You Could Soon Invest in Hyperloop

You might be able to invest in Hyperloop, Elon Musk’s highly speculative high speed ground transportation system this year. At least two companies are mulling an IPO to fund the super-fast transportation system.

A California startup called Hyperloop Transportation Technologies (HTT) is planning to issue an initial public offering or IPO later this year, Livescience reported. HTT is a group-funded, crowdsourced effort. If you cannot wait for the IPO, HTT is collecting funds through Jump Start.

The company, which reportedly has nothing to do with Musk or his companies Tesla Motors (NASDAQ: TSLA), Solar City (NASDAQ: SCTY) or the privately held SpaceX, is planning to build a $100 million Hyperloop test facility in California’s Central Valley near Interstate 5. Fast Company reported that HTT has signed off on the deal with local land owners. The IPO will apparently raise $100 million to pay for the test track, Forbes noted.

Big Money in the Hyperloop Industry

Hyperloop Transportation, or HTT, is not related to Hyperloop Technologies or Hyperloop Tech, a similar effort being pushed by a group of politically-connected venture capitalists. Forbes reported that Hyperloop Technologies has some big brains and money behind it even if it lacks Musk’s stamp of approval.

Venture capitalist Shervin Pishevar, who is worth half a billion dollars, is backing the venture by using his Sherpa Ventures hedge fund. Pishevar is also a major investor in Uber Technologies Inc., so he’s no stranger to such theoretical concepts.

Also involved is former White House Deputy Chief of Staff and Democratic Party bigwig Jim Messina, who managed President Obama’s 2008 election effort. Messina helped bring outgoing U.S. Senate Minority Leader Harry Reid (D-Nevada) into the project, according to Forbes. Also involved are Jon Lonsdale, a cofounder of Palantir, Yammer and PayPal alum David Sacks and a former SpaceX engineer named Brogan BamBrogan.

Also onboard is Las Vegas businessman Anthony Marnell, who owns 190 miles of right of way for a proposed high speed rail link between Los Angeles and Vegas. Marnell and others have spent $50 million of their own money on a high speed rail venture called Xpress West. Xpress West’s right of way could be the first Hyperloop route.

Hyperloop Technologies is apparently serious; it has $8.5 million in the bank and plans to raise $80 million more, Forbes reported. The $80 million will be used to build a test track in an undisclosed location.

It’s also apparently one of three organizations trying to develop what Forbes calls a “hyperloop industry.” The others are HTT and a group of SpaceX engineers who may have Musk’s support for plans to build a Hyperloop test track in Texas.

Meet the Men Trying to Make Hyperloop a Reality

In addition to plans for an IPO and test track, HTT has apparently recruited 200 engineers and designers to work in its effort. Its leader is Dirk Ahlborn of JumpStartFund, who directs the effort from Hermosa Beach, California. Ahlborn has recruited large numbers of engineers, students, and designers to donate time to the effort.

Pishevar is apparently the Hyperloop’s biggest backer. A major Democratic donor, he apparently gave President Obama an elevator pitch on the technology at the White House. After the pitch, the President reportedly read Musk’s proposal for the Hyperloop and referred it to the White House’s office of Science & Technology. He also tried to rope Google Inc. (NASDAQ: GOOG) founder Larry Page into the efforts.
The Iranian immigrant also wants to fund half of Hyperloop Tech’s proposed test track personally. Forbes hinted that Pishevar could be planning a Hyperloop IPO of his own at some point in the future.

Hyperloop Technologies’ plan is to concentrate on freight shipping and compete with railroads. A picture on its website shows a bullet-shaped Hyperloop capsule with a cargo container inside it. The idea is to transform the freight industry and probably drive trucking companies and railroads out of business.

In true Silicon Valley fashion, Hyperloop Technologies started in BamBrogan’s garage but has now moved to a building in downtown Los Angeles’s seedy Arts District. The company has an impressive website that lists its board members and shows some interesting pictures of Hyperloop. Hyperloop Tech is also hiring; its website lists a number of job openings ranging from Aerodynamicist to Associate General Counsel.

The most intriguing job on its website is Marine/Naval engineer. That job is fascinating because pictures on the company’s website show Hyperloop tubes running under the ocean. Since Hyperloop tubes would be airtight, underwater trains could be feasible. The organization sounds serious; it is trying to hire pipeline design and welding engineers as well as a route engineer.

Fierce Competition in a Hypothetical Industry

Fierce competition is already developing in the largely hypothetical Hyperloop industry, according to Forbes. Hyperloop Tech and HTT consider each other rivals and engage in trash talking.

 

Ahlborn touts the benefits of his crowdsourced approach, while BamBrogan dismisses HTT as a bunch of amateurs. HTT claims to have interest from the Mexican government for the technology, while Hyperloop Tech is trying to get Uncle Sam’s support.

There are still many technological challenges to meet to make Hyperloop a reality. The biggest is that some of the underlying technologies, including air bearings, have never been tested outside of a laboratory. Also, nobody knows what the tubes will be made of or how the system would be powered.

Another issue facing the project is how to get right of ways in congested cities. It is hard to imagine railroads selling roadbed to Hyperloop or state departments of transportation giving up lanes of freeway for the project.

Long-term questions include how to make the system safe from earthquakes and how to keep passengers safe at such high speeds. That means a vast amount of research will have to be done before a test track is built. It could also mean a bill of $1 billion, not $80 million, for the test track.

These people serious about making Hyperloop a reality. It also looks as if there is a lot of work to be done before even a prototype becomes a reality. My guess is that government will have to get involved. One has to wonder how much political support for this next generation ground transportation is out there. Given Congress’s refusal to provide the modest sums necessary to properly maintain our highways or build a modern passenger rail system, I would not count on it.

It looks as if it will be up to private industry and capital and not government to modernize ground transportation. Hopefully Mr. Pishevar and Mr. Musk will be able to lead us into the Hyperloop age.