Some may not think so.

[meekGee]

Without getting into the exact dates and mission profiles, let's say that there are acts that demonstrate capability (as the one you suggest) and ones that demonstrate intent - and maybe both will be required.

I would think intent cannot be doubt even today or at the latest when a first stage has done a test hop. But you have a point. Some may not think so.

yeah well I don't have doubts, but my opinion is very far from universal...  There are lots of people that still see Musk as using the "Mars thing" as a clever ruse to distract the rest of the world from, well, something...

It doesn't have to make sense, it just has to resonate with lawmakers.   But there are a lot less people of this opinion today than there were a year ago, and I agree that intent will stop being an issue before capability will.  Seeing the F9/FH system fully work will go a long way towards that though.

[Mongo62]

I think this convincing will reach critical mass when SpaceX lands the first payload on Mars.  Which I hope will be 2016, since both FH and DV2 will be ready by then.

As far as I know, Red Dragon is projected for a 2022 launch (two years after the NASA 2020 sample collecting rover). Of course, a Dragon to Mars could in theory be launched in 2016 as you said (and could also serve as a precursor to the 2020 Red Dragon, perhaps with a sample-collection drill or small rover on board, to collect samples for a quite large onboard analysis suite).

[RocketGoBoom]

Elon Musk and Spacex don't have to fund Mars plans on their own. Governments will likely fund most of the initial missions.

In order to achieve Elon's goal, all that SpaceX has to do is become the obvious choice for building and operating all of the key hardware.

We all know that SLS will eventually be cancelled due to crazy high costs. So that won't get us to Mars.

We also can reasonably predict that ULA likely will have to restructure within the next 5 years due to loss of market share after their current block buy is done. Any company that declines 30% to 50% in revenue is going to go through severe changes. Odds are that ULA will be lucky to get half the business they have now, and the business they retain will likely be at much thinner profit margins due to competition from SpaceX. So ULA will be a much small entity in 5-10 years and likely unable to handle Mars.

SpaceX will likely be the only choice once SLS is cancelled.
My guess is that SLS is cancelled around 2018 to 2020. The US government and it's partners will likely instead give SpaceX the funding for Raptor, MCT and whatever else is on the drawing board.

Fanboi mode off.

[OpsAnalyst]

Elon Musk and Spacex don't have to fund Mars plans on their own. Governments will likely fund most of the initial missions.

In order to achieve Elon's goal, all that SpaceX has to do is become the obvious choice for building and operating all of the key hardware.

"Key hardware", as in - what, exactly?

All this thread's talking about is launchers and transport vehicles.

"Key technologies" is more like it and SpaceX has preliminary-to-zero competence in other sorts of things needed to get establish a sustainable presence on Mars.

SpaceX's "economy" comes in part from the fact that they're essentially re-engineering processes and products that are relatively well understood.  They're doing that very well and generating lots of savings relative to building-from-scratch.  But alot of this stuff would have to be built-from-scratch or at least derived from some older designs and knowledge and adapted forward into an environment fraught with uncertainty.  There's no getting around the fact that there are some very long-lead-time projects that need to be undertaken to set boots on Mars and stay there.

Why would governments pay Space X to develop those things?