In a story last week on FiveThirtyEight, Nate Silver made the bold claim that Uber can only reach its $50 billion valuation if it can identify new types of customers, like the ones who ride city subways and buses.
An alliance between public transit and Uber, he argued, could have the biggest impact in getting cars off the road, eliminating traffic and providing cost effective and fast ways to get from here to there.
Meanwhile, popular New York venture capitalist Fred Wilson has already called for a single platform to allow “multi-modal transportation,” writing in July that software that converges all the various transportation offerings in a single app on your phone is when “we will really have something.”
One company is already working on the public side of that “something”, and it happens to have 130 transit agency customers around the nation, a technology platform used by tens of millions of bus and subway riders and a home base in Research Triangle Park.
The vision of 10-year-old bootstrapped TransLoc
has always been to make public transit competitive with private by providing agencies and riders technology that makes it easier and more efficient to ride the bus. A new software, hinted at earlier this year by The Atlantic
, gets the company even closer to that goal. In testing with transit agencies this fall is TransLoc OnDemand, which lets them offer Uber-like on-demand rides in smaller vans, cutaway buses and other vehicles at a fraction of the Uber price.
“Because we have all this data about riders, we believe we can help transit agencies recognize where routes should be, when they should run and also provide on-demand service,” says CEO Doug Kaufman. “We can take mass transit from a last resort for some to the first choice of everyone."
For more on his background and experience building startups, check out our sit-down Founders Series interview with Kaufman below:
The opportunity is huge—TransLoc’s existing client base represents just 5 percent of the U.S. municipal and shuttle (university or airport) market today. And it hasn’t raised any outside funding to secure those contracts. At least not yet. Conversations are underway to determine if now is the time to raise funds and scale big.
As evidenced above, the timing might just be perfect. According to Wilson, “Transportation is one of about five or six things (safe streets, good schools, affordable housing, great parks, convenient transportation, etc) that makes for a great city and a good quality of life.”
And it's something venture capitalists have poured money into improving. Uber is now the world's most capitalized startup, and several funds have been established to invest only in emerging transportation technologies. CB Insights last tracked VC into consumer transportation tech in mid-2013 when funding was up 50 percent year-over-year.
But TransLoc's team has something the others lack—large government contracts.
"You've got to have some stability and technical chops to really close deals like that," says TransLoc board member Jason Massey. "This 10-year-old company has market gravitas but is scrappy like a new startup. The new products have breathed life and excitement into this company."
It all started in an NC State dorm room
TransLoc was founded by Josh Whiton in 2004, when he was a college student at North Carolina State University frustrated by the unpredictable bus schedule.
Whiton started hacking a web application that let people see where the buses were located in real time (or within the 45 seconds and two minutes it took a website to update back then). TransLoc was among the first to let transit agencies move their system online, so riders could see exactly when their buses were going to show up. All it required was a hardwired GPS unit inside a box that sat on the bus.
NC State was the first customer in 2005, and it also became Whiton’s largest source of talent. Over the next seven years, he hired 14 people—mostly engineers and one sales and support person. They secured 38 customers and launched the "Rider" mobile app by 2012, when the board decided the company could grow faster. But Whiton knew he wasn’t cut out for that job, and so the board hired a new CEO. And when that didn’t work out, they decided to find two leaders to drive the company forward—one for sales and marketing and the second for product.
Kaufman, a connection from the Council for Entrepreneurial Development's Dhruv Patel, was chosen for the product role and Daniel Flowe took on sales and marketing. In 2014, the board decided to focus the company on product development and named Kaufman CEO (Flowe is now at SAS; Whiton is board chairman).
Leader is serial entrepreneur focused on product
Kaufman was the top choice for the job, according to Massey, because of his laser focus on product since the start of his entrepreneurial journey in the pre dotcom era. He became an entrepreneur by accident when, as a psychology PhD candidate and professor, he posted his course information and curricula online. This was before there were course management systems like Blackboard. Kaufman recognized a need and started building an Internet business (called AlleyDog.com) around online study guides. Soon after, he met the Blackboard founders. They liked what he was doing and asked him to join their growing team in Washington D.C.
After several years heading up product development during Blackboard's fast trajectory toward IPO, Kaufman moved to the Triangle to start a mobile messaging service for higher education called ClearTXT. Though it was supposed to be a mobile learning solution that let professors or universities broadcast messages to their students, when the shootings happened at Virginia Tech, sales exploded for its emergency communication capability.
Kaufman stayed with the company for a period of that growth and then sold it to a competitor. Soon after, he started Spring Metrics
, which he envisioned as a way to determine who was buying his online study guides and who wasn’t so he could more effectively convert visitors to his website to buyers.
As he started talking to other locals about the idea, they encouraged him to turn it into a product. He rallied a trio of co-founders and was accepted into the first class of The Startup Factory-predecessor LaunchBox Digital. But after raising a couple rounds of funding and disputing the go-to-market strategy and market opportunity, Kaufman stepped out of the day-to-day operations. It was soon after that he found a home at TransLoc.
The theme of Kaufman’s career has been “creating something valuable and building a business around it,” he says, and that’s what led him to a company and industry in which he had no experience or knowledge.
From maintaining to innovating
Despite all that, Kaufman’s first initiative at TransLoc was to start developing the company's first new products since its founding. As he dove into the industry and better understood the needs of agencies, he and the team recognized that rider data was sorely lacking. And so TransLoc became the first company to deliver transit agencies critical real-time data about its riders when it launched TransLoc Traveler late in 2014. For the first time, software could both show where a bus is positioned along the route (the existing technology) and where there are riders. It also replaced an antiquated system of surveying riders with paper and pencil during bus rides with a software that gathers information 24/7 from any mobile phone with the app downloaded.
By tracking the locations of riders—both when they typically ride the bus and where else they spend time every day—Traveler delivers data that helps transit agencies set new routes or decide whether to change an existing one. Traveler also lets agencies communicate directly with riders, sending messages along a route or asking survey questions.
To understand how impactful the software can be, consider these facts: buses in Gainesville, Fla. have more than 10 million rides a year and the TransLoc app is used 60 percent of the time. At NC State University, 70 percent of all students have the app and 76 percent of those are power users, which means they use it twice a day every weekday of the month.
It’s been a year since Traveler started collecting data and more than 100 million trips have been collected.
The software is so compelling because it gives agencies access to information they never thought possible, Kaufman says. And, it's affordable.
“There’s a lot of focus on the enterprise in this industry—how do we sell a half-million dollar bus to an agency or giant reporting and planning tools," says Kaufman about other vendors in his industry. "They’re not thinking about how to create innovative technologies that we don’t charge a fortune for today but help move the industry forward.”
OnDemand is another example of that innovation. Kaufman envisions using the mobile app in the evening to schedule his ride for the next morning. If he wants to be at work by 9 a.m., the app could look at who else in the general area also needs a ride around that time and create a route that picks up and delivers each person to their destination on time.
The tests this fall are with Emory University and the University of Tennessee in Knoxville—both plan to use OnDemand to manage their Safe Rides programs, says TransLoc marketer Rebecca Cooper.
Building a solid business
Customer service and sales and marketing were also lacking in the old TransLoc. So Kaufman put new systems in place to better serve customers, including providing them with marketing kits to help get riders to use the new technologies. Flowe, meanwhile, created a sales methodology used today by a team of salespeople.
Kaufman also made key hires. Bill Bing, who previously started and ran Square 1 Bank's venture fund and is a mentor at Groundwork Labs, now serves as director of finance. Debra Hurst, a former IBM manager, is head of services. Director of Product is Scott Lacy, who co-founded Spring Metrics with Kaufman. And Joel Bush spent five years at Shoeboxed in Durham before taking on the head sales and marketing role.
According to Massey, they are "very specific talent to grow the business." And they've done just that, tripling revenue since 2012 and turning a "one-trick pony" into "a platform play for transit agencies," he says.
But a new management team and focus meant some people had to go, either of their own free will or Kaufman's. One of the toughest parts of the transition to a growing, product-focused company were the layoffs, Kaufman admits. But sacrifices had to be made to get TransLoc in position to take advantage of the technology it built and leadership position it's taken in a fast-changing industry.
Today, the challenge is more around how fast to grow. The company will employ as many as 45 employees by year's end, a marked increase from three years ago. And though there is room to up-sell the new software to existing customers, there are hundreds of agencies in the U.S. and eventually around the world to target. A round of venture capital could catapult a wider scale sales and marketing effort.
Meanwhile, Uber continues to toe the line between private and public transportation, offering services like "Smart Routes"
which discounts rides for those who walk to a set location (like a bus stop) to hop an UberPool ride. Though $45 billion in public money goes to transit agencies every year, they still must innovate to serve the needs of residents as the world changes.
"We need to move fast,” Kaufman explains. "But we’re managing all of this existing technology that we’ve got millions of users dependent on. We have to be great with that while still building new products that completely transform an industry.”
As his products penetrate the market and become a viable option for riders alongside Uber, Lyft and others, Kaufman expects increases in adoption similar to those he witnessed as Blackboard became popular on college campuses.
“Once you put stuff like this in the hands of riders and agencies and they know what is possible, they just want more," he says.
It will be interesting to see if that "more" aligns with the vision set forth by Silver and Wilson, and if TransLoc is the one to build it.