Daily Management Review

While Commercial Markets Beckon, Consumer Drone Business Stumbles


11/12/2016




While Commercial Markets Beckon, Consumer Drone Business Stumbles
As weak consumer demand and falling prices drive startups to shift their focus to specialized business applications, the fledgling drone industry is in the throes of change.
 
The consumer business has all but crashed for 3D Robotics - an early drone startup that raised more than$125 million from investors. Announcing a camera-equipped drone with imaging software designed for construction companies, this week the comoany unveiled a new commercial strategy.
 
After just a couple of weeks on the market - some units had sudden power outages, GoPro Inc this week announced a recall of about 2,500 drones for a refund. The company didn't say when it would offer a replacement product. Europe's Zano, which made mini-drones for consumers, shut down last year.
 
Drone makers now see big opportunities selling to businesses under newly relaxed U.S. regulations while they overestimated demand from hobbyists. Strong prospects especially in software and services that can make aerial imaging useful for industries including insurance, construction, agriculture and entertainment is seen by investors and entrepreneurs beyond flying robots.
 
Aggressively developing drones for delivery are companies including Amazon.com Inc and Zipline, a drone startup.
 
The China-based DJI has stung most startups vying to sell consumer drones which are often used for racing or photography. The Chinese company has slashed prices to dominate the market. for example, from nearly $1,000 at the beginning of the year, DJI discounted its popular Phantom 3 drone to about $300.
 
3D Robotics co-founder and CEO Chris Anderson said that they took a beating after releasing its Solo consumer drone last year for about $1,500.
 
"It's no fun watching prices fall by 70 percent in 9 months," Anderson said, referring to DJI's price-cutting.
 
Despite having a backlog of drones sitting on Best Buy stores shelves, Berkeley-based 3D Robotics has all but scrapped its consumer business after shuttering warehouses and factories and laying off scores of employees, Anderson said. They now sell for one-third of their original price.
 
According to data research firm CB Insights, from $134 million in the previous year, venture capital financing for drone companies fell 59 percent in the third quarter, to $55 million ad the chill is being felt widely. The drop heightened caution about drone companies even as it reflects a widespread funding slump across the tech sector.
 
Rory O'Driscoll, a partner at Scale Venture Partners said that any new company would have "an extraordinarily difficult argument to make" to venture capitalists while trying to compete with DJI on consumer drones.
 
"Consumers buy drones, and it's a disposable item. They play with it, and then they are done," he said.
 
DJI began making commercial drones and pursuing software development more than a year ago and the company eclipses many Silicon Valley startups with a workforce of 6,000.
 
"Four years ago, it was enough to take something out of a box, you push a button and it flies. The smart money is now in drone services," said Adam Lisberg, DJI spokesman for North America.
 
(Source:www.reuters.com) 






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