The Sunshine Economy: Building Boat Sharing Company Boatsetter
For several years, South Florida has been working on its technology credentials. Tech incubators, accelerators, pitch competitions and other efforts have worked to nurture and grow the technology industry, especially tech start-ups.
Last year, South Florida pulled in more investment money and more investment deals than any other area in the Southeastern U.S., according to technology conference eMerge Americas, the Knight Foundation and FIU. (While the region attracted $1.4 billion in venture capital, almost 70 percent of the money went to one company -- Magic Leap, based in Plantation. Magic Leap has raised $2 billion in total for its effort to create augmented reality technology.)
Boatsetter, a peer-to-peer boat rental platform, is a local tech company attracting outside investors. Jackie Baumgarten founded the company in San Francisco. In the four years since moving to South Florida, Boatsetter has attracted millions of dollars in investment, the business has expanded across continents, and Baumgarten has emerged as a top technology entrepreneur.
"What we do is connect people who want to get out on the water with boats and boat owners and captains. We do not own or control or maintain control of any of the vessels on the platform," says Baumgarten. Boatsetter shares that business model with AirBnB, Uber, Lyft and other sharing platforms.
Baumgarten won't talk about specific financials for her company, but says the value of the rentals on the site more than quadrupled last year and revenue to the company was "in line" with that growth rate. Where that revenue comes from is no secret. Boatsetter collects 35 percent of a boat owner’s rental rate. For professional boaters who captain a boat, the company takes 15 percent of the rental fee. Boatsetter charges another 10 percent booking fee.
Embedded in those fees is a three-way insurance policy that Baumgarten describes as "one fundamental problem" for her original boat sharing company, Cruzin, which she founded in 2012.
Recreational boat owner insurance doesn't cover the vessel if the boat is chartered. She says she spent eight months learning about recreational maritime insurance before finding a company to issue the coverage -- Geico Marime Boat U.S. "It protects the boat, the boat owner, the renter and the captain. It's fundamentally critical to enable this type of transaction in a safe, legal manner."
The insurance is a significant cost for Boatsetter and controlling it has enormous upside for the company. Baumgartner estimates it consumes up to half of the company's gross profit.
Business is good
Through its main Boatsetter platform, Baumgarten expects to conduct between 10,000 and 30,000 transactions this year. She thinks the total business conducted through Boatsetter's technology will be greater, though. The company has expanded into offering cloud-based software reservation services to private owners with several to more than 100 boats in their fleet. "The reason we're doing this is because then that inventory that they have, we can list on our marketplace." Baumgarten sees this part of her company as organic growth and "completely in alignment" with the core business.
Boatsetter has expanded into top 15 markets worldwide, including the Caribbean, Mexico and the Mediterreanean. Its seasonal business in Ibiza helps swell Boatsetter's employee count to 45. The firm has 35 permenant full-time employees spread across four locations: Fort Lauderdale, Prague, Canada and Spain.
"We are laser focused on building an incredible company and that means scaling (up)."
Search for capital
Baumgartnen has raised $23 million for her boat sharing businesses from more than a half dozen investors, but it hasn't been easy. "Initially raising capital was very difficult for me, being a first time CEO and a woman. I didn't have the track record and I didn't have the existing network to tap into," she says.
Like a lot of entrepreneurs, the first money in came from Baumgarten herself. She says she put her condominium in California up for sale, put most of her belongings into storage and didn't take a salary for two years as she build the forerunner to Boatsetter. Her first investment was about $100,000. "I think about it as to what it will be worth in the next few years."
Building the company from South Florida has some advantages, but attracting venture capital investors isn't one. She says recently an investor dismissed taking a stake in the company without seeing financial data or hearing about strategic plans. "He told me because I wasn't in California they wouldn't invest."
Baumgarten says none of Boatsetter's investors have sold their shares of the company. "I want a partner who's going to stick by me and grow the company and support me investing in the right decisions for the company."
The boating business is improving.
More than 250,000 new power boats were sold in the United States in 2017, according to the National Marine Manufacturers Association. It was the best year in a decade for boat sales. Spending on boats hit a record -- $39 billion. Florida led the nation with almost $3 billion spent on powerboats, engines, trailers and accessories. That represented a 10 percent jump from a year earlier.
Nationwide, almost one million used boats changed owners -- the highest number since before the Great Recession. Still, powerboat ownership is below pre-recession years. About 11 million are registered in the United States, according to Coast Guard data. One out of every 13 registered recreational boats in America is in Florida.
This is the supply side of the business model Boatsetter is building as a peer-to-peer boat rental platform. Baumgarten thinks if she’s successful, her company’s technology will help boost the overall marine industry.
The average boat owner is in his late 50s, according to industry data. Baumgarten says that is not the case for Boatsetter customers. "We have successfully been able to bring in younger demographics and more diverse demographics." She says almost 80 percent of its renters are younger than 45, and a third are women.
"The marine industry is really looking at a very dark future if they don't find a way to bring in younger demographics."