Play it in slow motion, cue the orchestra and cut to a fluttering flag, and this scene could beat the richest Hollywood cliché. The rocket men are returning from their mission, seven of them in matching blue jumpsuits, mission patches on their sleeves. Riding on a massive flatbed truck, they bounce down the road cut through an open field, their rocket still hot from its launch.

One has a badge of duct tape over a gash on his cheek, but it's big grins and waves all around as their families stream out to meet them in the road. A kid in a spacesuit runs out for a hug, rows of fans hang back to snap photos and the boys from NASA stroll up to offer hearty handshakes.

With this kind of welcome, they might as well have returned from landing on the moon. They haven't, of course—haven't even gone into space. On this rainy mid-September day in 2009, the men of Armadillo Aerospace, a private spaceflight company, have just completed the highest level of the X Prize Foundation's Lunar Lander Challenge, putting them in line for a million-dollar prize from NASA.

So what if the moon rocks are fake? The thrill is real and so is the rocket they've built, a 10-foot monster named Scorpius that runs on liquid oxygen and ethanol in two stacked round tanks, balanced on four legs and topped by a box of electronics. Hours earlier, Scorpius had taken off from a launch pad in a field, landed on a simulated moonscape, refueled and flown back.

Now, with the rocket raised to stand on the truck bed behind them, the jumpsuited heroes pose in front of it, allowing their fans—and their egos—a little post-flight indulgence.

The lunar challenge had kept the best of the country's spaceflight startups occupied for years, and now with this successful launch 40 miles east of Dallas, Armadillo has become the first to complete its second and final level, cementing its place at the pinnacle of the NewSpace movement, a cluster of private companies making spaceflight more efficient, more affordable and more accessible than it's ever been. Nobody else had even made it to level one.

The team's president, John Carmack, strolls out in a more typical Armadillo uniform: white team T-shirt, khaki cargo shorts and one hand around a Diet Coke, looking and sounding every bit the video game guru he is, the visionary behind games such as Doom and Quake. He recounts last-second adjustments he'd made to get Scorpius flying again after its touchdown on the moon, racing to correct his launch code before the rocket's liquid oxygen evaporated. "It's boiling off something like three pounds a minute. If we lost 30 pounds on there, we'd be really marginal," Carmack says. "That was rather stressful."

Also in the crowd is Peter Diamandis, the New Space movement's biggest booster, who jumpstarted a generation of small aerospace companies 15 years ago by dreaming up and helping fund the original X Prize. Earlier he told reporters he was simply an Armadillo fan, and there are plenty of those filling out the crowd too—rocket buffs, gamers out to meet the legendary Carmack, even a guy who hadn't cared about rockets until the day he heard an explosion near his office and couldn't believe it when he learned it was a rocket going off in North Dallas.

The duct-taped Russ Blink, an Armadillo co-founder, shouts over the crowd to Diamandis, asking in mock seriousness, "You got that big check for us?"

Diamandis grins and shouts back, "Soon."

It sure looked that way at the time, but no. Three weeks later, the X Prize judges made the controversial choice to give Masten Space Systems an extra day to fly to the simulated moon and back, because its Xombie rocket had been damaged by fire on the first day and needed more time for repairs. Not only did they complete the flight, but their landings were 68 centimeters more accurate than Armadillo's. Carmack's group took home the $500,000 second prize.

Although Carmack remains bitter about Masten's deadline extension, Armadillo co-founder Phil Eaton takes a more circumspect approach. "We have a goal to build an industry, and obviously that requires more than one company," he says.

For those in "the industry," alternately called "NewSpace" or "Alt Space" or, to be more precise, "alt.space," their timing couldn't be better. In February, President Obama announced that he'd cut from this year's NASA budget the Constellation program, the space shuttle's replacement, putting an end to its slow progress and ballooning costs. Last month at the Kennedy Space Center, Obama spoke about the space program's new direction: Send Americans to Mars by the mid-2030s, land on an asteroid and turn to private industry to "make getting to space easier and more affordable."

Scrapping the program that would have taken the U.S. back to the moon is not without its critics, including former astronaut Neil Armstrong, who worries that we are simply handing Russia and China the keys to space. After Obama's April speech about NASA, Alabama Senator Richard Shelby criticized the plan as "a welfare program for the commercial space industry...where the taxpayer subsidizes billionaires to build rockets that NASA hopes will one day allow millionaires, and our own astronauts, to travel in space."

Obama's NASA plans are spelled out in the agency's budget, which faces plenty more opposition in Congress. Texas Senator Kay Bailey Hutchison is gathering support for a compromise that would keep the shuttle flying two missions a year, to ensure the U.S. has a secure, proven way to keep the International Space Station stocked and running.

Far from giving up the space race, Eaton says the country's space startup community represents America's best chance at reclaiming a lead it ceded long ago. "We all thought that it had to be done at a national level, and when we realized that it didn't, now you have companies like Armadillo Aerospace, Masten Space Systems, XCOR or Virgin Galactic, and they're all saying, 'We can do this.'"

Already in 2004, Diamandis awarded Virgin Galactic $10 million for making the first privately funded manned set of flights into space. Since that time, other X Prize suitors like Armadillo and Masten have matured into players for the millions NASA won't be spending on the shuttle after this year. Aerospace giants such as Boeing and Lockheed are looking forward to NASA's money as much as anyone, but like IBM or Microsoft in the golden age of computer startups, they are the established, bureaucratic dinosaurs, with noses so deep in government business it hardly matters where one ends and the other begins. As NASA grows into a sponsor of new technology, it's looking to entrepreneurs, down where there's still room to make the decisions that look flat-out crazy until you realize they make perfect sense.

In 2009, Carmack says his company completed 20 launches with its rockets flying loose, and too many flights to count with a rocket tethered to a crane. Armadillo has won new contracts from NASA and its engines have powered rocket-racing planes through 50 flights last year. Last month they inked a deal with Space Adventures—the same space tourism agency that brokered Dennis Tito's $20 million seat on the Russian Soyuz in 2001—to book rides aboard future Armadillo flights to space for the low price of $102,000. That's half of what Virgin Galactic plans to charge.

Despite his competitive and creative zeal, Carmack is a pragmatist at heart, and Armadillo's core strategy reflects it. "Let's not take things that are so at the limit of what we can afford that we're too scared to fail. Because then you'll never try," he says. In other words: fly a lot, learn from your crashes.

For the rocket boys who grew up with Mercury, Gemini and Apollo, space hasn't been this exciting since 1969. Phil Eaton was four years old when Armstrong and Buzz Aldrin landed on the moon—that's when he decided he wanted to be an astronaut too. He built model rockets as a kid, but would give up his dream to become an electrical engineer. Only in the mid-'90s did he return to rocketry, but more as a hobby he could share with his own children. His rekindled interest led him to the Dallas Area Rocket Society, surrounded by plenty of other "born-again rocketeers." "I still had the passion for the model rockets, and started getting bigger ones," Eaton recalls. "Pretty soon you couldn't buy a big enough rocket motor off the shelf that had the performance you wanted, and you had to make your own."

Through a mutual friend, Eaton met Russ Blink, a former Texas Instruments engineer who built rocket engines in his spare time. In the late '90s, they worked together on big projects, six- and seven-footers they'd light up at big rocket meets. Eaton and Blink combined their talents flying a 60-pound miniature of the X-30 National Aero-Space Plane, a Reagan-era craft that was never produced, but was designed to fly at 25 times the speed of sound. They flew a rocket with seven motors, which they named "Atomic Balls."

"We decided that we needed to get more serious about building some liquid rocket engines together," Eaton recalls, but that was tough because they worked on opposite sides of Dallas—Eaton in Duncanville and Blink near Richardson. Eaton took a job at the company Blink had co-founded in the early '90s, Long Range Systems, which makes the light-up, vibrating pagers that let you know your table's ready at restaurants. After work, they built rockets on the back loading dock. They spent $50 to $100 a month on supplies and distilled highly concentrated hydrogen peroxide rocket fuel overnight in Blink's garage.

For a young Neil Milburn growing up in Middlesbrough, England, it was Sputnik rather than Apollo 11 that caused him to fantasize about space travel. In 1958, he watched from the distance of his smoggy, industrial hometown as the U.S. began developing its own space program, playing catch-up with the Russians. Kept out of the Royal Air Force because of his eyesight, he went to Leeds to study chemical engineering in the early '70s, and amassed experience doing engineering work with startup companies. He took his career to the U.S. in 1982, and by the late '90s was living in Plano, nearing retirement, when he found the rocket society, then found the loading dock behind Blink's warehouse.

They built rockets together for a few months, Eaton recalls, before he got an e-mail from Carmack, introducing himself and asking if Eaton would be interested in meeting to discuss a possible collaboration. Blink recalls thinking Carmack's name sounded familiar at first, but he couldn't place it. "Then it just clicked the next day," Blink remembers. "It was like, 'Do you know who John Carmack is? Holy cow, he's got money.'"

Carmack wasn't lured to spaceflight by any childhood dreams of taming the final frontier. Growing up in suburban Kansas City, he read some science fiction in the course of what he recalls was his "typical geek childhood," but instead he got hooked on computer programming. At 14, he was arrested for trying to steal an Apple II and spent a year in a juvenile home, during which time he invented a giant role-playing game called Wraith. He dropped out of college to code full-time, eventually creating Wolfenstein 3D, the seminal first-person shooter game with a dungeon labyrinth filled with Nazis, attack dogs and ammo. More intense shoot-'em-ups like Doom and Quake turned his Mesquite-based company id Software into one of the most buzz-worthy players in the gaming world.

Carmack ran his company with a kind of ideological purity that gamers could relate to, becoming an outspoken supporter of open-source programs—letting users see and modify the code. He turned up in person at an impromptu gathering of id Software fans at a motel in Garland in 1996, holding court with fans one night in a scene that replays itself in the keynote speech he delivers at the annual happening now called QuakeCon. Last year more than 7,000 gamers packed the Gaylord Texan Resort's convention space for the three-day tournament, each traveling with a custom-built gaming computer tucked under one arm and, maybe, a suitcase in the other. QuakeCon is for gaming, not sleep.

At first, Carmack's video game fortune went to custom Ferraris, but in 2000, after a series of stories about private spaceflight on the tech blog Slashdot caught his eye, Carmack began looking at custom vehicles more extreme than any of his cars. Compared to the cutthroat gaming industry, he saw gross inefficiency in the aerospace business, he says, and approached the industry like it was something to fix. Back in the '50s and '60s, space technology development was fast and costly, and after the space race was over, aerospace companies discovered a long-term market for big-ticket products such as missiles and other weaponry. Chasing a budget space market just never became worthwhile, Carmack says. "For me it really was just the sense of untapped opportunity."

He met engineers competing in the Cheap Access to Space competition—a race to take an unmanned craft to suborbital space—and eventually bankrolled a few of them. Carmack practiced with some model rockets, and after the competition ended without a winner, he decided he wanted to join up with people who had hands-on rocket experience. "I thought it would be a better strategy to take people who are actually out there and doing things on some level," he says, "even if they're just essentially large bottle rockets."

He called the president of the Dallas Area Rocket Society and asked if there were any gung-ho rocketeers in the club working with big, liquid-fueled rockets, and the president mentioned Eaton, Blink and Milburn. At their meeting in 2000, Carmack told the three men he wanted to be involved in the team, not just write the checks. They agreed, and decided their rockets should be computer-guided, and Carmack would write the code for them. Their ultimate goal: a reusable vehicle that would carry humans to orbit.

Of course, they all still had their day jobs. "We made the commitment to meet twice a week," Eaton says. "We were consistent. We always showed up on Tuesday, always showed up on Saturday." Carmack's weekly recaps of their progress are still archived on Armadillo's website; they documented all their tests, enlisting Matthew Ross, who does video work for id Software, to shoot footage of the launches. Throughout the company's wins and crashes over the years, the posts are matter-of-fact, even when they touch on personal matters: Detailing the team's work on a "two-module dual-gimballed configuration" Carmack followed with this news: "For my birthday this year, my wife got me a crane truck."

James Bauer, a welder living in Oak Cliff, was a longtime id Software fan who had hoped to join the company and help develop three-dimensional scenes for the games. He realized, though, that he was better suited to working with his hands, and after following Armadillo's progress online for a year, he e-mailed Carmack in mid-2004 to see if his rocket team could use a welder. Carmack wrote back the next day, inviting him for a tryout. Bauer became Armadillo's first full-time employee, making the precise welds that hold Armadillo's fuel tanks together. "For a month or so it was really uncomfortable for me," he recalls, "Because these guys were working on rockets, and I thought of myself as just a regular Joe." Bauer handles the welding, but like Ross, who shoots video, or Joseph LaGrave, who drives the truck, it's a small team and building rockets quickly becomes everyone's job.

Tommy Bishop, a rocket club friend who'd joined Blink's company, eventually joined them on the back dock. "We all showed up and we just worked," Bishop remembers. "There were no real specific assignments. Now, it's different."

"The first vehicles were really tiny things. It was like, 'What's the minimum thing we can put together that a computer can control?'" Blink recalls. From there, though, they progressed quickly, through traditional-looking rockets like the orange-tipped Flying Crayon to a rocket-powered table carried by four engines. Starting from scratch, they developed a broad knowledge base as they tested out new engines and propellants, test-launching their designs in open fields. The space next door to Blink's company became vacant, and they turned it into Armadillo headquarters.

"When the X Prize came about, things changed a little bit," Blink says. The prize—for making the first two privately funded manned flights to space within a two-week period—had been around since 1996, but interest around the country picked up as the 2004 deadline approached, and Armadillo chased it. Besides, if Armadillo wanted to put a man in space, they'd have to scale up their rockets someday anyway. Blink, the smallest of the team members, fit best inside the aluminum tube for the "payload," and became the guinea pig, strapping himself against the bulkhead and sitting on a pile of foam for drop-tests to gauge G-forces in a landing on a crushable nose cone.

Eaton says they spent a year testing and adjusting a peroxide-powered chair they'd designed before they made three successful flights in a row and decided it was safe for Blink to ride. "We had an ambulance on site, just in case," the post-flight journal reads. Video of the September 2002 flight shows Blink in a yellow hooded hazmat suit in the parking lot behind a warehouse, strapping into the chair between two big tanks like Marty McFly into a DeLorean. The rockets fire and Blink, hands neatly in his lap, lifts a few feet off the ground. The chair flies forward, then back a few feet before landing hard after six seconds in the air. Blink became the first and only team member to fly an Armadillo rocket—even if it was just five feet off the ground.

With extensive online video documenting their flights and failures, and growing interest in all 26 of the X Prize competitors, Armadillo quickly developed a global fan following, fed by the fact that team members, usually Carmack or Milburn, regularly answered questions about their progress in Armadillo's online forum. Carmack's star power in the gaming world may have helped their popularity too, as suggested by a June 2004 question from one "faithful disciple": "Are you the second coming JC? Come to take those who believe up into the sky? In the beginning, you brought us Doom, now conversely Rapture." Along with sales pitches from people hawking antigravity or perpetual motion devices, Milburn told an interviewer on the "Space Show" podcast in 2008 that at least 50 fans write in each week hoping to volunteer.

Ahead of the X Prize deadline, the team's mystique only grew, as news reports that handicapped the competition focused on Armadillo's hobbyist pedigree. "There's a mystique and mythology about it, but it's completely out of proportion with its level of difficulty," Carmack said in an October 2003 interview with the Dallas Business Journal. "A computer is radically more advanced than a rocket ship." Ultimately, the X Prize challenge proved too complex to tackle before the 2004 deadline, for Armadillo and all but one of its competitors.

The team that won the X Prize was, in many ways, the ultimate insider, led by the mutton-chopped engineer and aviation evangelist Burt Rutan and his Mojave, California-based company, Scaled Composites. Their manned plane SpaceShipOne flew to an altitude of more than 62 miles, beating the prize's deadline by less than two weeks. It was a high point in private spaceflight that other companies will be hard pressed to beat.

The deaths of three Scaled Composites employees in 2007, during early fuel tests for SpaceShipTwo, which was being developed for Virgin Galactic, marked a corresponding low point for the company and a reminder of the dangers in any space startup business. Stories around the X Prize focused on the garage-startup side of the industry, but that's an image Armadillo shies away from, preferring to focus on its decade of expertise and safety precautions. These safety measures got a test in October 2007 when Armadillo flew its "quad" rocket Texel, with four tanks arranged around a single engine, in an attempt to win the new Northrop Grumman Lunar Lander Challenge. After landing hard on the runway, the engine failed to shut down and Texel bounced back up in the air until Carmack, watching with team members at a distance, triggered the hard cut-off. Texel fell back down onto the pad and unleashed an enormous fireball.

The neighbors were getting restless after years of rocket tests at the North Dallas warehouse. In 2008, with plans for even bigger rockets and their lease about to expire, Armadillo decided it was time to move. They tried a few other locations, launching for a while in a field outside Rockwall, where their first launch spooked a rancher's horses, sending them bounding over his fence. Eaton began looking even farther out, driving east of Dallas in search of airports marked on his GPS. In Caddo Mills, he found a quiet runway and a hangar left behind by a sailplane business. Eaton went before the Caddo Mills City Council to discuss moving in, and discovered he'd been scheduled right after a Texas Department of Transportation group told the council it should find some new uses for the airport. The timing was perfect. Armadillo moved into the hangar that May.

It's a cool spring morning in Caddo Mills, with rows of kids and parents lining a two-block stretch of downtown. The Armadillo team is back on the flatbed, jumpsuited and waving, throwing candy along the parade route during the town's annual Fox Fest celebration. Armadillo's old X Prize banner is hanging from the side, with a green sign taped to the corner that says "Go Foxes," for the town's high school mascot. LaGrave is driving the big crane truck, with Ross in back waving and taking pictures and Milburn, the grandfather and high school physics teacher, smiling broadly as the truck makes a wide right turn on Main Street. Surrounded by "moon rocks" from last fall's Lunar Lander Challenge, holding up a big American flag, Blink sits at the back of the trailer, in an old Russian cosmonaut suit one of the guys bought on eBay.

Pixel, their four-tanked rocket, sits on the trailer behind Blink, resting on the NASA landing gear that Armadillo's been contracted to test. A boy in the crowd casually points up and tells his mom, "It's cool how they build that." After the parade the Armadillo team collects a tall green trophy from the judges—second place—and heads back to the hangar. "I don't know, maybe we needed more green on there," LaGrave jokes.

The new home is 45 minutes from Dallas, and shortly after the company set up shop at the airport, Eaton found a house on the outskirts of Caddo Mills and moved his wife, daughters and baby son to be near the rockets. Now the white board covered in rocket schematics also has good-luck notes from Eaton's kids. It's been good to be a part of the small town, Eaton says, good that the fire department knew where to find him, for instance, the night there was a methane leak back at the hangar.

In fall 2008, Armadillo claimed the Level One X Prize Lunar Lander Challenge in New Mexico, flying its rocket for two 90-second flights and winning $350,000. They became the first team to tackle the Level Two challenge that year too—lighting up Pixel on the pad the very next day. An uneven mixture of liquid oxygen and fuel overheated the engine, burning through the engine nozzle and flipping Pixel upside down as it launched. They made their plans for next year's competition—the one Masten would come from behind to win, thanks to a last-minute rule change—but around this time, Eaton says, they also decided to begin focusing on sustained business over one-off wins like the X Prize. "You can't support a long-term business plan on prizes," Eaton says.

Earlier in 2008, they'd signed on to supply rocket engines for Diamandis' Rocket Racing League, a scheme Wired once described as a "NASCAR in the clouds," but the league struggled to gather the financial backing to get started. It was steadier than prize money, and, as Carmack later wrote on Armadillo's blog, he'd warmed to the idea of airplanes powered by Armadillo's rocket engines, running at 250 miles per hour.

After cashing NASA's prize check, Armadillo took on paid work for NASA too, most recently testing out methane engines and landing gear for a potential lunar lander. Eaton says he found it incredible that NASA's representatives took one at look at Pixel, the rocket that flipped over during the lunar challenge, saw it lying on the ground in the hangar next to their rocket designs three generations further along, and decided that's what they wanted to outfit a moon landing. As far as he was concerned, Armadillo's tests had already proven it was simpler and more stable to have a separate engine for each module (Pixel has two modules and one engine).

Carmack says he poured nearly $4 million into Armadillo in its first eight years, and only in the last two has the rocket company turned a profit. "I do have the fear that if we get stuck being a small-time contractor, we do a couple million dollars a year and just kind of get by on that. There are little aerospace companies all over the place like that, and I desperately don't want to be that," Carmack says. After selling id Software last year, he's got more free cash, and says he'll be using it to pump up Armadillo's operations. "We're going to hire some more people on staff and we're going to make things go faster, because now really is the time."

NewSpace has been fairly quiet in the mainstream since the hype around the first X Prize in 2004, but things are picking up. Visit Masten's website today and for just $250, you can send a kilogram of whatever you like—science projects, grandpa's ashes, you name it—aboard one of its rockets to space. Bigelow Aerospace, makers of inflatable space hotels, has already launched a pair of prototypes in orbit.

The biggest player of all is a man who Carmack calls "the white knight" of NewSpace, Elon Musk. In 2002, Musk, a South African software wiz, founded Space Exploration Technologies, or SpaceX, with $100 million from the sale of his company, PayPal. In 2008, on its fourth attempt, SpaceX's Falcon 1 became the first privately funded rocket to reach orbit running on liquid fuel. After North Korea's failed rocket launch in 2009, Carmack sent an e-mail to Musk. It read, "Elon > Kim Jong-Il." "The notion that a private American citizen is able to accomplish what a major national power is unable to, it's a wonderful thing," Carmack says.

Like others involved in New-Space, Armadillo has plans to launch commercial flights to the edge of the atmosphere this year. And it intends to enter the adventure tourism business, offering space diving (skydiving, only much higher), and building ships that carry paying, floating customers to space. While Virgin has been marketing itself as the luxury carrier for suborbital flight, Armadillo's prices will be low enough to meet a much larger market. "Our stuff is definitely going to be a lot more Buck Rogers than Virgin Galactic," Blink says. "They spent a lot of time with a European designer to make it look really slick. Ours is really, 'OK strap yourself onto the foam and we're gonna light the candle and here you go.'"

Adds Carmack, "You see over and over in business and in engineering, when costs come down for any given capability, it winds up being exploited in ways that people never even considered." That's about as dreamy as he gets about the prospects for space—no poetry, no science fiction, just his faith in new markets to spark innovation. "That's a trap that people fall into, they put their eyes on the stars instead of where their next foot is landing," he says. "I want to stay pragmatically focused. It's going to happen that just one of these days we look around and we're there."