Drone Zone: 3 Startups Using Drones to Fuel Big Data
As we have entered an era of big data and analytics, organizations are increasingly employing end-to-end digital platforms to aggregate and analyze data in the cloud. However, we are still barely scratching the surface of one of the most powerful sources of data at our fingertips: drone data capture.
While unmanned aerial vehicles (UAVs), more commonly known as drones, have been used since 1917, it has only been in the past 5 years that the $10.3 trillion construction industry has begun applying analytics to drone data capture to increase efficiency, reduce costs, and improve workplace safety.
As part of TrustedInsight’s MBA Venture Capital Competition, Laura Harrison, Matt Tookey, and I met with drone startup founders, startup accelerator program managers, and investors. Through these conversations and our research, we concluded that budding partnerships between drone data analytics startups and traditional construction companies will be emulated in other industries — such as mining, agriculture, and film — in the next 5 years.
Investor Appetite for Drones
Between 2011 and 2015, drones quickly rose to the top of the minds of startup founders and venture capitalists alike as new battery technology allowed them to fly longer for cheaper. Drone investment activity reached its peak in 2015 with $450 million in equity raises. As Alex Niehenke, an investor at Scale Venture Partners, put it, “In 2015, everyone was super-hyped about drones.”
Despite the hype, the investor appetite for drones has begun to fall since 2015 as investors have failed to achieve the returns they sought. As such, funding for drone startups dropped in 2016 (as seen in the bar chart above) and is continuing to decline in 2017.
What Many Investors Are Missing
But why have drone startup returns been disappointing?
Venture capitalists are turning away from drone investments as they see lackluster returns in consumer-facing hardware products and consolidation as China-based DJI controls 70% of the hardware market, but what these investors fail to see is that the real opportunity is in enterprise software data and analytics products for drone data capture.
While today’s drone hardware has made significant progress, Tomislav Zigo, director of virtual design and construction at Clayco, points out that “where it really breaks down is the processing and analytics.”
Drones are able to capture ample data, but construction companies are often unable to effectively gather and process the data given their busy schedules and lack of data analytics training.
Construction managers will not be able to leverage the power of commercial drone technology until they are also using end-to-end solutions that transmit the data to the cloud, provide an enhanced analytics solution to synthesize commercial drone data, and provide real-time recommendations to on-site managers using the data.
Thus, the real opportunity for investors is in companies focusing on untapping the power of enterprise data and analytics to bring data captured by drones to use.
If this technology is brough to life, PwC predicts that it will have a $127 billion impact across 8 key industries as illustrated in the graphic above.
Early Stage vs. Growth Stage: What to Look Out For
As seen in the chart below, 53% of drone investments are in the angel or seed stage of funding. This highlights an overemphasis on early stage companies and a void in expansion stage funding.
In order to fuel the growth in the high potential commercial drone data space, investors should look to increase the slice of the pie comprised by Series B, C and D+ in the chart above.
3 Companies We Like
While there are many companies in the space, Laura Harrison, Matt Tookey, and I identified 3 companies as frontrunners based on their current positions in the market, the quality of their analytics solutions, and the vision of their management teams.
We focused on companies that have already raised Series B or C rounds because the void in expansion stage funding gives investors an edge as they look to participate in and potentially lead transformational rounds.
Airware was founded to meet the needs of commercial users by filling the gap between expensive, inflexible military technology and unreliable hobbyist products.
It offers a complete enterprise drone solutions operating system, Aerial Information Platform (“AIP”), providing hardware, software and cloud services that enable customers to tailor drones to any commercial application and seamlessly connect aircraft, sensors, payloads, and application-specific software.
We are bullish about Airware largely because of its traction with large enterprise customers. In 2016, State Farm became a customer of its roof inspection solution as it becomes the first company to successfully build a product for the insurance industry, which represents a $6.8 billion opportunity.
Additionally, Airware has a unique advantage in construction as it forged a strategic relationship with Caterpillar to sell its solution through the the construction machinery giant’s dealership network.
Founded only 4 years ago, Kespry quickly rose to the attention of investors and drone enthusiasts and is now at the cutting edge of the industry.
Unlike many of its competitors, which rely on DJI for their hardware solutions, Kespry has an end-to-end platform.
This platform is able to target a capture area using an iPad application, launch and land the drone without a pilot, share all data automatically with the application, and store the data produced in the Kespry cloud — the cloud then creates reports using AWS analytics.
Kespry’s solution is regarded as the most accessible and pragmatic for customers, which helps explain its traction with customers like John Deere. Whitaker Contracting Corporation, another Kespry customer, is able to measure stockpiles 12 times faster using Kespry drone technology than it could previously.
Additionally, Kespry 2.0 is able to reach a half hour of battery life and cover 150 acres (see tech specs in the figure below).
Despite this performance, it is the customer-friendly, end-to-end nature of the Kespry 2.0 that compelled Whitaker Contracting Corporation and other SMB and enterprise customers to adopt the technology.
The relative ease of use of Kespry technology gives it a discernable advantage specifically with SMB customers, who may be at first be skeptical of drone technology.
Using aerial images captured by the drone, Skycatch’s platform allows a user to capture a site with high accuracy — to within a few centimeters — then to convert the image into a 3D model as shown in the figure below.
The 3D model is useful for invoicing, planning, and validation and is why we believe Skycatch is poised to stand out among drone data companies.
Data captured with Skycatch technology may be used to verify that a general contractor did, in fact, complete its job, leading to more accurate invoicing and more precise measurement of the materials used on a site.
3D models can also be used to plan how equipment will be placed onsite, leading to more efficient execution of projects involving heavy machinery.
Finally, we believe Skycatch’s growth will outpace its competitors because it has begun to establish several meaningful corporate partnerships. For example, Skycatch recently announced a partnership with AT&T, whereby Skycatch will pair its software with AT&T’s LTE.
Concluding Thoughts
While Airware, Kespry, and Skycatch are not the only companies poised to realize the potential of the $127.3 billion commercial drone data and analytics industry, we believe they are best-positioned to the lead the way based on their strategic directions, management teams, and traction building and selling solutions to enterprise customers.
While there are additional hurdles to clear — most notably the communication of value to investors and enterprise customers alike — we predict that drone-captured analytics will replace existing surveying and data aggregation methods by 2020.
*If you are interested in drone companies and want to better understand the drone market ecosystem, I recommend Chris McCann’s post.
