SpaceX's next-gen rocket is the key to its sky-high valuation, early investor says: 'Starship also enables all kinds of frontier markets'

Elon Musk's SpaceX is on the verge of launching what could be the largest initial public offering (IPO) in history, with its next-generation Starship vehicle poised to play a critical role in achieving its remarkable valuation.

Standing at 408 feet tall, the fully reusable Starship V3 surpasses the height of any previous iteration. It boasts a payload capacity of up to 100 metric tons, which marks a substantial increase from the 35 metric tons transportable by the V2 model. Moreover, the V3 is equipped with 33 new Raptor 3 engines that together generate an impressive 18 million pounds of thrust upon liftoff.

However, the most noteworthy aspect of the Starship V3 extends beyond its technical specifications; it is designed to underpin a vast array of businesses essential for driving SpaceX's astonishing $1.7 trillion valuation, as noted by Chad Anderson, founder of the venture capital firm Space Capital and an early investor in SpaceX.

According to Anderson, the future of various ventures—ranging from Starlink's satellite internet services and cellular ambitions to the establishment of orbital data centers—hinges on the capabilities offered by the V3.

"This next-generation vehicle is what enables all of these future businesses," he conveyed in an interview with CNBC.

Anderson anticipates a convergence of terrestrial and orbital infrastructure on an extensive scale, creating unprecedented opportunities for relocating heavy industry beyond Earth.

Furthermore, Starship is anticipated to facilitate the construction of lunar bases and eventually establish a colony on Mars. Notably, SpaceX's IPO documentation revealed that Musk stands to gain additional shares should he successfully implement data centers in orbit and a Martian settlement.

"Starship also enables all kinds of frontier markets," Anderson remarked.

Currently, the Starship V3 remains in development and is undergoing a series of test flights. Following the cancellation of a scheduled test flight on Thursday, SpaceX successfully launched the vehicle on Friday evening.

The V3's significantly enhanced payload capacity allows SpaceX to deploy a greater number of next-generation satellites into orbit compared to what the partially reusable Falcon 9 could accommodate. This increased capability is crucial as SpaceX aims to position 42,000 satellites in low Earth orbit—up from the current approximate count of 10,000—effectively connecting "hundreds of millions" of mobile users to its satellite network.

Although still in its formative stages, the Starship V3 is integral to SpaceX's aspirations of establishing orbital data centers. Given that these data centers require substantial infrastructures, including extensive solar arrays to be launched into space, the V3's upgraded carrying capacity is vital to this initiative.

Valuation Questions

Despite SpaceX’s ambitious growth projections, questions linger regarding the rationale behind its extraordinary valuation. The company’s IPO prospectus suggests a potential "total addressable market" reaching as high as $28.5 trillion, which is just a few trillion short of the U.S. annual GDP. This figure represents the market deemed "actionable" by SpaceX, as detailed in the document.

Aleksandar Tomic, an economist and associate dean for strategy, innovation, and technology at Boston College, commented to Fortune that SpaceX's prospectus leaves considerable interpretative space.

"There are significant questions, such as what multiple should you evaluate it at, and then what multiple should be assigned to Elon Musk’s involvement," he stated. "However, obtaining precise answers proves challenging when the company is reticent to provide clarity."

Nonetheless, in his discussion with CNBC, Anderson asserted that SpaceX should not be evaluated like a traditional company. The organization’s ambitious projects concerning orbital data centers and future Martian initiatives must be factored into its valuation. Essentially, SpaceX is more than merely a launch service provider, he emphasized.

"Investors and allocators are pricing in 2040 economics here. You're not looking at this business solely as a launch business. You’re viewing it as a launch service that provides them a competitive advantage and access to orbit," he concluded.