Starcloud is a startup that’s racing to build massive data centers in space that supporters say could limit the strain artificial intelligence is placing on terrestrial electric grids.
But the fate of Starcloud — and dozens of other space startups seeking to upend the mining, pharmaceutical and telecoms industries — depends on whether Elon Musk can figure out how to get SpaceX’s Starship megarocket to stop exploding.
Starcloud is one of 47 companies whose business models rely on the increased capacity or lower launch costs that the SpaceX CEO has for years promised Starship would already be able to deliver, according to an exclusive analysis from the financial data provider PitchBook. The largest and most powerful rocket ever built, Starship prototypes have unexpectedly burst into flames more than a dozen times, interrupting commercial air travel and sending shrapnel into Mexico.
Those space startups — including ones working on orbital data centers, asteroid mining and microgravity pharmaceutical manufacturing — have collectively raised more than $8 billion from investors and could soon be at risk if Starship continues combusting, PitchBook found. POLITICO’s E&E News requested a tally of companies whose business models largely depend on the long-anticipated megarocket after discussing the significance of Starship with 11 space company investors, executives and researchers.
A decade ago, Musk claimed SpaceX would build a rocket capable of carrying mankind to Mars by 2025. Now, with his megarocket still grounded, his goal is to return astronauts to the moon by the end of President Donald Trump’s term and visit the red planet in 2030, which could lead companies and venture capitalists that bet on Starship to reevaluate their wagers.
“If Starship isn’t running within the next two to three years, then you’re going to start seeing investors getting nervous,” said Ali Javaheri, a space sector analyst at PitchBook. Most VCs raise money, back startups and promise profits to investors over seven to 12-year time spans — and some space startup investments are approaching the end of that cycle.
Starcloud is one of the new companies that needs Musk’s megarocket to take off. It’s planning to build 5-gigawatt data centers in space, powered by mileslong solar arrays. That’s as much electricity as roughly 4.2 million U.S. homes consume on an annual basis. Starcloud didn’t respond to a request for comment.
Customers needed
Starship’s explosive delays put startups like Starcloud at risk. But its potential failure could also harm SpaceX, which can’t rely on government contracts alone to fund its planned launches, according to space industry analysts.
SpaceX and Musk didn’t respond to requests for comment.
The company and its CEO have often described failures as part of their plan. When a Starship rocket exploded in January 2025, SpaceX said the rocket’s “rapid iterative development process” would continue. Musk shared a video of the test flight debris incinerating as it fell back to Earth. “Success is uncertain, but entertainment is guaranteed!” he said in a post on X.
“I don’t think people grok the scale of what SpaceX are building,” said Finn Murphy, a co-founder and partner at the venture capital firm Nebular, which is an investor in Starcloud. “They need so many businesses to be spun up in order to actually consume the inventory for launch that they’re going to put together.”
Murphy shrugged off the rocket’s setbacks.
“We’re investing in companies pushing the envelope of risk in engineering and market timing,” he said. “If you’re early, you’re wrong. If you’re late, also wrong. The best companies have raised capital to survive potential delays.”
For startups that need a lot of cargo room or low launch costs to succeed, Starship is their only potential near-term option, according to Bryan Clark, a former naval strategist.
“Nobody else is really pursuing a Starship-scale vehicle,” said Clark, who is now director of the Center for Defense Concepts and Technology at Hudson Institute, a conservative think tank. “It’s pretty much at this point SpaceX and a bunch of other people that are pretty far behind.”
Failure to launch
Under development for more than a decade, Starship is the largest and most powerful rocket ever built — taller than a 40-story building and nearly 30 feet wide. It is designed to carry roughly two semitrucks’ worth of cargo to space with each launch and to be fully reusable.
In 2025, Starship experienced what SpaceX euphemistically calls “rapid unscheduled disassembly” during three of its five test flights. The rocket also erupted in a massive fireball on SpaceX’s South Texas launchpad last June. Its next test flight is expected in April, with commercial operations at least a year out.
Starship’s struggles come after Musk — who also leads electric vehicle company Tesla and is the world’s richest person — took a detour into politics that badly damaged his reputation as a visionary environmentalist.
He was the largest funder of Trump and Republican lawmakers in the 2024 election and then ran Trump’s so-called Department of Government Efficiency, which claims to have slashed billions of dollars that agencies had planned to spend on limiting climate change.
SpaceX has already dramatically lowered the economic barriers to space. Starship could eventually reduce them by another order of magnitude.
The cost of getting cargo into space has fallen from over $65,000 per kilogram via NASA’s Space Shuttle to about $1,500 aboard SpaceX’s partially reusable Falcon Heavy rocket, according to data from the Center for Strategic and International Studies, a bipartisan think tank. Musk predicted in January that Starship could drop that rate to around $100 per kg.
“The cost of access to space will drop by a factor of 100 when you achieve full reusability,” the SpaceX CEO said while discussing Starship at the World Economic Forum in Davos, Switzerland.
The company’s Falcon spacecraft “burn up on reentry,” Musk noted by way of comparison. “The cost of that is equivalent to a small to medium-sized jet.”
NASA has backed 18 Starship-dependent startups, more than any other funder, PitchBook’s data shows. The vast majority of the financing has come from venture capital firms like Andreessen Horowitz, Lux Capital and Nebular.
NASA, Andreessen Horowitz and Lux Capital didn’t respond to requests for comment.
New space competition
Advocates of orbital data centers — including Musk and his billionaire space competitor Jeff Bezos — claim floating AI factories could reduce data centers’ reliance on fossil fuels for baseload and backup power. But orbital data centers only make economic sense with larger rockets and cheaper launch costs, according to space industry analysts.
Last month, Musk merged his rocket company with xAI, an artificial intelligence firm he also leads, in part to provide more capital for his orbital data center ambitions. Meanwhile, SpaceX is preparing for what is expected to be the world’s largest initial public offering in June. That move could provide the company with a $75 billion boost but would increase the regulatory scrutiny of SpaceX and Musk, who has frequently battled with Washington.
The environmental benefits of orbital data centers is a matter of some dispute as well. Dramatically increasing the rate of SpaceX’s methane-fueled rocket launches could worsen climate change, damage the ozone layer and harm the ecosystems near launch sites.
Skeptics of space-based data centers say they would struggle to transmit large amounts of data back to Earth via a narrow band of the electromagnetic spectrum reserved for satellite communications. That limitation undercuts their potential to alleviate AI-related grid strain.
Other industries that could be reshaped by Starship-enabled competitors include mining and pharmaceuticals. AstroForge, for instance, aims to extract valuable metals from asteroids and return them to Earth. Drug-maker Varda Space Industries has begun small-scale manufacturing of specialty crystals that are easier to produce in microgravity settings.
AstroForge and Varda didn’t respond to requests for comment.
The biggest company that needs the Starship system to work is Voyager Technologies, which has raised almost $4.6 billion from investors. The defense and national security contractor is seeking to build a replacement for the International Space Station that it’s calling Starlab.
“There are limited launch vehicles capable of lifting an object of Starlab’s mass into orbit and such vehicles do not have a proven track record of successful launches,” Voyager warned investors last June ahead of its initial public offering. “If such launch vehicles are not operational by our planned launch date, we may experience delays in our ability to commence the Starlab business, and if our attempted launch fails, we may not be able to construct a replacement in a timely manner, or at all.”
In the same prospectus, Voyager noted that Starlab was specifically “designed to be deployed and achieve initial operational capability in a single launch on SpaceX’s Starship,” adding that the company had already “secured a launch contract with SpaceX.”
Voyager didn’t respond to a request for comment.
Another company that is largely reliant on Starship is AST SpaceMobile, a space-based cellphone and internet provider, securities filings show. SpaceX is both a contractor and competitor of AST.
Last year, SpaceX’s current fleet of rockets were used in over 86 percent of all U.S. launches and more than 51 percent of launches worldwide, according to an E&E News analysis of statistics compiled by retired Harvard University astrophysicist Jonathan McDowell. So AST has few options for getting its satellites into orbit other than using Starship or another rocket from SpaceX, which has its own Starlink internet service.
“There are a limited number of third parties with the capabilities to launch our satellites, some of which have launched services that could compete with the SpaceMobile Service,” the company said earlier this month, alluding to SpaceX.
That March 2 filing also warned that AST could be at risk if the company fails to “reach commercially viable agreements with launch providers that can accommodate the technical specifications of our satellites” or if launch costs “exceed our estimates.” Analysts expect Starship would allow AST and other startups to put larger objects into orbit at prices well below current going rates.
AST didn’t respond to a request for comment.
The multibillion-dollar question
Unlike Voyager and AST, most of the startups banking on the Starship system aren’t publicly traded and therefore don’t have to disclose to the Securities and Exchange Commission how they could be harmed if the rocket continues going up in flames. In fact, the dozens of companies identified by PitchBook could even be an undercount, according to space industry experts.
“Virtually every space startup I’ve talked to uses Starship as their proposed launch capacity [and] launch cost for all their calculations,” said Morgan Goodwin, the executive director of the Planetary Sunshade Foundation, an environmental group that advocates for the development of a giant space umbrella to limit global warming. The foundation supports space sunshade policy and commercial research efforts.
“That’s just the standard,” Goodwin added. “It’s become a unit of measurement, even though it does not yet operate.”
More Starship fireballs wouldn’t necessarily wipe out all the companies or investment funds betting on its success, according to PitchBook’s Javaheri. That’s because many companies could reengineer their products to be smaller or weigh less. Some promising startups could also seek additional support from NASA, the Pentagon or other agencies, he said.
“There’s workarounds,” Javaheri added. “But it just makes everything more expensive.”
How soon Starship begins launching cargo into orbit remains the multibillion-dollar question.
“SpaceX will probably get there,” said Clayton Swope, a former technical intelligence officer at the CIA who is deputy director of the Aerospace Security Project at the Center for Strategic and International Studies. “I just don’t know when.”
