Crowdfunding as a tool for the boat building sector

One of the most common moans made by delegates at many of the maritime conferences is the lack of access to capital for start-up projects in the maritime sectors. By its nature, the maritime sector is a capital intensive space to play in and many entrepreneurs’ dreams are dashed sitting in a chair at their bank.

Crowdfunding has emerged internationally as a potential source to deliver funds to enthusiastic entrepreneurs who have a good idea to sell. Can this form of finance be harnessed for the likes of the small boat builder keen to bring a unique platform to the market?

Cape Town-based entrepreneur, Jako Laubscher is testing the waters with his River Lounge concept on the Indiegogo platform which claims to have raised over $1 billion in crowdfunding for projects around the world. The platform has successfully hosted a number of other boat-related projects including the HYPAR smart boat, and the Keelcrab Sailone.

The River Lounge concept is seeking crowdfunding to take it to the next phase of development.

There are, however, a number of projects that do not seem to have gained traction yet including Laubscher’s River Lounge. Although currently in its concept stage, the River Lounge idea is an interesting one that could potentially attract interest from local and international investors.

The River Lounge is a fully automated hydraulically platform with hidden units that open and close with your remote control. It is a fully roadworthy product that can open on its own trailer for a 42m2 two bedroom apartment with amenities, air con, braai area, fridge, freezer (under deck), kitchenette AND/OR launch onto the water for a day out on the dam/river.

For international shipping it fits into a 40ft container or your garage. Weighing less than 2,5t your average truck or sizable car can tow the River Lounge to various destinations.

In contrast to the slick presentation and detailed drawings associated with the River Lounge on the Indiegogo platform is the rather crude conceptualisation of a kit to change a stand-up paddleboard (SUP) into a motor boat. Unsurprisingly the idea – which seems to consist of literally tying a chair and small outboard onto a SUP – has not garnered much attention.

Monty Furmie is another South African with maritime funding aspirations on Indiegogo. This Cape Town-based software developer is hoping to get crowdfunding to launch a sport fishing boat and charter business to be known as Kraken Oceanic. Capital raised via the platform will be used to train currently unemployed people in the skills associated with the building of the required vessel for the business.

In addition, Furmie states as one of the goals, the ambition to create open source software and systems for all communications, energy, GPS and Sonar/Radar requirements. “This software will be released as open source software and made available from our website as well as a publicly accessible GitHub repository,” he writes in his overview of the project on the platform.

Choosing a platform

Indiegogo is one of many international platforms that host start-up projects as well as fundraising opportunities for charities, but local South African versions are also available. The choice of platforms is one of the first steps towards running a successful crowdfunding campaign as one needs to consider their audience reach as well as their business model.

The South African based Jumpstarter platform has an “all-or-nothing” protocol built into their business model. As a registered Non-Profit Organisation (NPO), Jumpstarter states that all projects must be 100 percent funded before its time expires to be able to claim the funds. Funds relating to projects that do not meet this requirement become usable for other live Jumpstarter Projects as credits or pledges.

They maintain that this reduces the risk for all involved as it does not compel the project originator to follow through on a concept without the full financial support required.

By contrast the Indiegogo site offers two funding models and allows campaigners to access funds even if their full project goal is not met if they choose the flexible funding model. Choosing the fixed funding model, however, sees contributions returned if campaigners do not meet their goal. The choice depends on whether the project could go ahead without the funding goal being reached or not.

Obviously a commission fee is structured into the pricing and the platforms stipulate the percentage of funds raised that they claim. This can vary across the different platforms and can additionally include commissions and charges on funds that are transferred via a credit card.

Luring funders

Whatever the platform, however, the project really needs to catch the attention and emotions of potential funders who are generally everyday internet browsers that need to be persuaded to be parted from their cash.

This necessarily begs the question of trust. Will South African, and indeed African campaigners, be deemed to be trustworthy on international funding platforms where perceptions of a corrupt continent may thwart calls for investment?

Most platforms make it fairly easy to create a funding project or campaign – but on the surface it does not seem that even the most reputable sites are immune to hosting scams. Indiegogo, for example, recently hosted a scam that netted a campaigner $850,000 in a couple of days for a innovative artificial gill that “lets you breathe underwater”.

A company called Triton seems to have capitalized on the lack of knowledge surrounding marine ecosystems by claiming to have invented a device that was able to filter the oxygen out of seawater and allow scuba divers 45 minutes of shallow shipwreck exploration.

Bearing in mind that this is not an isolated scam, investors need to understand that they could be operating in a potentially grey area while those seeking funding need to realise that they need to overcome any skepticism that may exist by being transparent as well as open to questions.

One can be sure that these online platforms that act as facilitators for this funding have built-in terms and conditions that protect them when the fish does not hit the net so to speak.

It is interesting to note that, given the huge potential for crowdfunding to promote entrepreneurship and financing on the African continent, the establishment of the African Crowdfunding Association (ACfA) was established to promote effective self-regulation as well as “build trust and transparency between all actors in the African crowdfunding ecosystem”.

The take-home has to be, however, that both campaign developers as well as investors need to be circumspect about their expectations when using crowdfunding platforms. That said, it could be an interesting space for some maritime sectors to seek finance. Quite honestly, though, it is the platforms that are actually raking in the funds for the role in facilitating the deal – and it is therefore not surprising that a massive plethora of available crowdfunding sites exist.

Perhaps I will start one aimed directly at the maritime industry – anyone keen to fund this for me?

 

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