Skydio valuation raises American hopes in drone war with China
Placement of DJI on trade blacklist has opened new opportunities for US manufacturers
California-based Skydio has become the first US drone maker to be valued at more than $1bn in a fundraising that signals broader confidence for America’s second act in the drone wars with China.
The new valuation comes from a $171m investment led by Andreessen Horowitz’s growth fund, doubling all fundraising since its founding in 2014. Others in the round included existing investors Linse Capital, Next47, and IVP, plus a new investor in UP. Partners.
This is the first significant fundraising since Washington placed China’s DJI, the world leader in drones, on the Entity List prohibiting US companies from supplying it with components. That move is widely expected to propel growth in America’s drone sector as the products evolve from flying cameras designed for consumers to more sophisticated tools for enterprise and government.
Skydio had been consumer-oriented in its early days, making drones for hobbyists who might want an aerial shot of themselves cycling down a mountain. To avoid trees while maintaining high resolution, it developed obstacle avoidance software that later became critical in its shift towards commercial applications — now the industry’s fastest growing segment.
“It turns out that developing all the software and hardware to do that has set them up to be best in class at competing in the enterprise markets,” said David Ulevitch, general partner at Andreessen Horowitz.
Until recently, China’s DJI beat its competitors on performance and price. Its estimated market share in the consumer market is north of 70 per cent, an overwhelming dominance that caused the likes of GoPro and 3D Robotics to exit the consumer market years ago.
But as drones are increasingly using software to create real time 3D models of infrastructure like bridges, then uploading them to the cloud for analysis, US companies led by Skydio, American Robotics, Teal and Draganfly believe they will have a second shot in the booming market.
“The potential for drones has really caught people’s imaginations in the consumer world, capturing amazing video — and in the industrial world for inspection, mapping, and monitoring,” said Adam Bry, Skydio’s chief executive officer.
“But the paradigm is still this manually flown world,” he added. “The real shift that’s happening in the market is this transition to fully autonomous operations, where the drone lives in a dock, it’s connected to the internet and it flies itself on demand wherever it’s needed.”
Skydio’s flagship product, the X2, is equipped with seven cameras, 100x zoom, night vision, and promises to turn ordinary users into expert pilots thanks to its self-piloting abilities.
They are “easy to fly and pretty much impossible to crash,” said Benjamin Spain, who runs the North Carolina Department of Transportation’s drone programme, which has 11 Skydio aircraft.
According to September projections from Valuates Reports, a market researcher, the global industry for commercial drones is expected to grow by a third each year from $6.5bn last year to $35bn in 2026.
The commercial sector had become the most lucrative market for drones even before Covid-19, but the pandemic accelerated that growth by underscoring the need for touchless technology.
Big as the opportunity is, DJI cannot be counted out as a competitor. Although the group may find it challenging to build the best drones without thermal cameras or chipsets from US companies, they remain on sale at Best Buy and the Apple Store, and anecdotal data suggests they continue to thrive.
In a survey of more than 2,000 business users by DroneDeploy, a leading software group, 78 per cent said they will continue to use DJI. Skydio was a distant second, at 7 per cent, said DroneDeploy CEO Mike Winn.
DJI’s share “is less than it was before, so it’s definitely enabling American businesses, and that’s really exciting for the industry,” he said. “But it’s not having the impact that some people imagined.”