Space start-ups -- and SpaceX itself -- see a future for small, cheap microsatellites in orbit. Image source: Getty Images.

Microsatellites may be the next big thing to hit space tech.

Ordinary communications satellites -- the kind that require something as powerful as a SpaceX Falcon 9 rocket or an Arianespace Ariane 5 to loft them into orbit -- weigh as much as 5 tons. In contrast, microsatellites weigh no more than half a ton and can be as small as 22 pounds. (The scale goes even smaller. "U"-class cube satellites, which consist of one to six linked 4-inch-square boxes weighing just 2.5 pounds each, fall within a "nanosatellite" class that maxes out at 21 pounds.)

Whatever you call them, satellites are getting smaller -- and the cost of building them, cheaper. Jim Cantrell, CEO of space launch start-up Vector Space Systems, says the parts needed to build a useful communications satellite -- which used to cost $2 million or more -- today can be had for as little as $25,000. And these satellites are also getting cheaper to launch. Cantrell's outfit, for example, will begin taking reservations later this year to launch 50- to 100-pound microsatellites into orbit for $1.5 million to $2.5 million apiece.

And this is sparking a boom in the space launch business.

Space, ho!

As recently as 2012, we were sending only a dozen or three microsatellites into orbit annually. By 2014, 172 microsatellites were launched, then 175 last year. This year, a new record could be set -- perhaps as many as 210 microsatellites sent into orbit, or six times 2012's tally. Fast-forward another four years, and Cantrell predicts we'll see as many as 500 microsatellites making the trip into orbit, comprising three out of every four satellites launched in 2020.

The Los Angeles Times reports that, to accommodate the demand for launch services, a whole slew of new space companies is rising up -- most of which you've never heard of before. Vector Space is one. But there's also Firefly Space Systems of Cedar Park, Texas; Rocket Lab in Los Angeles; and Cube Cab -- a company so new its website  doesn't even list a physical address.

Taking a different route to space is Stratolaunch Systems, which plans to fly an airplane really high, drop a rocket with a microsatellite aboard it, and let the rocket boost the satellite the rest of the way into orbit -- missile style. This is also the approach that Richard Branson's Virgin Galactic intends to take. Similar to its WhiteKnightTwo + SpaceShipTwo = space tourism setup, Virgin plans to fly a modified 747-400 up to 35,000 feet, and then release a launcher dubbed LauncherOne that shoots satellites into space from there.

How much will it cost?

Hypothetical prices on these hypothetical services vary (none are operational as of yet), but most of the start-ups seem to be quoting prices in the $5 million  to $10 million range for microsatellite launch services. Vector Space Systems is the outlier here, offering space launch for as little as $1.5 million and promising to begin operations as early as 2018, while Virgin Galactic is offering the most robust capability -- $10 million to put a 440-pound microsatellite into a 300-mile-high sun-synchronous orbit.

In between is Rocket Lab, which claims to have 12 multi-cubesat delivery missions fully booked already. By agreeing to stack their cube satellites among a collection of 32 other customers' payloads, Rocket Lab is offering cut-rate prices to each customer -- and maxing out its own revenue at more than $6.6 million per launch.

Will anyone succeed?

Indeed, Rocket Lab's quoted prices -- as little as $80,000 for a single 1U cubesat -- are a far cry from the $62 million launch price SpaceX charges for putting much larger satellites in orbit -- or the $225 million average launch cost from the likes of Boeing (BA 0.01%) and Lockheed Martin (LMT -0.01%). Clearly, the start-ups are pricing aggressively to grab as large a share of this emerging market as possible, and as quickly as possible, too.

Don't expect the giants of the space industry to cede the market, though. SpaceX for example, which paid little attention to the microsatellite industry initially, may find it more lucrative to service now that mass demand has arrived. After all, were SpaceX to imitate Rocket Lab's business plan, one single Falcon 9 rocket could easily lift the mass of 100 or more 100-pound microsatellites into orbit. And at a total launch cost of $62 million, that could work out to $620,000 or less per satellite launched, versus $1.6 million or more from Rocket Lab.

The trick, of course, will be finding enough customers to fill out its cargo hold, and juggling this multitude of small satellites into their owners' desired orbits. But even here, SpaceX may have found a solution in the form of an Alphabet (GOOG 0.45%) (GOOGL 0.52%) project to put upwards of 4,000 microsatellites into predefined orbits, to provide global broadband internet service from space. (That's the project that inspired Alphabet -- or Google, as it was called at the time -- to invest $900 million in SpaceX last year.)

The upshot for investors

Will SpaceX find a way to make it work and use rockets designed for lofting large satellites into orbit, to accommodate the needs of scores of smaller satellites, designed to work as orbiting constellations, instead? Will SpaceX even elect to go this route, when it seems to be doing brilliant business servicing the large-satellite market already?

Time will tell. In the meantime, investors can rest assured that with so many other start-ups innovating and offering novel pricing schemes, tailored flight plans, and pick-your-own-launch date services, there should be no lack of options for companies joining the race to put microsatellites in space.

There should be business enough to go around. Because if we really are going to be launching 500 satellites annually just a few years from now, we're going to need every one of these options -- and more.