THE BLOG
01/29/2015 02:07 pm ET Updated Mar 31, 2015

NASA's Investment in Commercial Space Is Vindicated!

Last week, Google and Fidelity announced they were acquiring about 10 percent of Elon Musk's Space Exploration Technologies, "SpaceX." This ten-figure investment (yep, that's a Billion dollars with a capital "B") signals a coming of age for New Space -- a collection of innovative companies involved in commercializing spaceflight. Although the traditional investment community has long marginalized these firms, NASA backed the development of a competitive space launch market as the lead investor to the dismay of some traditionalists.

In the Silicon Valley venture capital model many risky startups are funded, spectacular disasters occur and only a fraction of the firms ever pay off. Securing significant investment from an outside firm or an initial public offering is the inflection point that differentiates losers from the winners in that world. This $ billion endorsement from a tech giant and a flagship investment fund has rocketed SpaceX over the hump and new space is now real business.

Since the Cold War, governments have controlled space launch technology, and they have also been the major consumers of launch services. The U.S. government is by far the largest potential customer for any global space launch provider. Agencies like NASA, the DOD, and NOAA are in continual need of launches in support of the valuable public services they provide to America and the world. These include things like NASA's leading edge medical research; the military's Global Positioning System that helps you find your way and find your smart phone; and the weather satellites that keep us dry, warn us of catastrophe and even make our farmers more productive.

Like any savvy business strategist, Elon Musk has aggressively pursued the government as an anchor client, while building a healthy manifest of domestic and international customers. SpaceX's success with capturing government contracts and subsidies has been miniscule when compared to the decades of pork barrel largesse ladled out to the incestuous military-industrial-complex firms. Nevertheless, the spunky startup has been the target of frequent criticism over its participation in NASA's Commercial Orbital Transport Services (COTS) and Commercial Crew (CCDev/CCiCap/CCtCap) programs. Ironically, these critiques have often come from pundits who nominally advocate free market principles, but are actually apologists for old-school aerospace cronyism. These fellows would apparently like to reestablish the government's launch monopoly, continue to outsource our launches to Putin's Russia and paint American flags onto Russian powered launch vehicles.

A classic source of such hubris has been Dr. Loren Thompson of the Lexington Institute. In a 2011 Forbes two-part attack entitled "What NASA Risks By Betting On Elon Musk's SpaceX" and "The Case Against SpaceX, Part II" Thompson implied Musk was pandering to the Obama administration and portrayed the nation's top entrepreneur as a fuzzy headed space guru promising a nirvana he won't deliver. Thompson, whose organization is funded by military-industrial-complex competitors of SpaceX, described the disruptive new space company as an "unproven supplier with a risky business strategy" and stated that their Falcon 9 rocked has "major performance limitations compared with other launch vehicles." Being a student of government, rather than a student of business, the good doctor interpreted the "$4 billion in corporate funds" that Boeing and Lockheed-Martin have poured into their old Delta and Atlas launch vehicles as a gauge of innovation. I see it as a whole lot of taxpayer dollars and a damning indictment of the economic inefficiency of the traditional cost plus defense-contracting model.

Well, the empirical evidence is now in. Since those pieces were published, we've seen a full dozen Falcon 9 launches go well, including six perfect supply runs to the Space Station. Curiously, that record of success didn't put an end to Dr. Thompson's nitpicking. A few months ago, he blasted off a piece entitled "When SpaceX Falters, Washington Looks The Other Way" which has since mysteriously vanished from the Internet.

However, now that SpaceX's solid launch record has been crowned with a billion dollar affirmation from the most credible of private market sources it must be obvious to anyone that we aren't talking Solyndra here. The global space economy is expanding and other new space firms, like XCOR Aerospace are regularly securing additional private funding. There have been and will be more bad days in space, because the job is hard to do; but the time has come to serve the critics of new space a big plate of crow - or, perhaps that should be falcon?

Greg Autry teaches technology entrepreneurship at The Lloyd Greif Center for Entrepreneurial Studies in the Marshall School of Business at the University of Southern California. He recently co-authored a report for the FAA Offices of Commercial Space Transportation entitled An Analysis of the Competitive Advantage of the United States of America in Commercial Human Orbital Spaceflight Markets. You can find him on Facebook.