FLIR, a thermal sensor pioneer, has been very active with acquisitions within the industry. It began in 2016 with Prox Dynamics, the former maker of the Black Hornet, which they then submitted to the Soldier Borne Sensor Program for the Army.
Since then we have seen four additional acquisitions made by FLIR:
- Aeryon Labs for multirotors
- DoneBase for drone services
- Endeavor Robotics for ground robots used for EOD (an acquisition >$300 million)
- Aria (CyPhy Works) for the assets and IP of a tethered drone company
So where exactly is industry consolidation happening and how can you get involved? Who are the key players and who is trying to buy these companies? Is there an advantage in buying up such disparate assets in the same space?
We should start by looking at the 800-lb gorilla in the drone space, DJI. DJI has been massively successful in making it difficult for other companies in other parts of the world to compete with them and their vertical integration. Additionally, DJI is developing most of its tech in-house like chipsets for long-range links, sensor payloads, and cameras. FLIR, on the other hand, has its hand in a lot of different businesses and has the infrastructure, the manufacturing, engineering, operations, procedures, processes, and size in place to get that sort of economy DJI is developing to scale.
When it really comes down to it, no one cares about the drone itself in the commercial space. The point of the drone is to be able to move a sensor around in 3-D space. What is important is the actual information that comes from the drone flying around, collecting data and processing it. If we look at the drone space through this lens, the only thing that matters is the sensor.
In FLIR’s case, you see a situation that begins with a company that knows sensors and has the capacity to build around that sensor. If you continue to expand from there, stabilization becomes very important, which can be acquired from Aeryon Labs. If the goal is to have a comprehensive information product, a drone base like PrecisionHawk, for example, is essential to providing the elements of a turnkey drone services company to look at the disparate parts of the stack and bring everything together to offer an end-to-end solution for the information product FLIR is ultimately looking for.
In our opinion, FLIR is positioning itself to be able to offer whatever type of information product, ISR application, search and rescue application, etc. that businesses need. The FLIR solution would then be made up of a number of different technologies developed in silos.
CyPhy created a very cool, elegant solution to get 400ft up in the air and zoom in and out of a large area by attaching it to a Polaris and driving it around. However, the price tag was through the roof and they might not have been able to get the necessary traction they needed to reduce the cost due to the cost of development and R&D, leaving them in limbo between the government and commercial spaces. If you take that technology under FLIR’s roof and add in their size and their economies of scale, CyPhy can potentially create something a bit more cost-effective.
So, where does that leave other large technology companies on the sensor, software, and hardware sides of the spectrum? Will there be an opportunity within the next two or three years for them to buy up assets as well?
To put it precisely: the drone space is difficult. We learned at DJI and then at 3DR that the more elements you add onto a drone, the higher the possibility is for the firmware to crash. Not only is it running a complex operating system, but it’s simultaneously fighting weird vibration environments, disruptive wind and weather forces, and, of course, gravity. Eventually, gravity is going to win. Drones are consistently running complex IMUs, navigation systems, and different sensor fusions are always happening onboard. The more you try to get these drones to process in real-time, the easier it becomes for something to fail.
Take your iPhone, for example. Have you ever noticed that each iOS update seems to be buggier than the last? That’s because it’s doing more stuff. It’s having to work harder to get everything to you in real-time, and other elements of the firmware begin to lag behind. The same is true for drones. They are starting to perform object recognition, real-time change detection, and tracking processes. However, in the drone’s case, if it experiences a firmware freeze, it results in it falling out of the sky or flying away. If you want to offer an end-to-end solution, and this doesn’t matter if you’re Amazon or UPS building a drone for delivery or Apple building a drone for mapping, building a drone is a lot more complex than you may think. It’s not just a three-button camera. It’s literally a flying robot.
Unfortunately, no matter how big your budget is as a tech company, you can’t cut down on the amount of time it takes to get a flying robot to fly consistently and reliably. There are so many small yet essential factors that go into solving those problems. In FLIR’s case, they don’t have that kind of time, so instead, they have their sights set on acquiring smaller companies who have solved different parts of the stack to accelerate the timeline for their ability to offer compelling end-to-end solutions in the aerial and autonomous robotics space.
Interested in how we think this trend could impact your business? At Guinn Partners, we leverage our holistic understanding of the industry and use it to point you in the right direction. We’d love to learn more about what you’re doing and to see if there is a way we can help.