Venture Capitalists Prowl Drone Market


Startup drone makers are finding record amounts of funding as venture capitalists prowl for early winners in what may become an $82 billion industry.

From Silicon Valley to New York, firms including Kleiner Perkins Caufield & Byers, Lightspeed Venture Partners and ff Venture Capital are lining up behind unmanned aerial vehicle companies. Google Inc., General Electric Co. and Qualcomm Inc. also are jumping in with cash.

“Everybody wants to invest in drones because they’re seeing not only the potential but actual results right now,” said Jon Ollwerther, vice president of marketing and operations at drone builder AeroCine, which operates from a waterfront Brooklyn warehouse with a view of the Statue of Liberty. “We have said no to money.”

There’s more than ever to go around. Investors have pumped $210 million into businesses like SZ DJI Technology Co. and DroneDeploy so far in 2015, almost double the total for all of last year, according to data compiler CrunchBase. The pace has quickened as U.S. regulators grant more exemptions for limited commercial operations, reassuring financial backers that they’ll see a payoff from their support.

“It’s blindingly obvious to us that this is going to be a big space,” said John Frankel, founding partner of ff Venture Capital.

The U.S. Federal Aviation Administration told Congress on Wednesday that final regulations for business use of drones would be done by mid-2016. That promises to be a boon for unmanned aerial vehicles able to take video, make maps, monitor crops and inspect bridges.

70,000 Jobs

Within three years after the rules are set, the industry will create more than 70,000 U.S. jobs and have an economic impact of $13.6 billion, according to a 2013 report from the Association for Unmanned Vehicle Systems International trade group. In a decade, that total will soar more than sixfold.

Hurdles abound. Camera-toting UAVs stir concern that privacy will be at risk. Better batteries are needed to extend fly times. Long-distance trips require an air traffic management system and detect-and-avoid technology to dodge obstacles. The FAA may not go much beyond current limits: flights in an operator’s line of sight, below 400 feet (122 meters) and not near people.

Venture investors are willing to look past the challenges, because it’s important to get in now.

“Usually in these emerging industries there’s a lion,” Lightspeed Partner John Vrionis said. “It’s not that you can’t have a good return being the No. 2 player, but the vast majority of the money comes from being the leader.”

Kespry, Skycatch

Lightspeed led funding of $12 million for Kespry, which uses an autonomous quadcopter to capture and analyze aerial survey data. Skycatch, with similar concepts, got its first investment from ff Venture Capital.

DJI, the Chinese dronemaker that gained notoriety when one of its craft crashed on the White House lawn, raised $75 million in May from Accel Partners, giving it a valuation of about $8 billion. Airware, whose products include drone software, collected $40 million from investors that include GE Ventures, Google Ventures and Kleiner Perkins.

“If the market becomes as big as we think, there will be multiple investments that are done,” Kleiner Perkins General Partner Mike Abbott said. “I’m meeting companies all the time.”

70,000 Jobs

Within three years after the rules are set, the industry will create more than 70,000 U.S. jobs and have an economic impact of $13.6 billion, according to a 2013 report from the Association for Unmanned Vehicle Systems International trade group. In a decade, that total will soar more than sixfold.

Hurdles abound. Camera-toting UAVs stir concern that privacy will be at risk. Better batteries are needed to extend fly times. Long-distance trips require an air traffic management system and detect-and-avoid technology to dodge obstacles. The FAA may not go much beyond current limits: flights in an operator’s line of sight, below 400 feet (122 meters) and not near people.

Venture investors are willing to look past the challenges, because it’s important to get in now.

“Usually in these emerging industries there’s a lion,” Lightspeed Partner John Vrionis said. “It’s not that you can’t have a good return being the No. 2 player, but the vast majority of the money comes from being the leader.”

Kespry, Skycatch

Lightspeed led funding of $12 million for Kespry, which uses an autonomous quadcopter to capture and analyze aerial survey data. Skycatch, with similar concepts, got its first investment from ff Venture Capital.

DJI, the Chinese dronemaker that gained notoriety when one of its craft crashed on the White House lawn, raised $75 million in May from Accel Partners, giving it a valuation of about $8 billion. Airware, whose products include drone software, collected $40 million from investors that include GE Ventures, Google Ventures and Kleiner Perkins.

“If the market becomes as big as we think, there will be multiple investments that are done,” Kleiner Perkins General Partner Mike Abbott said. “I’m meeting companies all the time.”

Source: Bloomberg

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