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Mark Frohnmayer Built a Three-Wheeled Rocket Trike. Why Is It Worth a Billion Dollars?

Frohnmayer has come closer than anybody to bridging the gulf between our gas-guzzling present and an electric future.

Elon Musk didn't understand what Mark Frohnmayer was building.

Frohnmayer is the founder of Arcimoto, a Eugene company that makes lightweight electric vehicles that just might be as revolutionary—for Oregon and the world—as Musk's Tesla.

Strangely enough, they knew each other before either was famous. A decade ago, they car-camped together in the California hills with a mutual friend, Adeo Ressi, CEO of the Founder Institute.

Back then, Musk was a mere multimillionaire running a money-losing electric car company, and Frohnmayer was the scion of an Oregon political family who had a few bucks in his pocket and the crazy idea to build two-passenger, three-wheeled, doorless EVs in Eugene, Oregon.

"I told him what we were doing," Frohnmayer recalls, "and he was like, 'Oh, it sounds like a golf cart.' And I was like, 'Well, not exactly.'"

Years later, Musk found out what Frohnmayer had built: a slick rig with dual electric motors that goes 75 mph and accelerates like a Tesla.

It was 2019 and their friend Ressi had just gotten his Arcimoto delivered to his house in Palo Alto, Calif. Musk jumped in, hit the accelerator, and lurched into a concrete wall.

"Elon became the first person to crash a production Arcimoto," says Frohnmayer, 46.

Musk and Frohnmayer both want to save the world from climate catastrophe. Neither knew much about EVs before they began building them. Both men have cult followings and incredulous critics, and both have dodged bankruptcy and ruin many times.

Unlike Musk, however, Frohnmayer has never totaled a McLaren supercar (price: $815,000), or downplayed COVID-19 to keep his employees at work during a pandemic, or called anyone an idiot on Twitter. To the contrary, he plays the banjo on calls with shareholders and has an Oregon Country Fair grin that contrasts with Musk's libertarian smirk.

But like Musk, whose car company is now worth more than $650 billion, Frohnmayer's Arcimoto is on a tear. Its stock soared earlier this year, driven by positive reviews, progress on production, and the election of a U.S. president who has vowed to sink billions into EVs.

In February, Arcimoto—which sold shares to the public in 2017—became one of the most valuable companies in the state, at $1.25 billion, and Frohnmayer became one of its richest citizens (at least on paper).

It's an amazing valuation for a company that has just 152 employees. Last year's sales totaled $2.2 million, and the company lost $18.1 million. (By comparison, Portland railcar maker Greenbrier has a stock market valuation of $1.6 billion but has 15,000 jobs and annual revenue of $2.8 billion.)

But the stock market is forward-looking. It values tomorrow, not today, and transportation wonks think Arcimoto will own a piece of the future.

"Arcimoto has huge potential," says John MacArthur, a research associate at Portland State University's Transportation Research and Education Center. "It serves an underappreciated part of the market that could be gigantic."

Maybe so. Or maybe Arcimoto is just the another experimental EV company run by an idealistic polymath with a savior complex.

Either way, it's the most fascinating business and clean-tech story in Oregon at the moment, because Frohnmayer has come closer than anybody to bridging the gulf between our gas-guzzling present and an electric future. Now, can he drive the rest of the way?

Oregon has long tried to foster an EV industry, both for the jobs and the climate. Starting in 2011, the state spent more than $3 million on Forth (then called Drive Oregon) to try and seed an industry here. In 2019, Gov. Kate Brown signed legislation setting a goal that at least 90% of new vehicles would have zero emissions by 2035.

Despite the help, the industry hasn't taken off. Tim Miller, a former Intel executive, is one who tried. He founded Green Lite Motors in 2005 to make a three-wheeled EV like Arcimoto's. The company operated until 2014, when Miller just couldn't raise any more money and had to close.

Frohnmayer has gotten further than anyone because he just won't give up, Miller says. "Mark has a deep sense of mission. That's what gives him tenacity."

Frohnmayer's lifestyle suggests he couldn't care less about money, despite the fact his Arcimoto stock is worth about $100 million. He lives with two roommates in a small bungalow strewn with Buddhist prayer flags in the unglamorous "flats" of Eugene with his dog Keira.

He'd like to have a family someday but, for now, "all of my children are made of metal and plastic," he says.

It's hard to imagine Frohnmayer ever being in a bad mood. He's tall and fit with short red hair—thinning and going gray—and he's often smiling. Friends say he is the most earnest person they've ever met.

"At heart, he's a hippie—a muscular hippie—but his methods are extremely technocratic," says Clay Shentrup, who has collaborated with Frohnmayer on a plan to fix America's voting system (see "Aim for the Stars," page 15). "He wants us to all be singing kumbaya and in harmony and having a nice unpolluted world that we can all raise our families in."

For fun, Frohnmayer likes to play the board game Risk (at which he admits he's bent on world domination). "I don't like to quit generally," he says.

To name his company, Frohnmayer started with A, because it would place him at the top of any list of car companies. "Arc," he says, is short for archetype, the pattern from which many will be made, and "moto" means drive.

At the Arcimoto plant in Eugene, vehicles roll across the polished concrete floor toward completion, tended by the company's 60 factory employees. The place looks like a neat and tidy auto body shop, except for some very high-end equipment. A 4,000-watt laser cuts steel tubing and plates, and two robotic welders (named Domo and Arigato) weld them together. A state-of-the-art lathe (called Kenny G) and a milling machine (Barry White) carve components.

Arcimoto's main product is the Fun Utility Vehicle—it's a jab at SUVs, which Frohnmayer hates. Arcimoto also makes the Deliverator, an FUV with a compartment on the back for packages, and the Rapid Responder, for fire departments that would rather not roll a huge truck for every emergency.

In January, Arcimoto agreed to pay $10 million for a 185,000-square-foot building, where Frohnmayer says he will churn out 50,000 Arcimotos a year, a rate he hopes to achieve in the next 18 months or so. Through economies of scale, he hopes to cut the price per vehicle to $11,900 from today's $17,900.

But that future is far from assured. As of Dec. 31, Arcimoto had completed just 174 vehicles since production began in late 2019. It had preorders for 4,717, up from 4,197 at the end of 2019, an increase of 12% despite pretty relentless marketing on YouTube and a Tesla-like buzz.

Getting car buyers to pay $17,900 for an FUV when they already have an SUV in the driveway could be a tough sell. And the FUV is an odd duck.

Technically, it's a three-wheeled motorcycle, but it has a crash-rated steel frame fitted with a clear, fighter jet-style canopy. (For a test drive, see "Vroom Vroom.") It has no doors, because those are heavy, costly and hard to build, but it has heated seats and heated handlebar grips. Frohnmayer's mother drives hers year-round in Eugene.

Related: What it's like to drive an Arcimoto.

Now, Arcimoto must spend millions to ramp up production. Building lots of vehicles at a reasonable price is hard. Tesla, founded in 2003, didn't make its first profit until last year. Ford Motor Company's gross profit margin has fallen for five years, hitting 4.8% in 2020.

So, why would anyone want to get into the business? To save the world, of course.

Frohnmayer says he's an unlikely entrepreneur. The family business is politics.

His late father, Dave Frohnmayer, was elected Oregon attorney general three times starting in 1980 and ran for governor in 1990. Dave was one of the last of a generation of moderate Republicans and among the dozen most important Oregonians of the last half-century. From shutting down the Rajneeshees to running the University of Oregon as president for more than a decade, he played pivotal roles in most of the state's key stories.

As a kid in Eugene, Mark Frohnmayer played a lot of video games. He was an introvert and wanted little to do with politics, at which his father excelled. He got an Apple II when he was 7 and taught himself how to program. He spent a lot of time mapping his neighborhood to see how people and goods moved around.

Tragedy rocked his world early on. In 1991, his 12-year-old sister Katie died of a rare genetic disease called Fanconi anemia, which impairs the production of blood cells in bone marrow. Another sister, Kirsten, died from it six years later at 24. Amy succumbed in 2016 at age 29, leaving only Mark and his brother Jonathan, an animal rights lawyer.

The death of Amy, especially, shaped Mark.

"The way she faced it has been a source of inspiration for me," Frohnmayer says. "She had a zest for life even when she knew she had a ticking time bomb in every cell in her body."

After graduating from South Eugene High School, he went off to Berkeley to study electrical engineering and computer science. He graduated in 1996 and returned to Eugene to work for video game maker Dynamix.

In 2000, he and friends started a new venture called GarageGames. Seven years later, billionaire Barry Diller bought the company for $50 million. Frohnmayer's take: $6 million.

He was a single guy with a windfall of cash, suffering deep distress about the fate of the world.

"I had the irrational exuberance from the sale of GarageGames and money burning a hole in my pocket and a huge sense of urgency to solve the issue of climate change," Frohnmayer says.

A bike commuter, Frohnmayer had moved recently, and he needed something with a motor. He saw a three-wheeled electric thing called the BugE in a Eugene parade. The BugE came as a kit. He got friends to help him assemble it. "That was really the light-bulb moment," he says.

Frohnmayer started Arcimoto in 2007. As a software guy, he thought it would take him six months to build a prototype. But this was hardware. Not just computer hardware but bent metal with human beings inside. He knew nothing about it, and he spent all his GarageGames proceeds learning on the job.

"The first seven years of Arcimoto was just repeated failure," Frohnmayer says. "We were aiming for something that we continued to miss."

The closest Arcimoto came to collapse was in 2011. He took a prototype called Generation 5 to California for a 20-day tour. A driver took it out for a time trial at Refuel, an EV showcase at Laguna Seca Raceway in California. At high speed, one of the suspension arms broke and the vehicle rolled. The driver walked away without a scratch, but the vehicle was totaled.

"We took Generation 5 home in pieces," Frohnmayer says. Arcimoto ran out of cash, and Frohnmayer cut all but two employees.

Frohnmayer raised a bit more funding, but the company petered along. Arcimoto built more prototypes. None made it to market. His money lasted three years, until just before Christmas 2014, when he had to lay off his last employees. "It was a dark time," Frohnmayer says.

Realted: Mark Frohnmayer thinks he can build a better election, too.

Then, lightning struck. Sketching on a napkin, he found a 7-year-old error. The three-wheeler he saw in the Eugene parade had motorcycle handlebars. All of Arcimoto's prototypes had a steering wheel. Ditching it would let him put the passengers more upright, shorten the chassis, and cut 600 pounds from the weight.

He called Jeff Curl, a friend, and asked him to pay the salary of Jim Jordan, his lead designer, for three months. They dumped the steering wheel, buffed up the exterior, and in early 2015, Frohnmayer took sketches of the new design—it would be his eighth—to Silicon Valley, where he had gone begging for six years.

And he got lucky, finally.

Bill Hambrecht, a legendary Silicon Valley investor, is a disruption hunter. His firm, WR Hambrecht + Co, looks for companies with the potential to upend traditional industries. That's what turns Silicon Valley on.

"We identified Arcimoto as being very disruptive," says Michael Kramer, CEO of Ducera Partners, a New York investment bank that owns part of WR Hambrecht.

Together, the two investors plunged $2 million into Arcimoto, a corpse-reviving shot of capital. Frohnmayer got the news on March 10, 2015, the same day his father died after a long bout with prostate cancer.

"A lot of life has happened during this project," Frohnmayer says.

Bigger money arrived in 2017 when WR Hambrecht helped Arcimoto sell shares to the public. The sale raised $19.5 million, a jackpot amount.

Ducera has no other investments in EVs, he says. "This is our bet." Kramer rips around New Canaan, Conn., where he lives, in a forest green FUV. "Everyone asks me about it," he says.

Arcimoto has a hardcore following online. Among the acolytes is freelance journalist Galileo Russell. On a YouTube channel with 152,000 subscribers, Russell posts slam poetry-style analyses of Tesla and Arcimoto. (Frohnmayer was so impressed he named Russell to the Arcimoto board.)

The comments on Russell's videos don't quite reach GameStop fervor, but people are clearly fired up. "Diamond hands on FUV," one user wrote, using internet-speak for buying and holding a stock come hell or high water.

Arcimoto started retail production of FUVs in September 2019, but the stock fell, bumping along near zero through much of 2020, until late last year, when investors went crazy for anything with an electric motor and wheels, and the stock, which traded for less than $2 in early 2020, suddenly jumped to $36.80 on Feb. 4, boosting the value of a company that has made no money to more than $1 billion.

The most generous way to value money-losing companies is to divide their share price by sales per share. At $13 a share, Arcimoto's price-to-sales ratio is 185. Tesla's, by comparison, is running at about 20. So investors buying Arcimoto shares at $13 are expecting its sales to grow a whole lot faster than Tesla's.

But that may not be completely crazy. If Frohnmayer can produce 50,000 vehicles in 2023, as he hopes, and sell them for $11,900 each, Arcimoto's sales would hit $595 million. If that happens, buying in for $13 a share would look like a bargain.

"Arcimoto has a real product that's really shipping," says Michael Shlisky, a senior analyst at Colliers Securities in New York. Arcimoto's closest competitor, a Canadian company called ElectraMeccanica that also makes a three-wheeler, is still just taking orders.

If Frohnmayer succeeds, he might do more to serve Oregon than even his father did. A large Arcimoto factory would employ hundreds, perhaps thousands, in Eugene. The best case, says MacArthur, the PSU transportation expert, is that Arcimoto fosters a constellation of EV companies in Oregon, just as Intel's expertise brought more chipmakers, and Nike's talent pool lured Adidas, Under Armour and others.

"That would be the real success," MacArthur says.

Save the planet? Boost the state? Put an electric tricycle on every street corner? Frohnmayer says it's all about to happen.

"When you look at where Arcimoto wants to be in 10 years, selling hundreds of thousands of vehicles worldwide, there's absolutely an argument for why we would be considered undervalued at $1 billion," Frohnmayer says. "In the bet on the clean future, I think Arcimoto is a good bet. That's why I'm all in."

GO: Mark Frohnmayer speaks at a virtual TechfestNW on May 21. Tickets are $25 at techfestnw.com.