Financing SpaceX's Mars plans

[clongton]

The only way that SpaceX is going to build and launch multiple HLLVs and trans-Mars spacecraft is if a government, or governments, fund the project.  I've always seen SpaceX plans as a pitch to NASA and the U.S. government.  None of this gets built otherwise.

 - Ed Kyle

I'm usually closely aligned with Ed on most things but not on this one. In fact I'm really the opposite. In my opinion the only way for SpaceX to keep the cost of the project manageable is to avoid NASA and the USGov like the plague. Any involvement with them, except as a paying customer who gets no critical path votes (they are purely passengers) will at least double the mission costs. The venture capitalists know beyond a doubt that if the USGov has a say in anything of this magnitude that a good 50% of any cash they put into the project is completely wasted, pissed into the wind, and they will avoid the project. Musk's personal fortune plus venture capitalist investment will be enough to get the project started without the USGov screwing it up. Putting any kind of congressional funding (which is politically motivated and wasteful by definition) in the critical path would be beyond stupid.

However SpaceX will need to demonstrate some major proof of concept technology, as OpAnalyst stated, before venture capitalists will flock to the door. For example, SpaceX will need to land a functioning fuel station on the Martian surface, creating methane fuel from the atmosphere; fuel that could be used either as rocket propellant or as fuel for ground transport. Something of that nature will get the technically savvy investors' attention.

A good ROI is not going to come from returning goods or anything else to earth from Mars. A good ROI is very long term and is going to come from profitable commerce ON Mars among and between the colonists. It's no different, except in scale, than an American company investing in a foreign enterprise, like Shell Oil for example doing drilling somewhere in the African desert. Profits from commerce will attract investors, not boots and flags and not sample returns. Investing in this endeavor is really ground-floor investing and the investor must be prepared to wait significant time for the ROI, which will begin slowly and start small, but could eventually grow into a flood of positive returns. That's why a colony, and not just a base, is vital. Profitable commerce is what will create the ROI.

This needs to stay a privately held endeavor, with the very real potential for profitable inter-colonist commerce to attract the kind of investors SpaceX will need. Involving the USGov, or any of its agencies, or any government at all, in the critical path will kill this whole thing dead.

[RonM]

If SpaceX and its subcontractors can start off by placing a small base on Mars, the first tenant could be USGov. That way the government can help start business on Mars by paying for the initial setup and save money using commercial services instead of a government exploration project.

[Lar]

This needs to stay a privately held endeavor, with the very real potential for profitable inter-colonist commerce to attract the kind of investors SpaceX will need. Involving the USGov, or any of its agencies, or any government at all, in the critical path will kill this whole thing dead.

Great analysis snipped, except for the conclusion which really needs reinforcing... One nit, Shell is an Anglo-Dutch company rather than an American one, but that doesn't change your argument one bit.

(as I said on Quora recently, "I'm from the government and I'm here to help you" is rarely ever true)

If SpaceX and its subcontractors can start off by placing a small base on Mars, the first tenant could be USGov. That way the government can help start business on Mars by paying for the initial setup and save money using commercial services instead of a government exploration project.

This SOUNDS plausible,  but folk like Senator Shelby will try to screw it up. Even if explicitly told "you're a customer paying a fixed price for a product we define" Shelby and his ilk will try to introduce FAR and other inefficiencies to drive up the cost and protect their contributors interests.  But this veers a bit too far into space policy so I will stop.

[tobi453]

You do not want the US government on Mars. Actually you should create your own government on Mars. This is one of the big advantages of Mars. If you have the money to go there, you can make your own laws, create your own country, your own currency, have laws that attract business to move from Earth to Mars. You can create a new society according to your own beliefs and wishes.

Mars being a colony of any earthian country is bad idea. You just need to look at history what happened to the british and french colonies in Africa, Asia and America. Most of them are now independent (after a few wars and a lot of bloodshed).

[JasonAW3]

I've thought a bit about 'how' SpaceX c/o EM could finance a trip to Mars. 

Theory 1:
Tesla gains enormous market share, to the point that everyone has to drive a Tesla electric car/minivan.

Theory 2:
A shift in world economics forces everyone on Earth to change their currency to a Bitcoin like backed denomination via PayPal.

Theory 3:
A 100m golden asteroid plummets to Earth and lands softly onto the SpaceX parking lot in Hawthorne CA. 

Theory 4:
Elon shorts Google and Twitter preferred shares in order to ring the crash register at the moment of a loss of global communications due to a Carrington class CME/solar flare event.

Just like the theory of evolution... given enough time, one of these events will likely occur.  However getting rich off of the sales of an electric minivan seems highly unlikely and should not be considered as a likely outcome. 

Given as an assumption that it took NASA $200billion in 21st century dollars to go to the moon, the costs to go to Mars are out of reach for all but governments who subscribe to Neil Degrasse Tyson's (NDT) view of exploration.

I think Elon deeply believes a Mars mission is not affordable.  His public appearances about Mars are really for gaining media ratings, selling great covers for magazines/branding.  Definitely isn't hindering the current efforts. 

(For comedic input).

I'm not sure I can agree with you on this subject.

First of all, the majority of the technologies needed for the manned Lunar missions are now relatively commonplace and fairly inexpensive.  Computer Tech alone would put greater than the entire computer systems that NASA have for landing on the moon into a system not much bigger than a paperback book.  Computer power that cost hundreds of millions in the 1960's can now be found for under $200.

The real cost that currently makes such an endevor difficult at best has been the insistance on use of disposable launch vehicles.  Spending millions of dollars on construction of complex machines whose pimary purpose is to expel exploding gases in a reeliable and controlled manner, only to throw away the entire structure after each use, is pure insanity.  If such systems can be buiilt to be reused even as few as 10 times before major refurbishment or recycling is required, then you will manage to reduce the overall launch by at LEAST a factor of 10 or more.

Any sort of sustainable effort on colonizing any nonterrestrial location is going to REQUIRE a fully reusable spacecraft system , or at the VERY least the landers should be able to be reused as habitats.  (Perhaps using a system similar to the Skycrane system used for MRL, but able to land, be refueled and launched back into orbit to link up with the main space craft returning to Earth.  Returning the Skycrane to Earth Orbit would allow proper teardown and refurbishment until an orbital facility for such could be established in Mars Orbit).

Newer manufactoring techniques and mass production or components that would require replacement after each flight, further reduces costs.  By utilizing more automated systems and streamlining the required personnel for each flight, costs are further reduced.

I would not be at all suprised to see a date in the not too distant future where a replacement satillite is launched and an old or defective satillite is picked up by the same cargo craft for return to the Earth for repair, refurbishment or recycling.  Millions spent on building and launching satillites could then be recovered and reused, affording a more cost effective system of satillite construction and deployment.  (By combining the launch of a replacement satillite and recovery of a defective or old one in the same flight, recovery costs are also vastly reduced.  A cargo only version of the Dreamchaser may be ideal for LEO launch and replacement of satillites).

Obviously Geosynch satillites would require a different approach, likely involving an extremely elliptical orbit with a Geosynch apogee and a LEO perigee, or more likely a roving platform moving from satillite to satillite effecting repairs or component replacement as needed and purchase.  Such a teleoperated rig would either periodically drop back down to LEO via either a solar electric, ion drive or solar sails to maximize fuel effeciency, so that replacement parts cand be swapped out and refueling can be accomplished.  It is assumed that any sort of repairs and or replacments of Geosynch orbital satillite components would be scheduled months in advance, as that is likely how long such a repair drone would take to go from LEO to GEO in the most fuel efficent  manner possible.

Overall, with the concept of reusing what is there or repairing or upgrading systems in space, costs for both the companies launching and using these satillites would be greatly reduced.

By reducing the number of obsolete and dead satillites and debris in orbit, one also increases the safety margin for manned and unmanned spaceflight substantilly.

[Robotbeat]

Apollo got about 15 exploration stacks from its $100 billion, plus another 15 or so LEO mission stacks (Saturn Ib and capsule).

If they were instead replaced by the BFR and MCT, you could conceivably produce 15 of them and another bunch of extra MCTs (could make multiple MCT launches in a single window with a single BFR). If they are fully reusable, that's a pretty good start on a colony transport capability.

Another way of looking at it is this: Apollo employed about half a million people. If SpaceX could pull off their colonization effort for 5,000-10,000 individuals (including contractors but not including those employees and contractors working on other launches), then they could get one and a half orders of magnitude reduction in overall money spent (remember how vertically integrated they are). If they can automate launching to the extent necessary for a colonization program, then they could end up with a lot more accomplished for a much smaller number of people working on it than Apollo.

As far as the cost of the colony infrastructure... The way of colonization is necessarily going to be much different than the way we engineer exploration spacecraft. More like an AK-47, less like an M-16. And much of it will need to be repairable or even totally reproducible on the surface.

[woods170]

You do not want the US government on Mars. Actually you should create your own government on Mars. This is one of the big advantages of Mars. If you have the money to go there, you can make your own laws, create your own country, your own currency, have laws that attract business to move from Earth to Mars. You can create a new society according to your own beliefs and wishes.

Mars being a colony of any earthian country is a REALLY bad idea. You just need to look at history what happened to the british, french, spanish, portugese, german, swedish, danish, italian and dutch colonies in Africa, Asia and North- and South America. Most, if not all, of them are now independent (after a few wars and a lot of bloodshed).

Emphasis mine. Improvements to your otherwise excellent post.

[Robotbeat]

Is that a bad thing? America was a colony of Britain, sure they became independent, but would Britain be better off today if America simply never existed?? I sincerely doubt it.

#Murica.

[M_Puckett]

I would say during the early 1940's, Britain was damn glad they both invested in the American colony and even glad it rebelled, went it's own way and got strong. 

[Coastal Ron]

...The venture capitalists know beyond a doubt that if the USGov has a say in anything of this magnitude that a good 50% of any cash they put into the project is completely wasted, pissed into the wind, and they will avoid the project. Musk's personal fortune plus venture capitalist investment will be enough to get the project started without the USGov screwing it up. Putting any kind of congressional funding (which is politically motivated and wasteful by definition) in the critical path would be beyond stupid.

However SpaceX will need to demonstrate some major proof of concept technology, as OpAnalyst stated, before venture capitalists will flock to the door....

I'm not sure I see any reason for venture capitalists to be interested in the goal of going to Mars for the reasons Elon Musk has publicly set out.  Not if we use the term "venture capitalist" (VC's) in it's pure form.

VC's have invested in SpaceX, but that's because SpaceX the transportation company is a business with a well defined market.  Going to Mars is not yet a business, and other than $500,000 tickets for shipping colonists to Mars, I'm not sure there is an identified market.

VC's are in the business of investing other people's money for the purpose of making them money, and the current average for an exit (i.e. the big money moment when a company goes public or is acquired) is 7 years.  SpaceX is currently at 6 years for their initial $20M Series A investment, with no exit in sight.  And with long transit times to Mars, any such investment is likely to have extremely long waits for an exit.

Now that's not to say that there won't be people interested in investing in Musk's vision, but they will be doing it as Angel investors - individuals - and not as part of an typical investment fund.

And I would bet that Elon Musk is wooing high net-worth individuals today in order to line up his future funding stream.  And where he falls short with private money that's when I think he will seek out government money, and it will be with very focused uses in order to ward off the oversight issues many have already highlight.

[AJW]

On my point about private contributions, one day at Skywalker Ranch I watched as George Lucas spent an afternoon making sure that the soon to be planted grapes were properly lined up in front of the Tech building.  Why was George so concerned about grapes?  Because Francis Ford Coppola owned a vineyard and George purchased the most expensive wine grape seedlings he could find so he and Francis could see whose was best.

Steve Ballmer is hoping for the opportunity to drop $2 Billion of his $18 Billion fortune to buy a basketball team and he would have to get in his jet and fly two hours each way just to sit court side.  Why does he want a team?  Because Paul Allen, another Microsoft founder, owns both the Seahawks and the Trail Blazers.

The Koch brothers like to use their money to play politics.  Ellison likes fast sailboats.  Now Musk shows up and he is playing 'Rocket Ship to Mars' with real rockets.  The problem is that to play this game you can't just go out and buy a serious competitor, but I bet that Musk will let you 'invest' a billion or two to play along with him.  Tour the rocket factory, visit Vandy, KSC.  There are over 400 people in this country worth over a billion and most of them you've never heard of and never will, but given a chance to add their name to the list of those who opened the door to man's expansion beyond Earth is priceless.

Once Musk can demonstrate the ability to land people and supplies on Mars, we are likely to see a backlash from other countries either trying to send their people there as well, or demanding that Mars should be owned by all.  The USG can either bow to international pressure, or let Musk continue forward to insure greater US influence on the new planet.  This is a no-brainer.

BTW, it is easy to use the term 'Colonists', but that implies an allegiance and dependence on a non-present government and history shows how well that works out.  Settlers and Settlement are more appropriate terms in many regards.

[aero]

Beginning to sound like crowd sourcing from billionaires ...

What contribution levels and prizes ...

[meekGee]

...The venture capitalists know beyond a doubt that if the USGov has a say in anything of this magnitude that a good 50% of any cash they put into the project is completely wasted, pissed into the wind, and they will avoid the project. Musk's personal fortune plus venture capitalist investment will be enough to get the project started without the USGov screwing it up. Putting any kind of congressional funding (which is politically motivated and wasteful by definition) in the critical path would be beyond stupid.

However SpaceX will need to demonstrate some major proof of concept technology, as OpAnalyst stated, before venture capitalists will flock to the door....

I'm not sure I see any reason for venture capitalists to be interested in the goal of going to Mars for the reasons Elon Musk has publicly set out.  Not if we use the term "venture capitalist" (VC's) in it's pure form.

VC's have invested in SpaceX, but that's because SpaceX the transportation company is a business with a well defined market.  Going to Mars is not yet a business, and other than $500,000 tickets for shipping colonists to Mars, I'm not sure there is an identified market.

VC's are in the business of investing other people's money for the purpose of making them money, and the current average for an exit (i.e. the big money moment when a company goes public or is acquired) is 7 years.  SpaceX is currently at 6 years for their initial $20M Series A investment, with no exit in sight.  And with long transit times to Mars, any such investment is likely to have extremely long waits for an exit.

Now that's not to say that there won't be people interested in investing in Musk's vision, but they will be doing it as Angel investors - individuals - and not as part of an typical investment fund.

And I would bet that Elon Musk is wooing high net-worth individuals today in order to line up his future funding stream.  And where he falls short with private money that's when I think he will seek out government money, and it will be with very focused uses in order to ward off the oversight issues many have already highlight.

It is true that any Mars plan falls way outside of the standard VC investment model.

The likely candidates for investments are either high net-worth individuals (which includes some VCs, as people) and some corporations that are used to making very long term investments (mining companies, energy companies).

The second set of investmentors are those that invest in what I'll generally call "Mars Stakes" - you buy some property right or share of an operation on Mars not in order to own it for perpetuity, but because it is sellable.  The same reason people buy stocks.   If the overall market value will increase, on average, all such investments are good.

Many things are touted as "once in a lifetime", but for better or for worse, this will be a true once-in-a-lifetime development - something like the growth of the United States or modern-day China - but different in some pretty fascinating ways.

[aero]

The second set of investmentors are those that invest in what I'll generally call "Mars Stakes" - you buy some property right or share of an operation on Mars not in order to own it for perpetuity, but because it is sellable.  The same reason people buy stocks.   If the overall market value will increase, on average, all such investments are good.

That works if you have a "geologic" survey of the area and potential for access to it. But for early Mars, mostly it will be unknown except as can be surveyed from space and half of it will be on the other side of the world from the settlement. Do you think investors will put their money into land with only space survey data? I suppose I might buy a few acres if I could pick them up for pennies per acre but that price wouldn't go very far toward Mars transportation or building infrastructure.

What price per acre would be needed to touch the cost of settlement? Mars surface area is 144.8 million km², or 35,780,859,236 acres. I guess that land sold off for $1 USD per acre would address the minimum cost of settlement, but with risk. A price of $10 USD per acre would make the probability of successful settlement much higher.

[meekGee]

The second set of investmentors are those that invest in what I'll generally call "Mars Stakes" - you buy some property right or share of an operation on Mars not in order to own it for perpetuity, but because it is sellable.  The same reason people buy stocks.   If the overall market value will increase, on average, all such investments are good.

That works if you have a "geologic" survey of the area and potential for access to it. But for early Mars, mostly it will be unknown except as can be surveyed from space and half of it will be on the other side of the world from the settlement. Do you think investors will put their money into land with only space survey data? I suppose I might buy a few acres if I could pick them up for pennies per acre but that price wouldn't go very far toward Mars transportation or building infrastructure.

What price per acre would be needed to touch the cost of settlement? Mars surface area is 144.8 million km², or 35,780,859,236 acres. I guess that land sold off for $1 USD per acre would address the minimum cost of settlement, but with risk. A price of $10 USD per acre would make the probability of successful settlement much higher.

People will lay claims on land as soon as the first foot touches the ground.  "That mountain range is mine since I saw it first".   

To prevent a wild west, someone will grid the place, and markets prices will rule. Very much like internet domain names.

So sure, some people will buy unsurveyed land for a dollar, but as you point out, that's a LOT of dollars, and that land might end up being worth a dollar even 1000 years from now.  There's land on Earth even that is completely worthless.

So I don't think there's going to be a rush to buy random acres on Mars, but only acres that people really have a use for.  And if two entities have use for the same acre, and that acre is somehow unique, its price will increase.

But as a colony is set up, naturally the acres around it become scarce and unique, and so they get value, and that's where investment comes in.

[RocketGoBoom]

The Koch brothers like to use their money to play politics.  Ellison likes fast sailboats.  Now Musk shows up and he is playing 'Rocket Ship to Mars' with real rockets.  The problem is that to play this game you can't just go out and buy a serious competitor, but I bet that Musk will let you 'invest' a billion or two to play along with him.  Tour the rocket factory, visit Vandy, KSC.  There are over 400 people in this country worth over a billion and most of them you've never heard of and never will, but given a chance to add their name to the list of those who opened the door to man's expansion beyond Earth is priceless.

This sort of ties into the topic on "who will compete with SpaceX".

I have always thought that it won't be ULA or Ariane or any of the legacy launch vehicles. It will be a billionaire who wants to create a legacy that will cause their name to be remembered centuries from now. So we could easily see billionaires trying to either partner with Elon on Mars or compete with SpaceX with an entirely new company.

Elon Musk has a shot at an immense level of historical significance beyond just being on the Forbes 400 list.

I suspect there are a few billionaires who see what is happening and would like to do the same. Competition for SpaceX and getting financing for Mars could easily come from this crowd.

Or also Elon and a few billionaires could set up a tax free foundation called "MarsX" or "Mars Foundation" and fund it that way.

Some foundations of billionaires fund education (Gates), some fund libraries, some fund hospitals, etc.

It would not surprise me at all if Elon raised $20 billion in tax deductible funding from that crowd to fund Mars. We are talking about ego and immortality.

Mars definitely seems like a non-profit to me.

[CraigLieb]

There are other countries out there with plenty of cash willing to buy this technology or even just license trips to get their people there ahead of everybody else. For example, China could fund a bunch of these trips continually using funds from the incredible imbalance of trade generated by our addiction to "made in China".
The good thing about this spending would be a repatriation of a HUGE amount of cash from China to USA. The unfortunate down-side might be that "Red Planet" may after the fact not just be because of the color.

[sublimemarsupial]

There are other countries out there with plenty of cash willing to buy this technology

ITAR says no.

[JasonAW3]

The Koch brothers like to use their money to play politics.  Ellison likes fast sailboats.  Now Musk shows up and he is playing 'Rocket Ship to Mars' with real rockets.  The problem is that to play this game you can't just go out and buy a serious competitor, but I bet that Musk will let you 'invest' a billion or two to play along with him.  Tour the rocket factory, visit Vandy, KSC.  There are over 400 people in this country worth over a billion and most of them you've never heard of and never will, but given a chance to add their name to the list of those who opened the door to man's expansion beyond Earth is priceless.

This sort of ties into the topic on "who will compete with SpaceX".

I have always thought that it won't be ULA or Ariane or any of the legacy launch vehicles. It will be a billionaire who wants to create a legacy that will cause their name to be remembered centuries from now. So we could easily see billionaires trying to either partner with Elon on Mars or compete with SpaceX with an entirely new company.

Elon Musk has a shot at an immense level of historical significance beyond just being on the Forbes 400 list.

I suspect there are a few billionaires who see what is happening and would like to do the same. Competition for SpaceX and getting financing for Mars could easily come from this crowd.

Or also Elon and a few billionaires could set up a tax free foundation called "MarsX" or "Mars Foundation" and fund it that way.

Some foundations of billionaires fund education (Gates), some fund libraries, some fund hospitals, etc.

It would not surprise me at all if Elon raised $20 billion in tax deductible funding from that crowd to fund Mars. We are talking about ego and immortality.

Mars definitely seems like a non-profit to me.

Truth be told, I'm pretty sure, in the short term, Mars WOULD be non-profit.

The money is in the infrastructure.

In order for Mushk to be ABLE to go to Mars, and sustain a colony there over the long term, he will HAVE to establish a system of reusable equipment, up through and including Heavy Lift Launch Vehicles.

By establishing these vehicles, he can underbid other launch vendors who will likely continue to use disposable launch vehicles for several more years at the very least.  (Partially due to backstock on such launchers and partially because they will have to play catchup with SpaceX's reusable systems.)  Most likely competators will try to recover the avionics and engine sections only at first, which will reduce their launch costs, but not quite enough to be truely competative with Musk.  His time frame of putting a colony, (or at least make a manned landing) on Mars, is a goal that could be achievable, within this framework.

By branching into commercial launch services, SpaceX increases the income that they are receiving and is no longer quite as dependant upon NASA for financing the developement of his spacecraft and his interplanetary launch capibilities.

It's interesting that his other endevors, Tesla, Solar City and the new battery factory, not only provide further funds for the overall corporation, but also provide an infrastructure that can be readily utilized in providing both vehicles, power and power storage that such a colony would require.

His release of the patents into the public domain for the work that has been done so far for his electric cars was actually a very good idea, in that, as the one major manufactorer of Lithium Batteries for electric cars in the US, it not only will stimulate the growth of the Electric Car industry, but by having a standardized battery system, readily available in the US, it increases Elon's market share and profit.  As the battery packs seem to be the limiting factor in both cost and production speed, even if other major car companies don't utilize Tesla's patents, (and whose recharge stations are becoming more and more of a national standard, and will likely become an international standard) Tesla's marketshare will also increase.  His battery swap out stations being standardized, likewise increases his brand presence.

Using the Solar Panels that his other company is making, for home, industerial and car recharge use, also tends to increase brand identity, thus also increasing market share in the solar power market as well.

Overall, Elon Musk is depending more on economies of scale to not only increase the money he has available for his projects, but to also lower the overall costs of all facets of his companies in order to actually achieve his goals.

In other words, while raising money through ALL of his corporate endevores via increasing his market share and profit in each area, he also lowers the costs associated with the manufactoring and operation of his various corporate endevores, making the end goal of his efforts more attainable.

[jsgirald]

People will lay claims on land as soon as the first foot touches the ground.  "That mountain range is mine since I saw it first".   

To prevent a wild west, someone will grid the place, and markets prices will rule. Very much like internet domain names.

So sure, some people will buy unsurveyed land for a dollar, but as you point out, that's a LOT of dollars, and that land might end up being worth a dollar even 1000 years from now.  There's land on Earth even that is completely worthless.

So I don't think there's going to be a rush to buy random acres on Mars, but only acres that people really have a use for.  And if two entities have use for the same acre, and that acre is somehow unique, its price will increase.

But as a colony is set up, naturally the acres around it become scarce and unique, and so they get value, and that's where investment comes in.

There are historical precedents other than Wild West, during the Scramble for Africa many nations in Europe spent huge resources to acquire colonies that where essentially worthless. Only decades after the fact some of them obtained anything resembling a ROI, at a horrific human cost.

The motives for this 'scramble' were complex, but geopolitics and national prestige had a large influence. Although western nations today do not put the same value in those areas anymore, others like China or India still want to claim a place in the sun as superpowers. A new Space Race might be a powerful force behind Mars colonisation.