Investopedia has published an article by Stephen Simpson, CFA called The Reality of Investing in Space Exploration.

Simpson says, “We are finally on the cusp of real private involvement in outer space. From space station resupply vessels to space tourism to, perhaps, even off-world mining, companies like Orbital Sciences, SpaceX and Virgin Galactic seem to be serious about establishing a viable place for private industry outside our atmosphere.”

Nevertheless, Simpson says, “It is still not all that easy for investors to participate in this evolution.”

We respectfully disagree with that statement.

First, we would point out that activities like asteroid mining are more accurately described as space industrialization, rather than space exploration. That’s a quibble, however.

The real problem, we think, is Simpson’s definition of investment.

After examining companies like SpaceX and Virgin Galactic, Simpson concludes “The reality is that Orbital Sciences is really the only option investors have for an investment that is directly tied to space and space exploration.”

Actually, there are quite a few companies that are tied directly to space through established industries like satellite communications and remote sensing. Orbital Sciences is just one of money. Simpson excludes Boeing from consideration because  “commercial space is just too small a part” of what they do, but the same it true for Orbital Sciences, which does a large amount of defense contracting.

Again, that’s quibbling, however. Although he hasn’t communicated it clearly, Simpson obviously means to limit his scope to investments in emerging space industries.

Simpson is right that there are very few publicly traded companies which are heavily invested in “suborbital space planes, commercial launch service providers, vehicle builders, exploration companies or even far-off ideas like asteroid mining or interplanetary travel.”

There, however, lies his big mistake: limiting the definition of investment to publicly traded corporations. That’s not an unexpected bias for a certified financial analyst, but it does miss a world of possibilities.

Financial advisors will be quick to point out that most Americans are limited to investing in publicly traded companies, which are regulated by the SEC. Only qualified investors (generally, upper-income individuals) are allowed to invest in privately held companies such as space startups.

That’s true, when it comes to passive investments. The law is different, however, when it comes to those who are actively involved in running a business. There are no restrictions on who can start a business or how much they can invest in their own venture.

Active investment is arguably the best way to become rich. People like Bill Gates, Steve Jobs, and Elon Musk did not become billionaires by passively investing in companies run by other people.

The active approach may also be the best way to invest in space exploration. For those with modest amounts of capital and some technical and management skills, the reality is that starting a space venture is easier than ever.

With imagination, vision, and some hard work, it’s now possible to start a space company in your garage. Low-cost consumer electronics offer capabilities that rival or surpass high-cost aerospace hardware. Guidance systems that cost millions of dollars and weighed hundreds of pounds a few decades ago are now available for under $100 from companies like Sparkfun and can be carried in your wallet. The PhoneSat project at NASA Ames has demonstrated that it’s possible to build a complete, functioning satellite for $5-10,000. It’s now possible to place a small payload into orbit for under a million dollars. Suborbital flights are even cheaper, and companies such as Armadillo, Virgin Galactic, and XCOR Aerospace will soon be selling crewed flights for $100-200,000 per seat. There are even programs like Citizens in Space which are often free flights for qualified payloads.

One example of this approach is Unreasonable Rocket, founded by engineer Paul Breed and his teenage son (also named Paul Breed). Unreasonable Rocket has completely a some very interesting projects, including a VTOL rocket that threatened to take the Northrop Grumman Lunar Lander Challenge away from better funded teams at Masten Space Systems and Armadillo Aerospace, and rocket engines fabricated on a 3-D printer. The junior Paul Breed has since left home and gotten married, but Unreasonable Rocket continues and has even found time to pursue some non-aerospace side projects such an autonomous land vehicle.

Unreasonable Rocket’s latest project is the development of a nanosatellite launcher that could place a 3u CubeSat in orbit for $400-600,000. Paul Breed has spoken of making the nanosatellite launcher an open-source project and is pursuing innovative approaches to funding, including a possible Kickstarter campaign and competing for a $100,000 prize in the Space Frontier Foundation’s recent business plan competition. Unfortunately, the Space Frontier Foundation did not see fit to fund the project, but there’s no indication Paul is giving up.

From payloads to satellites to launch vehicles, opportunities for business innovation and market disruption abound. As reusable launch vehicles start to come on line and launch rates increase, with hundreds of flights per year expected in the near future, those opportunities will only increase. We expect to see many more garage-based companies in the future,  some of which will produce future billionaires like Steve Jobs.

Written by Astro1 on July 30th, 2012 , Commercial Space (General)

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