The Exchanges

Q So what is the ride difference on an electric boat versus gas? Because I mean, there, there's the same for cars. You get jolt, it's much faster, but does that transfer in the water?

A It's more noticeable in different ways. So when you first pull away from the dock and you don't hear anything except water, it is a wild experience because you're so used to that like roar of an engine. Then you punch it, and it's, I mean, we've got over twice the torque of even the most premium boats out there, and we size up our propeller, which is, you kind of think of it like the tire for boats. Um, it, it's what allows you to transfer power into the water. We have a bigger propeller so that we can transfer more power before it starts to cavitate. That translates into just a really snappy experience when you punch the throttle. If you've been on a newer boat, you punch a throttle, and there's multiple seconds of lag before the boat's like, okay, I'm gonna start moving forward now. Very different experience. When you corner, like when you turn this wheel really hard, it handles like a jet boat, and you'll hear people say this, like, this feels like a jet boat, except it's a 24 foot, or like, you know, 23 foot, uh, 7000 pound wakesport boat. Um, And then, again, the, like, software experience of it, and not inhaling fumes, and being able to hold that conversation, like, it, it's a great experience for, for many different reasons than you'd find in automotive.

AI assessment note: “That translates into just a really snappy experience when you punch the throttle.”

Q You have employees from Rivian, Tesla, SpaceX. So how do you, I mean, those are really fast timelines. So how do you guys all come together? You use principles from where they worked? Like, how does this work?

A Yeah, there's, there's a balancing act here. We do try to reason a lot from first principles. The founding team was pretty heavy at SpaceX. Um, and, and so that first principles mentality is, is definitely something we're bringing as well. But building is also a craft industry. It's, it's got a long history of these really talented boat builders and naval architecture firms, uh, Designing the vessels themselves. And so we tried to take from both of those. We don't want to ignore that storied history of, of boat building and think that we know better because often we don't, but we are also trying to rethink a lot of the problems that we're solving in the context of an electric powertrain or hybrid electric powertrain.

AI assessment note: “We do try to reason a lot from first principles. The founding team was pretty heavy at SpaceX.”

Q There's a big opportunity here. So what is your long-term vision?

A We want every vessel in the water to be powered by ARC. I mean, we're big believers in this isn't, you could, you could kind of take the environmental aspect out of this. Electric powertrains are better suited to a water environment than these pure diesel or pure gas powertrains are. So we want to modernize, you know, this entire industry around those power trains, layer software in at every level and create this platform that on the consumer side makes for just better boats. They're more performant. They're quieter. Uh, they have software features that aren't anywhere in the industry today, but on the commercial side, there are also these platforms that you can start layering in autonomy or start layering in, uh, added safety features. Um, Yeah. So every, every vessel on the water.

AI assessment note: “We want every vessel in the water to be powered by ARC.”

Q You've raised around a hundred million dollars, um, from some big Silicon Valley names, uh, investors like Eclipse, Andreessen Horowitz, Lower Carbon Capital, Abstract Ventures, and a newer investor, Menlo Ventures. The last round was a Series B. It was like a seventy million dollar Series B in 2023. Why did you go after venture capital?

A This is such an obvious idea. There are probably a million people in the U.S. that have thought somebody should make Tesla for boats, or somebody should make electric boats. Again, in going from gas to electric, it's not a gas car to electric car. Like, it's a gas leaf blower to an electric leaf blower. The percent improvement in the experience is dramatically better. So it's this obvious idea. We're not trying to invent a new category. We're not really taking demand risk. We're just delivering better boats. There's also not a lot of technology risk in what we're doing because the automotive industry has existed for the past 10 years and like has been plowing money into electrification and high voltage power electronics and battery supply chains for 10 plus years now. It's all driven by execution risk. And so when you have a business that is driven by execution risk, that is a great fit for venture capital because you already have all the conviction you need and you just need to hit go and, and actually go attract the team and do that hard work. And it comes with an upfront investment. Like it takes, it's, it's hard to actually go do that. It's hard to go build the battery packs and get them working reliably and, you Safely and fully tested and qualified and ready to go out into the field for, for many years to come. It's hard to go attract that team. It's hard to go spin up a …

AI assessment note: “when you have a business that is driven by execution risk, that is a great fit”

Q And we're at reindustrialize, so I have to ask you, what is ARC's role in reindustrialization?

A Going electric makes a ton of sense. There are all these things in the boating industry, like the best days of a boat owner's life for the day they buy it and the day they sell it because their maintenance headaches, they're unreliable, they're super expensive to operate. You have to winterize them. They've got fumes coming off of them. The analogy I give is like today's boats look a lot like the old lawnmowers or leaf blowers, uh, that are loud and noxious and run out of gas on you. Going electric solves all those problems. The challenge is that boats consume a lot of power moving through water, and so you need to solve that power challenge by putting a lot of energy on board. We do that by building our own battery packs in-house. They're giant battery packs, 226 kilowatt hours, so, you know, the size of multiple electric sedans put together. When you build your own battery pack like that, you have to build the vessel around it, or you're going to end up with a very compromised product. So our version of re-industrialization is a pretty vertically integrated product here. We build our own battery packs. We build the primary structures around those battery packs. We designed both of those together in, in unison, all under one roof. We've got a 150,000 square foot facility in Torrance, California, in Los Angeles, California, and our manufacturing boats out of it.

AI assessment note: “So our version of re-industrialization is a pretty vertically integrated product here.”

Q When you're testing and building the boat, there's a lot of data involved. There's AI involved. We're in like this transformative time where it's proliferating across the board. I'm curious from your perspective, like how are you thinking about AI integration and potentially AGI within the boat itself?

A One of our biggest bottlenecks today is actually just manufacturing boats. We have a ton of demand and we need to increase the supply that we have. Manufacturing is hard for any number of reasons. It's this complex orchestration problem. Like you could have 99.9% of things go well, but if one screw is missing at some critical step of the process, everything slows down. I think a lot about how do we use tools to make that process go better, faster, be more efficient. Um, and, and so for us, it's, it's almost less about what goes on the boat today and a lot more about what goes into building the boat today. How do we take the team that we have today, make them a lot more efficient? Obviously there's our software engineers are all using these new tools to basically be more efficient, more effective software engineers. Um, but electrical engineers are starting to get a bunch of new tools for how you do circuit design and how you validate some of the designs and, um, manufacturing like work instructions and, uh, the generation of those work instructions, which are kind of like for the uninitiated, it's kind of like imagine Ikea furniture where you have some set of instructions that tell you how to assemble something. That happens at a more extreme degree in a manufacturing environment. And, and so like, how do you actually go write those and, and generate them when a design changes …

AI assessment note: “it's almost less about what goes on the boat today and a lot more about”