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Elon Musk on Why SpaceX Has the Right Stuff to Win the Space Race

A lot of people with a lot of money want to stake a claim in space. One guy is ahead of the pack, perhaps because he has chosen his partners well.

Elon Musk's SpaceX is scheduled to launch a rocket and space capsule filled with supplies bound for the International Space Station on May 7. If the launch is successful, it will be the first time a private company, not a government agency, has accomplished such a feat.

SpaceX
Source: SpaceX
SpaceX

In the past, NASA would pay contractors like Boeing or Lockheed Martin to build equipment which NASA would own and operate. Here, NASA is paying SpaceX for services, not equipment, which saves the government money and risk. However, NASA has to give some money upfront, hundreds of millions of dollars in fact, which SpaceX has used to fund its buildout. By partnering with NASA, not competing with it, Musk has managed to go farther and faster than others in not only creating a commercial space venture, but turning a profit.

"I'm primarily an engineer, but I also have the financial side of things," Musk said during a CNBC interview.

Sitting next to the Dragon space capsule the company successfully launched into orbit and retrieved in December, 2010, Musk explained that his business style saves time and money.

"Normally you have a chief engineer and a CEO, and they're kind of different. In my case, it's the same, so I can simplify the decision making, and I only need to convince myself whether the decision is correct."

Musk put up the first $100 million for SpaceX ten years ago, money he made as a co-founder of Paypal .

He says other investors have put in another $100 million.

The company has signed about $4 billion in contracts for over 40 missions, both with private customers and NASA, and those agencies have come up with down payments. "I think we've received about $400 or $500 million in NASA funds so far," Musk says.

SpaceX builds nearly all of its own components in a renovated hangar in Hawthorne, California, which once housed Boeing.

Like Apple , the company believes in the importance of controlling the entire system. "I do think it's important to, well, I hesitate to use the word 'control,' but to ensure that the whole system is done right," says Musk. When asked why he hesitates to use the word "control," Musk replied with a laugh, "I don't want to sound like a control freak."

Source: SpaceX

The key to SpaceX's success, assuming its equipment functions as planned, is to convince customers to pay for services on a used spacecraft.

Musk thinks each Dragon capsule could be used ten times, eventually bringing down the current price per flight of $60 million for use of the Falcon 9 rocket and $60 million for shipping cargo--and eventually humans--aboard the capsule.

SpaceX is also building a much more powerful rocket, the Falcon Heavy, which Musk believes can launch a full payload for under $1,000 a pound--"in the space industry, that's like the four minute mile."

The company may go public by the end of 2013, but only if management can provide some predictability in revenues. "You don't want to go public and then surprise the market with a bunch of negative things, and so I think we want to really be at a steady cadence of launches before filing an S-1." One report suggests SpaceX is worth $1.3 billion. "It's probably something like that," Musk says.

Asked about other ventures by other billionaires, Musk paused before replying.

Regarding this week's announcement by Planetary Resources to mine asteroidsfor precious metals to send back to Earth, Musk thinks the group's plans to set up in-space refueling stations is the better, more practical idea. Then there's Blue Origin, a space venture by Amazon CEO Jeff Bezos, about which little is known. "I think if Jeff Bezos were to spend more time on Blue Origin, it would probably make more progress."

There are many legacy players in the space industry, even legends like Neil Armstrong, who've expressed dismay that a private company will now control a process that has always been controlled by NASA and the military. “Technically I think we’ve probably got, in absolute numbers, more people rooting for our failure,” says Musk, “but relatively speaking, I think we’ve got more people rooting for our success…the ratio of lovers to haters has improved.”

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  • Based in Los Angeles, Jane Wells is a CNBC business news reporter and also writes the Funny Business blog for CNBC.com.

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