Posted By Simon Montford on October 28, 2016
Last week I attended the 3rd annual Commercial UAV Show. I can't believe it's been a year since I covered the previous event, and wrote "There's no business like drone business". It took place on the 19th and 20th of October at ExCeL in London. The first thing I noticed was that the number of exhibitors and attendees appeared to be down compared to the previous year. I felt, however, that the quality of companies and delegates had increased. Last year l got the impression that many who attended were there out of curiosity. While milling around the expo floor, I came across an industry analysts with a remit to gather data and obtain market intelligence, an entrepreneur scoping out commercial opportunities, and an intern who had been dispatched on a fact-finding mission by her boss.
This year things felt rather more "grown up". Instead of a bunch of enthusiasts trying to figure out how they could make a living out of doing something they enjoy; building and flying drones, the expo consisted of highly professional organisations with solid business models, and very slick product offerings. Apart from consumer drone OEMs such as DJI, 3DR and Parrot, the entire sector in the early days was primarily populated by hobbyist-entrepreneurs. The problem was that many of them didn't really quite know where the industry was headed, what pain points the nascent industry would be capable of solving, and which commercial sectors would be the first to benefit from consumer drone technology. Many just naively thought that by attaching cameras to a bunch of flying robots, they would suddenly become rich. Not surprisingly the mystical money tree they had imagined never materialised, and most of this rash of amateurish startups failed. Their failure was of course inevitable, because they didn't formulate sustainable business models, figure out how to solve customer needs, or raise growth capital - the lifeblood of any high-growth early-stage company.
Above Photos by Paul Gilbertson
Most startups that are still in business today are thriving, not only because they were able to develop sustainable business models, and transform themselves into well-oiled money making machines, but also because the entire sector has matured. After all a rising tide lifts all ships. Factors driving growth include better and cheaper hardware due to economies of scale, and less regulatory confusion. Today operators can, therefore, buy off-the-shelf components, use low-cost cloud hosting solutions for data storage and analytics, and go about their business without fearing that regulators may suddenly shut them down. Also, there's growing awareness and general realisation among end-users that their businesses really could benefit from what the UAV sector has to offer.
Although it sounds callous, the aforementioned Darwinian cull that I just described is actually a very good thing. It separated the wheat from the chaff, and paved the way for the next wave of innovation. I saw far too many aerial filming production companies exhibiting at the show last year, a service that has become highly commoditised. This year what I saw was the epitome of the idiom "survival of the fittest".
Some of the most exciting and impactful applications of drone technology I came across during the show included UAVs that are being used to protect endangered species, such as great apes in Indonesia and Tanzania, and sea turtle populations throughout the world's oceans.
UAVs, and the data they collect, are increasingly being used within the civil engineering sector to reduce maintenance and operational costs, and increase safety. Drones are also being used instead of humans to inspect industrial assets, so there will eventually be no need to suspend employees at great heights over land or sea.
Above Photos by Paul Gilbertson
I spent some time chatting to a few members of the Sky-Futures team, and was seriously impressed with their entire product offering. One of the most significant strategic advancements by the company is their pivot from primarily being a hardware and personnel services business to a machine automation and data analytics one. This is where the real value lies! Drones will soon be able to fly unassisted, due to recent advancements in machine learning. The next generation will therefore come with machine vision and collision avoidance as standard. Regulation is less of an issue when your fleet of drones are monitoring unmanned industrial assets located in remote locations. A.I. will transform heavy industry - for the better. Sky-Future's platform already delivers substantial value to its customers by providing more accurate and timely inspection reports, and this has led to substantial efficiency gains. The company is laser focused on the oil and gas industry, but their technology platform could easily be applied to many other industry verticals. According to Crunchbase, the company recently raised a further $5.7m, $4.2m of which came in the form of a strategic investment from Bristow Group, a helicopter service provider to the energy industry. That brings the total raised by the company to $9.5m.
A further innovation that grabbed my attention during the show was a joint initiative by Unmanned Life and Prime Competence to combine drones and autonomous ground vehicles for indoors postal sorting. The Dutch and British companies are attacking the booming e-commerce market at its weakest point, which is making sure that sorting capacity and delivery go as fast as the consumer buys online. They are currently running a pilot initiative to demonstrate that their autonomous drone solution can perform the task of accurately sorting packages more rapidly than the current industry standard. If successful, this would add value to the end-user and result in a lower cost-per-sorted-unit for the company.
Something else that was equally evident was that the big boys are starting to muscle their way into the room. Rubbing shoulders with plucky young startups like of Yuneec, Sky-Futures, DroneX, Aibotix, and Flyability were senior citizens such as Lockheed Martin, Insitu Inc (acquired by Boeing), Textron Systems, and Cobham; BAE Systems were conspicuously absent. Perhaps next year we'll see further consolidation as a result of M&A activity. It is inevitable in my mind that Primes such as Lockheed and BAE Systems will continue to make strategic investments and acquisitions, as will some of the more successful startups, in a bid to acquire innovation, chase rapid growth, and/or rid themselves of competition.
As the number and financial strength of businesses operating in the commercial UAV sector increases, so will the volume of money flowing into it from governments in the form of grant funding, as well as private equity. Much of this will be spent on R&D that will further fuel innovation, and turbo-charge the market, resulting in even better products and services previously thought inconceivable.
Indicative of the current pace of innovation is Uber Elevate. Within a decade, the company aims to have a network of fully electric "flying cars" that will take off and land vertically, on-demand! As far as I'm concerned, when we finally get flying cars, man (and woman's) quest to make all things science fiction a reality will, in my mind, be complete.
It is very clear that the commercial UAV industry is experiencing rapid growth, and exciting times lie ahead. I'm looking forward to returning next year to see what a difference a year will make. I have a feeling we'll all be in for a treat.
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