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 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.
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.
Yes 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.