1. Casino Royale: Venture Capital In the 2006 movie Casino Royale, James Bond attempts to bankrupt a terrorist financier by beating him in a high-stakes poker game. The plot twists and the tournament culminates in a $115-million winning hand for Bond—who discovers later the woman he fell in love with has stolen the winnings.
Just how high is the game of drone investment? According to CB Insights data, we’ve seen $199 million in 30 deals year-to-date. That’s more money invested in commercial drone businesses in the first nine months of this year alone than all previous years before.
These investments have been funded mostly by venture capital firms like Accel Partners, Andreessen Horowitz, and Kleiner Perkins Caufield & Byers. But other firms—like GE Ventures, Qualcomm, and Intel—are also investing to cash in on what they see are growth markets for their chips or IoT offerings.
The gold rush may be over. As pointed out here, there’s a growing sentiment that we’ve reached a precipice. Private valuation euphoria seems to be dissipating. Tech IPOs are down (and the tech startups that have gone public are generally under-performing). Volatility in broader markets is creating uncertainty.
Will these firms get stiffed like James Bond? Some will. Just look at the offices some occupy in San Francisco (big rents!) and the high cost of high-caliber employees. Not to mention the assumed crazy forecasts included in these firms’ business models (like the ones I’ve referenced in Diversity and Hype in Commercial Drone Market Forecasts). In 2016, we may not see a “crash and burn,” but keep your eye out for a quiet “right sizing.”
2. Magic Carpet: Drone Air Traffic Management In nearly all the legends and folklore, the magic carpet is used to portray the power of the carpet’s master. One legend has it that the Queen of Sheba gifted King Solomon a green and gold flying carpet studded with precious jewels. It is said that this flying carpet held spectacular powers. Made from a special type of clay with magnetic properties (and since the earth is a magnet), it held the ability to hover several hundreds of feet above the ground. With the carpet, Solomon was able to travel vast distances, but not without some big mishaps. In legend, the carpet seems to be a metaphor for his power and reach.
A lot of companies like Amazon, BNSF, BP Google, and even Walmart, want a magic carpet, too. They want a low-altitude air traffic management framework for drones so they can deliver goods and perform operations beyond visual light of sight (BVLOS)—and that’s exactly what NASA has promised in the Unmanned Aircraft System (UAS) Traffic Management (UTM) project. NASA’s UTM piggybacks on the FAA’s Next Generation Air Transportation System (NextGen). The present FAA plan emphasizes use of small UAS in areas outside airport locations, which would be ‘geo-fenced’ to avoid drones interfering with large vehicle landing and take-off activities. But for all these future UTM plans, ADS-B technology (or ADS-B-like signal integration) is a key element for ‘tracking’ and reporting the position of a drone.
The problem is ADS-B use as mandated by the FAA is fraught with shortcomings. For one, ADS-B is not mandated for use in Class G where most small drones will fly. On top of that, ADS-B “In” (the part that tells you where other aircraft are) isn’t mandated for anyone. Additionally, some pilots already feel the new activity of ADS-B distracts too much, and small aviation flyers may choose to ignore new input or not update their systems. So, here we are working on a magic carpet solution to low-altitude flight management, and the mistake may be that we are trying to solve it with an improperly regulated flight management solution. We’ve detailed these and ten other issues in the study ADS-B and Its Use for Small Drone Traffic Management which you can read more about here. We also discussed the NASA UTM on the sUAS News Podcast: Drone Hype Cycle.
3. Enter the Dragon: DJI When it first looked like there could be commercial uses for drones, analysts assumed that defense avionics and electronics suppliers would lead the market because they had a head start. Then came DJI.
Often considered one of the greatest martial arts films of all time, Enter the Dragon (starring Bruce Lee) was the first Chinese martial arts film to have been produced by a major Hollywood studio, Warner Bros. The 1973 film is largely set in Hong Kong. I think the name is a fitting description for DJI, which is headquartered in Shenzhen, China, just outside Hong Kong. According to The Economist, the company is at the forefront of the civilian-drone industry.
DJI estimates it already has about 70 percent of the commercial market worldwide and a larger portion of the consumer market. This plays out when looking at FAA data. As we reported in sUAS News, DJI is the first drone company to break the magical 1000 N registered airframes, and they still hold a commanding lead with a reported 44% market share as of December 8, 2015.
DJI continues to release new product after new product and leads other manufacturers with technology like geo-fencing and even micro investments with its SkyFund. I predict this will continue well into the future given their current lead, their strategic partnership investment with Hasselblad, and their recent investment into an R&D facility in Palo Alto, California.