In California, a wealthy Internet entrepreneur touches down, fresh from his visit to Cape Canaveral. His name is Elon Musk. The 36-year-old father of five is feeling positive about the prospects for obtaining a launch site near the Mecca of American space exploration. But in the meantime, he has a rocket to launch in just a few months. As usual, it will take off from a military base in the South Pacific. He hopes this time the flight will be successful. He’s got $100 million of his own money riding on it.

In Texas, Doom designer and programmer John Carmack is splitting his time between the game company that made him a millionaire and a space startup. Each day, he leaves his office at Mesquite, Texas-based Id Software early in the afternoon, and goes to his shop, where he’ll stay up until midnight tinkering a block of stainless steel into a valve for his prototype spacecraft. At Armadillo Aerospace, Mr. Carmack is developing a moon-lander prototype, one he hopes will win him this year’s Ansari X-Prize, a $10-million award for space innovation.

In New York City, one of the United Kingdom’s richest men unveils an interior prototype of a new, American-made spaceship he proposes to launch in a year. Sir Richard Branson has built his Virgin empire from music, trains, and planes. Now he wants to add space tourism to his collection of commercial fiefdoms.

In the California desert, 61-year-old entrepreneur Jim Benson decides the management team at SpaceDev, his Poway, California-based company that makes microsatellites and other space hardware, can go on without him. So he resigns and a few days later starts a new company—aimed at taking people into orbit.

While the grassroots movement of privately funded civilian space exploration has been building strength for at least a decade, it has taken off in the past 24 months. The scheduled retirement of NASA’s space shuttle in 2010 has opened up an opportunity for private rockets to take satellites and other payloads into orbit, creating a private space race funded by several deep-pocketed entrepreneurs and venture capitalists.

BoosterismAs with any race, the prize is market share, and the market opportunity for this race breaks down into roughly two key components: boost services—that is to say, building rockets, and booking room on them for various payloads, including satellites, scientific material, or even remains of the dead; and so-called space tourism, where private companies charge individuals hefty sums to hitch a ride on a rocket.

One estimate puts the current market for peddling boost services to the U.S. government at around $5 billion per year in revenues—about the same size as the market for global boost services, for a grand total of about $10 billion. The Federal Aviation Administration and the Commercial Space Transportation Advisory Committee in their latest projections expect demand for commercial orbital space launches to be on the order of 22 to 24 launches per year worldwide, the bulk of those being on medium-to-heavy launch vehicles taking payloads into orbit.

Satellite operators, broadcasting companies, and, more recently, digital radio services like XM Satellite Radio and Sirius Satellite Radio are booking rocket space to get their satellites into orbit.

Despite a continuing need to launch stuff into space, the commercial boost market is not a hot growth area. During the peak of commercial launch activity, from 1997 through 2001 when telecom companies were sending satellites up at a rapid pace, commercial launches accounted for 42 percent of all worldwide launch activity. That share has decreased in recent years. Commercial activity accounted for just 33 percent of worldwide launches in 2005.

But that hasn’t deterred new companies seeking to break into the boost business, including Kistler Rocketplane of Oklahoma City and Mr. Musk’s SpaceX, based in El Segundo, California. Entrepreneurs like Mr. Musk say that aside from commercial payload launches, the U.S. government could be a top customer. That’s because even after NASA retires its shuttle, it will still need to get equipment to the International Space Station. And global governments are always looking to launch military and scientific material, such as remote sensing equipment and astronomy satellites.

Mr. Musk is perhaps best-known as a co-founder of PayPal, where he served as the company’s chairman and CEO, and was its largest shareholder when the company was acquired by eBay for $1.5 billion in 2002.

“The reason I got involved in the Internet, was I thought it would change the world in a good way and I think it has,” he says. “The three areas I thought were interesting other than the Net were hydrogen power, solar energy, and space exploration.”

To that end, he’s put up $100 million of his own money to found SpaceX, build rockets, and launch them, so far on a trial basis. He’s gearing up to launch a test flight of a second rocket this December.

To compete in the boost market, which is currently dominated by companies like Boeing, Lockheed, and Orbital, new providers need to figure out ways to get payloads into orbit cheaply. It currently costs about $10,000 per kilogram to get a payload into low Earth orbit (LEO) on a U.S. rocket—typically one provided by Lockheed, Boeing, or another contractor. Other countries can do LEO payloads at about half that price or less, particularly Russia and China.

At SpaceX, Mr. Musk plans to be able to lift 55,000 pounds to LEO for under $35 million, or about $1,431 per kilo, a bargain price by today’s standards. Kistler Rocketplane proposes to get 10,000 pounds into LEO for $20 million, or about $4,400 per kilo. Both companies have attracted the attention of NASA, which in August split a $500-million award between them to develop and demonstrate their systems, in hopes of fostering technologies that can cheaply get crew and materiel to the International Space Station.

But neither company is near commercial launch of its services. They first need to have a series of successful test flights under their belts and then get final approval from the FAA before offering commercial launches to paying customers.

Will they succeed? Mr. Musk hopes so. Proving his upcoming test flights are successful, he projects SpaceX will break even within a year due to a backlog of pre-booked orders. He’s had some setbacks, though. In March, his first prototype, the Falcon 1, had a fuel leak that caused the rocket to catch fire mid-launch. At $6.9 million to build the rocket, the leak proved what space engineers have known for decades—they don’t call it rocket science for nothing.

Thrill RideThen there’s the more specialized field of space tourism—the idea of getting people to pay a rather sizable ticket price for a rocket ride, the experience of zero-gravity, and a safe descent back to Earth.

In the space tourism category, Virgin Galactic—the brainchild of Sir Richard—has the highest profile. Virgin plans to take high-rollers with a few hundred thousand dollars to burn into space aboard a 60-foot spaceship. To that end, Virgin has contracted with Mojave, California-based Scaled Composites to build its spaceship prototype. Scaled is the same company that developed the earlier SpaceShipOne with funding from venture capitalist Paul Allen. That craft won the Ansari X-Prize in 2004 after four successful flights, and now hangs in the Smithsonian Air and Space museum.

Virgin hopes to begin commercial flights within two years, and if it hits its target, it can expect competition from Mr. Benson’s tourism venture Benson Space, also based in Poway. His vehicle of choice is the HL-20, a craft reverse-engineered from a Russian shuttle design by NASA Langley. When completed (Mr. Benson hasn’t said when that will happen), the craft should take as many as 10 people into orbit. Mr. Benson plans to develop suborbital capabilities first, before taking people and packages to the International Space Station.

He’s already raised $1 million to start the company, and plans to raise another $30 million to $50 million from wealthy individuals. “Considering I raised a million with seven phone calls, I took that as a sign that I’m in the right place at the right time,” he says. “The giggle factor is gone.”

Amazon.com founder Jeff Bezos may play a role in space tourism as well. The reported plan at his Blue Origin space venture is to offer flights on a rocket based on a prototype called The New Shepard, rumored to be patterned after the cone-shaped vertical takeoff and landing vehicle known as the Delta Clipper, originally built by McDonnell Douglas. Some space buffs will remember the Clipper from 1993, when it had its maiden flight, and flew successfully for the next two years, before its final voyage cracked its aeroshell.

The most recent news from Blue Origin, which declined interviews, is that the FAA has given the firm the green light to build a spaceport on Mr. Bezos’ private ranch in southwest Texas. Mr. Bezos has said he hopes to begin flight testing of the McDonnell Douglas-designed New Shepard by year’s end, in anticipation of full-scale commercial spaceflights launching in 2010.

Currently, it costs about $20 million to go to Russia to hitch a ride on a Soyuz booster, as Anousheh Ansari, the co-founder of a Plano, Texas-based VC firm, did recently. Virgin Galactic and Benson plan on cutting that to around $200,000—about the cost of driving a 2006 Bentley Continental GTC convertible off the lot.

If that ends up being the ticket price when Virgin Galactic and Benson start lighting their candles, it will take 50,000 customers globally per year to match the potential market size of the $10-billion global boost market.

And that ticket price may go down over time. Armadillo’s John Carmack thinks downward pricing pressure could be very significant in coming years. He believes space tourism is a real commercial possibility, but still in its nascent stages.

“The tourism market is probably going to be easier to capture as time goes on. It’s real,” says Mr. Carmack, whose company prefers to wait and see before developing space tourism services.

Next WaveTourists don’t just need a way to travel. They also need somewhere to stay once they get to their destination. To that end, Las Vegas-based Bigelow Aerospace is developing inflatable space habitats—or floating space hotels.

Originally, NASA had funded a program called Transhab to make inflatable habitats for the International Space Station. When that program was cut for lack of government funding, entrepreneur and Budget Suites of America hotel tycoon Robert Bigelow picked up the NASA patents and began developing a commercial version, with $75 million of his own money.

The first prototype, dubbed Genesis 1, was launched into space atop a Russian Dnepr rocket in July, and is currently orbiting the Earth following a successful inflation test. A second flight of another prototype is scheduled for early 2007. Mr. Bigelow hopes to have a full-scale space habitat in orbit in by 2012.

Peter Banks, a principal at the newly formed, NASA-backed strategic venture capital fund Red Planet Capital, which has $70 million in NASA funds to allocate to companies developing space technologies, says the arrival of businessmen like Mr. Bigelow in the space marketplace is improving the investment climate.

“What’s different is that he’s asking the industry to give him opportunities to get the vehicle up there and take people back and forth,” Mr. Banks says.

Mr. Bigelow may be remembering the lessons of Bugsy Siegel and Las Vegas: Make a destination, however implausibly located, and people will line up to spend money. After all, it’s hard to get tourists to open their wallets if they’re still strapped into their seats.

Contact the writer:SWolfe@redherring.com