Lit Motors is awesome, but let’s be realistic

27 Comments

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.

27 Comments

Mackeyser

All I know is that I’m looking into RVing and it seems to me that rather than a toad (a towed vehicle) like a Jeep Wrangler, the C-1 could be a better option. The purpose of having a “toad” is to have a vehicle that can get one around town. Well, Something like this makes me wonder if a C-1 or even a pair of C-1s if there’s a group wouldn’t make a better answer. For some folks, no. They drive to the boonies, dry camp and then get into the 4×4 and go further into the boonies. The C-1 wouldn’t help.

But for the highway and byway RVer who’s trying to see America…and there are a LOT of them including…someday…the wife and I, putting a C-1 into a toy-hauler (basically a shed on a towed trailer bed) would be a really amazing option. Certainly more cost effective for running from a campground to the store. I dunno how comfy the seats will be, so that might be an issue. RVers aren’t generally 25 with great backs. But I know RVers are always looking for options and when RVers visit busy metropolitan areas, having a cost-effective transportation solution that allows for easy parking and easy mobility is a huge plus. All you need to see that is to watch any NASCAR event or any big NCAA event, NFL event or concert. You’ll see those RVs with tow vehicles. Man…they’re tons of them. All of those gas-guzzlers that transport 1 or 2 people around… Pretty much what the C-1 is meant for, yes?

Anyway, I’m rooting for this company. After I replace the wife’s Suburban (we’re a family of 6) with something a little smaller and more efficient, I want something for when I need to get around town. I wanted something that would last me awhile and would hopefully transition well to RVing. I started looking at various TDI vehicles, but then I remembered Lit Motors and…violá.

I tell ya, once you go into production, even having a few around the country to test drive would make a HUGE difference.

Wallace Ebarb

How many cars do you see on your way to work or from work with one person. If Lit can keep the retail price down, I see consumers with a family car and this second vehicle I’ll call the carmacycle. If I had the prerequisites for investing I would have already bought in and just know I could sell this product without any effort. I am sure they have already thought of most of the applications beyond the basic new car trend. With electric charging or battery swap infrastructure gradually progressing most especially in cities where traffic, parking, pollution, and fuel consumption are moving more quickly to the top of the critical priority lists, this is the next huge step in solving all those problems at once. I see it morphing for luxury and handicap and even leisure after it comes off the production line.This vehicle is the near future in transportation for the businessman as well as private consumer in major metropolitans. I know there are investors out there who are hesitating, but they better get on the train soon.

Techie

Maybe Tesla should buy Lit. Share battery technology, give it a brand recognition plus funding and I see a win-win situation.

Ben

I love the concept and would like it to succeed, however, the 24k price tag is way too much. If you look at Elio Motors, it’s 6,800 and features AC/Radio/Air Bag/Traction control and host of other things you would find in a car. If Lit Motor can lower the price to 7-8k I’d pick one up in an instant.

MMM

The C-1 may look expensive at first, but I believe that “fuel”/maintenance/insurance/licensing costs will be so low that it may return the investment faster than, say, a hybrid vehicle.

Lawrence Rhodes

My one HUGE concern is I have seen no videos of the vehicle doing any normal driving. Lots of video of it backing up and going in a straight line. I want to see it doing the slalom course at Infinion Raceway. I have seen other gyro stable vehicles lean into corners but without the C-1 actually doing it I am skeptical. Don’t get me wrong. The basic design has already been done and won an Xprize but that vehicle used wheeled struts to stabilize the vehicle. Good luck to Kim but I’ve been fooled by awesome electric designs before.

Richard E. Halliburton

If LIT can convince investors to put money into this, then it’s their (the investors’) fault if it doesn’t make money. Personally, I wouldn’t risk money on the C-1 because it seems to be to be an elaborate and expensive solution to a inconsequential “problem”. That is, how to go around curves on two wheels safely without requiring the driver to know how to counter-steer (lean). The assumption seems to be that people would enjoy (or, at least, wouldn’t mind) leaning around curves if it could be done safely but without requiring any more skill or concentration than driving a car. i don’t see that logic – I think most people who don’t already enjoy motorcycles will continue to prefer not to lean around curves. I think people who enjoy leaning around curves will continue to prefer conventional motorcycles (they don’t want their “lean angles” calculated for them). So where’s the market? I mean, I’d love to take one out for a spin to see what it’s like to just turn the wheel and feel it automatically lean from side to side. Cool! But once the novelty wears off and it’s time to decide whether I want to actually buy one, I’m going to start thinking about value. What value does the C-1 offer, as a mode of transportation? It seats 2 (and I think it’s reasonable to expect, “fairly uncomfortably” compared with the typical car); little cargo space; dangerous on the road (visibility issue with other drivers – same as with motorcycles), and what about leaning around curves on snow-covered pavement? A Ford Fiesta costs about $18K new. It’s (reportedly) fun to drive, seats 4 comfortably, has lots of cargo space, and has four wheels with ABS and traction control, plus a lot of other amenities we take for granted. Yes, there will be people who will want the C-1 even at $24K because it’s cool – but the size of that market is teeny-tiny compared to the volume of sales LIT will need to keep building them once the VC money is burned-through.

Thomas Cocirta

@Richard
Think also about the huge advantage of narrow vehicles: lane splitting.
Leaning in curves is the natural way to drive. Conventional cars are doing the oposite, by trying to stay horisontal. That creates safety problems and…car sick.
Question: why do drivers at the wheel of convetional cars are leaning on their seat when steering?

Thomas Cocirta

@Katie
your analysis is not taking into account a lot of factors and compares apple with oranges.
Of course it is not going to be easy to fund Lit Motors but it’s not going to be as hard as you suggest. Their project is different than those that you cited. And times are changing also. We’re in a middle of a big revolution and the future it’s not a straight line continuation of the present.
I suggest you should read this very good book:
“Makers. The new industrial revolution” by Chris Anderson.
(http://www.amazon.com/Makers-The-New-Industrial-Revolution/dp/0307720950)
Or, at least read my comment in this discussion.

Dan Frederiksen

Aside from being very far from production ready (not even a working prototype), it just seems certain that only very very few will buy such a small and seemingly vulnerable vehicle. They completely overlook that. and at 24k$…
It’s just a cacophony of mistakes.
That cargo moped is similarly detached from reality. That’s a product for India with indian profit margins and production costs.
Make an enclosed twizy or quarter price tesla roadster. the latter could be extremely successful. C1, not so much.
and in 2-3 years when I’m proven right, they wont have learned from it…

Robert Roll

So here I am at a very young 69 years young and having some fears that enough is enough for my Honda shadow 1100 at my age, even though we use it a half dozen times a year. Short season in Montreal Canada and no longer fun worrying about rain or an accident

I see a huge market for older folks like myself and those that no longer have the strength to keep a 2 wheeler upright and turn to trikes. OMG, even my wife could drive it instead of being the b…ch on the back. Have a Ford 2014 Energi since November and only used 1 3/4 tanks since the 4 1/2 months I owned it Yes this IS the vehicle of of the future. I believe that the car is so simply designed that any maintenance can be done by any large electric car shop that has the ability to use the internet and Skype to get answers from LIT to fix it IF it ever breaks down. Parts are 1-2 days away by overnight freight. Yes I probably will send in a deposit and dump my Honda. I will have my cake and eat it. Thanks LIT

Robert Roll
Montreal, Quebec, Canada

Franco Antonio Salese IV

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.

Tom Kacandes

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

Lit Motors

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

-Ryan

Thomas Lewis

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

weegee

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

Alex Flynn

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.

Lutz Kehrer

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

Lit Motors

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

Dale Monroe

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

Doug King

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

Madlyb

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.

Lit Motors

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

junkbitteracct

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.

Thomas Cocirta

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

Nick Prudent

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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