A leading expert in UAV analysis has warned that further consolidation is on the horizon for the drone industry, which could force a wave of mergers and bankruptcies in the sector following the sale of the assets of Airware earlier this week.
Philip Finnegan, director of corporate analysis at Teal Group, said that the end of Airware, one of the most promising venture-capital funded startups highlighted the ‘looming’ consolidation ahead, in an article written for Forbes.
Airware unexpectedly shut down last month, leaving around 120 employees without jobs after the startup’s £92m in funding dried up.
Supplier of commercial drone solutions, Delair, announced an agreement to acquire the key assets of the developer of software analytics tools for drone data, promising to “ensure the continuity of service for existing customers and dealers”.
The acquisition also included Airware’s Redbird analytics software and IP, plus the 26 employees who ran it.
Finnegan said that the demise of the company was a ‘disappointing end’ for the startup, which raised £92m ($118m) from 2013 to 2018 and ranked as the third largest venture capital funded startup worldwide.
Speaking in his Forbes article, Finnegan wrote: “Despite this initial promise, Airware ran into problems that forced it to shift its strategy. Initially, the company planned to provide the operating system for drones. The goal was to become a Microsoft of drones, enabling greater commonality and utility for drones. Then the company shifted to providing more hardware. DJI, which has more than 70% of the market for drones worldwide, proved to be a formidable competitor. As DJI’s intense competition pushed Airware out of hardware sales, it moved more toward providing software for drone data collection and analysis. Even its new strategy was insufficient to provide enough cash flow to survive.”
Finnegan goes on to say that the problems in the drone sector remain for services and analytics, with the commercial market ‘developing more slowly’ than investors had originally hoped and companies adopting drone tech ‘cautiously’.
He continues on Forbes: “Regulatory barriers are taking time to loosen. Without Federal Aviation Administration approval to fly beyond visual line of sight, the commercial viability of many operations in agriculture and industrial inspection is in doubt.
“Companies are adopting drone technology cautiously. The large firms that could deploy large fleets of unmanned systems are still running proof of concepts to ensure that drones will meet their needs and provide cost savings.”
In conclusion he says that there is still a ‘large, profitable market ahead’ in the drone industry, with Teal Group forecasting a commercial market of almost $40bn over the next 10 years – but companies will need to dedication and commitment to go the full distance.
“Companies need the staying power to allow the market to mature,” he concludes.