Opinion: Spacehab Was The Beginning Of Commercial Space

Forty years ago, a quirky entrepreneur named Bob Citron arrived at the offices of The Center for Space Policy (now CSP Associates) in Cambridge, Massachusetts, with a novel business proposal to fly space tourists in a passenger module inside the cargo bay of a NASA space shuttle.

The U.S. had issued the first policy guidelines for the commercial use of space two years earlier, with then-President Ronald Reagan looking for ways to encourage private-sector investment in the final frontier.

Citron needed help navigating the NASA bureaucracy, finding qualified contractors to build his modules and raising capital to pay for the project. My CSP partners and I were skeptical that NASA would agree to allocate scarce shuttle payload capacity to provide joy rides for wealthy space tourists or that, considering the cost to develop, qualify and operate Citron’s passenger modules, his business plan could ever turn a profit.

Our team proposed that Citron focus on a more promising opportunity: providing pressurized modules filled with microgravity experiment lockers that could be leased by government customers, research organizations and private companies and operated by shuttle astronauts in a shirt-sleeve environment. Citron readily agreed, and together we developed a business plan for the company, known as Spacehab, with four lofty goals: 

• Secure White House policy and budget support for a pathfinder commercial space venture.
• Assemble a multinational contractor team that would design and build the laboratory modules.
• Persuade NASA to contract with an untested commercial space startup.
• Find a syndicate of private investors and lenders willing to underwrite the project. 

Despite making good progress with its module design, Spacehab came perilously close to failure only 18 months after it had been conceived. The tragic loss of the space shuttle Challenger on Jan. 28, 1986, nearly derailed the company’s ambitious strategy. News of the disaster reached us in Turin, Italy, during a negotiation with the CEO of Aeritalia (now part of Thales Alenia Space), which eventually would build Spacehab’s habitat modules.

The shuttle manifest was thrown into disarray, and NASA informed Spacehab that no launches would be available before 1995, nearly a decade away. Potential Spacehab investors were grimly reminded of the inherent risk of human spaceflight. The project seemed doomed. 

But Reagan’s personal interest in promoting a commercial space industry led to a provision in the February 1988 National Space Policy that instructed NASA to “make best efforts” to launch Spacehab’s laboratory module in the early 1990s. NASA in 1988 authorized Spacehab to develop a 1,100-ft.³ structure to fly in the cargo bay of the space shuttle that would quadruple the shuttle’s pressurized experiment volume. Two years later,  the agency contracted with Spacehab to lease 200 of the 300 available experiment lockers over six upcoming shuttle flights, at a total cost of $184 million. 

By 1993, Spacehab boasted a $250 million backlog of microgravity experiment locker rentals and had raised $150 million of private capital—though only by securing the investment through a novel insurance policy with a Lloyds of London syndicate that would pay out if Congress failed to appropriate funding to support NASA’s multiyear commitment to the company. At the time, Spacehab had just eight employees.

On June 21, 1993—nine years after Citron first visited CSP’s offices—Spacehab flew its first 10-day mission aboard the space shuttle Endeavour. Sold-out experiment capacity on Spacehab’s three initial flights was leased by 47 companies, 27 universities, eight research institutes and NASA. 

Spacehab research and logistics modules and unpressurized cargo carriers went on to fly on 22 space shuttle missions through 2007, including seven logistic resupply flights to Russia’s Mir space station and eight supply runs to the International Space Station (ISS). In addition, the company developed an unpressurized external stowage platform that was attached to the ISS airlock, providing a permanent spare parts facility for the crew.    

The commercial space industry has grown dramatically in recent years. But Spacehab was the first to develop and fly a privately financed habitat for humans in orbit and the first to provide microgravity research and space station logistics support as a business service. Spacehab in 1995 also became the first company to complete an initial public offering of a pure-play commercial space services company. 

Spacehab’s innovation and perseverance helped the company to succeed against all odds and serves as a pathfinder for the generation of commercial space companies and investors that have followed.

Brad M. Meslin is a founder and senior managing director of CSP Associates, a leading aerospace and defense transaction diligence advisory firm.