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The following post was written by Reduxio CEO Ori Bendori during his tenure as Partner at Viola Ventures (2004-2018).
Drones (a.k.a. unmanned aircraft) have been around for many years and have been used around the world mainly for military purposes. Traditionally they have been preferred for missions that are too “dull, dirty or dangerous” for manned aircraft, but the drone industry has developed significantly in the past 10 years, and their new role in the civilian world has suddenly made them more interesting than ever before. In fact, the drone market is expected to reach $11B by 2022, with half of it comprising civilian applications (which are where most of the growth is coming from).
Technologies that originated in the Mobile industry, such as low cost and high capacity batteries, mobile communication that’s available just about everywhere, cheap and powerful mobile computing, open source software and even 3D printing – have all contributed to the advancement of the drone industry. These days you can build a highly-capable drone for a few thousand dollars and you can control it from your iPhone.
Chinese startup DJI, for example, sells very capable drones for as low as $500 (and they sold over $500M last year) and another startup, called 3D Robotics, provides open source code for flying their drones (as well as others). So VCs are now taking an interest in drones and there is VC money being spent in this new market, including in Israel.
Drones are strongly connected with other emerging and exciting markets, such as cloud computing and analytics, and Internet of Things (IoT). There are some horizontal solutions such as Autonomous Flight and Flight Planning Platforms (as well as hardware components, which doesn’t fall within the scope of this article) but what I would like to focus on in this post is the new vertical applications that are using drones.
Consumer (“follow me”) Drones
With this drone application, a GoPro-like camera records your extreme sport adventures (sky diving, cycling, etc.) or vacation activities on a video from an unusual point of view. This is a highly popular use of drones (usually quadcopters) which is relatively low cost, so of all the applications this will probably comprise the largest amount of drones, but low margins and unclear business models might make it less attractive for some investors. DJI is the clear leader here, selling huge amount of drones.
From 3DR: Adventures with 3PV™ Follow-Me – Aerial GoPro Drone Footage
Plug and play add on that turns drones into intelligent tools for film-makers (from Vertical)
Agriculture
This is probably the largest commercial vertical for drones at the moment, growing at an estimated $5B annually. Usually referred to as “Precision Agriculture”, it’s a farming management concept that’s based on observing, measuring and responding to inter and intra-field variability in crops. The drones fly over the fields and collect visual (and infrared) information which is then analyzed using Big Data analytics techniques. Apart from observing, some drones also help with certain tasks like crop spraying, monitoring and weed removal. This application has a clear ROI for both large farms and high value crops, like wineries for example. Japan is the early adopter in this field, but the market is expected to grow globally. It’s likely to remain mainly a service business, as farmers have no relevant expertise in operating the drones. 3D Robotics is a leading technology provider for this market.
Package Delivery
This application of drones represents the ultimate delivery mechanism, delivering your precious new gadget (and other easily transportable goods) immediately to your home. Amazon and others are creating a great deal of noise about it and there has also been some early deployment of this drone application in China. It’s an area that’s buzzing with a lot of hype and represents a potentially huge market.
The main issue around this application is fear, as people don’t like the idea of flying objects (that can fall!) over their heads. There are also issues with the cost of the service and the range and weight of packages that can be delivered via quad copters (it requires a vertical takeoff and landing, which is not optimal for carrying heavy packages over long distances). We’re likely to see this application happen, but the scale of this market is still unclear.
Other drone applications that are attracting less interest (for now)
There are other niche areas where drones can potentially be developed further, such as infrastructure inspections in hard to reach places (like pipelines, high-voltage transmission power lines, etc.), and public safety (for example surveillance, crime fighting, search and rescue, environmental management, etc.).
A word about regulation
The authorities were caught unprepared for the emergence of drones in our lives. In the US, the initial response to developing anything drone-related that wasn’t a hobby (or useful for killing terrorists) – was NO. But last February the FAA finally released (for the first time) some regulations that are in the right direction. It appears that the answer to package delivery is still NO, but probably YES to Agriculture and other areas. Other markets, especially Japan and Europe, are more open to the development of drone applications. It is viewed as a potential new industry that’s connected with IoT and other new technologies.
Israel and Drones
Israel is a pioneer in the drone business. The local military drone industry is probably second only to the US (I was personally involved with drones many years ago). There is a lot of local talent developing and flying drones that can create commercial opportunities for drones in areas other than military-related technologies (e.g. Cyber) and we have already seen a few very interesting startups in this area here at Viola Ventures. We think that this new and emerging market is very interesting and are excited about the opportunity to support Israeli startups with potential to contribute in this area on a global scale.
We think that this new and emerging market is very interesting and are excited about the opportunity to support Israeli startups with potential to contribute in this area on a global scale.
