Matthew Milner

A car with 2 seats, 4 wheels, and a top speed of 70 miles per hour?

Kind of dull… until you realize it can fly.

As in, fly in the air. At 1,500 feet.

Yes, it’s a flying car, and you can invest in it today.

The flying car has been on the drawing boards of inventors since the 1930s. But despite 30 patents over the years describing a vehicle light enough to stay aloft, yet safe enough to drive, a working model has remained elusive, more science fiction than reality.

Until now.


Source: Terrafugia

After spending six years and more than $10 million, a Boston-based company called Terrafugia recently completed preliminary testing for a flying car that would be at home on The Jetsons.

To finish development, Terrafugia is raising $500,000 from equity crowdfund investors – everyday citizens who write small checks in exchange for ownership stakes of early-stage companies.

In other words: you, the reader, could invest today.

Is it a good potential investment? Good question. Let’s take a look.

TF-X is a four-seat electric flying car. With its vertical takeoff abilities, you don’t even need a runway.

Terrafugia’s initial product is called “The Transition.”

At 19 feet, it fits in a home garage, and handles like an ordinary car as you drive it to a local airport. But after its wings are unfolded, this car-turned-aircraft can take off from a standard runway and cruise in the air for 400 miles before landing again and getting back on the road.

It might be practical – 35-mpg on the highway, 20-mpg in the air, airbags, disc brakes, and ample space for your golf clubs – but with an expected base price of $279,000, it sure isn’t cheap.

The Transition already received initial approval from the U.S. Federal Aviation Authority (FAA). It should be ready to ship by 2015. Complete just 20 hours of flying time and pass a test – and you could step into its cockpit.

But The Transition is just the beginning.

Terrafugia is already looking forward – and up in the air – to their TF-X vehicle.

TF-X is a four-seat electric flying car. With its vertical takeoff abilities, you don’t even need a runway. And with its “AutoFly™” system, just tell it where to go: it flies for you, and lands for you, too.

Driverless cars, like Google’s, already navigate city streets. Statistically speaking, they’re safer than cars driven by humans. Flying cars could be the next step. In fact, TF-X will automatically be able to avoid other air traffic, bad weather, and restricted airspace. And Terrafugia expects that learning how to operate one should take no more than five hours.

Not only that, but over time, the price should drop to be on par with a decked-out Mercedes.

The fate of prior companies attempting the holy grail of flying cars hasn’t been encouraging. To be more specific: not a single one has succeeded.

Will this time be different – for the product itself, and for its investors?

Well, if anyone could pull off this challenge, it’s the team from Terrafugia. In addition to their impressive engineering skills – 123 years of combined aeronautical engineering experience, with 9 MIT degrees, including 2 Ph.D’s. – they’ve got grit and sales skills, too. In fact, they’ve already booked $30 million in pre-sales for The Transition.

But in our opinion, the question of whether or not to invest comes down to a question of timing.

In our reference guide to investing in start-ups, The 10 Commandments of Crowdfund Investing, we advise investors to ask, “Why Now?”

In a nutshell, without a compelling reason why RIGHT NOW is the right time to launch a product, a start-up runs the risk of either being too early to the party – or too late.

Is now the right time for Terrafugia? Certainly there are reasons for optimism. Development is easier nowadays due to technology breakthroughs like carbon fiber composites and accelerometers, as well as recent changes in FAA and National Highway regulations.

And emerging business models around transportation, like the “car sharing” model that Zipcar has popularized, might help Terrafugia succeed. (“Zip-planes,” anyone?)

Furthermore, the FAA is currently developing something called the “NextGen Air Traffic Control System.” It will allow all aircraft to know, automatically, where every other aircraft is. If and when that system becomes operational, the TF-X would be well positioned to take advantage of it.

But many significant hurdles remain, including:

1. Legal Challenges – No one is sure whether flying cars will ultimately be regulated by the FAA, or by the Department of Motor Vehicles.

2. Capital – As deliveries of The Transition are more than a year away, and TF-X vehicles are 8 to 10 years away, Terrafugia might run out of money – maybe more than once – before they complete development.

3. Cost – To become a mass-market phenomenon, the price of a flying car will need to be competitive not just with other small aircraft or a high-priced Mercedes, but with mid-priced cars such as Hondas or Fords.

Until the cost of a flying car comes down to earth, and a “highway in the sky” exists, our perspective is clear: although Terrafugia is incredibly cool, it’s not quite ready for an investment from crowdfund investors.

Hold onto your checkbook until you find a company where RIGHT NOW is the right time for it to get started!

Best Regards,

Matt Milner
for The Daily Reckoning

Ed. Note: While now might not be the time to invest in flying cars, there is still plenty of new and exciting technology that could make you money right away. Ground floor investments in companies whose tech is already starting to revolutionize various industries. These tech companies are detailed every single day in the Tomorrow in Review email edition, complete with no less than 3 specific chances to discover for yourself real, actionable profit opportunities. Sign up for FREE, right here.

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Matthew Milner

Matthew Milner is a Media & Technology executive. After selling a tech company he founded to Hearst in 2008, he joined Hearst Digital’s senior management team, first launching their brands online, then acting as their Entrepreneur-in-Residence. Matthew is founder of Crowdability, a free platform that aggregates investment opportunities in private-equity crowdfunding from across the web directly to you.

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