How SpaceX Became the World's Most Valuable Private Company

SpaceX is the world’s most valuable  private company - worth more than the GDP of countries like Finland and Chile. Its valuation has steadily increased over the  years, fueled by one groundbreaking achievement after another, before soaring to unprecedented  heights in 2024, reaching $350 billion. What’s remarkable is that almost  no investors are willing to sell their shares, according to Elon Musk.

We have liftoff. Confident that SpaceX’s value  will soar to even greater heights. And to think, this is the same SpaceX that nearly collapsed two decades ago after a  series of failed rocket launches.

The journey began in 2001 over the Labor Day  weekend when 30-year-old Elon Musk logged onto NASA’s website to explore their plans for reaching  Mars, assuming it would happen soon since humans had landed on the moon way back in 1969. To his surprise, he found no clear plans for a mission to the red planet. When he googled further, he discovered an upcoming dinner in Silicon Valley hosted  by an organization called The Mars Society.

Intrigued, he and his wife, Justine,  bought two tickets for $500. Musk also wrote a $5,000 check to the  organization, catching the attention of its president, Robert Zubrin “zoo”, who  seated him next to filmmaker James Cameron. They discussed the urgency of colonizing Mars and  the existential risks humanity faced if it didn’t.

This was a turning point for Musk. He now had a mission far more important than  his earlier ventures, like co-founding PayPal. When he shared his plans for colonizing Mars at a  PayPal alumni event, fellow alumnus Reid Hoffman, said: “How is this a business?

” - as recounted  by Walter Isaacson in his biography on Elon Musk. But for Musk, it was never about business. It was about purpose.

As Shivon Zilis, one of his Neuralink executives and the mother of three of  his children, put it on X: “When I first encountered Elon,  one of the things that struck me was that he was never interested  in doing anything “for money” — it would always boil down to “is this of  existential relevance to humanity. ” In his mind, colonizing Mars is essential  to the survival of our species, which may be the only example of  consciousness in the universe. There’s always some chance that something could  go wrong on Earth.

Dinosaurs are not anymore. And besides. .

. Mars was about  striving for an exciting future. Life can’t just be about solving problems.

There  have to be things that inspire you, that move your heart. That make you glad, when you wake up in  the morning, you’re excited about the future. And going out there and being a multi-planet  species and being a space-faring civilization, and making science fiction not fiction  forever, I think that’s one of those things.

Initially, his plan was to build a  small rocket to send mice to Mars. But what if the mice didn’t survive? It  wasn’t exactly an inspirational mission.

His second plan was to send a tiny  greenhouse to Mars - a symbolic gesture to demonstrate life on another planet. He estimated it would cost about $30 million,  which he could afford thanks to the sale of PayPal to eBay, netting him $180 million. To get started, Musk flew to Moscow to buy a Russian rocket.

But things didn’t go as planned. He thought he’d secured a deal to buy  two refurbished ICBMs for $18 million, but the Russians clarified that it was $18 million each,  and then they raised the price to $21 million. Rocket engineer Jim Cantrell, who accompanied  Musk, later recounted to Issaacson how the Russians taunted him: “They said, ‘Oh,  little boy, you don’t have the money?

’” If the Russians wouldn’t sell him rockets  at a reasonable cost, he’d build his own. He began developing what he called  the "idiot index," a way to measure inefficiency by comparing the cost of a finished  product to the cost of its raw materials. Musk discovered that the finished  rockets were marked up by a factor of 50.

He realized he could build  rockets far more efficiently. Although his good friends tried to talk  him out of starting a rocket company - one even compiled a reel of rocket disasters -  Musk was already aware of the challenges. He says he gave himself a 10% shot of success.

There are times when something  is important enough, you believe in it enough, you do it in spite of fear. Musk set up shop in an old warehouse  in Southern California, long home to aerospace giants that had cultivated  a deep pool of engineering talent. In May 2002, he incorporated  Space Exploration Technologies and later renamed it SpaceX to  include his favorite letter - X.

The goal of SpaceX was to launch  its first rocket by September 2003 and send an unmanned mission to Mars by 2010. While these timelines were wildly optimistic,  biographer Walter Isaacson noted that they “transformed his wild notions from being  completely insane to being merely very late. ” Around the time he started SpaceX,  Justine gave birth to their first child, Nevada, named after the state where he was  conceived during the Burning Man festival.

But their happiness didn’t last. Just 10 weeks later, while attending a wedding,  a hotel manager rushed to inform Elon and Justine that their son, who had been sleeping in his  crib under a nanny’s care, had stopped breathing. Although the paramedics revived him, Nevada had been deprived of oxygen for  too long and was declared brain dead.

The cause was identified as Sudden  Infant Death Syndrome (SIDS). Musk was devastated. His mother, Maye, described  the moment to Walter Isaacson: “He cried like a wolf.

Cried like a wolf. ” He threw himself more deeply into his work. One of his pivotal early  decisions was hiring Tom Mueller, a brilliant engineer who worked on  engines at the aerospace company TRW.

He was also a regular at the Reaction Research  Society, a club for rocket enthusiasts. One day, Musk visited the club  and peppered him with questions, asking if he could build an  engine as large as TRW’s RT-106. Intrigued by the challenge, Mueller applied  his expertise to create the Merlin engine, which powered SpaceX’s Falcon rockets.

When Mueller set an aggressive deadline for  completing a version of the Merlin engines, Musk insisted the timeline be cut in half. Mueller pushed back, saying, “You can’t just  take a schedule that we already cut in half and then cut it in half again. ” Musk’s response: “.

. . when I ask for  something, you fucking give it to me.

” Although the engines weren’t completed  within Musk’s expedited timeline, it highlighted his extreme sense of urgency  to get to Mars as quickly as possible. That sense of urgency often collided with  the slow-moving bureaucracy of California. Getting approval for testing at the Mojave Air  and Space Port was bogged down by red tape.

To keep things moving, SpaceX leased an  abandoned test site in McGregor, Texas, previously owned by the bankrupt Beal Aerospace. Mueller and his team worked 12-hour days  followed by dinner at Outbreak Steakhouse and ended the night on a conference call  with Musk, who pushed for faster solutions. When lightning struck a test stand  in Texas, it damaged a fuel tank’s pressurization system, leaving  a bulge in one of its membranes.

Traditional aerospace companies  would typically opt to replace the tank - a process that could take months. Instead, Musk said, “Go up there with some  hammers and just pound it back out, weld it, and we’ll keep going,” as recounted by Isaacson. From the beginning, they prioritized  moving quickly and cutting costs.

For example, Ashlee Vance’s biography on  Elon Musk recounts a moment when a supplier quoted $120,000 for an actuator  to swivel the upper-stage nozzle. Musk laughed and told the engineer  in charge of that component: “That part is no more complicated than  a garage door opener. Your budget is five thousand dollars.

Go make it work. ” Cutting costs became a hallmark of SpaceX. What a lot of people don’t realize  is that SpaceX makes about 80% of the vehicle by value in-house.

For the engine,  raw metal comes in and out comes the engine. While SpaceX thrived on working  quickly and cost effectively, they needed someone who could sell their product. There’s Gwynne at her cube Gwynne Shotwell’s assertive yet easygoing  nature struck a perfect balance to Musk.

Before joining SpaceX, Shotwell was head of space systems sales at the low-cost  rocket builder Microcosm Inc. Her colleague, engineer Hans Koenigsmann,  had recently been recruited by Musk. When she gave Koenigsmann  a ride to SpaceX one day, she got the chance to meet Musk,  who was impressed by Shotwell and offered her the role of vice president of  business development the following day.

Shotwell helped SpaceX secure its first  major Defense Department contract in 2003 - a $3. 5 million deal to launch small satellites  enabling commanders to quickly access imagery. But not all contracts were awarded fairly.

In February 2004, NASA granted a $227  million contract to Kistler Aerospace to resupply the International Space Station  without allowing other companies to compete. A NASA deputy administrator admitted to Musk  that Kistler was chosen because it was on shaky financial ground and needed propping up. “financial arrangements being shaky.

” Musk was livid and complained to the  Government Accountability Office, forcing NASA to cancel the Kistler contract. This was crucial because it set a precedent that  future contracts would be awarded based on merit. 3 2 1 0 SpaceX was ready to prove its  capabilities to the world.

It was time to launch their first rocket into  orbit to show that a private company could compete and beat legacy aerospace  giants and government agencies. Originally, the plan had been to launch the Falcon  1 from Vandenberg Air Force Base in California, but delays caused by the Air Force prioritizing  a secretive billion-dollar spy satellite led Musk to move operations to the Pacific, to a remote  atoll in the Marshall Islands called Kwajalein. The launch itself took place on  the even smaller island of Omelek.

The SpaceX team found creative ways to  save money; rather than paving a path to transport the rocket to the launch pad 150  feet away, they laid plywood on the ground, rolling the rocket forward a few feet at  a time before repositioning the boards. On the morning of the launch on  March 24, 2006, Musk’s brother, Kimbal, convinced him to take a bike  ride at sunrise to relieve some stress. Good signal strength.

Just five seconds after liftoff,  the rocket began losing thrust. A fire caused by a fuel leak  broke out on the Merlin engine. The mission ended in failure  less than a minute later.

It was tough for the team, who had  given everything - even sleeping on air mattresses under the  stars, to process the loss. But Musk remained resolute, telling his team:  “. .

. we will build another rocket and try again. ” After reviewing the footage, they discovered that the fire was caused by a leak from a  small B-nut that secured a fuel line.

The night before, an engineer had removed and  reattached the nut to get access to a valve. However, Isaacson notes it was  Musk who had approved a lighter, cheaper version of the part  that doomed the flight. A second launch in March 2007 showed promise  as the two stages of the rocket separated, but the second stage started to spin  out of control due to sloshing fuel.

Musk had decided not to add  slosh baffles - internal rings to stabilize the fuel inside the tank -  to save weight - another costly lesson. By the time of the third launch in August 2008, SpaceX faced immense pressure  as it was running out of money. Musk had told his team they  only had enough money for three launches and two had  already ended in failure.

Meanwhile, Tesla was teetering  on the brink of bankruptcy. Not to mention, Musk was going  through a bitter divorce. The third flight was scheduled for August 3, 2008.

The upper stage separated from the booster. But just as the team was getting  ready to celebrate…disaster struck. The rocket’s first stage collided with the  second, sending both crashing back to Earth.

This time, the fault was in the redesigned  cooling system for the Merlin engine, which caused it to produce a small  amount of thrust even after shut down. While this wasn’t a problem under sea-level  conditions, in the vacuum of space, the effects were amplified, leading to the collision. Employees were devastated.

Were all their efforts for nothing? Musk refused to despair. Dolly Singh, SpaceX’s former  head of talent acquisition, vividly recalled his words in her post on Quora: “…we need to pick ourselves  up, and dust ourselves off, because we have a lot of work to  do.

Then he said, “For my part, I will never give up and I mean never,”  and that if we stick with him, we will win. I think most of us would have followed  him into the gates of hell carrying suntan oil after that. It was the most  impressive display of leadership that I have ever witnessed.

Within moments  the energy of the building went from despair and defeat to a massive buzz of  determination as people began to focus on moving forward instead of looking back. This  shift happened collectively, across all 300+ people in a matter of not more than 5 seconds.  It was an unbelievably powerful experience.

” Although Musk had nearly exhausted all of his own  personal funds for the three flights of Falcon 1, thankfully…SpaceX could muster a fourth flight. Financial support came from his former  PayPal colleagues, including Peter Thiel, who had ousted him as CEO eight years earlier! They stayed on friendly terms, and  Thiel and the team at the venture capital firm Founders Fund invested $20  million the day after the third launch failed.

Within just six weeks, SpaceX  had another rocket ready to fly. 3 2 1 0 Their fourth attempt took  off on September 28, 2008. We have liftoff.

Musk took his kids to Disneyland  in the morning to relieve stress, even fittingly riding Space Mountain. The tension rose as the rocket  climbed steadily into the sky. And then, two minutes and 36 seconds into flight: Stage separation confirmed!

Falcon 1 was the first privately  built rocket to reach Earth’s orbit. As Musk celebrated with his employees, he told  them, “This is just the first step of many. ” Three months later, three days before Christmas, NASA awarded SpaceX a $1.

6 billion contract  to resupply the International Space Station. Beyond thrilled, Musk changed his computer  login to “ilovenasa” as Walter Isaacson notes. The contract paved the way for SpaceX to  develop a much larger and more powerful rocket.

The Falcon 9 is named for its nine Merlin engines. It was over twice the height, 12 times heavier,  and 10 times more powerful than the Falcon 1. True to the spirit of SpaceX, Musk and his  team found innovative ways to reduce costs.

While latches used by NASA in the  space station cost $1,500 each, a SpaceX engineer modified a bathroom stall  latch to create a locking mechanism for just $30! When an air-cooling system for the payload bay  was estimated at $3 million, Musk suggested they use a regular $6,000 home air conditioner and  modify the pumps, as described by Isaacson. SpaceX officially cemented its status as nimbler  and more cost-efficient than its competitors.

We believe in, sort of, everyday low  prices. And we’ve stuck to our guns on that. Whereas other launch providers  sort of treat it like a rug bazaar, they’ll charge you what they think you can afford.

The original version of the Falcon 9 cost  around $50 million per launch, substantially lower than the Space Shuttle’s staggering $1. 5  billion per launch over the life of the program. President Obama noticed SpaceX’s ability to  slash costs and in 2009, he made the bold and controversial decision to bring NASA’s plans  for the Space Shuttle’s successor, Constellation, to a screeching halt - shifting the focus of space  exploration to private companies like SpaceX.

The Falcon 9 was followed by the Falcon Heavy, but Musk’s ultimate vision was  to build a fully reusable rocket. Starship is the centerpiece of SpaceX’s  mission - a fully reusable launch vehicle. Starship is the reason SpaceX is the  most valuable company on earth today.

A company that won’t be going public anytime soon. Musk once explained: Mars requires developing complex  technology over a decade+, but market cares about next 3 months.  Result would be conflicting priorities.

” Shareholders prioritize consistent quarterly  profits and immediate returns on investment, while SpaceX’s mission of going to Mars requires decades of development without  immediate financial payoffs. However, one sector of SpaceX may go public:  Starlink, its satellite-based internet service. Starlink has grown from 60,000  subscribers in 2021 to 5 million in 2024.

Musk has hinted at the possibility of  taking Starlink public in the future: “. . .

but only several years in  the future when revenue growth is smooth & predictable. Public market  does not like erratic cash flow haha. The idea is that Starlink’s revenue stream  could provide financial support for Elon Musk’s long-term goal of colonizing Mars.

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