Space start-ups see dollar signs in Obama's NASA overhaul

"We cannot continue to coddle the dreams of rocket hobbyists and so-called 'commercial' providers who claim the future of U.S. human space flight can be achieved faster and cheaper than Constellation," Shelby said after the proposal was announced.

But space entrepreneurs see the new strategy as a gold mine for an emerging commercial industry. Obama's budget would pump billions of dollars into private ventures trying their own hands at space travel.

Start-ups headed by wealthy tech innovators, including Amazon CEO Jeff Bezos, Microsoft co-founder Paul Allen and PayPal co-founder Elon Musk, are trying to be viable alternatives to government-run space projects. Their goal is to develop space tourism (think hotels on the moon) and travel beyond the moon (think asteroids or Mars). From the private sector's perspective, NASA has lost its luster over the decades since its first trip to the moon.

"What we've been doing for the past 40 years is just maintenance," Stimers said. "What we need to be doing is a lot more innovation. The idea that our human space flight capability has consisted of only one platform is a little disappointing."

In 2004, the first space-related prize, the Ansari X Prize, gave $10 million to Scaled Composites, a firm run by Burt Rutan and financed by Allen, for carrying three people 100 kilometers above the earth's surface twice in two weeks.

Even Google has gotten in on the game, sponsoring the Google Lunar X Prize. The prize will give $20 million to the first privately-funded team that sends a robot to the moon, lands it, and transmits photos and data back to earth.

"The U.S. Government doesn't build your computers, nor do you fly aboard a U.S. Government owned and operated airline," X Prize Foundation CEO Peter Diamondis wrote on Huffington Post this month.  "Private industry routinely takes technologies pioneered by the government and turns them into cheap, reliable and robust industries. This has happened in aviation, air mail, computers, and the Internet. It's about time that it happen in space."

Obama's proposal to hand the reigns to the private sector is seen in some corners as a lack of direction. Some lawmakers are worried that private firms won't take the necessary safety precautions. Others fear losing NASA jobs and and contracts.

X Prize thinks there will be plenty of demand for astronauts and NASA engineers in private firms that need their experience. The fledgling industry is taking root in places like California, New Mexico, Oklahoma, Florida and Virginia. Stimers stressed the emphasis start-ups are putting in safety. Unlike the government, he said, a deadly accident in space would put a private firm out of business.

Stimers says X Prize is looking for policy support for commercializing the space program, not for federal funds to feed the prize competitions. And it wants to continue working closely with NASA to develop prize programs for the government.

K&L Gates also lobbies for the Commercial Spaceflight Federation, which represents firms like Virgin Galactic (run by Sir Richard Branson) and the Mojave Spaceport in California.