An Update on Commercial Drones #AUVSI2017

If artificial intelligence is the brains, then robots are the brawn in the future of work.

Earlier this week, we attended the AUVSI XPOENTIAL trade show in Dallas, the largest global gathering of unmanned systems providers, robotic software developers, and industry experts.

We sat down with 13 executives from some of the leading commercial drone companies. Here are the takeaways from our meetings:

  • We’re Still in the Early Innings of Drones. Overall demand for drone hardware, software, and services continues to see strong momentum domestically and internationally. Industry leaders are confident that the market potential in core verticals remains deeply unsaturated. Increasing customer awareness around the efficiencies of drone technology represents a catalyst for accelerating industry growth.
  • Ground Robots and Drones are Complementary. Terrestrial robots and aerial robots (i.e., drones) should not be considered competitive offerings. Some of our favorite strategies in the space couple ground robots with drones for autonomous services.
  • Drone Delivery is Real. Throughout our meetings, robotic delivery of packages was identified as one of the largest untapped markets. Most industry leaders do not expect regular drone delivery to be viable for 5+ years; however, that’s a meaningful uptick from last year, when a similar group did not expect drone delivery to be realistic for 10+ years. Amazon is leading the way in the drone delivery space, but will likely acquire enabling technologies to make it a reality.

  • Deregulation is Key. Further deregulation is needed to take the drone industry to the next level. The FAA’s Part 107 significantly deregulated the commercial drone market and provided a meaningful catalyst to the industry, but additional legislation is needed to allow drone flights beyond the operator’s visual line of sight. This would expand the number of locations where drone flights are allowed. Another regulatory imperative is implementing a nationwide unmanned traffic management system.
  • Consolidation Will Continue. Industry consolidation has been a common theme over the last two years and leaders in the space expect this trend to continue. Consolidation will likely include smaller company acquisitions or mergers, as well as Fortune 500 companies entering the space.

We asked each executive we met a set of six questions to better understand the trends driving or holding back the commercial drone industry.  Here are the aggregate responses to our 6 questions:

  1. What’s the biggest limitation holding back the industry? Unsurprisingly, most drone executives highlighted regulation as the primary industry headwind. Customer awareness, product understanding, and a lack of actionable applications with drone-collected data were also common answers.
  2. What U.S. government regulation is holding back the commercial drone industry the most? Five executives mentioned the restriction of drone flights beyond visual line of sight (BVLOS). Prohibiting flights over people, allowing only one drone to be operated per pilot, and limiting the number of locations drone flights can take place were also identified as large regulatory headwinds. Companies that perform drone services for infrastructure inspection, construction, and mining indicated that regulations are not holding the industry back, because most of these operations are performed within the line of sight.
  3. When will flights beyond visual line of sight be deregulated? Almost everyone agrees that BVLOS flights will not be fully deregulated in the next year or two. On average, most experts think the industry will see BLVOS deregulated in 2020. A few sources indicated that the FAA may implement a process in 2018 that would streamline the application process allowing users to fly BVLOS.
  4. What is the biggest technical challenge you need to solve? While answers varied based on company focus, common technical challenges include sensor integration, battery performance, onboard computing capabilities, and computer vision capabilities.
  5. What is the biggest untapped market or use case for drones that you see? It was broadly acknowledged the largest untapped market remains the core verticals many of these companies are currently focused on: oil & gas, construction and mining, agriculture, and utility inspection. Several companies also highlighted package delivery as the largest market opportunity.
  6. Ground robots will be better than aerial drones for what applications? Most experts think terrestrial robots are better suited for applications that involve carrying heavier payloads or taking direct action (e.g., bomb disposal or pesticide dispersion), and most experts view these two robots as more complementary than competitive. For example, terrestrial robots can be used to carry multiple aerial drones to a central work location. Ground robots can also perform maintenance on drones, change components, or swap their batteries.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.