Tropical beaches, snow-capped mountains – or, outer space. Seem like a far-fetched set of vacation options? Not if you’re Elon Musk.

Mr. Musk, founder, CEO, and sole financier of Space Exploration Technologies (SpaceX), wants to rewrite the rules of space travel by introducing private enterprises to an industry dominated by governments and big corporations. He hopes that SpaceX will help lower the exorbitant costs of space travel, letting the average Joe see earth from outer space.

“What we’re hoping to do is engage a sort of Moore’s Law to space,” he says, “where every two to three years, the price of access to space drops by a factor of two.” The Moore’s Law reference is fitting, considering Mr. Musk’s past: the South African native made a boatload of money in Silicon Valley, netting a portion of the $1.8 billion made in the sale of two Internet companies, Zip2 for $307 million in 1999 and PayPal for $1.5 billion in stock in 2002.

Using only Mr. Musk’s formidable bank account, SpaceX has already built a seven-story spacecraft for less than $100 million. Launch costs hit $6 million, which is about 80 percent less than the cheapest comparable vehicle on the market. If all goes as planned, Mr. Musk’s rocket ship, the Falcon 1, will launch from Glendale, California’s Vandenberg Air Force Base in May, carrying a communications satellite for the U.S. government.

The Falcon flight will make history as the first privately funded development and launch of a rocket ship, and will also encourage the handful of businessmen who have founded their own space exploration startups.

“If something isn’t done about lowering the cost of access to space, the average person is never going to get a chance to go,” says Mr. Musk, who thinks space tourism has the potential to be a booming business.

The commercialization of space is by no means a new idea. Companies like Percheron, American Rocket, and Kistler all tried to create – and profit from – launch vehicles at lower costs. Almost all have failed, either in production, or during a crash-and-burn launch. Many simply ran out of funds. The few that still exist are by no means a great commercial success.

Mr. Musk believes his company is different. In 2000, he founded El Segundo, California-based SpaceX, and with a team of experienced aerospace engineers, set out to design and build a low-cost space vehicle from scratch. In December of last year, he unveiled his finished product at the Smithsonian Institution in Washington, D.C. as part of the 100th anniversary of manned space flight. The Falcon 1, a dual-stage, liquid-fuelled rocket booster named after the Millennium Falcon from Star Wars, was originally scheduled to launch in January, but was postponed because of regulatory reasons and additional liability testing.

What caused a software engineer-turned-billionaire to build a rocket ship? “I wasn’t one of those people who always wanted to be an astronaut,” he says. “But I always thought that the destiny of humanity lay in space,” says Mr. Musk. Eventually, he envisions a trip to outer space becoming as cheap and routine as a commercial airline flight – but only if private enterprise gets involved.

“One of the competitive advantages that we have is bringing the Silicon Valley way of doing things to the space industry, which is very bureaucratic and slow moving,” says Mr. Musk. “Everyone at the company has equity, it’s a flat layout with very little bureaucracy. Everyone just works out of a cube, including myself,” he says. Despite impressive NASA’s advancements, like its two exploration rovers on Mars, Mr. Musk believes that the space industry desperately needs true competition to lower cost barriers and speed innovation.

SpaceX’s business model is right out of an entrepreneur’s textbook: catering to a largely neglected market with an inexpensive and innovative product. The Falcon will only cost $6 million, compared to the $30 million Pegasus, made by Dulles, Virginia-based Orbital Sciences. Mr. Musk says the Falcon is second only to the space shuttle in its reusability, and is capable of hauling 1,500 pounds, enough to carry small satellites into orbit.

Mr. Musk isn’t the only entrepreneur hoping to energize the space industry. In 2000, Amazon.com founder Jeff Bezos founded Blue Origin, a Seattle-based space research company currently developing a low-cost, sub-orbital launch vehicle. John Carmack, inventor of the video games Doom and Quake, headed to Dallas and founded Armadillo Aerospace, which is developing a launch vehicle that he hopes will win the “X Prize” – a space race contest sponsored by the New Spirit of St. Louis Organization, a space advocacy group. To win, contestants must successfully send a rocket carrying three people to an altitude of 62 miles, or the “beginning” of space, twice in two weeks. The winners will get $10 million – chump change compared to development costs, but the X Prize is mostly a space publicity stunt. Like Mr. Musk, the contestants hope to raise interest in manned space flights, lower the cost of human space travel, and eventually launch space tourists using vehicles developed by their company.

With the possibility of space tourism a long way off, SpaceX is going for a more immediate and realistic revenue source. By launching small satellites for governments, corporations, and research institutions, Mr. Musk says that the Falcon should bring in about $50 million annually with six to eight launches. The U.S. government, always looking to lower costs, could be a customer.

“If a small launch vehicle were developed privately and was made available to the U.S. government at a competitive price, certainly we would benefit,” says John London, who managed the Pathfinder program at NASA’s Marshall Space Flight Center in Huntsville, Alabama.

SpaceX plans to build more vehicles, incrementally increasing the size, payload, and reusability with each step, eventually creating a completely reusable vehicle capable of carrying humans into orbit. In 2005, SpaceX plans to complete the next vehicle, the larger Falcon 5 (named after its five engines). The Falcon 5 will be able to launch 9,000 pounds into orbit – enough to haul the Mars exploration rovers, or take supplies to the International Space Station.

At $12 to $14 million per launch, its developers believe that Falcon 5 will bring in much more money than its predecessor, especially if Mr. Musk reaches his projection of eight to 10 launches per year. “Four years from now, I think we could be doing over $150 to $200 million per year in revenue,” he says.

Once the Falcon 1 proves itself, SpaceX will seek outside funding. “I think it’s possible that we could raise money before our first launch,” he says, but admits that his Falcon needs to fly before he’ll get much help from investors.

Even when money is no object, some space veterans doubt whether or not a privately funded space startup – or its vehicle – will ever get off the ground. In the past six years alone, about 10 companies have failed, according to James Wertz, president of El Segundo-based Microcosm, a company focused on cutting costs in the space industry. Microcosm has successfully launched two sub-orbital vehicles since its inception in 1984, and is currently developing its first low-cost orbital vehicle, the Sprite.

Mr. Wertz believes that some of these businessmen may get in over their heads. “Some don’t realize the technical problems,” he says. Historically, about 10 percent of all launches have failed. “That’s a pretty large failure rate,” says Mr. Wertz. “Even with the most money you can put in, and the best technology, you still have failures.”

And in the space industry, failure means a lot more than a negative bottom line – as the world witnessed in February 2003, when the space shuttle Columbia exploded in the skies above East Texas, killing all seven astronauts on board. “It’s a dangerous business,” says Mr. Wertz. “Everything has to work well, or things go disastrously wrong.”

But Mr. Musk doesn’t seem daunted by past failures. “There’s certainly a lot to be discouraged about,” says Mr. Musk. “There have been quite a few private space companies, and none have succeeded.”

So what makes SpaceX different? Mr. Musk says that failed ventures were done in by one of three reasons, or a combination thereof: lack of capital, lack of technical know-how, or a strategy based on a series of miracles. Mr. Musk says that SpaceX has all three bases covered.

Through clever thinking and innovation, he says SpaceX has lowered costs in every area of Falcon’s development. The Falcon family of vehicles utilizes serial cables instead of an ethernet connection, uses a real-time version of Unix instead of proprietary software, and does not require any launch-site assembly, as many Boeing and Lockheed vehicles do. Dramatically lowering costs and simultaneously increasing quality might sound counterintuitive, but Mr. Musk says the Falcon 1 is “about as reliable as you can get.”

He may seem a little over-confident – or perhaps even off his rocker – but at least one space veteran thinks Mr. Musk has what it takes to succeed. “He has hired some of the best talent available,” says John London. “They’re not going in with rose-colored glasses.”

Mr. London also has confidence in Mr. Musk himself. “He has done his homework,” he says. “He has learned from the failures of other people, and studied past attempts. There is no guarantee that he will be successful, but he has certainly put together the people and the program that will make a real good run at it.”

A successful launch is very different from a successful business. Even if Falcon makes it into orbit and back intact, Mr. Musk might never get his $100 million back. “If return on investment is the major driver, developing a space launch vehicle is probably not the best thing to do,” says Microcosm’s Mr. Wertz.

“The launch market at this moment is very small,” he says – only about 120 small space vehicles launch worldwide each year. Subtract the number of existing vehicles, factor in giants like Boeing and Lockheed, and a new private space vehicle will be lucky to launch three to five times per year – and that’s only for a “dramatically successful launch vehicle,” says Mr. Wertz. “The development of space launch vehicle is not a good investment right now.”

Mr. London believes that the small market for Falcon 1-type launch vehicles is largely because of the high cost barriers. “If the launch costs were a lot less than they are today, a lot more people would be in line waiting to fly,” he says. But he admits that venture capital is hard to come by for any space startup. Most Wall Street investors aren’t hankering to spend their money on such a risky venture. But if they had to add one space startup to their portfolio, SpaceX would probably be their best bet. “I would expect that he would be successful,” says Mr. London.

Regardless of their chances of turning a profit, Mr. Wertz and Mr. London believe that companies like SpaceX will benefit the space industry as a whole, by sparking innovation and helping to lower costs. “It is critical to the space industry – costs must come down,” he says.

Mr. Musk agrees. “This is about lowering the price so that normal people can go to space if they want to,” he says. Most people agree that humans will eventually travel to space, and that the intervention of the private sector will at least speed that process up. But whose rocket ship will take us there is still up in the air.