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Entrepreneur Tries His Midas Touch in Space

Elon Musk pitches his Falcon rocket as a low-cost launcher, and maybe more.

April 22, 2003|Josh Friedman | Times Staff Writer

In his native South Africa, science whiz Elon Musk struck his first business deal when he made $500 selling the code for a "Space Invaders"-style video game he invented.

He was 12. It took only another decade or so for him to make some real money: By age 23 Musk had his first significant company in Web software maker Zip2. He banked $22 million when he sold it in 1999 to Compaq Computer.

And last year, he pocketed about $150 million in EBay Inc. shares when the Internet auction giant acquired PayPal, the online payment firm he co-founded three years earlier in Silicon Valley.

Now, the tall, soft-spoken Musk is on to his third major venture, risking much of his fortune -- along with his reputation as an entrepreneur with a golden touch -- by setting his sights once again on space. But this time it's no game.

Musk, who last year moved from Northern California to the aerospace hub of the Southland, is bankrolling an upstart rocket maker in El Segundo called Space Exploration Technologies Corp., or SpaceX for short, with a commitment of $50 million.

The boyish-looking 31-year-old vows to revolutionize the space industry with a low-cost, reliable satellite launcher that charges $6 million a flight -- less than half the going rate for small payloads.

Musk says SpaceX's Falcon rocket could take off as early as December if the customer, a government agency he won't identify, has its satellite ready and SpaceX clears regulatory hurdles. As the company's chairman and chief executive, he wants the maiden launch to coincide with the 100th anniversary of the Wright brothers' flight at Kitty Hawk on Dec. 17.

Ultimately, Musk said, he hopes to help make human space travel more affordable through new launchers and exploration vehicles.

"I like to be involved in things that change the world," he said. "The Internet did, and space will probably be more responsible for changing the world than anything else. If humanity can expand beyond the Earth, obviously that's where the future is."

Besides, he added, "rockets are cool. There's no getting around that."

Whether Musk becomes a space industry visionary -- or the latest in a string of delusional Don Quixotes -- remains to be seen. Doubters call Musk's vision pie in the sky, a gross underestimation of the technological and commercial challenges SpaceX will face.

"He's a young, smart guy who has made a ton of money, but we have a saying in the launch business: The way to become a millionaire is to start with $1 billion," said Marshall Kaplan, a former rocket engineer who is director of space programs for consulting firm Strategic Insight Ltd. in Arlington, Va.

Big Thinker

What's more, with the collapse of the telecommunications industry, few contracts are available even for small commercial satellites, noted Charles Vick, senior fellow at GlobalSecurity.org, a defense and aerospace think tank in Alexandria, Va. For the moment, the market is primarily driven by government contracts, particularly for military and NASA payloads.

Musk is undeterred by the odds. He figures he has beaten them before.

"Elon thinks bigger than just about anyone else I've ever met," said David Sacks, former chief operating officer at PayPal and now head of an independent film company in L.A. "He sets lofty goals and sets out to achieve them with great speed."

A few years after selling his video game's code to a gaming magazine, Musk invested the $500 in a pharmaceutical stock he had been tracking in the newspaper in his South African hometown of Pretoria. The shares were later sold for "a few thousand," he said.

At 17, Musk said he used the proceeds to help finance his move to Canada, where he started college. In leaving home, he went against the wishes of his father, an engineer, and his mother, a fashion model and nutrition consultant.

"If you wanted to be close to the cutting edge, particularly in technology, you came to North America," Musk said.

As a cash-strapped college student, he said he learned about frugality. "I tried various experiments to live on less than $1 a day without getting scurvy," he said with a chuckle. "You can cook spaghetti sauce with, like, a third of a green pepper, or buy a thing of sausages and a loaf of bread to make hot dogs for 25 or 30 cents apiece."

After two years at Queen's University in Kingston, Canada, Musk landed a scholarship at the University of Pennsylvania, where he earned undergraduate degrees in economics and physics before moving to California in 1995.

He enrolled at Stanford University with plans to pursue a doctorate. But he never attended a class, deferring to start Zip2 instead from his Palo Alto apartment at age 23.

With the Internet boom just beginning, the idea behind Zip2 was to allow media companies to establish Web presences through automated publishing and features such as maps and directions. Musk snared millions in venture capital funding, and Zip2 attracted publishing-company clients including Knight-Ridder Inc. and Hearst Corp.

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