A Tale of Two Companies

Dieter Loibner | Professional BoatBuilder Magazine

Torqeedo’s Deep Blue 40 KW outboard on display at the company’s headquarters in Gilching, Germany

I have been tracking, and writing about, the technical side of recreational boating for three decades. In that time, I have come across, or been approached by, numerous inventors and developers with an idea for a product that they are sure will take the boating world by storm, i.e. by developing and marketing electrical or hybrid propulsion systems. I always ask them this question: “Do you have sufficient funding to survive at least five years without making a profit?” They think I am joking. I am not. The marine marketplace is diffuse, conservative (slow to change), and hard to penetrate. Looking for customers is like looking for a needle in a haystack. Marketing costs are high.

Over the years I have seen many people try to break into this marketplace. Many fail at considerable personal financial cost, sometimes in the millions of dollars. A few have built profitable companies, but by the time profitability is achieved, the founders have frequently ceded control to outside investors—they no longer own the company they created and all too often are now working for the new owners. If the founders still own the company, it is often because it’s not sufficiently attractive to secure outside offers, in which case they are tied to it, and sometimes almost a prisoner of it, until they retire, at which point the company often dies.

I thought it would be interesting, and a salutary lesson for would-be entrepreneurs among our readership, to look at this through the histories of two companies, with very different investment and growth strategies, operating in the electric propulsion and hybrid markets.


I first met Christoph Ballin and Fritz Böbel, the founders of Torqeedo, almost a decade ago. A year or two previously, Ballin had bought a house on Lake Starnberg, Germany, where fossil-fueled motors are outlawed, and had acquired a skiff with an electric outboard. Böbel, a highly qualified electronics engineer, took one look and said: “This is a horrible motor. With new technology we can do three times better than this!” Ballin conducted a market study and Böbel a technical study. Deciding there was a viable business model, they resigned from their respective jobs and launched Torqeedo in 2005 with an initial goal of producing motors at least twice as efficient as the competition.

File photo

Christoph Ballin, Torqeedo’s CEO and co-founder

Having no previous experience with electric outboard motors, Ballin and Böbel were unhampered by preconceptions. Their single-minded pursuit of efficiency led them to adopt a new generation of brushless permanent-magnet electric motors driven by electronic pulse-width modulated motor controllers (the same technology used on a much larger scale in all hybrid and electric cars). Böbel and Ballin made their motors small enough to fit inside a pod not much larger than a propeller hub. Putting the motor right next to the prop eliminated losses that arise from transmitting power down a shaft through one or more right-angle bevel gears. Immersing the pod kept the motor cool, eliminating the need for a complicated cooling system. They also put the motor controller into the pod so all that ran down the shaft was wiring to the integrated drive unit. Then they invested heavily in developing a compact, lightweight lithium-ion battery pack to power their outboard motor.

Better efficiency, steep learning curve

Böbel and Ballin hired a German container-ship and submarine propeller designer. Using modern digital design and rapid prototyping techniques, they created four generations of propellers in six weeks, learning that the key to propeller efficiency is a large diameter and slow speed. Unfortunately, the only way to make motors small enough to fit in a pod is to have them run at high speeds (up to 8,000 rpm). So they designed a miniature 8:1 planetary reduction gear, which they also built into the propeller hub.

After eight weeks they had an electric outboard with overall efficiency of more than 50% converting battery power to propulsive power in the water—twice as efficient as traditional electric outboard motors. The addition of the lithium-ion battery, with its high energy density, gave a range of several miles.

Assuming their outboard would stimulate rapid competition from well-established bigger players, they moved quickly and brought their motor to market in just 11 months. This was when they discovered that they had a lot to learn about building products for the marine environment.

“We found it is very easy to outperform the competition on motor and battery technology but much harder to gain an understanding of materials issues in the marine environment, which the competition has understood for decades. We knew everything about electric motors and not enough about corrosion,” Ballin told me.

Dieter Loibner | Professional BoatBuilder Magazine

Torqeedo’s inhouse R&D department

Torqeedo had a painful few years. By 2010 their outboards were already into their third generation and had gone through considerable reengineering. This included galvanic isolation of the electric motor, so no zincs are required on the shaft, and waterproofing to IP67, a rating that requires the entire outboard to withstand full immersion to a depth of 1m (3.3′) for 30 minutes. During one demonstration a Torqeedo jumped off its transom and ran underwater until its battery went dead; it still worked when recovered by a diver a couple of weeks later.

By 2010, Ballin and Böbel had around 15,000 battery packs in service and had seen “everything that can go wrong,” forcing them to make constant revisions. That year they also launched their fourth generation of batteries. And Torqeedo’s motors showed up in all kinds of applications, mundane and exotic, such as the propulsion system for a classic solar-powered ferry.

Famous, but broke

The two entrepreneurs had initially funded Torqeedo themselves, expecting to be profitable fairly quickly. Within a year and a half, the startup money was gone. They secured additional funding from angel investors and ran through that. They were winning all kinds of awards—German Startup of the Year in 2008, and a European Cleantech summit in 2009. Nevertheless, by 2010 they were broke again and forced to seek venture capital. They pulled in $4.7 million, which gave them a new lease on life, but in exchange they had to play by the rules of the venture capital investors. In principle, the VCs could have exchanged the management; they had to approve budgets, and gained the right to decide when and at what price to sell the company. In 2011 Böbel decided to leave.

Torqeedo pursued a strategy that prioritized growth and brand recognition over profits. Year-to-year growth rates were phenomenal (from Torqeedo’s inception, the company grew on average by 35% annually). Ballin: “In the years of the financial crisis 2008–09 we only grew 20%, which made it difficult to raise money.” In spite of those challenges, in a few years their small Travel T1003 electric outboard motor sold tens of thousands of units. Another round of funding in 2012 raised an additional $5.6 million from venture capitalists, and Torqeedo embarked on an ambitious program of product development, initially with a 40-kW (50-hp) Deep Blue electric outboard, powered by a massive high-voltage (325V) lithium-ion battery pack adapted from the automotive world by Johnson Controls (and replaced recently with the battery pack from the BMW i3 electric car). In more recent years they filled in the entire range between the T1003 and Deep Blue with 4-kW, 10-kW, and 20-kW outboard motors and pod drives, powered by lithium-ion battery packs at varying voltages. There is even a 0.4-kW electric drive for kayaks. Torqeedo racked up , including prestigious DAME and IBEX innovation awards.

The company expanded rapidly in size and personnel, and moved into new premises. Ballin: “If you want R&D funding at reduced costs for the customer, you need scale. In the marine world, to get scale you have to go global. To go global you need a service network. It’s a tedious and expensive task; we try to set up 5–10 new service dealers every year.” Expansion brought its own challenges, like finding established and experienced industry professionals who could step into Torqeedo’s startup culture.  At one point, Ballin remarked to me: “If you hire somebody for what is perceived as an established company, some applicants will tell you they only work 30 hours a week and need to exercise their dog in the lunch break, when we used to work 80 hours a week and sleep on the office floor.”

And then along came successful technology entrepreneur Stephan Schambach.

A tech entrepreneur steps in

File photo

Stephan Schambach

Schambach, in his words, “convinced the founder of the legendary [financially troubled] multihull brand Gunboat, Peter Johnston, to design a hybrid performance catamaran. I found a garage shop that played around with electrical drives, lithium-ion batteries, and range-extender generators. Trouble was, the propulsion and energy system came from said garage shop. It worked in principle but was utterly unreliable. In fact, I needed a captain who was an electrical engineer.”

Schambach searched for a better solution. He founded Moonwave Systems to develop the electric propulsion system. However, he did not want to be in the lithium-ion battery business. This brought him to Torqeedo and its high-voltage pack for the Deep Blue system. Ballin was on the hunt for investors once again. In late 2013 Schambach “ended up investing in Torqeedo, and my company Moonwave Systems was to become part of it. There were synergies in the high end of the product lineup, and our hybrid-propulsion prototype was turned into a real product.”

Adding hybrid systems

Torqeedo had already been working on parlaying the Deep Blue motors into serial hybrid systems—electric propulsion with an integrated range-extending generator. The fusion with Moonwave pushed this project into high gear, resulting in a sophisticated serial hybrid built around a core control system. This provides whole-boat energy management, delivering electric power at any desired standard voltage, AC or DC, to all electrical loads on a boat. The control system can be applied to a series of standardized electric machine, generator, and other modules, resulting in a system that is scalable from 27 kW up to 55 kW (35 hp up to 70 hp) continuous, including twin propulsion systems for catamarans, using the same controllers, software, and building blocks. Todd Sims, Torqeedo’s global sales manager, noted: “The standardization of components allows for consistent performance, a high level of safety, and easier service and support.”

Courtesy Torqeedo

Schematic of Torqeedo’s Deep Blue hybrid system on a Gunboat 60 catamaran

Sims’s optimism aside, Torqeedo has struggled to find, or build, a suitable range-extending generator to optimize this system. It experimented with products from other manufacturers, tried developing its own solution, and in February 2018 announced a partnership with WhisperPower, a Dutch company that has its own hybrid systems. The new 25-kW, 350VDC variable-speed generator is fully integrated into the Torqeedo system and is reported to achieve consistent fuel-consumption levels below 300 g/kWh (0.67 lb/hph), in which case it would outperform the peak efficiency of any stand-alone marine generator in the marketplace.

Restructuring ownership

The fusion of Moonwave with Torqeedo was not without hiccups. Schambach noted: “Investing turned out to be rather complex. Tired shareholders who were unable or unwilling to support the company going forward made every step difficult. It was a typical story about all that’s wrong with venture capital in Germany—too many people investing too little and having too many rights. Over several financing rounds, I ended up investing more than €20 million. We managed to restructure the ownership of the company such that only active investors had a say in the future. We could have invested even more and grown Torqeedo into a profitable public company. We had plans for it and interested investors.”

But instead, the Volkswagen “Diesel­gate” scandal that affected German car­makers radically changed the political and technical landscape. Automotive manufacturers abruptly shifted research and development into electric vehicles. A new CEO at diesel engine manufacturer Deutz decided to fast-forward the adaptation of the company to the new reality. Deutz, a 150-year-old German engine manufacturer, went on the hunt for electrification expertise; in September 2017 it bought Torqeedo lock, stock, and barrel. Some, but not all, Torqeedo investors made good on their investment.

A revolution in increments

Torqeedo now has the funding to hire additional engineers, increase the pace of product development, and cement its position as the preeminent electric and hybrid propulsion company in the recreational marine world. Ballin explains that exchanging venture capital partners for an industrial partner brings not only financial stability but also Deutz’s industrial competence, component sharing, and economies of scale. It significantly enhances Torqeedo’s technical capabilities and will help drive down costs.

Schambach’s assessment of the Deutz buyout is a little different: “Some will say we were just lucky, but luck comes to those who are prepared.”

From its inception, Torqeedo positioned itself to be, in Ballin’s words, “the spearhead for clean electric mobility in boating.” However, because of the fragmented nature of the boating world, with multiple small niche markets, Torqeedo found “we can bring about change, but not in a broad-based disruptive movement. We are doing it by making changes in many small places.” Torqeedo has discovered that reinventing transportation doesn’t come cheap, or easy—a lesson currently being learned in boardrooms around the world.

Ballin summarizes the company’s journey: “As a startup founder you may believe you are participating in a sprint, but while you are running you realize you are in a marathon. The struggle was a lot longer than I had imagined. I had thought five years maximum.” Torqeedo is now 14 years old. Between R&D investments and maintaining rapid growth, it has yet to make a sustainable profit.

For more startup stories check out Nigel Calder’s brief of two small US firms that have been offering electric propulsion systems

Hybrid Marine

For four decades, Graeme Hawksley, the driving force at Hybrid Marine, has played a broad-based leading role in electronics development, all the way from silicon chip and board design, through firmware and software creation, to testing and implementation. Midway through his career, he “sold everything that would not fit into my 26′ wooden sailboat” and spent four years sailing from the U.K. to New Zealand, interspersed with contract work to fund the passage. The voyage culminated in marriage and a pregnant wife, prompting a return to the U.K. He went into business as an independent consultant, but his sailing ghosts had not been fully exorcised. He ordered a 32′ (9.7m) steel Wylo hull and deck, which prompted the designer, Nick Skeats, to suggest, in Hawksley’s words: “‘You are an electronics chap. Why not have an electric motor for propulsion rather than an engine?’ I thought about this for a while, decided I would need a generator to charge the batteries, and the initial idea for a hybrid was conceived.”

Nigel Calder | Professional BoatBuilder Magazine

Company founder Graeme Hawksley testing a parallel hybrid system

In 2003 Hawksley launched Hybrid Marine, assisted by a £45,000 (approximately $70,000) grant from the U.K.’s Department of Trade and Industry. His focus was on a serial hybrid (electric propulsion with a range-extending generator managed by a control system for optimum usage). By 2006, after three years of research and development, he had a working prototype on his own boat.

Shifting to parallel hybrid

My acquaintance with Hawksley and Hybrid Marine goes back to 2007. As part of ongoing research into marine hybrid options, I visited Hawks­ley at his home-based workshop. We went for an electric-powered ride up and down the Medina River in his boat. I recruited him to help work on a series of articles for Professional BoatBuilder (Nos. 107 and 108), which initially delved into the pros and cons of serial hybrid applications, and then, in the third installment (PBB No. 127), introduced the notion of a parallel hybrid (in which a diesel engine remains connected to the propeller shaft with an auxiliary electric “machine” that can be used for propulsion power and generation). These articles later became the technical foundation for a successful $3-million grant application to the European Union—the HyMar project—which investigated the viability of hybrid technologies in recreational and light-commercial marine applications.

To provide data for the articles, Hawksley conducted a very detailed performance analysis of the boat, a Malö 46, I was having built in Sweden at the time, and then we explored fuel maps, specific fuel-consumption rates, and what a serial hybrid (diesel electric was the term I used at that time) would look like in my application. We discovered that for many anticipated duty cycles it was not easy to improve on the efficiency of a well-optimized conventional diesel installation.

Nigel Calder | Professional BoatBuilder Magazine

An early-generation, air-cooled, brushed “electric machine” used by Graeme Hawksley in his parallel hybrid systems was later replaced by liquid-cooled brushless machines.

One outcome of our articles was a shift in Hawksley’s focus toward parallel hybrids. He realized that it is difficult to make a business case for going into production with a serial hybrid, “whereas a parallel system has a lot going for it. Rather than competing with an engine supplier, a parallel hybrid can enhance their products. A small company such as mine can work in partnership with engine manufacturers to develop, market, and sell systems. The pricing of these systems will be much more competitive than a serial configuration.” He found a customer willing to pay for a system, secured a £60,000 (approximately $90,000) government loan to fund the project, and, in 2007, soon after we met, produced his first commercial parallel hybrid system, which is still in operation.

Sticking with the idea while refining it

Hawksley: “Since that time, we have made enhancements and upgrades to the design, but it is basically the same configuration. We emerged from the prototype stage about 10 years ago and are now in production at a small scale. As this is mainly through subcontract for the various components, it is very easy to scale up (and down); we are able to respond quickly to changes in business demand. We have developed good relationships with engine manufacturers and subcontractors. We contract out the manufacture of custom components (mechanical and electronic) with the final integration performed in house. We utilize the engine manufacturer’s service network for warranty and servicing of our systems. This enables us to have a small internal team that concentrates on developing the core technology and providing a high level of technical support to our existing customers.”

Although the overall configuration has changed little from the early days, the implementation is significantly different. Hybrid Marine has shifted from air-cooled, brushed “electric machines” (devices which can serve as both a motor and a generator) to more robust water-cooled permanent-magnet devices. It has refined the mechanisms for mechanically interfacing the electric machines with engines, while the control boards and software have significantly evolved. There have been substantial aesthetic advancements.

Multimode hybrid system

“After a decade,” Hawksley said, “we have gained a lot of knowledge and understanding. We are able to judge what will and will not work, enabling us to guide potential customers accordingly. Every application is different, and a big part of our business is the ability to specify and supply complete power and propulsion systems that meet expectations at an acceptable price. We are currently increasing the range of engines we can work with (10 hp to 230 hp). Our next big development is the Multimode Hybrid. This system combines the best features of serial and parallel hybrids and is very cost-effective. We see this as the next generation of marine hybrids.”

Nigel Calder | Professional BoatBuilder Magazine

The first passenger barge with massive battery banks and hybrid-propulsion systems from Hybrid Marine.

Hawksley noted: “There is no real magic to the development of our business. It has just been a lot of hard work with restricted resources. Each system we sell must make a profit and must be at a price customers are prepared to pay. This has shaped Hybrid Marine from day one. We have built our reputation on producing robust systems and resolving any problems if they arise. All of our systems (bar one exception) are still in operation, and we are very proud of this.”

When I first met Hawksley 11 years ago, he was on a roll and full of enthusiasm and confidence about the commercial potential for his systems. “Nigel,” he told me, “within a couple of years I will be selling 100 systems a year.” I did not want to prick his bubble, but I knew that without significant outside resources he would not be able to gain that kind of market penetration any time soon. In the event, despite garnering various prestigious awards—the Mansura Trophy in 2008, the Practical Boat Owner Green Product of the Year award in 2009 and 2011, and a Shell Springboard Award in 2010—he was unable to secure the necessary level of funding. He did at one point catch the attention of a potentially significant investor, who made a loan that was convertible into equity if they got along, but they did not. Hybrid Marine eventually repaid the loan.

Still at the helm

Hawksley now looks upon this failure to secure investors as a benefit. Unlike the founders of Torqeedo, he still owns his company. “Looking back, we were incredibly fortunate not to take inward investment—not that any was on offer. We have full control of the company, with 100% of equity owned by the founders. This was not the initial plan, just how things turned out. The market has developed very slowly, and a small concern such as Hybrid Marine has been able to service this low volume with minimal resources. As the market has developed, so have we. We have never turned away a genuine order and will continue to grow to meet demand.”

The downside is, despite having what is, in my opinion, the most highly developed parallel hybrid in the marketplace, Hybrid Marine has nowhere near the name recognition and presence that Torqeedo has in the serial-hybrid and electric-boat worlds. Hawksley rationalizes this: “We are not so much into brand recognition, but we have worked diligently to build a good reputation. Our philosophy is to build this reputation, and business will follow. The industry needs to have confidence you will be around for the long term, so it takes years to build relationships. To a large extent it is not a matter of finding a market but of developing one yourself.”

Small, but not burning cash

There are upsides to this slow-growth strategy. Hybrid Marine has been in some kind of a profit since 2009, and, Hawksley said, “we have been able to pay the principals a reasonable wage for the last three years. It was about 2016 that sales developed to the point of properly supporting the founders, 13 years from the initial conception. There is some wisdom in the expression ‘to become an overnight success just takes 20 years of hard work.’” This past year, sales hit the £500,000 mark ($655,000), and Hybrid Marine has grown to three full-time employees and one part-time.

Hawksley has an upbeat outlook: “We will continue to grow with the mar­ket and are seeing very strong business. We are now putting profits back into the business and are able to fund all development work ourselves.” Hybrid Marine may be in the unique position of making marine hybrids profitable.

Cultivating a niche

Ironically, profitability brings its own risks. If Hybrid Marine proves there is a more substantial market, bigger players may move in and try to take it. Hawksley notes that “once the big engine suppliers see the potential for business erosion by the emerging hybrid offerings, they will release their own systems. To some extent small companies like us seed the market for larger concerns to reap the future benefits. However, we don’t expect anyone to thank us for this.” He continues: “My strategy is to keep working at the niche applications where the big boys are not so engaged. There is plenty of room here for strong business growth regardless of when the larger engine suppliers show their hands.”

Nigel Calder

Hawksley tests an early-generation hybrid system in a shed attached to the side of his house.

For the near future, Hawksley believes Hybrid Marine is on a path of steady growth and increased profitability. Maybe in the future there could be a Torqeedo-style buyout. Hawksley comments: “We have some really good, well-developed technology and strong patents. This could certainly allow quicker time to market with cost-effective systems. We are always open to approaches from engine manufactures who understand what we have to offer.”

It’s Tough Building a Market

Torqeedo and Hybrid Marine are the technology leaders in their respective fields—serial and parallel hybrids—with well-tested products that should have significant market appeal. The problem has been getting the word out and finding customers. Torqeedo has done this by investing millions in marketing and in building a worldwide dealer network, with phenomenal year-to-year growth that has built a substantial company with hundreds of employees, but the effort has required a constant search for additional capital. The founders and early investors did not do well. Torqeedo has undoubtedly become the brand leader in its field but has yet to make a sustainable profit; it must surely be poised to do so now.

Hybrid Marine has pursued a polar-opposite strategy of slow growth based on sales, without recourse to outside capital. It took a decade to reach even marginal profitability and another several years before the founders could pay themselves a reasonable wage. They are, however, still very much in control. Although the company has great technology, it is still not known outside a small niche market. The groundwork has been laid for sustained growth into the future, but it is still not clear to me how the founders will cash out when they want to retire or do something else.

It is not easy building a successful company in the boating world and even harder to create the conditions for a clear exit strategy when the time comes to recover the value of the years of hard work and investment. It is fortunate that most of the people I see trying to do this are driven by a love of boats and an enjoyment of simply being in the boating business, which helps to sustain them through the lean years. Nevertheless, I will continue to ask: “Can you keep going for at least five years without making a profit?”

  • Torqeedo made the motor small enough to fit into a pod at the bottom of the shaft