Organic Transit Figures Out How to Use Kickstarter As a Sales Channel - 1

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Organic Transit Figures Out How to Use Kickstarter As a Sales Channel - 1
Nearly two years ago, Rob Cotter was busily building a prototype of a new type of solar, electric and pedal-powered vehicle we in the Triangle know as the ELF.

It's styled a bit like a smart car but with some of the qualities of a golf cart and a tricycle—it has three wheels. You can pedal, or just sit and steer. It's a new class of vehicle, one that has baffled legislators, police officers, trade officers and city officials.

Is it a car? Or is it a bike?

Buyers haven't seemed to care. An early 2013 Kickstarter campaign brought in $225,789, more than doubling Organic Transit's $100,000 goal. Cotter has sold about 300 ELFs in the year since they began shipping, growing his staff to 25 employees and revenue to $1.3 million. ELF buyers have come from seven different countries.

And demand is such that his team will make and ship 1,200 of the $5,495 (and higher) vehicles in the next 12 months. One of those will be a Juice ELF, which will make fresh squeezed juices daily in Durham, and make deliveries.

But inventing something so new you're the one defining it, "the innovator's dilemma" Cotter calls it, presents some unique challenges. He shared them with other entrepreneurs last week at an American Underground "HelpFest."

For one, Durham is a great place to start a clean tech company (cost-wise), but it's a tough place to build one. The credits and incentives for energy-efficiency vehicles are in California. And most of the other innovation in the field is there (the California Governor's office emails Cotter monthly about opportunities).

It's hard to raise capital here. Investors from other parts of the world are much more interested in the technology, though Cotter hasn't yet made a deal. He says he gets about 20 investor inquiries a month—from a random investor wanting to put $1,500 into the company to the largest brewery operator in Canada.

Here in the Triangle: "95 percent of investors might find it interesting but they're not going to play with us," he says. "Manufacturing in the U.S. doesn't fit in their wheelhouse."

With 4X the Solar and Pedal-Powered ELFs in Production, Growing Pains at Organic Transit - 2
Lawmakers don't know what to do with the ELF. The U.S. Office of Homeland Security tried to fine Organic Transit $25,000 for not paying an obscure 177 percent trade tax required of American manufacturers that cut and drill aluminum in the United States.

Right here in Durham, a woman was told she couldn't ride her ELF on the American Tobacco Trail. It apparently weighs too much. And American Underground can't let its tenants use the ELF it purchased a year ago—insurance concerns.

Add to that the market for bike technology in the U.S. just isn't as good as overseas and it's not easy or cheap to drop ship a 150-pound of plastic and metal to Brazil or Germany or Denmark or Australia. A recent ELF shipment to Australia got held at customs for $350 per day as they determined what fees to charge—its lithium ion batteries made it a hazardous material (It was eventually shipped back to Los Angeles).

Serving customers across the U.S. has presented its own challenges too—a partnership with a San Jose nonprofit that retrains the homeless as bike mechanics helped produce 10 ELFs for West Coast customers. But there was the issue of quality control. That relationship is currently on hiatus.

"These are the things that pop up all the time," Cotter says. "You'd have to be some kind of crazy Savant to know these things are on your radar. We're blazing new territory, pushing something forth and it's setting off alarms."

To fight some of the fires, Cotter is building relationships with lobbyists. He wants to make sure it remains legal and easy to make and to ride an ELF here. He'd also like to see incentives and zero-emission credits come to other states. Part of that is building awareness and educating the public about the power of his creation.

Like for example, that he saves ELF owners $3,000 to $10,000 in fuel purchases each year. That visiting home nurses in Montana use ELFs to visit their patients. He's working on a version for disabled people, a delivery truck and a police model.

Cotter's team has begun work on an autonomous ELF that could be rented for an hour or two like Zipcar but could drive itself to pick up the passenger. And eventually, the ELF could be programmed to help a rider meet personal goals, like lowering CO2 emissions or improving fitness (peddle harder to burn more calories).

He's since gotten the attention of an early executive at Zipcar who is building a platform for the sharing economy that lets users rent a car, boat, truck or anything that moves in one place. The guy wants ELF to be a part of it.

To get access to the West Coast opportunities, Cotter is considering a presence in Oakland and perhaps at the SfunCube incubator there. The city is becoming a mecca for solar innovators—Elon Musk's SolarCity, which makes and sells solar panel arrays, and Mosaic, which matches investors with solar projects, are there.

To make distribution easier, Cotter is working on a decentralized manufacturing strategy. He can fit up to 50 unassembled ELFs in a 40-foot container, but has to find distributors who can assemble and sell them in each country. In this nation, he hopes to set up ELF popup shops that will operate for a month at a time assembling and selling ELFs. That will buy him some time to figure out the best U.S. distribution model.

He also hopes to find a strategic investor who can help with the issues of distribution, manufacturing and R&D. And he recognizes the need for a board of advisors.

"I have to get a team together," he says. "But we wanted to get a point where we can control the equity and not be giving this away to grow it fast. But maybe now is the point to double down."

One thing that hasn't been hard is attracting talent. People will come to where the exciting stuff is happening, Cotter says. He recently hired a PhD who worked in Ford's electric and hybrid vehicle division.

"It does have a bit of magnetism for people who have their own vision for what transportation should be," he says.