Why electric vehicles may not lure investors

Despite the flurry of recent venture investments in electric vehicles, most VCs are reticent to jump into the race. That’s probably because no venture capitalist has ever funded a successful transportation startup. In fact, there’s a line of failures a quarter-mile long.

Immediately after WWII, angel investors backed Tucker Corp., in its bid to build a safe, high-performance automobile. The company failed, in part due to an SEC investigation of its IPO. This despite the fact that founder Preston Tucker managed to secure many of the capital assets he would need to launch the company at bargain-basement prices and had developed truly innovative improvements to existing automotive technology.

Then there was the De Lorean Motor Co. Founded by a former General Motors executive, the company designed an innovative auto body with iconic gull-wing doors and stainless steel exterior. But a dip in demand, followed by an entrapment scandal sank the company in 1982, costing investors over $100 million.

Ben Rosen, founder of Sevin Rosen Funds, tried his hand at creating a new car company in the mid 1990s. He partnered with his brother, a former Hughes aeronautic engineer to create a hybrid with a flywheel for acceleration and a turbo-generator for cruising. The vehicle was a play against battery powered vehicles of the time, which were clunky and inefficient. But after $24 million of capital invested, mostly by Rosen, the brothers shuttered the 70-person company in 1997.

Automobiles aren’t the only failures. The Indian Motorcycle Co., makers of fat-fender cruisers, went through a $45 million buyout in August 1999 by Katama Cycle, McKinley Cycles and J.L. Albright Venture Fund. The company sucked up another $48 million from J.L. Albright in 2001 before going under again in 2003. Stellican Ltd. bought the trademarks associated with the company in 2004 and plans yet another re-launch. The company raised $30 million in September 2006 from an undisclosed investor.

Then there’s Segway. The personal transporter has taken on something of a punch line status. Since 2000, it has pulled in approximately $126 million in funding from a bevy of VCs, including Kleiner Perkins Caufield & Byers. The company recalled 23,500 of the two-wheeled electric vehicles in 2006 due to a software glitch that can cause them to suddenly back up.