Electric boat builder Arc raises $70M for cleaner, quieter vessels

Nearly 12 million recreational boats cruise along America’s waterways every year, leaving in their wake smelly exhaust, sheens of fuel and roaring engine noise. Now, a handful of startups are looking to extend the electric-vehicle boom that’s sweeping through streets worldwide into rivers, lakes and coastal waters.

Arc Boat Company is one of the newer entrants in the growing market for battery-powered boats. The Los Angeles–based company, whose team includes former SpaceX and Tesla engineers, launched in 2021 with the mission of electrifying the industry — starting by building a pricey luxury powerboat.

On Wednesday, the startup said it had closed a $70 million Series B funding round, bringing its total funding to over $100 million. The round was supported by Arc’s existing venture-capital investors Eclipse, Andreessen Horowitz, Lowercarbon Capital and Abstract Ventures, and also included Menlo Ventures.

“Gas boats are noisy, they’re noxious, they are super-unreliable,” Mitch Lee, Arc’s CEO and co-founder, told Canary Media. ​“Electric boats solve a lot of those pain points. But the hard part is execution [of the technology].”

With its new funding, Arc plans to design and build a speedboat for wakeboarding from a new factory in Torrance, California, with the goal of reaching a broader — albeit still relatively wealthy — market of recreational boaters. The company is also seeking to double its workforce to around 140 people within the next 18 months, Lee said.

Recreational boat engines contribute only about 1 percent of annual U.S. carbon-dioxide emissions from gasoline-burning vehicles. They more immediately impact the surrounding environment by spewing smog-forming pollutants into the air and spilling fuel. While recreational boats have dramatically lower energy needs than, say, a high-powered fishing vessel or a cargo ship, transportation experts say the boats can still be ​“good first candidates” for developing zero-emissions technologies needed to clean up larger, long-distance vessels.

Tom Hesselink, executive director of the Electric Boat Association of America, estimates that thousands of tiny fishing boats and other watercraft with ​“displacement hulls” are using small electric motors nationwide. But perhaps only ​“tens” of speedboats and other ​“planing” boats currently use powerful battery systems like the ones designed by Arc and its peers — a group that includes Seattle-based Pure Watercraft, Canadian firm Vision Marine Technologies and Swedish boatbuilders Candela and X Shore.

Hesselink’s own company, Budsin Electric Boats, has been building displacement-hull watercraft for over 30 years in Marshallberg, North Carolina. He said the falling cost of lithium-ion batteries over the last decade has helped spur recent demand for all-electric boats. So, too, has the growing interest from investors and manufacturers in electrifying all aspects of the transportation sector.

“The market is on the very verge of breaking out,” he said. ​“It’s going to be an exciting next couple of years to see how this all shakes out.”

Replacing gas engines in boats with batteries isn’t as straightforward as it is for cars. Speedboats in particular need significant amounts of power to burst out of the water and plane on the surface to pull along water-skiers or wakeboarders. At the same time, adding batteries makes the boat heavier, which can hinder performance. And though lithium marine batteries are generally getting cheaper, they can still significantly increase the cost of a new or retrofitted boat.

Arc’s first model, the 24-foot Arc One, sold for $300,000 — about 50 percent more than a comparable gas-powered boat. The 500-horsepower vessel has three times the battery storage capacity of a Tesla Model Y and can reach top speeds of 40 miles per hour.

Lee said the startup is ​“nearing completion” of delivering Arc Ones to customers. The CEO declined to say exactly how many of the limited-edition boats the company made, but he noted that fewer than 20 of them would ever be out in the wild. He described the pricey boat as a ​“bootstrapping tool,” one that helped the company establish its technology and manufacturing processes on its way to delivering electric boats at larger scales.

With the new wakeboarding boat, Lee said the goal is to build a battery-powered vessel that can compete on price and performance with popular gas-powered models, which can cost between $180,000 and $250,000. In the long run, the electric boats could potentially be cheaper to operate since they require less maintenance, and because owners don’t need to ​“winterize” their batteries like they do gas engines to prevent them from freezing and breaking during colder months.

“It’s really hard to package enough power into a boat to be directly competitive with existing gas options,” Lee said. ​“It’s a testament to our team that we’ve delivered these [Arc One] boats on an incredibly fast timeline” while working toward the next phase of the company’s journey, he added.