Apple's auto ambitions sideswipe electric motorcycle startup

SAN FRANCISCO (Reuters) -- Apple Inc.'s aggressive recruitment of auto experts as it explores building a car has left a promising, if financially troubled, electric motorcycle startup in the dust.

Mission Motors, whose sleek electric bikes drew comparisons to Tesla's cars, ceased operations in May after losing some of its top engineering talent to Apple, according to sources close to Mission.

Although it has never openly acknowledged it is looking into building an electric car, Apple has recruited dozens of auto experts, many from automakers such as Ford or Mercedes-Benz, which shrugged off the departures.

As tech giants vie to define the future of personal transportation, dangling higher salaries and a more secure future, the defections can be devastating for startups, industry insiders said.

Some close to Mission Motors said it had reached a point of no return by last fall, when departures to Apple, and other companies, accelerated after a long struggle to find funding and a sound business model.

But former CEO Derek Kaufman thinks the company could have carried on if it had not lost key employees -- undermining efforts to raise funding.

"Mission had a great group of engineers, specifically electric drive expertise," Kaufman said. "Apple knew that -- they wanted it, and they went and got it."

A spokesman for Apple declined to comment for this story.

Kaufman said Apple recruiters began circling Mission as it was trying to raise a crucial round of funding last autumn.

An investor who had committed to the round backed out after two key engineers joined Apple, he said, and more employees followed in the coming months.

Tesla's reaction

San Francisco-based Mission is not the first to run up against Apple's auto ambitions. Tesla Motors Inc. CEO Elon Musk has publicly chided the iPhone maker for trying to poach engineers.

In February, electric-car battery maker A123 Systems sued Apple for recruiting some of its top engineers, claiming it had been forced to abandon key projects. A123 and Apple later settled on undisclosed terms.

With an r&d team of several hundred, A123 could weather the departures, CEO Jason Forcier said. But a small startup could be crippled, he noted.

"The competition for engineers is as stiff as I've ever seen it, and I've been in this game for 25 years now," he said.

That was illustrated earlier this year when ride-hailing app Uber snatched as many as 50 people away from Carnegie Mellon University's robotics lab, according to media reports, to help it build a self-driving car.

And amid tepid interest from investors in clean tech, startups rarely raise the money they need to compete, Forcier said.

"We put $1 billion into A123," he said. "Startups get $10 million to $20 million -- it's nothing."

Mission raised about $14 million, according to investment database CrunchBase.

Scot Harden, a vice president at electric bike maker Zero Motorcycles, said his company has not suffered any defections to Apple thanks to a stable base of investors.

"You have to have investors behind you who really see that future," he said.

Mission critical

Apple never tried to acquire Mission Motors, Kaufman said. But the engineering team, specializing in hardware and software for electric drive systems, including algorithms for battery charging and cooling, offered Apple a range of expertise to draw from.

At least two Mission employees joined Apple in 2012, according to LinkedIn profiles. Over the past year, people with knowledge of Mission estimate about a half dozen engineers moved to Apple.

Other employees also joined companies such as Tesla and Harley-Davidson, but Apple grabbed the largest share, they added.

The hires include Nancy Sun, Mission's vice president of electrical engineering, Mark Sherwood, director of power train systems engineering, and Eyal Cohen, vice president of software and electrical engineering.

Sherwood declined to comment. Cohen and Sun did not respond to requests for comment.

From its founding in 2007, Mission attracted engineers driven to build a world-class electric motorcycle. The company made headlines as it unveiled its prototype: an angular, modernist racing machine that hit 150 miles (240 km) per hour in tests, a record for electric bikes.

"It was the best bike I've ever thrown a leg over," former Mission employee Jeremy Cleland said.

But Mission was perpetually on the verge of running out of money, people with knowledge of the matter said.

In 2010, the company began focusing on making software and components for electric vehicles for other firms, hoping to generate revenue to support the motorcycle project.

Mission Motorcycles

A separate company, Mission Motorcycles, was formed in 2013 to sell the bike, but it plans to file for bankruptcy, CEO Mark Seeger wrote in court papers in September.

Mission Motors had no more luck with its new third-party business model. Although it struck deals with Harley-Davidson and others, the contracts were not lucrative.

Infield Capital, the largest investor which now controls the company, is in talks with parties which may be interested in acquiring the remaining Mission Motors assets, including designs for components and software, a patent portfolio, and a battery lab, said Bill Perry, a venture adviser at the firm.

Mission's prized bike never reached consumers. But former employees now hold key roles in Silicon Valley's auto efforts.

They include Seth LaForge, an engineer on Google's self-driving car project, and Jon Wagner, Tesla's director of battery engineering -- an impressive tally for a company that never numbered more than about 50 employees.

"The Apples, the Googles and the Teslas really benefited from the education that those engineers were given at Mission," one industry executive said.