Oddbjørn Slinning, a partner at Norwegian legal firm SANDS, joins our growing debate that has raged this week on the spectre of a bubble emerging in shipping tech.
News carried on Splash this week that a bubble could be emerging in the shipping tech sector has sparked considerable debate both on the site and via social media.
I think we are seeing a healthy increase in the development of tech in shipping, driven by the availability of data, but a bubble? No. In shipping we’ve been used to a few companies driving design and operational innovation. Compared to other sectors supplier choice has been limited, mainly due to the high capital costs of the type of innovation we have looked for – new vessel designs, propulsion systems, or operational tools (such as digital navigation) to name a few.
The fact we are seeing new entrants who are more data focused is a good thing. Arguing that these companies ‘don’t know shipping’ and are ‘creating a bubble’, overlooks the fact that shipping needs this expertise, and we’re unlikely to supply it from within our own ranks.
There are, however, lessons we could all learn from the dot com boom and bust at the start of the century.
First we should accept that private money can invest in whatever it likes – the returns will determine the success or failure of the venture. I think it’s a stretch to draw comparisons between a relativity small number of non-listed shipping tech startups and the US$1.7tn-ish dot com bubble.
Secondly, the dot com bubble also gave us Amazon, eBay, Priceline and, indirectly, the dot com survivors Apple and Cisco. If shipping were to get companies as innovative and central to the global economy as these, we should be thankful.
My advice for what can clients do to identify the real winners among tech start-ups is as follows.
Like in any business venture, clients need to balance risk and return, and protect themselves accordingly. They should do their due diligence – if a start-up is under-financed and spending more than they earn, which is not unusual in an initial phase of a start-up company, then the risk of entering into a long term supply or service contract from an shipowner’s perspective will be that the supply or services may stop if the start-up runs into financial difficulties. A shipowner should thus ensure that other alternatives for critical service delivery are readily available – to avoid putting all their eggs in one basket.