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Summary:

Lit Motors is a cool company but that might not be enough to get its C-1 electric scooter to market.

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San Francisco startup Lit Motors and its electric scooter prototypes are inspiring. Founder Danny Kim is a visionary and an all-around cool guy. Heck, I would want one of these rides. But if I look at Lit Motors from a business and startup perspective, then, well … I guess I’m a bit of a skeptic.

Forbes reported Wednesday that Lit Motors has raised a seed funding round of $1 million from some well-known well-off folks like Zynga co-founder Mark Pincus, surfer Kelly Slater, and South Korean entrepreneur Kim Jung-Ju. Designer Yves Béhar has also signed on as an investor and design adviser. In total Lit has raised a little over $2 million, according to the article.

The C-1 prototype.

The C-1 prototype.

The new funding will go toward building a better, higher-speed prototype of its planned C-1 electric scooter, as well as hiring engineers. I saw a super-basic non-working prototype of the C-1 back when I visited Lit’s offices in 2011. It’s an enclosed, tilting, two-wheel electric vehicle.

Kim told Forbes that the company wants to have the new C-1 prototype built by the end of March, and have a C-1 that is production ready within eight months. Lit was working on building a cargo-carrying electric scooter at the end of last year, but its Kickstarter campaign only raised about $56,000 of its $300,000 goal, so it’s put that project on the back burner.

The Kubo, whose Kickstarter campaign failed to reach its goal.

The Kubo, whose Kickstarter campaign failed to reach its goal.

In order to produce the C-1, Lit will have to raise another $20 million to $40 million — that’s just to deliver the company’s first product to market. And that’s the rub of this business: it’s very expensive to be an independent auto company. There’s not just for the manufacturing and development costs, but there are also a lot of cost-consuming hurdles to jump over in terms of safety and regulations.

The funding environment — at least in Silicon Valley — is also not what it once was for electric vehicles. I don’t know of any Valley investors who would put multiple millions of dollars of equity into a two-wheel electric scooter startup. There’s just been too many problems with companies like this. Maybe Lit can catch the eye of Chinese billionaires.

Funding: Venture VehiclesYes Tesla is a major success story, but of course there was (is) Fisker (sucked down over a billion dollars and went bankrupt), Aptera (shut down), Bright Automotive (shut down), and Coda Automotive (bankrupt), just to name a few.

One of the less memorable ones was Venture Vehicles, a Los Angeles-based venture capital-backed startup that was building a vehicle that sounds similar to Lit Motor’s C-1. It was electric, enclosed and tilted, too. It went bust a couple years in.

One of Venture Vehicle’s investors told reporter Michael Kanellos in an interview a couple years ago that his firm had vastly underestimated the cost of getting a car company off the ground. Initially they thought it might take $20 to $30 million to get to the early production level, but the real price was likely closer to $100 million.

Tesla made it out alive on the back of entrepreneur Elon Musk, who not only had his own deep pockets, but also a long Silicon Valley rolodex. Lit Motors’ Kim will have to spend all his waking hours fund raising to get the C-1 to market. That’s also one of the reasons why you see Lit Motors doing a lot of press: Not only is the story and car cool, but media is one way to get the word out on fund raising.

And now that I’ve thoroughly been a real Debbie Downer, I’d like to say that I fully stand behind the emergence of electric cars, entrepreneurs working on hard problems, and Lit Motors’ ambition. It’s just that ambition sometimes bumps up against reality.

Updated at 2:20pm March 5 to correct that one of Lit Motor’s angel investors is South Korean entrepreneur Kim Jung-Ju, instead of South Korean boxer Kim Jung-Joo.

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  1. Not a Debbie Downer at all. The problem for Danny Kim: it’s easier to raise money for a HUGE unrealistic project than a small realistic one.

    When you’re raising money, everyone is encouraging you to see big. What they don’t want is a small but successive 10 people business that chugs along. As you know, those are called “living dead” — profitable but will never return the 10X-100X return VCs are expecting.

    Danny Kim is still young & he might as well go for broke. If/when Lit Motors crashes, he can go back building his cargo scooters one at a time for a reasonable profit. He won’t be Elon Musk, but he might be happier in the long run.

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  2. Thanks for the article, Katie. A few notes:

    - Our recent Korean investor is not the boxer Jung-Joo, but the billionaire entrepreneur Jung-Ju Kim, founder of Nexon.

    - The C-1 is not a scooter, but more importantly: the C-1 is not a car. That’s a key distinction, as motorcycles (which the C-1 technically is) are subject to much less regulation than cars. Less regulation means both cheaper and faster development, as development continues on our timeline, not a timeline dictated by a government agency. It’s not surprising so many car startups have failed—but we’re not making a car. Those failed companies have given us additional funding hurdles to overcome in their wake, but we don’t have many of the same regulatory challenges they had to face.

    - Another important, oft-overlooked aspect of the C-1 is the mechanical simplicity of the vehicle. Yes, we’re pioneering a terrestrial CMG stability system. However, that system is mechanically quite simple; the complexity is in the code, making development costs more akin to a software startup than hardware. Many of the failed companies you mentioned ran into problems of ballooning BOMs of complex systems and failed suppliers in the dire economic climate in the late 2000′s. The C-1′s part count is approximately 1/10 that of a typical car, and thankfully 2014 is not 2008.

    - The Kickstarter campaign for the electric cargo scooter was simply an experiment; no one had ever tried crowdfunding a vehicle like that before, and we were curious what the response would be. We’re currently hiring a team to develop the scooter separately from the C-1.

    - Our current target is to begin production at the end of this year, but as with all new product development, that is a target and not a promise. To quote your colleague Domenick Yoney of AutoblogGreen: “…we won’t be surprised, or even disappointed, if a customer doesn’t receive one before [the target production date]. We can’t even express, however, how anxious we are to see the production prototype in all its stabilized glory.” We’re more committed to an awesome product than a specific date.

    We understand and welcome skepticism, and you’re damn right we’re ambitious. Ambition changes the world—and that’s our ultimate goal.

    -Ryan James
    Lit Motors CMO

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    1. Thanks Ryan. I’ll fix the right Jung-Ju reference.

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    2. junkbitteracct Friday, March 7, 2014

      I don’t have the garage space to buy one so don’t have a reservation. But I think the C-1 is an awesome concept and I would invest in the company if I could. Vehicles like that are the future of mobility.

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    3. Thomas Cocirta Tuesday, April 8, 2014

      I totally agree with @Ryan. Their project is very far from Tesla project. Or any other “incremental development” projects, trying to replace the thermal engine with an electric motor and the tank with a battery.
      What’s even worst, “Tesla like” projects are based on the same CAPITAL INTENSIVE, mass-production paradigm as Big Auto. Centralization, vertical integration, marketing driven, etc.
      We’re in the middle of a big disruption: design, manufacturing, funding are more and more distributed. Power to the crowd.
      This will completely change the rules of the game. And Lit Motors have huge chances to be a winner in this new world.
      I wish you good luck!

      Thomas Cocirta
      tc@venqo.com

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  3. Personally, I think the concept is brilliant because it takes the simplicity of a motorcycle and disconnects from most of the weather-related disadvantages and does it with an electric powertrain.

    But, I do agree that the pace and level of funding doesn’t seem to point to a successful product launch any time soon…which is a damn shame.

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  4. I love this concept and I’d really like it to be successful.

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  5. Lutz Kehrer Friday, March 7, 2014

    Hi Katie, Thanks for the good articel.
    Ryan is right when he says that the development of a scooter is much easier than developing a car, BUT if it is not a car nor a scooter I highly doupt that it can be driven with a car license. (Ryan wrote me that for Germany the car license will sufficient)
    This of course means that the target market is much smaller. And if lit motors really wants to get the car license for Germany and the European Union they have to expect a lot of time and effort. If production starts end of 2014 i don’t expect it earlier than 2016.
    Lutz Kehrer

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    1. It’s true, in many jurisdictions the C-1 is currently considered a “motorcycle”. That’s mostly advantageous for both us and the consumer, aside from the licensing issue. Alex (below) is correct: if a motorcycle license is required, most C-1 owners (all in the US) will be able to take the driving test in their C-1, negating the need to learn to ride a motorcycle. However, we have been and continue to work to ensure that only a regular (car) driver’s license will be required, in the US, EU, and elsewhere. Other vehicles, like the Monotracer and Elio, have set a precedent for these type of licensing exceptions. We’ll release more information about our legal progress as we continue development. And even if our early adopters need a motorcycle license, we have little doubt we can eliminate that requirement eventually—it’s a question of ‘when’, not ‘if’.

      -Ryan James
      Lit Motors CMO

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      1. I don’t see qualifying for a motorcycle license by testing in a
        C1.

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  6. I’m in for my deposit! I have high hopes for Litmotors and the C-1.
    I would also say that if they can develop a 3/4-power (speed/distance/leaning) vehicle prototype they will be able to raise all the money they need to bring it across the finish line – and maybe even in to the black.
    I am not concerned about it being a motorcycle. People that want this vehicle will be able to take the M endorsement test – in the C-1. It will be a very easy test like people renting scooters to take their M endorsement.
    I can’t wait.

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  7. Waiting till I can print one on my MakerBot next Fall, I think.

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  8. Thomas Lewis Monday, March 10, 2014

    All he has to do is provide a motorcycle experience in a enclosed shell,if he can deliver,it will sell,period.It does everything a standard motorcycle doesn’t do,offers some safety,over none,increased range,maybe as much as double,over a non streamlined,aerodynamic motorcycle with the same propulsion powerplant,,lightweight,helps to lower impact on the roadways,bridges,takes up less space on the roadways[imagine if everyone commuted in C-1 's it would be like taking half the cars off the road and removing all of the emissions at the same time]So as long as the government doesn’t regulate the C-1 motorcycle into some new class of motorcycles,which would be totally ridiculous and make no sense,I think Lit will be okay

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  9. Ryan, look at Tesla’s (admittedly expensive) example building Superchargers and solve the licensing objection / obstacle with some simplifying direct action that also enhances the brand and customer experience. For example, you could create a partially refundable deposit on purchase, then give people a little training session using a scooter in a parking lot and a C-1 before they take their Motorcycle endorsement test, then rent them the C-1 for the test. Charge a little for this so it is valued (and people don’t jerk around the appointment). Note that you now have a productive use for cosmetically imperfect units.
    Customer benefit drives everything and you can turn this obstacle into a benefit if you’re smart about it. Other benefits I see: the C-1 is a big helmet over a motorcycle format, hell, I’d do a morphing video of a helmet expanding and enveloping a customer who’s just said “I always wanted a motorcycle but promised, uh, my mom that I’d stay safe…and voila!” The helmet becomes a C-1 and she (he?) drives away smiling. Incorporate bluetooth speaker phone as an option – bingo big customer benefit. Guy in motorcycle leathers pulls up to parking space, gets off, futzes with helmet and stuff, takes off jacket while a woman in a C-1 pulls up and parks next to him. She gets out, is wearing a lovely flow-y dress, closes the door and walks away as he stares after her. Next version is a guy dressed in shorts and T-shirt – you get the idea. What is the customer benefit? Benefit, benefit, what does it let me do? Anyone who has seen 30% of everyone in Beijing getting around on electric scooters of all variety knows this segment is going to take off. Keep up the good work! I’ll build the solar bike-port for charging it. Tom Kacandes

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    1. Yep, everything you mentioned is right on target and similar to potential plans we have for the future. Thanks for the suggestions!

      -Ryan

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  10. Franco Antonio Salese IV Wednesday, March 12, 2014

    Lit Motors has a fresh young passionate drive that will be injected into the industry. This concept will be developed whether big oil and big auto likes it or not.

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