Electrifying Marine Vessels with Arc Boat Company
Mitch Lee, CEO of Arc Boat Company, is bringing the Tesla playbook to boating. Arc’s quiet, software-powered electric boats—like the sold-out Arc Sport—deliver cleaner rides, zero fumes, and customizable wave settings. Mitch shares why electric makes more sense on water than land, how dockside charging already works, and why Arc builds full boats instead of motors. With $100M raised and an expansion into commercial vessels, Arc is leading a cleaner, better future for marine travel.
Episode recorded on Aug 6, 2025 (Published on Aug 12, 2025)
In this episode, we cover:
[3:27] An overview of Arc Boat Company
[5:07] Mitch’s background and experience
[6:28] The inefficiency of gas boats and fuel use
[8:17] His decision to build Arc
[10:54] The company’s vertically integrated battery pack
[12:04] Why Arc builds complete boats, not just motors
[13:31] Battery size, range, and charging times for Arc boats
[16:36] Charging Arc boats
[19:26] The traditional boat market and Arc's advantage
[24:26] Safety on Arc boats
[28:51] Lessons from Arc One to Arc Sport
[33:20] Software-driven customization for water sports
[39:19] Arc Coast’s design and target market
[41:30] Expansion into commercial and hybrid-electric vessels
[44:21] Why the US hasn’t electrified commercial vessels like ferries
[49:06] $100M raised from top VCs and celebrity investors
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Cody Simms (00:00):
Today on Inevitable our guest is Mitch Lee, CEO and co-founder of Arc Boat Company. Arc is electrifying the marine industry, starting with high-performance recreational boats and they're taking a very deliberate Tesla-like approach to their product rollout. They started with the Arc 1 in 2022, a limited edition luxury cruiser that served as their Roadster moment. In just two years from founding they went from concept to delivering actual boats to customers, a pretty remarkable achievement. Then came the Arc Sport in 2024, a wake boat that's now their flagship, designed specifically for water sports and already sold out throughout the summer and this year they announced the Arc Coast, a center console boat that brings their technology to a broader market. What makes this particularly interesting is how going electric completely changes the boating experience. You can actually hold a conversation while the boat is running. There are no fumes and because everything is software controlled, you can dial in specific wave settings for different riders, automatically record wakeboarding sessions or get alerts when someone falls.
(01:23):
This is all possible because Arc built massive custom battery packs, hundreds of kilowatt-hours of storage that's three to four times bigger than a car battery. They designed everything from the ground up as an integrated system. Mitch and I dig into why the case for electric is actually stronger on water than on land. Turns out gas boats are shockingly inefficient getting just one to two miles per gallon. We explore the charging infrastructure that already exists at most docks, why they chose to build complete boats rather than just electric motors and their recent expansion into commercial vessels. Arc has raised over $100 million from investors including Eclipse, Lowercarbon and Andreessen Horowitz plus celebrity backers like Will Smith and Kevin Durant. Let's dive in. From MCJ, I'm Cody Simms, and this is Inevitable. Climate change is inevitable. It's already here, but so are the solutions shaping our future. Join us every week to learn from experts and entrepreneurs about the transition of energy and industry. Mitch, welcome to the show.
Mitch Lee (02:44):
Thanks for having me.
Cody Simms (02:45):
Well, hey, this is going to be a fun conversation. As I shared with you, I just spent the last few weeks up in Oregon, got to get in some lake time with my family, so I'm fresh off the experience of getting yanked behind a loud, smelly traditional motorboat and can't wait to have a conversation with you about what that future might look like once it's not loud and smelly.
Mitch Lee (03:07):
I'm excited to share that with you and more excited for you to actually experience it. It's hard to put into words what the experience of being behind an electric boat is.
Cody Simms (03:15):
Did you just give me an invitation to go to the lake sometime because, hey, I'm in.
Mitch Lee (03:18):
Standing invite.
Cody Simms (03:20):
So listen, why don't you start just a quick description of Arc and then we'll dive into some of the why behind it and the what behind it.
Mitch Lee (03:27):
Yeah. Arc is a four and a half year old company at this point. We are electrifying the marine industry and we're doing that on both the consumer and commercial side at this point. Our flagship product to date is the Arc Sport, which is a fully electric 23 foot wake sport boat. It's great for wake surfing, wakeboarding family activities out on the water, and again, the most compelling part of it is that it's fully electric, so you don't have the fumes, the noise, the maintenance headaches, the reliability concerns, the winterization needs. I mean it's just a better experience from start to finish.
Cody Simms (04:06):
I can't wait to experience the noise part in particular. I mean obviously I care about the emissions side and all of that for sure, but just from being out there with your family perspective, I can't imagine being on a boat that you weren't yelling at each other when you're riding.
Mitch Lee (04:21):
I'm excited about the impact that we can have on the environment certainly, but the core of what we're doing is building better boats, hard stop. We are delivering better boats to the market, and noise is a big component of that that boating is supposed to be this social activity, and yet the engines just drown out the social activity and when you remove those engines, when you remove the fumes, when you can hang out on all different parts of the boat, it's such a better experience to be out on the water. It's almost unnerving to sit on a boat that's as powerful as something as the Arc Sport and be able to hold a conversation.
Cody Simms (05:00):
Yeah, amazing. Let's take a ride back four or five years. You're a software guy. How did you decide to go build next gen boats?
Mitch Lee (05:07):
I did spend a while in my career as a software person, but I actually still identify as a hardware engineer. I got a degree in mechanical engineering and spent my first couple of years out of college working in hardware. I was working on rotorcraft and particularly this composite rotor blade of the Apache and got my start there.
Cody Simms (05:26):
Amazing.
Mitch Lee (05:27):
Pivoted over to software for a little bit more versatility in my maneuverability in my career, bounced around some startups there, ended up starting one of my own and that was later acquired and gave me kind of this little bit of breathing room to think about what I wanted to do next. The way I describe Arc and Arc's opportunity is this is one of the most obvious ideas out there. There are millions of people that have thought somebody should go make an electric boat, somebody should go make Tesla for boats, however you want to frame it because it solves these fundamental problems with boating. There are these sayings in the industry. You might've heard some of these, like the best days of a boat owner's life are the day they buy it and the day they sell it, boat stands for bring on another 1,000. It's just encapsulates the pain of this unreliable vehicle that has constant maintenance headaches, has constant reliability concerns, is super expensive to operate.
Cody Simms (06:28):
My kids were asking me about getting a boat when we were in Oregon just a few weeks ago after they had a fun day on the lake, and I actually used that quote with them about the best day of boat ownership. So unfortunately shut them down very quickly.
Mitch Lee (06:42):
Yeah, it's for good reason. At the same time, some of the best memories you will make is out on the water with your family, and we want to just deliver better boats to people so that they get the joy and the upside of being out on the water without the downside of having to own one of these gas boats. The analogy... I really try to steer people away from the analogy of going from gas cars to electric cars. Electric cars make a lot of sense. I'm glad they exist, but gas cars are pretty good at what they do, and so the bar is higher to clear for electric cars.
(07:15):
The much better analogy of my mind is your gas lawnmowers, your gas leaf blowers, these loud noxious things, you're wearing earmuffs to use them and they'll run out of gas on you and if you accidentally leave them out, they just get wrecked. That's what gas boats are today, and so when you go to the electric version of that, it's a massive leap forward in terms of actually how compelling the product is, how compelling the experience is. Things just work, they're more reliable, they're quiet and you get rid of the fumes, but then also that's a platform for software. It's a platform for every part of that boating experience getting more compelling because it's software enabled because the boat steers in reverse because it has the software capabilities to do that.
Cody Simms (08:01):
You mean there's going to be better technology than just my ability to connect my Bluetooth phone to play music?
Mitch Lee (08:06):
I mean even that technology doesn't work that well. That's the basic, and you just code something that usually is broken on boats, so exactly that.
Cody Simms (08:17):
Coming back to you said, "Hey, this is the most obvious idea or whatever, lots of people have talked about it," but you went and did it, so what led you to decide, "Hey, this is a thing that actually needs to happen that we can go build a successful company from scratch doing?"
Mitch Lee (08:31):
Yeah, so tying that thought together, it's very obvious idea. You're not taking market risk. There's market demand here. We're just making better boats. You're also not taking technology risk, and this is the really important part that the thing that has changed over the past 5 or 10 years is many billions of dollars have been put into the automotive industry to establish the technology and supply chains to make electric vehicles viable. That technology is what we're tapping into when it comes to actually building Arc, so not a lot of technology risk. There's a ton of execution risk.
(09:08):
You really need to assemble a team that is capable of putting all these pieces together and that's hard. That's why we're based out of Los Angeles. It's why we're proud of the talent that we've acquired at Arc. It's our biggest asset is just that intense focus on execution of a fundamentally compelling business here, better product. The technology now exists for it, which it didn't even 5 or 10 years ago, and it's a real big challenge to go put those pieces together into something that you manufacture at rate that holds good margin, that is reliable as you want it to be.
Cody Simms (09:45):
I want to understand then some of the realities of the product you're building. We talked about noise, we talked about fumes, but from a practical reality perspective, what are we talking about in terms of range? How long can you drive this thing? How long does it take to charge? Where do you charge it? There's obviously not electric charging infrastructure set up at boat docks.
Mitch Lee (10:07):
That's not so obvious. I'll chat around that.
Cody Simms (10:10):
Correct me there please.
Mitch Lee (10:11):
So you start with the basic process. Obvious idea, technology now exists for it. You've got to go solve the fundamental challenge of boats consuming a lot of power by moving through water. Water's 1,000 times more dense than air, so you need a lot more power. If you look at the gas versions of these boats, they get call it one to two miles per gallon. A gas sedan gets 30 plus miles per gallon.
Cody Simms (10:38):
Wow.
Mitch Lee (10:39):
A fully loaded semi truck gets eight miles per gallon.
Cody Simms (10:43):
So there's no EPA regulation or anything on these boat engines.
Mitch Lee (10:47):
Quite the opposite in the marine industry. It's the wild west.
Cody Simms (10:50):
Should EPA regulation stick around? I guess, I should caveat with that.
Mitch Lee (10:54):
That's a much bigger discussion. Again, our focus is build better boats. That's all we care about, and this Trojan horse element of also in the back of your mind know that you're not polluting the water, the air, producing sound pollution. So fundamental challenge of power, the way that we solve that is by storing a lot of energy on board. We make our own battery packs in house. These battery packs are hundreds of kilowatt-hours, which is call it three to four times the size of an electric sedan battery pack. It's a lot of energy that you're storing.
(11:27):
Now, that's the very obvious first order problem. There's a lot of challenges with actually building battery packs, making them reliable, making them watertight, a lot of fun stuff, but it also unlocks all these second order problems. You now have something that's really heavy. These are thousands of pounds worth of batteries and it's volumetrically large. You've got this big package that you've got to put somewhere and it's expensive, so you need to compensate for the cost of this. That all presents challenges and the way that we've solved those challenges is that we vertically integrate the battery into the vessel itself.
Cody Simms (12:04):
I think you answered one of my next questions, which is why build an entirely new boat? Why not just build an outboard electric motor?
Mitch Lee (12:10):
Right. It's really because the only way to make a truly compelling product here is to build the powertrain into the vessel in the same way that electric cars weren't that compelling until somebody came along and said, "Let's build the car around the battery pack," and suddenly you unlock low center of gravity in the frunk and all these other advantages. But you have to do that work if you just try to drop a battery pack into a gas boat.
Cody Simms (12:36):
I mean the vast, vast, vast majority of pleasure craft speedboats are outboard motors. Your target segment market is small to begin with unless you dramatically outperform that product.
Mitch Lee (12:48):
Outboards are this powertrain that make a lot of sense for gas because you could honestly pull in and pull out a plastic gas container and just hook it up to an outboard and be off to the races. You can't really do that when you're in solid state energy storage, you're like battery energy storage, so you really want to integrate these things together and the experience you can unlock by integrating these things together, by building the battery, building the primary structure, but also building the firmware and software on top of that is a huge leap forward for the industry and is what actually makes what we're doing compelling.
Cody Simms (13:25):
So coming back to some of the questions about range and time to charge, given all of that, what are we talking about here typically?
Mitch Lee (13:31):
It depends on the market that you're in. Take the Arc Sport that is dedicated to wake sport boats or wake sport market, we quote four to six hours of active usage time rather than a range. I've been boating all my life. The boat you just took out, I'm pretty sure you don't know the distance in miles that it could have gone.
Cody Simms (13:50):
Lots of circles.
Mitch Lee (13:52):
Yeah. [inaudible 00:13:53]. So how long can you do circles for? Our answer is four to six hours of active usage time. In practice the data that we've seen from our early customers is that they're routinely actually the median-
(14:03):
... from our early customers is that they're routinely, actually the median or mean is something closer to eight hours of usage time out on the water. The reason that is, is because when you go slow in an electric boat, when you're going five miles an hour, when you're going through a no wake zone, when you're picking up a skier that fell, when you are out sitting on the water eating lunch or swapping people, you're consuming almost no power. And so that is essentially free time for you, that doesn't really accumulate.
PART 1 OF 4 ENDS [00:14:04]
Cody Simms (14:31):
I know my legs certainly could not handle four hours straight of wakeboarding, right?
Mitch Lee (14:36):
Yeah. People think like, oh, how long can I continuously surf for? How long can I continuously wakeboard? And then their arms start acting up and they're like, oh, the answer's three minutes or five minutes and I'm exhausted. So there's a lot more of that activity than most people expect, which is why you get these usage times that are exceed that.
(14:55):
Now, four to six hours of boat usage is actually a pretty big boating day. That satisfies most of the market. When you translate that into charging, what that means is that you've got 18 to 20 hours to recharge before you would feasibly be using it again, if not, substantially longer. That's a very tractable problem. What it means is that you can now use level two charging for substantially all of your charging. You don't really need DC fast charging.
(15:21):
It's the equivalent of having an electric vehicle that you only use to commute to and from work. I own an electric vehicle that I've DC fast charge maybe twice in the history of owning it because most of the time it's just going short distances and that's such a better experience than having to worry about gas stations. Especially when you think about how this works with boats. You're lugging gas cans down to a dock. You're going 20 or 30 minutes to the nearest marina to pay $8, $9 a gallon, or you're trailering a boat to a gas station. There's just not great options here. Versus a dock that is already wired for power because you have lights down on the dock. If you have a boat lift, that boat lift is already running off 240 volt. Marinas are already wired for power because bigger boats run off of shore power to power, what's known as hoteling loads. So your refrigerator, your bilge system, your other smaller electronics.
(16:18):
It's a way more tractable problem than automotive where you need DC fast charging because you want to do road trips, you want to hop in your car and go point A to any point B. In boats it's point A to point A with long recharge times with infrastructure that largely already exists.
Cody Simms (16:36):
So do you expect most charging will then happen at your dock, assuming you have a dock, or if you don't have a dock, you're pulling the boat out of the water at the end of the day and you're charging it at your home charger?
Mitch Lee (16:45):
Pulling the boat out of the water, you're probably fine to just plugged into a wall outlet because it's usually the case that you're not going to use it again until the next [inaudible 00:16:52]-
Cody Simms (16:52):
Got it. So you just trickle charge it through a 110.
Mitch Lee (16:53):
You trickle charge it. It's just such an easier charging problem than automotive. Or you can take it to DC fast chargers. We've certainly been caught... Well, maybe I shouldn't admit this live. But we may or may not have DC fast charged our own boats on the automotive-
Cody Simms (17:05):
I saw a LinkedIn post you recycled recently that showed someone pulling up to charge their EV and there was an Arc boat next to them at the supercharger station.
Mitch Lee (17:15):
Yeah. I can't comment on whether that was our team or not.
Cody Simms (17:18):
So in terms of the dock hardware, are you all creating dedicated hardware for this? Or is it as simple as buying a regular old standard home charger and installing it at the dock as long as your electrician can install it for you?
Mitch Lee (17:31):
It's exactly that. It's electrician knows how to install a 240 volt outlet for you and you just plug in an off the shelf charger. We use a CCS1 charging standard, which is where the majority of the industry has adopted. The goal, I mean, this gets back to the original premise here, which is we're borrowing a lot of technology. We're leveraging a lot of technology from the automotive industry. We're not trying to reinvent everything here. By doing that, we're able to get to market a lot faster, a lot lower capital needs to do that. And the adoption side of this is there's no technology risk. Again, you have off-the-shelf parts to charge this boat.
Cody Simms (18:13):
Do you get any out-of-water benefits? I mean, this is a massive, massive battery that might be sitting in your driveway. Can you use it at home somehow? Can it push your truck down the road like Lightship can do? Are there things you can leverage it for when it's not in the water?
Mitch Lee (18:27):
The answer is absolutely eventually.
Cody Simms (18:30):
Yeah, sure.
Mitch Lee (18:31):
Not today. I mean, one of the challenges of running a company like this is just maniacal focus, maniacal focus on what is the thing that will ultimately make us most successful. Well, it starts with building a boat that people absolutely love. There's an incredible amount of opportunity to build on this advantage over time, but it starts with scaling production of this boat. That's our biggest challenge today is we've got incredible demand for it and we need to go to scale production of it.
Cody Simms (19:00):
When I think of the traditional boat market, we talked about, I think the vast majority of sport pleasure craft are outboard motors. There's really a handful of engine manufacturers like Yamaha and I don't know somebody else probably. And then there's lots of people who build hulls, but those people who build hulls I guess don't have a lot of experience building powertrain, building propulsion, and that's where you're combining the two together, it sounds like.
Mitch Lee (19:26):
Yeah, and we're actually combining three together. Then there's the distribution side of this, which is your dealership networks. Quick history lesson perhaps, or how this industry has evolved the way it is. In the automotive industry if you're Tesla, you're up against Ford and GM, which are world-class manufacturers, that invest 10% of their revenue back into research and development every year. They are really good at what they do. The boating industry does not look anything like that, and the reason is because the barrier to entry to building boats is much lower. You can have a hobbyist that builds a boat out of a garage and then they strap a Yamaha or Mercury engine on the back of it and they have a boat.
(20:06):
What that has led to is this industry has evolved as a bunch of craft boat builders or smaller boat builders that are regionalized and doing relatively small volumes of boats. But that also means they're not really well capitalized to do deep research and development on how do we make our powertrains better? They're buying everything off the shelf outside of the hull itself, so everyone runs the same head units, everyone runs the same motor. You're really selling just an aesthetic, a brand, at that point because all the components are the same.
(20:39):
We're coming along we're saying, all right, there's going to be this turnover in the industry to adopt a new technology that is better suited to water, which is electric or hybrid electric powertrains. It's powertrains built through a simpler architecture that solves these core problems with boat ownership, boat operation. In the process of doing that, you introduce a really hard challenge, which is the electrification part of this, the electric part of electric vehicle. But once you've done that work, you can factor that across all your different products. So us being really good at the Arc Sport also makes us really good at center console. So us being really good at wake sports makes us really good at center consoles because the hard part about EVs is the E part, not the V part.
(21:26):
That then allows us to say, we're willing to go invest a bunch more money and time and resources into that foundational technology knowing that it's going to give us an advantage across every sector that we go into. I mean, again, we just recently announced our commercial expansion, and it's that same sort of technology, the same sort of infrastructure, the same sort of talent necessary to do one of those sets us up well to do the other.
Yin Lu (21:53):
Hey everyone, I'm Yin, a partner at MCJ here to take a quick minute to tell you about the MCJ Collective membership. Globally, startups are rewriting industries to be cleaner, more profitable and more secure. And at MCJ, we recognize that a rapidly changing business landscape requires a workforce that can adapt.
(22:13):
MCJ Collective is a vetted member network for tech and industry leaders who are building, working for or advising on solutions that can address the transition of energy and industry. MCJ Collective connects members with one another with MCJ's portfolio and our broader network. We do this through a powerful member hub, timely introductions, curated events, and a unique talent matchmaking system and opportunities to learn from peers and podcast guests. We started in 2019 and have grown to thousands of members globally. If you want to learn more, head over to Mcj.vc and click the membership tab at the top. Thanks and enjoy rest of the show.
Cody Simms (22:56):
I have two more sort of tech-ish questions and then let's talk about the actual boats you're building. Heat, obviously seemingly would be a problem, but I guess you're also running across cold water, so maybe less of an issue. I don't know.
Mitch Lee (23:09):
Yeah, you're sitting on this incredible heat sink that is a giant body of water. But when you think about what you need to cool, one of the biggest things is battery packs. The thing that causes battery packs to heat up is how fast they're discharging power relative to their total capacity. It's known as the C rate. So a smaller battery discharging really fast is going to get really hot. The battery pack on an Arc Sport or any of our boats is so massive that the C rate is actually quite low, and that means that you tend to not accumulate a lot of heat in that battery pack, so your cooling challenge is a pretty small one relative to what you see in automotive where those C rates can get very high because you're trying to accelerate onto the highway or you're trying to DC fast charge really fast, and that means a lot of power inflow or outflow in a relatively small amount of energy.
Cody Simms (24:05):
And I think related to that, the sort of final tech question I have is just around safety in general. A hole in the hull and water's leaking in, it may not be the end of the world in a regular boat. You go get a patched at the end of the day. For you guys, I assume that causes very severe problems.
Mitch Lee (24:21):
No, actually. I'm going to address safely kind of broadly.
Cody Simms (24:24):
Yeah, please do.
Mitch Lee (24:26):
Many people would be reasonable to say, hey, water and electricity, that doesn't seem like it, right?
Cody Simms (24:30):
Okay. Yeah. Maybe that's the right framing.
Mitch Lee (24:32):
First, boats today already run electric systems. We're just bringing that into the future in terms of how advanced those electric systems are.
(24:41):
Second, automotive does this pretty well, so you could drive Tesla, your Rivian, your other electric vehicles through puddles of water, through rainstorms, through hurricanes, into car washes, they are good at the sealing these battery packs. We use that same sort of technology, we take it a few steps further. But the third is you think about safety relative to what the other options are. Gas boats are notoriously unsafe. They accumulate these fumes in the gap between the hull and the flooring of the boat, or the deck of the boat is the chamber that can fill up with fumes when you're running that engine. If you don't blow those fumes out the next time you go to start that engine, it can actually spark, boats have blowers on board to literally exhaust those fumes, and if you have spent enough time at a marina, you have seen a gas boat catch on fire, guaranteed. The incident rate of this is incredibly high. They're not safe.
(25:38):
Electric boats by comparison are way safer than that. Again, you're no longer dealing with the fume aspect on board. We also just have so many sensors. You think about that situation with, okay, you've got a hole in the bottom of your boat. Well, first off, our battery pack isn't sitting on the bottom of the boat. It's actually lofted off of it. So you have to get a lot of water on that boat. Second, the thing that every boat has is bilge pumps. So water starts coming in and you have pumps that bilge the water back out so that the boat will stay afloat even with a small hole, incredibly important safety part of every boat. Those bilge pumps run off of 12 volt batteries when they're on gas boats. Those 12 volt batteries see parasitic drain, and so most people turn their boats off. They just say, bilge pumps aren't going to run because if they do run, then our 12 volt battery is going to die on us and we're not going to be able to use it the next time we go use it, turn the boat on. If you have a tiny hole in a gas boat, your boat's going to sink over time. That's usually the status quo. Or if you do have bilge pumps on, they run, they drain the battery, and now you're back in that same position where you don't have bilge pumps.
(26:46):
In our situation, we have this boat streaming tens of thousands of data points a second back to our system that will tell us the bilge pump has been running. We actually have alerts that say, your bilge pump has been running for a long time, and you will get alerted about that, so you're like, hey, something's probably up. Usually it's a cover blows off in a giant storm, and we can still alert you to that.
(27:06):
The third part of this is the 12 volt battery system, the low voltage battery system is recharged by our high voltage battery system, so you've got this giant amount of energy on board, which means that you could power those bilges for a really long period of time. The amount of time that this boat can float with a hole in it is drastically longer than it would be able to on a gas boat. So I'm rambling here, but it's to prove the point that at every level of this, the boat gets safer, it gets better, the experience, the ownership experience of this just moves in the right direction.
Cody Simms (27:40):
Amazing. I have so many questions about how you guys iterate on these design problems and how your team works, but I feel like we're continuing to kick the can down on what are the actual products, so let's spend some time there on describing, you mentioned them at the top of the show a little bit, but let's go into a little bit more detail on each of the boats that you are now selling.
Mitch Lee (28:03):
When we first started Arc, we wanted to narrow the scope of what we were trying to do, and we built the equivalent of the Tesla Road Surfer, Arc, which was called the Arc One. Limited run of boats, simplistic design behind them, and really exciting for what they represented in the market, which is an epically powerful boat that can actually sustain real activity out on the water for a full day. The purpose of that was to capture as many learnings as possible as quickly as possible, and to bootstrap a lot of the basic systems that you need to be successful at scale. So that's your brand, your team, your production system, your sales support, delivery system, all of those different functions that need to exist to actually be selling and delivering boats to people.
PART 2 OF 4 ENDS [00:28:04]
Cody Simms (28:51):
Is it easier to get a boat model into production than a car EV model-
Mitch Lee (28:55):
Absolutely.
Cody Simms (28:55):
... in terms of highway crash safety testing and all of that sort of stuff?
Mitch Lee (28:59):
Yeah, definitely. I mean, we brought the Arc One to market in two years while deploying sub-$20 million. By comparison, automotive companies routinely will spend billions of dollars to bring a new product to market over the course of four or five-plus years. That's for a variety of reasons. Boats are just a lot safer. The regulatory landscape looks very different. I mean, cars are hurtling down a highway with other cars hurtling the other direction, and steel everywhere, concrete barriers, and they're just very unsafe. And so there's good reason to have all the regulatory burden on that. Boats on the other hand, the worst possible thing that happens is they sink. I don't want that for anyone, but if they do sink, you put on a life jacket and you don't sink. And that's generally the worst case that you tend to see in the marine industry.
Cody Simms (29:48):
So Arc One, you sold a handful of them, I think. And you're done, those are all deployed at this point?
Mitch Lee (29:54):
Yeah, they're deployed with customers. And I mean, we've just learned so much from them. Boats go through multiple hurricanes at this point, we've had boats get dropped into water that's higher than our original design criteria, 90-plus-degree water, and we're like, "What?" And so just learned a ton from how people use those boats. And then factored all those learnings into, "Okay, now we're going and rebuilding for a higher-volume product in the Arc Sport."
Cody Simms (30:21):
Tell us about it.
Mitch Lee (30:22):
We took all those learnings from the Arc One, put those into the Arc Sport, which is a dedicated wakesport boat, and our first attempt at saying, " This is a product that we want to scale into the hundreds of units a year that is intended to go compete head-to-head with the existing gas boats out there." Not just be competitive on performance, competitive on usage time, but also competitive on price. That was incredibly important to us.
Cody Simms (30:47):
For non-wakeboarders, maybe describe what makes the wakeboarding market unique from a boating perspective.
Mitch Lee (30:54):
One of the most popular sectors in the marine industry, particularly in the US, is wake sports. And that's every activity from, depending on your age, water skiing, solemn skiing, wakeboarding, kneeboarding, and the most recent trend is wake surfing, which is where you are riding basically an ocean-like wave right behind the boat, and can drop the rope and surf it like you would surf out in the ocean. That's the purpose of this boat. What's interesting about this industry is it skews towards more premium boats. If you look at the automotive industry, take your sedans, you have your Honda Accords, and then you have your Mercedes S-Classes, and the volume tends to favor those lower-cost sedans. In the boating industry it's actually inverted, the volume favors the more premium version of the boats. Again, this market tends to cater to more luxury products. So if you have a nice lake house, you tend to want the best boat. And that's why you see the popularity of wakesport boats actually favor the best boats money can buy.
Cody Simms (32:05):
And wake surfing in particular, you actually need a boat that basically sinks itself a little bit in order to generate a wave behind it?
Mitch Lee (32:13):
Exactly. Boats are closer to planes than they are to cars. Actually, wakesport boats are called planing boats, because when they get up to speed they're flying across the top of the water. And in the same way that planes have wing flaps, you put flaps below the surface of the water to control... There are basically four things that you want to do. You want to control the roll of the boat, whether it leans left or right, the pitch of it, which is up or down, the yaw of it, which is this lateral translation. And then you also want to control how deep in the water it is, how much water it's actually displacing. By controlling those variables, you can throw a really nice well-formed wave that again, is just almost a perpetual wave machine that gives you this beautifully surfable wave that you can ride for extended periods of time.
Cody Simms (33:06):
And is this where your boat, the Arc Sport, I think in this case, having a higher amount of onboard sensors and controls can give the driver, and I guess by nature of the surfer behind them, more control over the kind of wave they're developing?
Mitch Lee (33:20):
Absolutely. Every part of the boating experience gets better thanks to software and sensors. So from the start of this, you hit one button and you say, " Cody wants to wakeboard." I hit one button and all of your configuration pops up. And that's how much ballast you have, the cruise control speed that you want, the recording studio gets pulled up. If you're surfing, it's like, "Hey, I want this speed, 11.2 miles an hour. I want to surf on the left side of the boat. I want a mellow wave." And all of this just gets configured exactly how I'd want. And then you punch the throttle and the boat takes care of the rest. Then you've got integrated cameras on board, multiple of them. There are three of them on the Arc Sport, one forward-facing, two that are facing the rear, one up in the tower and one down low.
(34:11):
So depending on the activity, you pull up that video feed on an integrated display, you hit record, or you just let the system run. You use that as almost a rearview mirror. You've got a heads-up display in front of you that can show what's in front of the boat. And then there's some great trick or some wipeout, you just hit record and it'll go capture the last 30 seconds of that, share that to your phone. You can immediately post it on Instagram, you can immediately text it to your friends, all these features. And then somebody drops, and it's like, "We can alert you when somebody drops." It'll beep at you, if you've been in an electric vehicle that will beep at you when the light turns green. Imagine that, but for when a rider drops. And then the music could lower, and the recording can stop, and the control surfaces can retract, and you go pick that person up. And these are not even that novel of features, but they're just so far out of reach for where the industry is today because they don't have the right hardware or sensors on board to do it.
Cody Simms (35:10):
It feels like many of these things could be in a gas boat. It's just that you guys have taken, much like Tesla, a technology-first approach to the vehicle, and so you come at it from the perspective of, "How can technology solve this problem?" Maybe I'm missing that, maybe some of this stuff couldn't exist without the full onboard electric drivetrain, but it feels like you could do it, it's just no one is driving innovation in the industry in a way that you guys are.
Mitch Lee (35:41):
Yeah, you could do some of these things. The two challenges are, number one, first off, you need to have everything [inaudible 00:35:48].
Cody Simms (35:48):
By the way, first of all, everything you described sounds freaking amazing. I didn't mean to discount that at all. I was just thinking, "Okay, how related is this to the fact that it is an EV boat," but it feels like Tesla where they bring technology into everything they do.
Mitch Lee (36:00):
It's more of the latter, but again, it goes back to how this industry has evolved. If you look at a gas boat, everything is off the shelf. These companies don't staff software engineers, they don't do software in-house. That firmware to be able to say, "Hey, we control every different component on this. We control all the different sensors, and we have this central processing unit that can actually incorporate those signals and act on them," that doesn't really exist at other companies. And again, it's the team behind it that doesn't exist. These tend to be very engineering-light companies. They're really about the craftsmanship of building the structure, and then buying everything else and integrating it. You don't actually have the opportunity to then enable those with software and with firmware. It is also helpful that we run an electric system, because again, everything communicates via electric signal, and you also have this giant battery on board, so you can support a lot of different activity off of a much larger battery.
Cody Simms (37:01):
How much does it cost, and how does it compare to a similar higher-end wakeboat?
Mitch Lee (37:05):
I'm going to go backwards to avoid the shock aspect of this. So wakesport boats have gotten very expensive over time. Average sales price of one of these premium boats is 250 to $300,000. You can easily buy a 400-plus-thousand-dollar gas wakesport boat today. The Arc Sport starts at $268,000. In practice, the boats that we're selling today are fully optioned at closer to $320,000. That's what most people are buying.
Cody Simms (37:33):
Yep. And what total cost of ownership comparatively? I assume you're spending a lot of money on gas for a big fancy wake boat.
Mitch Lee (37:41):
Certainly some of our customers aren't that sensitive to price, and yet they're still excited.
Cody Simms (37:47):
You mean you're dropping a quarter million bucks on a boat and you're not price sensitive?
Mitch Lee (37:50):
Yeah, some of our customers, certainly others are, but you still hear this pain of like, "I just hate paying five or $600 every time I go out on the water because of gas costs." You save a ton of money on that from the electricity costs. And then again, the convenience factor of this, that even if you set aside the operating costs, the convenience of just knowing, "Every single day I wake up and my boat's fully charged." It's like your phone, you stop thinking about batteries. Use it however you want to use it, you plug it in overnight, the next morning it's ready to go, that's such a better experience. In the off season, you don't need to winterize this boat. It's got a closed-loop cooling system, it's an in-house design, and there's no real systems to flush. So you get to skip that headache. And that's not just a cost savings, it's also a benefit in the sense that if you live in an environment like Seattle, where you'll think about, the season's turning in October, but then you randomly get a nice day in late October, you want to be able to take your boat out. If you've already winterized your boat, you can't. If you haven't winterized your boat, an Arc Sport, you could still go out and enjoy the water. And so these benefits stack.
Cody Simms (39:06):
All right, so the Arc Sport, I mean it sounds to me like the Model S or Model X of boating. And then I think you've got the Arc Coast, which is still not inexpensive, but more accessible it sounds like.
Mitch Lee (39:19):
Yeah, that is leveraging a lot of the same technology as what you see on the Arc Sport, in the same way that, you'll see this pattern in automotive, Model S and Model X were heavily factored, even though they've had different packaging on the outside. The Model 3 and the Model Y are heavily factored, they use a lot of the same internals. The R1T, R1S, heavily factored. That's the same thing with the Arc Sport and the Arc Coast, heavily factored, same battery pack, motor, converter, telematics system, PCBA powering it all. And what you're really doing is changing the packaging around it. Now the Arc Coast services a different market. It's that leisure fishing-style boat or sandbar boat, really popular in Florida and surrounding markets there. The packaging on the outside is simpler. You're not dealing with ballast systems and control surfaces and all this other complex equipment to throw this really compelling wave. So the cost goes down because the packaging itself is-
Cody Simms (40:20):
So it's more of a Dexter-style boat?
Mitch Lee (40:24):
Yes.
Cody Simms (40:26):
Without the Dexter vibes?
Mitch Lee (40:27):
Yeah [inaudible 00:40:28]. Dexter vibes, but yes.
Cody Simms (40:32):
Okay. And where are we on price point here?
Mitch Lee (40:34):
So this is another one of those cases where there's this base price, you call it around 170, and then the packaging version of this will go up from there. The reality is the earliest boats off the line will be at a more premium price. And it makes a lot of sense for us, we want to start by producing essentially one version of this boat, which has all the bells and whistles on it. And that helps us a little bit when it comes to simplifying the production system of it, but it also helps us because our margins will improve over time. So we want to start with the version that gives us the most room to not be hurt on margins.
Cody Simms (41:13):
And then you recently announced a movement into the commercial space, which sounds like more of a retrofit as opposed to everything you talked about, about the benefits of integrated powertrain and battery systems and all of that. Explain a bit about your pathways on that side of things.
Mitch Lee (41:30):
The commercial industry benefits from going electric, or in most cases, hybrid electric, just as much as the consumer one does. You could think about it as modernizing the powertrain on these vessels. Honestly, a lot of commercial vessels actually can sustain most of their loads off of a battery buffer, if the battery's in the megawatt hours, because they'll do these port operations where you'd look at work boats and they'll do these short, repetitive missions to go retrieve a ship, bring it in, and then sit and wait for the next one to come. And that is well suited to electrification. Those idling speeds are really inefficient when you're running pure diesel engines. If you have an electric powertrain, even if it's backstopped by a diesel generator, you could then run that diesel generator at peak efficiency and dump that power into a battery.
PART 3 OF 4 ENDS [00:42:04]
Cody Simms (42:27):
Ah. So it's still an integrated onboard powertrain. It's just connecting in a hybrid system with the existing diesel drivetrain.
Mitch Lee (42:34):
There are two plays that are happening. One is, these vessels have a really long usage life, and so for those vessels that still have remaining usage life, they'll repower. They're called repowers. And what we're offering to those operators or vessel owners is we will repower it with a hybrid electric powertrain, which then modernizes it, it satisfies a bunch of regulatory compliance, and it addresses your two biggest operating costs, your fuel and your maintenance. Those both improve by going electric or hybrid electric.
(43:07):
There's also even greater benefits that you can capture if you really build the vessel around your electric powertrain. So the complexity of this vessel is driven in part because you have this highly explosive thing sitting onboard, in the sense of the fuel, and spitting off fumes, and you've got to go exhaust those fumes and do a bunch of other stuff to keep the vessel safe while exploding engines many thousands of times. So by removing that, you can dramatically simplify the architecture of the vessel, and you just have rows of batteries that are really large [inaudible 00:43:45] batteries that are generally quite safe, they're just energy storage systems. And you power that into a very simplistic powertrain, and you have a substantially better vessel. And we're supporting both of those types of builds.
Cody Simms (43:57):
This is mostly commercial tugboat space, for the most part?
Mitch Lee (44:00):
Yeah, we're starting with commercial work boats, tugboats being the hero product there, but in the same way that when you build the foundation for one, you can apply that to many. You can apply that to, you can imagine, ferries, pilot boats, all these other types of commercial vessels can eventually be electrified.
Cody Simms (44:21):
My brain immediately went to ferries, and I'm glad you said it. You look at some of the more progressive cities in the U.S., San Francisco, Seattle, that sit on the water, that have a lot of ferries, and they're all smelly diesel ferries. Why has this not been solved in the U.S.? I feel like it's been solved in other parts of the world.
Mitch Lee (44:40):
It has been. I mean, this goes back to America is not all that great at building boats and vessels these days. It kind of atrophied that as a muscle, and you're seeing a big push to rebuild that muscle.
Cody Simms (44:54):
Boston, I can't leave Boston out of the equation. New York. These are big, progressive cities in the U.S.
Mitch Lee (45:00):
But I do think you are actually seeing a lot of interest in electrifying these vessels. You fast-forward five, ten years, this industry will absolutely be shifting in a big way towards going electric. And really it's held back by not a lot of people can do that work today, certainly not in the U.S. And that's something that we're quite proud of, is we are bringing the ability to go make electric ferries, electric tugboats, to the U.S.
Cody Simms (45:27):
I mean, the big European one, it was a Candela is a big electric ferry maker. It feels like a lot of these are hydrofoils. They're totally different form factors. They're not just taking an existing 30, 50-year-old ferry, and putting a hybrid drivetrain on it. They're smaller, faster, re-imagining what the... Almost like fancy water taxis.
Mitch Lee (45:46):
I would class that as more of a water taxi territory, in terms of just the capacity that they can carry, which again makes sense in certain canals and European areas. But if you look at the San Francisco Bay, you do not want that. You want a giant ferry that can carry hundreds of people. One of the things that makes boats so special is that they can move a tremendous amount of weight pretty efficiently. When you do something like hydrofoiling, you actually turn it into a plane, and you induce the same problems that planes have, actually to an even greater degree, because your wing is underwater where it can frequently hit debris or something like that.
Cody Simms (46:21):
They look freaking cool, though, I will admit.
Mitch Lee (46:23):
They look cool. And honestly, we're big fans of other people that are trying to electrify the space. I have nothing negative to say about the other companies. It's just when we look at the ferry market, we're looking at much larger ferries, ferries that carry hundreds of passengers. And you don't really want to fly those things above the water, you bump into physics limitations. So we'll [inaudible 00:46:44].
Cody Simms (46:45):
On the note of other people trying in this space, a company that I would say was probably your biggest competitor in the space has had some struggles lately, with Pure Watercraft. I know you may not be able to comment on another company, but what can you share about potential lessons learned, or things you're taking away from the journey that that company has recently gone through?
Mitch Lee (47:05):
This is hard. The execution risk here is tremendously challenging. And we focus so hard on taking this simple vision, this simple idea, and executing the heck out of it. It's still challenging, so certainly many opportunities for that to go awry. We look at every company that's in the space, not just in the marine space, but we look at other startups that are trying to electrify things, and we talk to all of their leadership teams, including with Pure, and they're not the only ones, and we take every lesson that we can back, incorporate it back in and incorporate it into our own strategy.
(47:45):
I think we started from different places. They started a lot earlier. They were vertically integrating an outboard motor, which has its own unique challenges. We're doing something quite different. We're actually trying to avoid vertical integration where we can, which runs counter to a lot of what I said, but we don't want to vertically integrate for vertical integration purposes. We really want to focus on, what do we need to vertically integrate to deliver a super compelling product to the market?
(48:10):
One of the great examples of this is, we actually source at the module level rather than at the cell level, and it avoids a ton of expensive capital expenditures, laser welding and all this other crazy stuff, taps into the automotive supply chain, gives us automotive economies of scale on these battery modules, while still giving us the ability to build our own battery packs.
Cody Simms (48:32):
Shifting gears, and we'll wrap up and get you out of here, you guys have had a few quite successful fundraisers. Maybe share a little bit about the financing history of the company.
Mitch Lee (48:40):
There's been a lot of enthusiasm for what we're doing. I think at a very basic level, we are a bet on this entire industry shifting over to electric and hybrid electric powertrains. In the consumer side, it makes a tremendous amount of sense, and it's really just about bringing that technology to market at a competitive price. Commercial industry, same thing, and the recent demand that we've seen has really been validating to that.
(49:06):
One of the things that gets us excited is several of the projects we're working on have no funding. It's two profit-seeking companies that agree, this makes sense at a spreadsheet level to improve costs here, and that investors see that and see that this massive industry, this $2 trillion industry, is undergoing its biggest transformation in a century.
Cody Simms (49:29):
Well, amazing. Well, just to highlight some of the names you have around the table, Andreessen, Lowercarbon, Valor, Eclipse, Abstract, congrats. I think some names we all may know from our pop culture world too, Will Smith and Kevin Durant. So, pretty cool.
Mitch Lee (49:45):
It's fun to get a group like that together. I mean, incredibly talented institutional investors and also great brand builders. People that understand that this is as much, especially on the consumer side, a lifestyle business as a technology business, and we're really excited to have all of their support.
Cody Simms (50:01):
Pulling on the Tesla metaphor, Tesla obviously, which seems like has been a big model for the company you're building, obviously sees a future of autonomy on the road vehicle side. What does that look like for you from a boating perspective?
Mitch Lee (50:16):
There's certainly many ways that we want to make the experience of operating a boat on the water better. The stress of having to trailer a boat, dock a boat, is real. We want to make that experience a lot more accessible, so that more people feel comfortable driving boats. Autonomy certainly helps there. At the same time, you're out on a boat for fun. You're not stuck in traffic, you're not upset because I've got to spend an hour in traffic here. Water is wide open, and so there's not that same pull towards, hey, we got to get some full self-driving boat, because that's not really how people use their boats. They want to be driving. They want to have open rein to the water.
Cody Simms (50:53):
I was trying to explain to wife when driving a couple of weeks ago, my son behind me on a tube, that my goal was actually to try to knock him off the tube.
Mitch Lee (51:03):
[inaudible 00:51:02] And software is not going to help [inaudible 00:51:06] to say, how do we throw this person off? Yeah.
Cody Simms (51:11):
Well, great. Listen, Mitch, I've really enjoyed the conversation. Anything else you want to make sure to share or highlight about where you think the space is going, or anything people should take away? And I guess finally, if anybody's listening who is in the market for a new boat, where should they go to find you guys?
Mitch Lee (51:25):
So [inaudible 00:51:26] if you're a prospective customer, arcboats.com is how you can go check out the boats. One of the things that we encourage absolutely everyone to do is just demo. There's that pre and post demo mentality that you have. It's one thing to talk about these benefits, talk about the software. It's a completely different thing to actually experience it. And we just want more people to get exposure to this, because that helps us in the long term. Whether somebody's in the market for a boat today or five years from now, we want them to know about us and the experience that they could look forward to.
(51:59):
The other call to action here is, we are growing rapidly. We are in large part limited by the team that we have today. We need to continue to grow it. So if you live in L.A. or are interested in coming to L.A., we certainly want to talk.
(52:12):
And then the final thoughts here are, this is just the start of what is going to be a massive transformation in the industry, and we're at the tip of that spear in terms of transitioning this industry over to more modern powertrains, over to more modern vessels. And we're incredibly excited about all the opportunity we still have ahead of us. I take a step back and I think, look at Lake Tahoe. The idea that there will continue to be gas boats on that lake, or new gas boats allowed on that lake, 10, 20 years from now seems almost laughable to me, given all the benefits of going electric.
(52:54):
And we are incredibly well situated to go accelerate that transition into boats that are not just better from a customer's perspective, but better for the environment that they operate in. And I look at the commercial industry and I see that same sort of opportunity, that we have an incredibly acute need to go upgrade our vessels, to go modernize our work boats and every vessel that we produce, and we want to go be a part of that. We're not going to be every single part of it, but we certainly want to support the powertrain and integration side of that.
Cody Simms (53:26):
Well, Mitch, I appreciate the conversation. I'm going to be following up with you for that demo so you can take me out.
Mitch Lee (53:32):
Please do. I mean, the favorite part of my job is certainly taking people out to experience this firsthand.
Cody Simms (53:38):
Awesome. Well, thanks for your time today.
Mitch Lee (53:40):
All right.
Cody Simms (53:41):
Inevitable is an MCJ podcast. At MCJ, we back founders driving the transition of energy and industry, and solving the inevitable impacts of climate change. If you'd like to learn more about MCJ, visit us at mcj.vc, and subscribe to our weekly newsletter at newsletter.mcj.vc. Thanks, and see you next episode.
PART 4 OF 4 ENDS [00:54:15]
