EV boat startup Arc wades into watersports with $70M in fresh funding

Arc is making a splash with investors as it wraps up deliveries of its limited edition $300,000 electric boat and eyes its next target: watersports. And, specifically the kind that require a wake.

The Los Angeles-based electric boat startup, which designed, built and has now delivered a limited edition run of the Arc One, recently raised $70 million in a Series B round from a bevy of returning investors, including Eclipse, Andreessen Horowitz, Lowercarbon Capital and Abstract Ventures. New investor Menlo Ventures — specifically long-time partner and self-proclaimed boating enthusiast Shawn Carolan — also joined in. Arc has raised more than $100 million, to date.

Flush with fresh capital, 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.

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; it,” 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.

Arc is hardly the only EV boat startup trying to carve out market share. The nascent industry has become increasingly crowded with companies like Candela, Evoy, Navier, GM-backed Pure Watercraft, Seabubbles and Zin. But Carolan, who has been pitched by EV boat startups before, noted that many of these are hydrofoil electric boats, which don’t create wakes. At least not large enough to market to the watersports industry.

“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.”