Ark expands commercial electric and defense boat business with $50 million in funding

Los Angeles startup Ark Boat Company is expanding its nascent commercial operations to include selling electric propulsion systems to defense contractors, fulfilling founder Mitch Lee’s desire to electrify everything on the water.

To that end, Arc has raised $50 million in a Series C funding round from Eclipse, a16z, Menlo Ventures, Lowercarbon Capital, Necessary Ventures, and Offline Ventures.

Lee told TechCrunch in an interview that these expansions into new markets won’t come at the expense of Arc’s consumer boating business. He said sportboats are a “significant revenue-generating” category for Ark and will help prove to commercial customers that the company’s technology is capable and durable.

It’s a plan that outlines how Tesla got its start, and one that Greg Reichow, a former vice president at Tesla and general partner at Eclipse, said could work for Arc as well.

“The right strategy was to develop the technology, run it on high-end consumer boats, and then gain experience using that technology to make sure the economics work really well in the commercial sector and that there is credibility for the commercial sector,” he told TechCrunch in an interview. “And here is where the Ark stands today.”

This approach seems to be working well. Lee said organic interest from commercial and defense companies was so strong that the startup’s plans to expand into these areas accelerated.

“Our argument is that the entire industry will be electrified, just like all lawn equipment will be electrified, because it’s just a much better experience,” he said.

Lee doesn’t expect Arc to build entire boats for these new markets. For commercial applications, he said Ark would likely take a similar approach with the hybrid tugboat it debuted last year. The project involves Ark designing a boat for a customer (Curtin Maritime) and building it in collaboration with a shipyard (Snow & Co.). In his defense, Lee said he felt more comfortable supplying propulsion systems directly to Prime and NeoPrime because there was a “huge unmet need for electric powertrains.”

Lee also said that future commercial and defense companies want something different from Ark.

“Our focus on commercialization is driven by a combination of two factors: falling electricity costs and rising combustion costs,” he said. “The cost of electricity is going down for obvious reasons. We are the beneficiaries of the automotive research and development system, and the cost of combustion is going up because of the burden of compliance. Because these things – and this is my wild way of saying – they are cancer-spewing machines.”

In his defense, Lee said a lot of attention has been focused on building autonomous boats and other personal watercraft.

“Being autonomous requires step function improvements in terms of reliability and uptime, because there is no crew on board to turn wrenches to keep these huge main combustion engines running,” he said.

Arc has grown to about 200 employees, and Lee said the company plans to add more to its production, engineering and market development teams, particularly for commercial watercraft, after raising the funding. And he seems excited about running a company that spans multiple lines of business.

“Diversification is very valuable in this sector. The consumer space has unique strengths. It has a good redemption cycle. [and] “And balance that with commercial applications that have tremendous defensive power,” he said. You can organize your demand years in advance. So when you balance these two things, they start to coalesce into a stable, predictable and defensible business. ”

There are always risks involved in entering new products or new markets, but with many former SpaceX, Tesla and Rivian employees, Arc is well-positioned to succeed, Reichow said.

“I’ve yet to see a company that can move as quickly as Arc in terms of developing something, whether it’s a technology or a product, and do it very quickly, very efficiently, and get a fast learning cycle out of it,” he said. “That’s their secret weapon and the reason they continue to win in the long run.”