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Will Smith, Kevin Durant and Sean 'Diddy' Combs invest in electric boat startup Arc

Arc, a startup that launched 10 months ago with ambitions to electrify everything on the water, starting with a limited-edition $300,000 boat, has captured the attention and capital of some of the entertainment industry's biggest stars. The startup, which closed a seed round in February led by VC firm Andreessen Horowitz, has brought on several new investors, including funds from Will Smith's Dreamers VC, Kevin Durant and Rich Kleiman's Thirty Five Ventures and Sean "Diddy" Combs' Combs Enterprises.

The new investment, which co-founder and CEO Mitch Lee describes as a strategic round, pushes Arc's total funding past $7 million. Chris Sacca's Lowercarbon Capital and Ramtin Nami's Abstract Ventures invested in Arc's seed round.

"All of these people, in addition to just being world class at what they do, have a ton of experience building brands and marketing products, and generally cultivating a community," Lee told TechCrunch in a recent interview.

In short, Combs, Durant and Smith have a sphere of influence that taps into the market that Arc is hoping to reach. The upper luxury segment, in which that first $300,000 boat sits, is not Arc's end game, Lee explained.

Lee and former SpaceX engineer Ryan Cook co-founded Arc with a plan to develop and sell electric watercraft at various price points and use cases. The company of more than 10 people — many with long stints at SpaceX — started with the hull, Lee explained.

Even though electric boats are quieter, quicker, more reliable and less expensive to maintain, they have not scaled because of three challenges, Lee said. Historically, there hasn't been a supply chain for batteries needed for boats, the right high-voltage electrical systems and a hull designed to accommodate the weight and volume needed for large battery packs, according to Lee.

"When we approached this we said, we are going to start with a purpose-built hull and purpose-built battery packs that are laid out in a way that makes sense if you were to just start from scratch," Lee said, noting that the engineering talent from SpaceX has been key to developing the hull and high-voltage electrical system needed.

The company now has a working alpha prototype called the Arc One, a 24-foot aluminum boat that produces 475 horsepower and can run between 3 to 5 hours on a single charge. Arc will produce fewer than 25 Arc One boats.

The Arc One is not aesthetically finished, according to Lee, who noted the attention has been on designing the hull, electrical system and battery packs. But the boat does work; the team recently took it waterskiing. Serial production of the Arc One is expected to begin next month, with the first deliveries to customers occurring early next year.

Arc's plan is to use the funds from investors to scale its production and develop boats than can be price competitive with gas-powered ones — a strategy employed by Tesla.

"We are not planning to make very many of these, but it sets the tone for what an electric boat can be in this market and it creates a new anchor for us — pun intended," Lee said. From there, Arc hopes to introduce and start selling a new boat by the end of 2022 that will be directly targeted at consumers in the mass watersports market. While Arc hasn't set pricing for its next boat, it would need to be around $150,000 to $200,000 to compete with its gas-powered brethren.

The timing of that next boat will depend on the timing and amount of additional capital Arc ends up raising, Lee shared. For now, the company hopes its first boat will charge up demand for its future electric products.