The successful rocket launch last week by Elon Musk’s SpaceX brings up some interesting valuation questions about a fledgling and high-risk business. The launch was the first since the company’s last attempt resulted in its rocket blowing up on the launching pad.

Stephen Fleming (Boostphase), a venture capitalist active in the alternative space industry, says that one of the key issues for appraisers is terminal value, which most likely is zero. “Traditionally, most of these companies have failed,” he says. “There have been literally dozens of space-related startups that have simply gone bankrupt or have been acquired just for the engineering team. I have done that. So there is extraordinary volatility in terms of what the result is going to be.”

Fleming tells Michael Blake (Arpeggio Advisors), who has done appraisals of space commercialization companies, that Musk and his firm “will continue to accomplish remarkable things, but by no means is that an attainable model as yet.” However, there is optimism that this industry will eventually make a lot of money. Fleming points out that the more successful firms will target a particular market need and not try to be all things to all people.

Alternative space firms are involved in launch services, hauling cargo to space stations, satellite and rocket manufacturing, recovery of minerals on asteroids, as well as space tourism for the superwealthy. So far, the need for valuation typically has been in a 409a context (lots of stock options are being issued), the raising of capital, and gifts or transfers.

Blake interviewed Fleming on his insights into this industry, and you can read it in the February issue of Business Valuation Update.