The Coming Leap in Mass Transit

Have you ever had a humbling “foot in the mouth” moment?

I sure have. It happened a couple of years ago when I first heard about a service, a smartphone app, aiming to fundamentally alter the taxi industry.

I was at a monthly dinner with a dozen venture capitalists and angel investors. After a few glasses of cabernet, when we were going around the table to talk about exciting or harebrained ideas we’d recently come across, I stood up to blast holes through this new taxi idea.

The top 20 U.S. markets for mass transit cater to 2.2 billion riders per year… whoever succeeds in capturing this market could become a billion-dollar company.

I ranted to my colleagues that the idea was impossible to execute and bound to fail. Trying to break into regulated markets like transportation, I said, is like sticking needles in your eye. And beyond that, in my mind, nobody would ever use or pay extra for a service like this — especially in places like New York City, where yellow taxis dot the road at all hours.

Fast-forward a few months to a bitterly cold and rainy night. I’d just ducked out of a steakhouse and was standing on the corner of 49th and Lexington Avenue, drenched, trying to hail a cab. The wind was howling, my loafers were soaked and there wasn’t an empty yellow cab in sight. Desperate, I pulled out my iPhone and clicked on the very same taxi app I’d verbally torn apart only a few months prior.

And what do you know: Within four minutes, my opinion of the product and the company changed.

Because within four minutes I was sitting in the back seat of a Lincoln Navigator, hot air blowing at me from my personally controlled vents. I’d been able to track the position of the car on my phone while I waited inside the warm, dry steakhouse, so I knew exactly when it would be at the curb. Sure, it cost a few dollars more than a yellow cab, but the overall experience was fantastic. Now I use the service constantly.

The service is Uber. And since the night of my foot-in-the-mouth remarks, the company has grown like a weed, making a huge dent in the taxi industry. In fact, the company recently raised over $250 million from Google at an eye-popping $3.5 billion valuation.

Given this company’s humble beginnings — and my initial skepticism — I’ve become open to the idea of small, private companies “disrupting” (that’s geek-speak for fundamentally changing) regulated and public-sector industries.

In fact, there’s a company raising money on AngelList right now that’s looking to disrupt mass transit. In fact, it could become the “Uber of mass transit”…

From an investor’s perspective, the opportunity is huge.

The top 20 U.S. markets for mass transit cater to 2.2 billion riders per year. Even at a few dollars in revenue per ride, whoever succeeds in capturing this market could become a billion-dollar company.

The company I’m referring to on AngelList is called Leap Transit.

They launched a trial in San Francisco. Within four months, they registered over 4,000 members, provided rides to over 2,300 people and are already generating revenue.

Based on the size of the market opportunity and the results of the test, the company attracted the attention of famed venture capital firm Andreessen Horowitz (early backers of Facebook and Twitter) as well as Ron Conway’s SV Angel fund (early investors in Google). They’re both investing in this round of financing.

Leap essentially operates its own fleet of buses, much like Uber operates a fleet of cabs. That might sound dull at first blush, but the way Leap leverages technology is downright innovative and exciting.

For one thing, there won’t be any standardized routes or schedules. The bus routes will be crowdsourced — meaning, the service will intelligently generate new routes based on riders’ pickup locations and destinations. So if you and dozens of other people live in the same area and are all headed downtown, the bus will automatically generate the most optimal route and pickup schedule.

And like Uber, Leap will allow you to check arrival times and track the current location of the bus right from your mobile phone. So no more wondering when your bus will arrive, wondering where it is or running to the stop in a panic.

On top of that, the buses have comfortable seating, air conditioning and free Wi-Fi, so you can work or relax while in transit.

We believe Leap Transit has the makings of a successful company… and a successful investment.

The company is currently raising $2 million on AngelList and, as mentioned, already has some high-profile investors involved.

The valuation is $4 million. Given the opportunity size, the company’s progress so far and the skills of their management team, we believe that’s an attractive figure.

Although the $2 million round recently became fully subscribed, there might still be an opportunity for you to get involved. You see, on equity crowdfunding sites like AngelList, people “reserve” shares before they actually purchase them. If they don’t complete the investment process, shares become available again and are usually allocated on a first-come, first-serve basis.

So if you’re a believer in the idea of privatizing public-sector industries and like what Leap Transit is doing, add your name to the waiting list.

Best Regards,

Wayne Mulligan
for The Daily Reckoning

Ed. Note: Identifying the “next big thing” in any industry is nearly impossible. But that won’t stop investors from trying. Wouldn’t you like to be one of the handful of people who get it right before anyone else? That’s why readers of the free Tomorrow in Review email edition are treated to every day — the chance to get in on the ground floor of the world’s most innovative and game-changing technologies… before they become household names. And since it’s free, you’ve got nothing to lose and a lot to gain. Sign up for Tomorrow in Review right here.

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