What explains the privatization of key government space projects to New Space actors? Private companies like SpaceX and Blue Origin have seen a significant increase in government funding in recent years and become instrumental in visible national security milestones such as space launches. The turn to New Space actors, start-up companies funded by entrepreneurs and private funding, deviates from the U.S. government’s historical record of relying primarily on traditional defense and aerospace contractors, in stark contrast to the commercialized and entrepreneurial format of New Space companies. We argue that the decision to increasingly rely on New Space firms is a function of supply side considerations, specifically that these firms have provided products that are not government requirements but that appeal and create demand for their affordable innovations. On the demand side, great power competition with China and the new space race have created incentives to leverage alternative avenues of innovation in the service of national power and prestige. Meanwhile, the end of the Shuttle Program, an interest in ending reliance on Russian launches, and declining budgets have increased demand for affordable launch alternatives. Understanding these driving forces is important for anticipating the future of public-private space partnerships and the role governments envision for New Space in the rapidly expanding and evolving commercial space sector around the globe.