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Arc wades into watersports with $70M in fresh funding

Arc Boats has raised a $70 million Series B round from investors to move beyond high-end electric boats and expand its operations toward electrifying more of the marine industry.

The Series B round was led by Eclipse, a firm focused on real-world startups, and included existing investors Andreessen Horowitz, Lowercarbon Capital and Abstract Ventures, as well as new backer Menlo Ventures. Los Angeles-based Arc has raised more than $100 million to date, having previously raised a $30 million round in November 2021.

Arc had been making and selling a limited number of $300,000 battery-electric boats called Arc One, but sold out. The battery pack in that model is about twice the size of that in a Tesla electric consumer car. Like a consumer EV, the boat is capable of over-the-air software updates. Now Arc wants to go from a maker of expensive, niche products to more “cost-effective” options. A new model is slated for 2024, though no specifics have been disclosed, and the company is taking fully refundable deposits. Co-founders Mitch Lee and Ryan Cook are planning to scale up with a new higher volume electric boat designed for wakeboarding, wakesurfing and other watersports such as tubing.

“We are only two and a half years old,” Arc Chief Technology Officer Ryan Cook said in an interview on Bloomberg Television. “We have sold and delivered these to customers — that is incredible for a hardware company — and it speaks to the engineering team that we have.”

“There is a new industrial renaissance in this country,” Eclipse Managing Partner Lior Susan said on Bloomberg Television. “You now can build the most sophisticated boat in Los Angeles. That would not be something you could do before. I think we are seeing companies like Tesla, SpaceX, Arc and others building a new industrial regime in this country.”

Lee and Cook, a former SpaceX engineer who is also CTO, founded Arc in January 2021 with a plan to develop and sell electric watercraft at various price points and use cases. They started by focusing on the design and development of a purpose-built hull and purpose-built battery packs, a plan that attracted early investment from Will Smith’s Dreamers VC, Kevin Durant and Rich Kleiman’s Thirty Five Ventures and Sean “Diddy” Combs’ Combs Enterprises.

The first boat was the Arc One, a 24-foot aluminum boat that produces 500 horsepower and can run between 3 to 5 hours on a single charge. The boat is also equipped with software — wireless updates are possible — and modern touches like a touchscreen. Lee said the company has produced fewer than 20 Arc One boats, the last of which should be delivered this fall.

“The Arc One was a bootstrapping tool,” said Lee, adding that gave the company a jumpstart on production and intellectual property and helped it build out its brand. “This this round of financing is really to get us into mass manufacturing of a wakesports boat that is actually designed to help substantially fund our operations. Our goal as a business is to make better boats and sell them for a profit.”

Arc plans to move into a larger 150,000-square-foot facility in Torrance, California later this year as part of that goal. The startup, which will continue to design and build its boats (and the software) in house, is also hiring. Nearly 30 positions are open at the company.

Arc isn’t sharing the design, specs or price point of this new electric boat, Lee said, noting that the company plans to go “bow to bow” or compete directly on performance and price. That doesn’t mean the next-gen Arc boat will be cheap. High performance wakesports boats can cost as much as $250,000. The mid-range inboard wakeboarding boat runs about $100,000. Lee likened it to the sedan market, which offers affordable and premium vehicles. Arc is shooting for the premium. However, Lee noted that in this industry some of these premium-priced boats also have the highest sales.

“There’s a whole whole category of the EVs that have headed towards foils,” Carolan said. “The Arc approach, and particularly in the watersports market, it’s sort of perfect.” He added that the founding team, its approach to building it own software and battery system, made it the first EV boat startup that “felt compelling enough to make an investment.”


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