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Richard Branson and the Space Tourism Business

December 14, 2011
URL: http://www.entrepreneur.com/article/222430

Richard Branson and the Space Tourism BusinessEditor's Note: Entrepreneur Richard Branson regularly shares his business experience and advice with readers. What follows is the latest edited round of insightful responses. Ask him a question and your query might be the inspiration for a future column.

Q: We're writing this email from a high school entrepreneurship class in the United States. We would like to know what inspired you to venture into commercial space travel. At what point do you expect to turn a profit on Virgin Galactic?

-- Future entrepreneurs, East Greenwich High School, via Entrepreneur.com and American Express OPEN Forum

A: In 1988, in the aftermath of the Soviet Union's implosion, President Mikhail Gorbachev invited me to the Livadia Palace, the onetime imperial home of Tsar Nicholas and his wife Alexandra, in Yalta on the Black Sea. The Russians were very keen for me to help open up this sector to tourists, and Gorbachev was a persuasive salesman: "Richard, you are known in Russia as a very brave adventurer; surely you would like to be a cosmonaut?"

I was flown to Star City at Baikonur in Kazakhstan for a tour. At the time, few Westerners had been allowed into that secret world, the workshop where Soviet scientists had created the Sputnik satellite, the Vostok, Voskhod and Soyuz manned missions, the Salyut space station -- and the ballistic missiles that had once threatened the West.

The Russians negotiated with entrepreneurial zeal, offering me the once-in-a-lifetime opportunity of becoming the first space tourist, through the Russian space program.

The price tag? Over $30 million.

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The idea of spending that much money on myself felt immoral. It made me question the ridiculous economics of putting people in space, and it sparked my search for the business breakthrough that would make space travel possible for thousands of people, rather than a select handful.

Next came the unseen part of entrepreneurship, the part that nobody ever discusses because, to be fair, there's not a lot to discuss. The secret to success in any new sector is watchfulness, usually over a period of many years. Our search for a way into space led us to a brave new world of exotic materials and untried designs, spin-offs and business opportunities, a thriving community of small companies and driven individuals supported by engaged and well-informed philanthropy.

The tipping point for commercial space travel came in May 2004 when space entrepreneur Peter Diamandis announced the Ansari X Prize. It was backed by Anousheh and Amir Ansari, who donated the $10 million to be awarded. The X Prize set a simple challenge to contestants: carry three people 100 kilometers above the Earth's surface, twice within two weeks.

There were three serious contenders for the prize. The most promising was Burt Rutan's company, Scaled Composites, which had unveiled its space program the previous year. Burt's ship, SpaceShipOne was to be carried into the upper atmosphere by a mother ship -- a lightweight plane called White Knight -- and launched in flight. I wrote to Paul Allen, Scaled Composites' financial backer, and proposed a 50-50 joint venture.

In September 2004, at the Royal Aeronautical Society in London, Burt and I announced the launch of Virgin Galactic. We signed a $21.5 million deal with Allen's company for the use of the technology, and announced that we had developed a $100 million investment plan to develop a prototype commercial six-seater spaceship at Burt's factory in Mojave, Calif. It was a terrific deal for us because the Virgin Galactic branding would now be on SpaceShipOne if it took the Ansari X Prize in October. This would give us worldwide exposure -- and it would deliver a message that we were a serious player.

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Burt Rutan is an engineering genius, years ahead of his time. There was very little about SpaceShipOne's design, fabrication, execution and flight behavior that wasn't new and unusual. As we anticipated, on Sept. 29, 2004, SpaceShipOne reached its apogee of 337,600 feet, or 103 kilometers. This was space. On Oct. 4, 2004, SS1, with test pilot Brian Binnie at the controls, reached 367,442 feet above the Earth and took the Ansari X Prize.

This development was the true launch of our business, and on July 27, 2005, in Oshkosh, Wis., Burt and I announced the signing of our current agreement. The new company we were forming would own all the designs of SpaceShipTwo and the White Knight Two launch systems that were being developed at Scaled Composites. The new business, the Spaceship Company, would be jointly owned by Virgin and Scaled. Burt's company would undertake all the research, development, testing and certification of the two craft, with Burt heading up the technical development team.

At present we have many space tourists signed up for future flights; we are conducting test flights on our ships and building a spaceport in New Mexico. Another potential arm of our business is its shuttle capability. The last NASA shuttle flew recently; the shuttles carried 51,000 pounds into orbit, at a cost of around $450 million. We and others in the emerging space private sector are working toward the day when White Knight Two will be able to take 28,000 pounds to 50,000 feet and launch it for a much lower price.

And in the future, our ships may be able to take payloads farther out into space. While Virgin Galactic must concentrate on its original plan of space tourism, these are all options for our business to grow its revenues and technology base.

So Virgin is ideally placed to move into the space industry. We have the expertise and experience of moving millions of people around the globe, safely and securely. Space tourism is an industry that's going to be a lot of fun -- for all of us!

-- Adapted from Business Stripped Bare by Sir Richard Branson.

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