This interview was conducted in 2020.
For a young industry, the commercial drone space has seen significant action and change throughout the last decade. What stage do you feel we are in today of the industry’s growth?
I think we’re finally transitioning from a nascent market to a growth market.
This can be supported with developments like the establishment of AcceleratUM, a company founded by former FAA principals Michael Huerta and James Williams, which seeks to “help the aviation sector develop regulations and operating practices to enable commercial applications of unmanned drones”
Having an advocate, that includes veterans from the authority that regulated US airspace, to assist with drone platform certification and BVLOS rules issues can only help the industry. The establishment of AccelerateUM only hints at the potential for market growth.
I think we are witnessing a sea change where the industry, in general, has become more focused on solving specific problems rather than trying to perpetuate a drone, or a set of drone services, that can function like a Swiss army knife – a one-size-fits-all solution. You need several tools like hammers, screwdrivers, and utility knives to fix or repair things in daily life. The same is true for commercial drone applications. Each industry has its unique problems. The oil & gas industry requires a lot of inspections while construction and civil engineers need the ability to conduct surveys with sub centimeter accuracies. Precision agriculture, especially small high-value crops, can benefit from spraying drones. Hence, different industries benefit from different platforms, payloads, and software.
When drones were first “commercialized”, drone operators were marketing themselves as problem solvers when they were really just drone pilots. A couple of people with a drone simply, in most cases, did not possess the required expertise. In agriculture, having a drone with a multispectral camera does not make you a crop scout. Likewise, owning a drone with RTK capabilities does not make the owner a certified surveyor.
In my opinion, the commercial UAS market’s current transition from nascence to growth is being driven by industry subject matter experts (SMEs). As SMEs became more familiar with what benefits drones could provide, they developed methods and processes for integrating done capabilities into their current workflows… But SMEs have slowly, but surely, brought drones into their toolkit. Service companies, at least the ones having the most success, have been concentrating on providing targeted services for specific industries. They have brought in subject matter experts to understand how to better solve problems and then use feedback from actual operations to improve processes and capabilities. While the adoption of drones for commercial use has been subdued by slow regulatory progress, it has also been hampered by the challenge of adequately convincing decision makers that drones can provide benefits in many application areas. However, as SMEs have become more familiar and more hands-on, they are increasingly able to translate the value of drones to executives whether that value is in cost savings, manpower savings, increased safety, or some other industry-specific metric.
The bottom line is: Adoption will drive adoption. Smart businesses will use drones where they generate the most ROI and this will make them more competitive. Other businesses will benchmark that success. And each industry will continue refining drone-based solutions to meet solve their specific problems.
What categories of the drone industry (whether end-user sectors, or product/technology specific segments) do you think have the most opportunity for investors and entrepreneurs in the next five years?
We see several growth opportunities.
I think there is a growing opportunity to repair drones when they’re damaged or broken. Robotic Skies has been at the forefront of this adjacent market, and it’s a need that’s only going to be become more popular. The release of DJI’s M300 underscores that potential. Companies are building drones that are really robust, can operate in all weather conditions, and can operate for longer durations. They won’t be disposable, which means they’ll need to be fixed.
There are also growth opportunities in the area of AI/computer vision. Innovative companies that can combine AI with the right amount of edge computing, fog computing, and cloud computing/storage will see demand because this will increasingly become a data intensive market. There will be data collected, processed, transmitted, encrypted, used for on-board operations/safety, etc. and there will need to be some very solid systems integration to support along with artificial intelligence to identify which data is to be collected, which data is to be processed, what data needs to be permanently stored, and a host of other operations. The roll out of 5G will only exacerbate the big data issues. Computer vision will also be increasingly relied upon for obstacle and collision avoidance as well as navigating the platform autonomously, especially when GNSS signals are weak, blocked, or unavailable.
As for industries, there should still be a wealth of opportunities in providing solutions for oil & gas, renewable energy, construction, and mapping/surveying. There are 100s of companies that do not use drones yet that could be saving $1,000s each week or month, depending on the industry. Any refinery that is not using drones for flare stack inspections is, pardon the pun, burning money. Industries where the largest ROI can be achieved will adopt drones faster – it is much easier to convince a company to adopt drones if you can show that a company will save a massive amount of capital by doing so. The opportunity in agriculture is growing as crop sprayers become more adaptable (they now can spray aerosol AND granules) and more affordable on a per platform basis. Different regions will demand different capabilities due to the vast variance in crop types, crop sizes, fertilizer requirements, pesticides required, and climatology.
In the last 18 months, what were the most important acquisitions or events that you feel significantly changed the direction of the industry?
One of the most important acquisitions I think, which has flown in under the radar somewhat, is Motorola’s purchase of Cape Aerial Telepresence. It highlighted the fact that large communications companies are understanding that drones will be operated autonomously and remotely to provide live streaming for a wide variety of applications to include first response, remote inspections, etc. While Verizon’s purchase of Skyward was one of the first times a large telecom recognized that full stack enterprise software for drone workflows has value, the combination of Motorola and Cape has highlighted the next drone evolution in drone operations. Even if it is well ahead of regulations to support!
Another interesting acquisition was FLIR’s purchase of Aeryon Labs. I’m not sure it was the best platform to choose from a scale perspective (due to the per platform cost of Skyranger) but I think it highlighted some important issues.
- FLIR realized that DJI would eventually be making their own thermal imaging sensors and FLIR needed a platform to carry its payloads once DJI did not need them anymore.
- Along with the Prox Dynamics purchase, FLIR realized that they could benefit from selling the platform and the sensor rather than just being a subcontractor providing sensors.
- The subsequent purchase of Endeavor showed they realized the future potential for unmanned-unmanned teaming.
And of course, I think the seminal event changing the course of the commercial UAS market is the current COVID pandemic. It has changed the landscape in 2 ways. First, it has exposed the benefits of drones to a whole new crowd. Stories of drones delivering medicines, PPE, testing supplies, and even some retail items have proliferated over the last 3 months. It has also caused what seems to be a more streamlined process for getting COVID-related drone operating waivers approved. This is evidenced by the Airobotics BVLOS waiver it recently acquired in under 24 hours to support the COVID response. Second, it has highlighted the fact that drones can still execute many tasks, especially those normally accomplished by 2 or more persons, while maintaining social distancing. It is becoming increasingly clear that drones may be beneficial should other gray rhino events occur in the future. Not only can they benefit end users in cost savings, they can act as an insurance policy by minimizing the potential impact of future unforeseen events.
How do you think recent world events will change the adoption or usage of commercial drones?
The COVID-19 pandemic has forced a global movement toward “social distancing.” In response, governments and health services providers around the world are searching for methods to quickly deliver critical medical supplies, like testing supplies and personal protective equipment (PPE), and business are seeking alternatives to their current way of conducting operations which enable employees to maintain a safe distance from one another. There is a rapidly increasing realization that social distancing is inherent in most current drone operations.
Because drones are versatile and can quickly deliver a wide range or items over relatively long distances they have become main characters in battle against COVID-19. The fact that they’re somewhat easy to operate, and already in the hands of many security forces and drones services companies around the world, only enhances their potential.
Both companies experienced in drone deliveries and companies that specialize in other industry verticals are participating in delivering items and providing some essential services as part of the COVID-19 response. Here is a non-exhaustive list.
- Zipline – this company has been delivering medical supplies in Africa for years and has begun to deliver COVID-19 test samples in Ghana. The company has also been working with the FAA to seek approval for similar operation in the US.
- DroneUp – this company normally provides vetted pilots for executing a wide range of drone services at a client’s request. To assist with COVID, the company has worked in coordination with UPS and the FAA to develop and execute strategies for delivering medicines to homes within a certain distance of a pharmacy. They have conducted 100s of deliveries within the confines of Part 107, with a Part 135 waiver/approval not being required.
- SkySkopes – this firm normally provides drone services focused on energy industry inspections and mapping/surveying applications. The company is consistently innovating and has developed a reputation for meeting unique client requirements – a trait which has allowed it to be flexible enough to engage in disinfectant spraying and testing delivery of medical supplies to critical locations to help fight COVID.
- Zing – this company has focused on delivering food from restaurants to consumers. It markets drone delivery kits to pilots that want to deliver items to customers autonomously using common drones under Part 107 rules. In response to COVID, the company has demonstrated how they can provide a contactless delivery of food to customer across a Florida waterway in 2 minutes – a trip that would normally take 15 minutes by car.
- Flytrex – like Zing, this Israeli firm has focused on delivering food to customers and has found success in executing this service in Iceland. The company recently partnered with Ease, a US drone services provider, to deliver essential medicine, food, and household goods to homes in Grand Forks, North Dakota in response to COVID-related demand.
- Airobotics – also Israel-based, this firm manufactures and sells drone-in-a-box solutions that provide fully autonomous drone platforms for a wide variety of applications. The company recently received the first COVID related waiver allowing drones to operate beyond visual line of sight (BVLOS) granted by the FAA. The waiver will allow a Texas energy company to use drones instead of humans to inspect its facilities while staff remain quarantined.
National and local governments have also been enlisting drones to respond to COVID-driven demand. The following are only a few of the many examples.
- The National Health Service (NHS) of the UK – has recently announces that it is initiating a drone delivery trial designed to provide medical supplies form the mainland to St. Mary’s Hospital on the Isle of Wight. A test program for drone deliveries was in the planning stage but the urgent need for COVID-19 response motivated the government to accelerate the program.
- The North Carolina Department of Transportation (NCDOT) in the US – the organization has developed public and private partnerships and are planning to launch the three projects to aid in COVID-19 relief which include Zipline delivering medical supplies to Novant medical campuses, UPS (with Matternet) delivering medical supplies to WakeMed’s main hospital in Raleigh, and Flytrex delivering food from restaurants to homes in Holly Springs, North Carolina.
- The Jeju Special Self-Governing Province of South Korea – has enlisted a hydrogen powered drone from Doosan which has delivered over 15,000 protective facemasks due to lack of medical resources on the islands of Gapa, Mara, and Biyang. The operation was the first waiver for BVLOS flights conducted specifically for the COVID response granted by the Republic of South Korea’s Ministry of Land, Infrastructure, and Transport.
There are several examples around the world where drones have also been used by state and local governments to remind people to maintain their social distancing in public areas to slow the spread of COVID-19. This is being accomplished by playing recordings through loudspeakers mounted to the drones, which have unceremoniously been labeled “shout drones.” While this idea may initially seem draconian and could foster a negative opinion of drones in those that are subjected to them, answering the question of how can this general idea be translated to positive applications will drive significant future demand for drones.
Imagine a pair of lifeguards on a busy beach. A frantic mother approaches lifeguard team and says a rip current has carried her child far away from the beach. As one lifeguard sprints off to save the child, another launches a drone with a camera and loudspeaker and pilots it toward the troubled swimmer. The speed of the drone allows it to get overhead much faster than a lifeguard can swim so once in place, the lifeguard piloting the drone could give the swimmer directions on how to swim himself out of the rip current.
Now imagine the aftermath of a hurricane, or tornado, where the power is out and cell phone service has been disrupted. Survivors may need information about where they can go to seek shelter or find other assistance. A drone with a loudspeaker on board could fly over and provide desperate people with this valuable information.
These are only a couple of examples, but it is clear that the way speaker drones are being used during the current pandemic can be easily translated into more constructive applications that would produce additional growth in demand for drone platforms and services worldwide.
Drone manufacturers are already realizing there will be demand in the future for drones that can broadcast information. For example, a Dutch company called Acecore has developed an advanced speaker drone that can transmit sound up to 80 decibels and functions in heavy rain and wind. We can expect many more companies to use the lessons learned and translate those into future opportunities and bases for improving operating techniques and procedures.
Do you see investment and acquisition interest in the space waning, growing, or staying steady?
I think it depends on what part of the market you focus on.
With regard to platforms, I see a steady investment. We need a large investment to build an industrial base for small UAS here in the US, but I don’t know if that will happen. That said, I see additional investment in automated cargo drones. Small, to very large. I think this market, focused on delivering a range of payload sizes for “middle mile”, will take off way before last mile. Delivering cargo with autonomous drones between known points and/or along established routes has significantly fewer hurdles to overcome than B2C retail drone delivery to any point on a map.
There will likely be limited investment in DSPs (other than the exception below) as we see more consolidation there.
The smart money, in my opinion, will be investing in middle mile solutions and delivery of “critical” supplies (platforms, services, etc.) and any innovative technologies that support those applications. Most technology will be translatable to other uses one regulatory frameworks allow. DroneUp has done deliveries under Part 107 with the blessing of the FAA, so Part 135 waivers aren’t necessarily required. In my opinion, that’s kind of a big deal, and opportunity.
Investment in tech that significantly increases battery energy density is also needed.
As a side note, I think there will be many asses lost with respect to the insane amount of VC being poured into “air taxi” developers. It will make the money burned by small UAS companies like Airware and P-hawk seem like chump change.
See below for acquisition interest…
When do you think we’ll see significant industry consolidation?
I think there will be acceleration in consolidation this year and next. We saw a flurry of activity in the second half of 2019 in software, hardware, and services exemplified by the AirMap/Hangar, AVAV/Pulse Aerospace, and Measure/Aerodyne deals. There are simply more solutions providers than current commercial UAS market demand can support.
I know of at least two services companies that are preparing for acquisition and I think COVID, while it should generate a net positive for the industry, will help shutter dozens small drone businesses which can no longer function due to the reduction, or ending, of contracted services. Companies that did not have long term contracts with large companies will struggle to find new work for some time. Drone companies that are flexible, like some of those mentioned above, will negotiate the pandemic obstacle and come out smarter and better prepared to operate and prosper in a post-COVID commercial drone ecosystem.
What technologies or companies are you keeping a close eye on in the short term?
Technologies –
AI– I’m really trying to separate fact from fiction in AI. While there is lots of potential, there is also a lot of hype. The companies that can do this well, and ethically, could really gain a foothold especially if they are first to market. Everyone says they “use” AI in their products but separating the wheat from the chaff will be difficult. The companies in this area that interest me are Exyn, Neurala, Shield AI, and Percepto
Sense/detect and avoid – this will obviously be required for autonomous operations and a robust UTM. UTM companies are a dime a dozen but I am very interested in what Altitude Angel (now partnered with Inmarsat), Terra Drone, Iris Automation, ANRA, and Fortem are doing in this space. Some are focused on GBSAA via UTM and some are focused on ABSAA for collision avoidance. We will need both before true waiverless BVLOS ops, in my opinion.
Companies –
Percepto – you guys highlighted this company in you 2019 drone report, and rightfully so. There are many autonomous drone and drone-in-a-box solutions but very few have those solutions deployed. As far as I know, no competitor has as many deployments as Percepto. Their drone has the highest IP rating of any proprietary drone in the market according to my information. They work with clients to ensure the Percepto solution meets each customer’s unique requirements. In my mind, this is by far the best and most innovative of the drone-in-box companies
Atlas Dynamics – if Percepto is first in the drone-in-a-box market then Atlas is probably second. Like Percepto, they have a relatively small footprint with a highly automated proprietary drone. The drone has a lower IP rating than Percepto’s Sparrow but their solution swaps batteries rather than recharging which they say is preferable to their mainly military customers. I think the charge vs. swap battery debate can only be based on the end user requirements and not on a broad opinion of which is better.
Volansi – this is one of my favorite platform providers. I like Impossible Aerospace and Terraview because they are filling a gap where end users require payloads be airborne for an hour or more rather than 20-30 minutes at a time, but Volansi is focused on a platform ecosystem. They have transitional platforms now that can carry 10 or 20 pound payloads up to 300 miles and they are planning on larger platforms.
Auterion – Their Skynode is a smart phone for drones. It integrates many modules (comms, computing, etc.) to include a flight controller based on Pixhawk as well as an SDK –all platform agnostic. The SDK will allow developers to create their own apps based on the open source architecture. It can allow companies like DroneDeploy, for example, to partner and have their app on the drone itself. It’s like what Airware was trying to do, but open source (Airware was proprietary) and with a lot more built-in and expansion capabilities. Skynode architecture will even be provided to OEMs that want to include it on platforms during manufacture. Auterion’s business model is for the cloud/software that will run Skynode. A smart phone cannot operate without iOS or Android support. I think it’s all interesting and potentially and changing as the idea is to provide a standardized operating system for drones so enterprise operators can seamlessly deploy dissimilar fleets and develop “apps” to enable unique drone applications to support increasingly specialized end uses. It really is the best attempt, to date, to provide an underlying system which can support all drones for all applications. It really is a solution that seeks to either solve current operational problems/hurdles, or provide options for solving those problems, and even allows for the latitude to support solving problems that haven’t even been identified yet.
Iris Automation – it will be interesting if their solution becomes the basis for a network of sense and avoid required to fly autonomously in low altitude airspace, like a TCAS for drones.