In 1999, after Compaq bought Zip2, Musk formed X.com, which morphed into PayPal after acquiring the competitor that originated the brand name.
The original business plan focused on allowing people to transfer money electronically via the Palm hand-held computer. But Musk quickly saw that the "killer" application would be a system that allowed the secure e-mailing of payments using any type of PC, according to Sacks, the former PayPal COO.
As soon as PayPal saw that so-called early adopters were using the system by the thousands to pay for purchases on EBay, Musk developed a "viral marketing campaign," Sacks said: The firm paid $10 to every new PayPal customer as well as anyone who referred a new user to the system. The campaign fueled exponential growth.
Despite the tech-sector implosion, PayPal went public in February 2002 with a market capitalization of $1.2 billion. Just five months later, EBay snapped it up for $1.5 billion. Musk's EBay shares now are worth about $200 million, thanks to the growth of the stock, which hit a three-year high Monday.
Musk's payoff has left him with the ability to dream -- and live -- large. He owns a six-bedroom house in Bel-Air, which he bought early last year with his wife, Justine, an aspiring novelist. With no kids, they spend much of their free time at the movies, Musk said. (His recent favorites include "Chicago" and "Lord of the Rings: The Two Towers.")
But can success on the Internet translate into success in outer space?
One early PayPal investor who enjoyed a windfall from that venture says Musk's SpaceX faces huge challenges.
"It's going to be a highly risky and capital-intensive business at the same time. That's not a combination venture capitalists like to see," said John Malloy, managing partner at Nokia Venture Partners in Menlo Park, Calif.
Still, he said, big investors with deep pockets and an interest in aerospace might be attracted to SpaceX, given Musk's reputation as "a prototypical Silicon Valley entrepreneur with a knack for being in the right place at the right time."
As he pondered his next project while the EBay deal came together, Musk said he wondered why space exploration hasn't moved faster.
"Its peak of success came with the Apollo program in the late 1960s, and for the last 30 years it has moved sideways at best," he said. "One of the major reasons is the launch cost."
Musk said he and his team are holding down costs on the Falcon project by sweating every expense line -- which starts with keeping the design and technology basic.
"I had several other opportunities, but when Elon approached me I could see he was different," said Tom Mueller, who joined SpaceX at its founding in June after 14 years at TRW and its new parent, Northrop Grumman Corp.
No Gimmicks
"The others always had a gimmick, like a helicopter blade or some miracle technology," said Mueller, SpaceX's vice president of propulsion. "Elon just wanted to take the best technology already out there, build a simple vehicle and use the right propellants."
The 68-foot-long, 28-ton Falcon, designed to carry a payload of up to a half-ton into low orbit, will have no wings, will fire in two stages instead of the usual three and will use fewer moving parts than rockets of established competitors such as Pegasus from Orbital Sciences Corp.
In addition to its supposed cost edge, the Falcon's streamlined design will mean less risk of malfunction, according to Musk.
A spokesman for Dulles, Va.-based Orbital Sciences declined to discuss his firm's pricing structure or SpaceX's plans.
"We don't comment on competitors directly, but Orbital Sciences has a long and distinguished history of launching satellites successfully for blue-chip customers like NASA and the Department of Defense," said spokesman Barron Beneski, "and we believe there will continue to be demand for high-quality launch vehicles such as ours."
SpaceX's headquarters, a converted 25,000-square-foot warehouse off Sepulveda Boulevard, feels like a throwback to the Internet heyday with its open cubicles, breezy camaraderie and a lounge offering free cappuccino and soft drinks. The building echoes with the sounds of welding, drilling and riveting. A half-built rocket sits in the middle of the factory floor.
Musk, who describes himself as "essentially chief engineer of the rocket," said he spends his typical day delving into production details with his team. There also is time to think about SpaceX's long-term possibilities.
"If we can be one of the companies that makes it possible for humans to become a multi-planetary species, that would be the Holy Grail," Musk said. "It sounds a bit crazy but it's going to happen, and only if people build the means to do so. We're making progress toward a greater philosophical goal while building a sound business."
Some industry experts say Musk has the vision and fortitude to make the venture work, if anyone does.
