Traction watch: game of drones

Editor's note:  Traction Watch is a new column focused obsessively on growth, and is a companion to the DEMO Traction conference series, which brings together high-growth startups with high-potential customers. Companies can apply here to showcase, or those similarly obsessed can register here to attend.

Despite uncertainty over draft FAA regulations, both industrial and consumer drones are set to takeoff this year. VC funding of drone startups is skyrocketing, and crowdsourced funding campaigns for consumer drones have flown far above initial goals. The drone industry received $108 million in VC funding in 2014, according to CB Insights. That's a 104 percent year-over-year increase.

PrivCo estimates drone startup VC funding at an even higher $412 million in 2014, but with only a 44 percent jump from 2013, as reported by CNN Money. Drones were the fastest growing tech sub-sector behind cybersecurity in 2014, according to PrivCo. Not too surprisingly, there's a VC fund specifically for drones, Drone.VC, created by David Weekly, founder of Hacker Dojo.

While drones began as a military technology, the majority of drone market growth will come from the commercial/civilian sector, according to Business Insider, with a compound annual growth rate of 19 percent expected between 2015 and 2020, compared to just 5 percent growth from the military sector.

Drones are by no means the exclusive domain of startups. For example: Amazon hopes to deliver packages one day via drones, while Facebook and Google are building drones to extend Internet access to remote areas.

On the consumer side, camera drones -- for taking high-def "dronies" -- have been wildly successful on Kickstarter and Indiegogo over the past six months. Zano, a palm-sized camera drone, raised $3.46 million from its goal of $185,300 on Kickstarter. PlexiDrone, which promises "cinema quality," raised over $2 million on Indiegogo; its original goal was $100,000. AirDog, a GoPro camera drone, raised $1.3 million on Kickstarter with a goal of $200,000. Chinese firm Ehang, which is producing a consumer GoPro drone called the Ghost, recently received $10 million in VC funding after its Indiegogo campaign raised $855,296 on an initial goal of $100,000. And as of March 16, the ELF VRdrone has raised $54,500 on a goal of $20,000, with 56 days left in its Indiegogo campaign.

The Consumer Electronics Association (CEA) estimates the global market for consumer drones will hit $130 million in 2015 revenues, up 50 percent from last year. "CEA market research expects 2015 to be a defining year for unmanned systems, and the category is ideally positioned for steady growth," said Gary Shapiro, president and CEO of CEA.

While the future of drone regulation is still cloudy, the skies do seem to be clearing a bit. In the U.S., the Federal Aviation Administration (FAA) banned commercial drones back in 2007. But in February, the FAA announced draft safety guidelines that would allow the use of drones under 55 pounds for "non-recreational" operations, as long as the flights occurred during daylight and the operator could keep the drone within his or her line of sight. The FAA is currently seeking public feedback on its guidelines. Other countries, such as Japan, Australia, the U.K. and Canada, are ahead of the U.S. in passing regulations to support commercial drone operations. For over 10 years, for instance, drones have been used in Japanese agriculture.

The FAA's guidelines, if approved, would be a boon for many emerging commercial drone applications, but would still ground efforts such as Amazon's delivery drones. However, there might still be hope for longer-range delivery drones in the U.S.; Aerospace company Excelis has been working with NASA to develop an air traffic control system that would remotely monitor low-flying drones to help ensure safety, Reuters reports. This system could enable drones to be flown remotely for commercial reasons--exactly what the likes of Amazon are hoping for.

(See also: "Are Robotics Startups Gaining Traction Affirmative.")


James A. Martin

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