Lit Motors is awesome, but let’s be realistic

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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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