Call it Space Race 2.0. Almost a half-century since the Apollo moon flights, entrepreneurs are expanding the boundaries of rocket and satellite technology as the U.S. makes room for private enterprise.

The result is a wave of innovation that echoes the leap in computing from key-punch mainframes to hand-held devices, with startups from San Francisco to Sydney pursuing new engines and Earth-orbiting probes as small as softballs.

Buoyed by billionaire Elon Musk’s SpaceX, the industry has surged more than sixfold since 2010 to more than 800 companies, according to market researcher NewSpace Global, with investment in private ventures in that span poised to reach $10 billion by year’s end. SpaceX led the way with $1 billion from Google Inc. and Fidelity Investments on Jan. 20 -- a day after satellite maker Planet Labs Inc. announced that it raised $95 million.

“It’s impossible to overestimate the degree of rock-star engineering talent that has come pouring into the commercial space sector,” said Matt Ocko, co-managing partner of venture capital fund Data Collective, an early investor in San Francisco-based Planet Labs. “For great scientists and engineers, this is incredible catnip.”

The fundraising snaps a years-long investment chill that followed the 1999 bankruptcy of Iridium LLC, the first global satellite-phone network. Interest is being kindled by SpaceX’s rocket launches, Virgin Galactic’s planned space tourism and efforts by Facebook Inc. and Google to deliver worldwide broadband via small satellites, drones, balloons and lasers.

Space Exploration Technologies Corp.'s (SpaceX) Falcon 9 rocket takes off in Cape Canaveral, Florida, in this handout photo made available to the media on May 18, 2012. Photographer: Chris Thompson/SpaceX via Bloomberg

'Childhood Dreams'

“A lot of us grew up during the space race, and there was a long lull when a lot of childhood dreams were put on hold,” said Steve Jurvetson, a venture capitalist and SpaceX director. “Now investors have the sense that there is money to be made, and there have been a flurry of business plans since SpaceX.”

The Google-Fidelity transaction with Musk’s Space Exploration Technologies Corp. implies a value of about $10 billion for a company with six launches in 2014, its busiest year. Even as Musk says he has no plans for an initial public offering, that payoff prospect has others dreaming of fortunes to be made in a field dominated only a generation ago by the National Aeronautics and Space Administration.

“What’s driving everything is SpaceX proving what they could do,” said Scott Nolan, an early SpaceX employee who is now a partner at Founders Fund, the San Francisco-based venture capital firm started by PayPal Inc. co-founder Peter Thiel. “It unlocked a lot of interest in commercial space development. SpaceX took this Silicon Valley, startup approach to design and efficiency and applied it to aerospace.”

'Weekly Basis'

From satellites that can be cupped in the palm of a hand to 3-D printers in space, breakthroughs “are coming on almost a weekly basis,” said Dick “Rocket” David, chief executive officer of New York-based NewSpace Global. Two of the hottest segments center on Musk’s pursuits: small satellites streaming data or images, and boosters to get them cheaply into orbit, David said.

Planet Labs has raised more than $160 million and launched 73 global imaging satellites. The growth was hard to imagine three years ago, when co-founder Will Marshall built the first of the miniature satellites nicknamed “doves” in a Silicon Valley garage.

“A lot of people were very skeptical, and what we were trying to do seemed ludicrous,” said Marshall, a former engineer at NASA Ames Research Center in Mountain View, California. “But we have assets in orbit, and customers who are very interested in the data. Every time we take a picture, we can see how the world is changing.”

Space Risks

Investing in the new space ventures is still a gamble. When Mountain View, California-based Google paid $500 million in cash last year for Skybox Imaging Inc., the venture had only launched one small imaging satellite at the time of the acquisition.

The valuation “was not weighted heavily on the technology, but rather on the notion of a low-cost satellite constellation that can provide persistent imaging” so the data could be used commercially,’’ said John Roth, vice president of business development at the space unit of aerospace company Sierra Nevada Corp., which is developing a winged orbiter. “It has yet to be seen if this business model can be sustained and successful.”

Space exploration also comes with the threat of catastrophic failure. Planet Labs lost 26 satellites in an Orbital Sciences Corp. rocket explosion above a Virginia launch pad in October.

“Space is hard,” Planet Labs’ Marshall said in a blog post at the time. “Planet Labs understands the risks of launch.”

NASA's Boost

NASA provided a boost to commercial space by retiring the shuttle in 2011 and bringing in U.S. contractors. SpaceX has been among the biggest beneficiaries, with contracts for as much as $4.2 billion to ferry cargo and crew to the International Space Station.

Musk, 43, is using SpaceX’s near-Earth flights to prepare for his more-ambitious project: interplanetary travel that may include establishing a city on Mars -- “a ridiculously long time-frame event,” as he put it in a Jan. 12 interview.

Other startups are focused on the here-and-now.

Accion Systems Inc., founded last year by two Massachusetts Institute of Technology students, raised $2 million in seed money from Thiel's fund and others to develop penny-size propulsion systems. San Francisco-based Spire raised $25 million in 2014 and plans later this year to launch 20 micro-satellites dubbed cubesats bristling with sensors to help track shipping and weather. It developed the first crowd-funded satellite.

Internet Redux?

“Space is going through what the Internet went through in the 1990s,” said Stephen Messer, an Internet entrepreneur and Spire’s first investor. “What was once government-funded is now privately funded, and you have miniaturization which is bringing the price down. The markets are also huge: weather alone is a multibillion-dollar industry.”

Venture capitalist Ilya Golubovich is among those looking for early-stage companies poised to take advantage of the imagery, data and analytics being unleashed by so-called nano-satellites.

Given the deal flurry, investors are confident of finding “exit windows” within three to five years, said Golubovich, founder and managing partner of New York-based I2BF Global Ventures.

“It’s one of the more exciting times in space since maybe the moon landing or Sputnik,” he said. “The sector has been heating up across the value chain.”

(Corrects number of satellites launched by Spire in 19th paragraph.)

Source: http://www.bloomberg.com/news/articles/2015-02-05/galactic-gold-rush-private-spending-on-space-is-headed-for-a-new-record