Virgin & Hyperloop one, Why this deal matters?

Hyperloop One, the company working on building an ultrafast 670-mph transportation tube, made a statement earlier this year when it completed two successful tests of the technology. Yet doubts remained. The trials had reached only a fraction of its promised speed, and an August tweet from Elon Musk suggested a burgeoning competition was in store — if governments would even approve of the infrastructure.

But then the Los Angeles-based startup recently raised $85 million in funding, including a newly-announced partnership with billionaire mogul Richard Branson and his Virgin Group —a move the now-called Virgin Hyperloop One says “provides external validation.”

“I sat in investor meetings in October of 2014 where investors would say like, ‘This is a waste of time, this will never happen, you’ll never be able to do this,'” Josh Giegel, Virgin Hyperloop One’s chief engineer and a former employee of Virgin Galactic, told Fortune Wednesday in New York City.

So how did Giegel and his partner Shervin Pishevar manage to convince one of the world’s most high-profile business magnates to not only invest in their startup, but also join its board of directors and lend Virgin’s name to the project?

It started with a phone call from Pishevar to Branson back in April where he suggested that their companies would be a good fit for each other. The pair had already become friends after Pishevar signed up for Virgin Galactic’s Future Astronauts program in 2012.

“We started talking with [Branson and Virgin] about, very broadly, ‘Let’s not make travel suck,’” Giegel explained.

Giegel had also met Branson several times when he worked as a engineering team leader at Virgin Galactic just before he left to found Hyperloop One.

“After they had that first positive call, Shervin and I had dinner and he was like, ‘So guess who I talked to today?’ And I was like, ‘Oh, I used to work for him,’” Giegel said with a laugh.

So Branson decided to visit the startup’s test site out in the Nevada desert in May, two months before the company completed its first full-scale test of the system. Donning a hard hat, Branson explored the facilities and quizzed the two founders on the feasibility of the technology.

“It was down to the weeds into some of the technical stuff and then all the way into how does it feel to ride this thing?” Giegel said of the meeting. “Then we started talking about a broader engagement which was, not just as an operator but say, an ‘experience purveyor’… where you get on a Virgin plane, you get on a Virgin train, and you know distinctively that it’s a Virgin experience.”

And of course, Branson had to tease Giegel about being his former employer.

“Richard and I were in the desert and he said, ‘So you left Virgin Galactic and you came to work on this,’” Giegel said. “And he’s like, ‘Well if you’re going to leave, this is probably a good thing to work on.’”

Not long after Branson’s trip, the Hyperloop One partners received word that Virgin Group was officially in. Now, the focus turns to the next round of testing. Giegel said Virgin Hyperloop One will conduct its next speed test in November, which could reach speeds up to 240 mph.

“I left Virgin to come and start this thing,” Giegel said of the company’s experience attracting investors like Branson. “At that point, I hoped we would be externally validated, but I didn’t think it’d be as quick and authoritative.”