Brightline proves America can still do infrastructure (?)

We’ve mostly looked at startups on the Weekly One Pager. But this week we’re diving into Brightline, probably the single most ambitious transportation company working in America right now.

Florida, meet mass transit

I recently moved. to Florida. And I started hearing people talk about “The Brightline”. Which I quickly learned is a private commuter train which started operating routes between Miami and West Palm Beach in 2018. 

That might not sound like a big deal. But trust me when I say that people here are very excited. 

I’m a New Yorker. I grew up on MetroNorth. So when I heard people gushing about the Brightline, I kept thinking: “Come on guys. It’s just a train.”

But…I was wrong. It’s more than just a train.

Brightline: A very very nice train

My girlfriend came down to visit West Palm Beach, and we decided to daytrip to Miami. At which point we realized that on Sundays, tickets for the 70 mile trip only cost…$8. In case you’re not quantitatively inclined: $8 is very cheap. 

Not only was it surprisingly affordable, it was also really nice. The stations were brand new, and my girlfriend even noticed a specific scent in the air. Vanilla. On MetroNorth we have sweaty crowds and crippling anxiety. On Brightline they have flavored air.

I won’t rave any more about the design, the bar carts, or the service. After all, this is a business publication, not a travel blog. But trust me when I say: 

Brightline is very nice. The Floridians weren’t lying.

Why I care

I grew up in the suburbs, so some might say I’m not a “real” New Yorker. But I spent many teenage weekends taking MetroNorth into the city. From there we’d ride the subway. Explore. Get buried in masses of people. Packed in the hot deep underground. There in the center of it all. I loved it.

Some people want their car, the freedom it gives, and nothing else. And I get that. But, I think trains bring connection. They bring people together, and they build cities and societies that are more dynamic. New York was built by trains. America was too. 

I get excited when I see anyone building big things in America. Infrastructure, ambition, and economic dynamism go hand in hand. That’s why I’m rooting for Brightline. 

On track?

In most One Pagers, I assess a few key risks and challenges. Most startups have a lot of unknowns. Risks that have to be taken into account. Most of that isn’t relevant for Brightline.

For example:

• Technology risk - None (It’s a train)

• Engineering risk - Not much (the tracks are done)

• Market size - South Florida is growing. Fast

• Competitors - Cars (***)

This isn’t a blockchain company. This is a proven business model with proven technology. What isn’t proven, is demand. Adoption.

Cars really are the main competition. Especially in a state like Florida which is heavily car dependent. 

So far more than 88 people have died in collisions with the Brightline. Which shows just how unaccustomed people are to trains in Florida.

So far though, adoption is going well. Ridership is up. And the company is reporting monthly revenues of ~$5MM.

Source (I thank Wikipedia for this graph and 80% of my personality)

Pretty good. But is it enough?

The Difference is Debt

With early stage startups, financing usually comes from venture capital. That means cash today, in exchange for a share of the company, and the hope of big returns in the future.

Infrastructure doesn’t work like that. 

A big reason is because infrastructure costs more money. Brightline’s initial build out was funded by $1.75B in debt. That costs money.

Debt investors don’t expect a big win in the future like equity investors do (think venture capital). But they do expect regular interest payments.

I actually work in corporate debt. So I could go deep on this, but I’ll make it simple. In 2023, Brightline must make $208M in interest payments. In the first quarter of 2023, they made $16M in revenue. And posted a loss of $53M.

That’s a big oof.

Why debt 

One of the most unintuitive things in business is leverage. Debt. 

As an individual, we think of debt (or credit) as a bad thing. You owe American Express for that vacation. You owe the bank for your house. Those debts can be a huge drain on your cash flow. And your life.

For businesses, debt is often a good thing. “Leverage” is just a fancy word for debt. Specifically, the amount of leverage you take on is the amount of debt you have compared to the cash (or equity) you’ve invested. 

Say you want to build a $500M factory. You put up $100M in cash (sounds good to be you). And get the other $400M from loans. That’s $100M in equity to $400M in debt, or 4X leverage. 

That leverage allows you to build bigger, more valuable things than you’d otherwise be able to. Without debt, you’d only have a $100M factory. With 4X leverage, you can do more.

You need debt to build big things. But you also need those big things to pay off. Otherwise you're screwed. 

Debt is a Bet (on the future)

Just because Brightline is spending a lot to service its debt, doesn’t mean it can’t be a success. In fact, that means that it has to be one.

Yes. The company is burning through money. But that’s because they’re growing. They’re trying to do something bold, and build something America hasn’t seen in decades. It might take time. It’s certainly taking money.

In venture capital, we aren’t surprised if a startup burns through runway. After all, that’s what runway is for. But if a startup runs out of money, they can usually raise more if things are going well. For Brightline, raising more debt could start to get difficult. And of course, expensive. 

There’s a reason the company built beautiful terminals and bought world-class trains. Brightline wants to get people talking. More than that. They want to get people riding the train. And fast. It might take vanilla air, diesel ambition, and a uniquely Floridian dream of doing the impossible. 

But whatever it takes, I’m rooting for them.

Until next time. This has been,

The Weekly One Pager

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PS - Monday morning of the following week counts as weekly now too. For real though. I appreciate your patience. Especially as I get into the flow of things with a new job and a new place. I love pulling these One Pagers together for you guys. And I’m hoping to get into a more reliable schedule real soon. Thank you for being here. Thank you for your support. And thank you for sharing this with anyone at all you think might enjoy it!