A couple years ago, in early 2013, I started writing a lot about Drones. I have always thought that Drones represent the leading edge of a robotics age. There are a host of reasons for that but the main ones are that they are already being actively used in military and some commercial applications, they require less coordination with the “real world”, and they represent a 10x improvement in cost and speed over things they replace (helicopters and planes).
However, finding an investment in this sector that fits well into our investment thesis has been challenging. We’ve looked at quite a few Drone investments but until recently we have come up empty. However, last month that changed when we closed on a seed investment in Dronebase.
Dronebase is a marketplace for Drone services. This is not a consumer oriented marketplace. This is a business to business oriented marketplace. If you are in the construction industry and want to hire a Drone Service Provider to monitor or survey your job site, Dronebase is for you. If you are in the mining industry and want to hire a Drone Service Provider to measure inventory values in your stockpiles, Dronebase is for you. If you are in the real estate industry and want to hire Drone Service Provider to create aerial imagery for your properties, Dronebase is for you.
Dronebase is standardizing pricing and quality around two basic offerings to start; aerial imagery & video and more data-driven mapping & surveying (including the relevant analysis).
Like all investments, who is doing this is as important as what they are doing. Dronebase was founded by Dan Burton, a former Marine Infantry Officer, who saw the power of Drones firsthand in his time in Iraq and Afghanistan. He came back to the states and worked in a number of interesting jobs, but never lost the fascination for and the interest in Drones. So he started Dronebase to facilitate the commercial adoption of Drones.
This is a seed investment for USV. Dronebase is operating, but only in the Los Angeles market right now. They have big expansion plans which this seed capital will help facilitate. They are looking for software engineers and sales and operations people in the Los Angeles area. If you are interested in working at Dronebase, check out their careers page and apply.
Why, would you say, has it been hard to find an investment in this area?
One reason may be that drones are typically not used in NYC where Fred is located hence proximity of investees. Noting that dronebase is in LA which is wide and open with plenty of land and sprawl. And Fred was in LA for many months so when in Rome invest in the Roman ideas. Otoh, there are plenty of people in NYC pitching dating and bar apps I’m sure.Other reason of course is that in order to get your feet wet with an idea like this you would have to practice or invest in the appropriate hardware which can be a bit costly for some people.
USV’s portfolio doesn’t appear to be geo-biased.
I am not saying it’s geo based.
I didn’t say based. I said biased.
I meant “biased” I know you said that.Short answer to the original question would depend on what Fred means by “hard to find”. Does USV actively approach companies or only work primarily when they are approached or when someone is referred to them? Probably both but no question it’s not primarily the former.There is no doubt that at this stage my guess is that there are slim pickings in this area of the types of companies that fit with USV. And those companies are not necessarily located where it’s easy for USV to take a meeting on a whim. Maybe if this company was in Iowa USV would have also invested in it, who knows? But there is no question that a firm would be more likely to consider an investment in a place where they can meet with the founders, multiple times and/or see a demo of what the founders are actually doing.Not specific to this but you’d be surprised how often business works that way.
FWIW, Dwolla is based in Iowa
My guess is their current thesis doesn’t fit many of the drone companies
I think Fred alluded to their investment thesis, which is deeper than “a good product in a good market”. Generally every USV investment derives some defensibility from a network of users. At least in theory even if a competitor emerged with an equal product, the network of the original startup would protect it. Work Market is a good example of a USV investment with a network that sells to businesses (USV’s network thesis is not just “social networks”).Most “drone” companies so far have been selling drones or drone parts to consumers. There is nothing inherently defensible about that. That’s why you see dozens (hundreds?) of competitors selling effectively the same quadcopter to people. Even a decent drone-based service would be pretty hard to defend because everyone has access to the same drones, and if you invented a better drone your defense would be patents not networks.
I get what you’re saying, but think you’re drilling down the wrong hole. Your analysis is like saying “investing in computers” back in the 80’s, and strictly meaning the sale of PCs and PC parts. I think the question I’m asking relates more to the use of the drones and the ecosystem that is evolving around them.
drones .. a word with two flavors, the sweet one, photography from above, the human race finally beginning to see itself in a larger context .. and the ugly one, the no accountability let’s smash someone on the other side of the world, just because we can .. aiyo
or invade someone’s privacy because we can.
In hardware innovations such as Robots and drones, do you still think your older thesis of networks of users still applies and optimal?
Interesting, with this investment and Clarifai, the “large network of engaged users” thesis isn’t that obvious at first blush. Is it buried somewhere, or are you slowly veering off it?
This investment still falls in line with their thesis, no?
Cool. When he expands he ought to office out of The Bunker sites that are opening across the country! http://bunkerincubator.com/
So, is this like investing in Hertz or UBER instead of in Tesla or a car manufacturer. Funny how nobody wants to build or invest in drones anymore, but VCs are flocking into drone Software and Services startups such as DroneBase, DroneDeploy, Perceptiv Labs, Airware, to name a few.There’s definitely a market separation between consumer and industrial/commercial usage. The market is moving upstream quickly, but I’m also seeing a new generation of personal drones at the sub $1K level that will be a lot easier and fun to operate by regular consumers.
This reminds me…
This is semantic BS.Uber is the world’d largest dispatcher of taxis.Facebook is the world’s largest personal rolodex.Alibaba is the world’s largest catalog.AirBnb is the world’s largest rental agent.
One way of interpreting this is about semantics. But the other (larger) issue is about the creation aspect of a “product” vs a “service” (let us assume the traditional semantic meaning of product & service here). So the real question is -:Are enough people willing to value creation of things like an IBM 360 or a Airbus A380? Valuation as assumed right from a VC in the chain all the way upto customers.One could answer that customers drive the product needs (and I am all for elements like “Lean”, MVP” etc. But the infographic above indicates more of a consumer-oriented mentality and even perhaps the darker side of capitalistic mentality rather than a “creation in the larger scheme of things” mentalityConsumers do not help make tectonic changes in the world, Creators do. Are we rewarding people looking at the former more than the latter is the question?Note: All semantics to be considered in the traditional sense. So points like consumers as creators or consumers driving adoption of eCommerce and not Creators are not relevant from the point that is trying to be made here
“This is semantic BS.” it is now.
That’s v good.But I am right & Tom is misleading people.
.While being perfectly correct, the lesson nonetheless is also right.Huge impacts and values are being created by approaches that do not require the ownership of the infrastructure or the underlying assets.They are, in effect, “process” companies.This is a phenomenon worthy of note as it says something about barriers to entry and the cost of entry.I wonder if the real capital isn’t intelligence?JLMwww.themusingsofthebigredca…
When Bob Crandall sold off Americans outdated planes and leased new planes from MD, it was still an airline company.
You are missing the big picture.Tell me the name of another taxi dispatcher.Uber is a transportation co wirh a revolutionary cap ex and employee structure.It’s success is due to the fact that it did not need to lease cars directly.
I am pretty sure I have the big picture here.Uber’s success is keyed by identifying slack resources & then aggregating demand to those resources.They are a clearinghouse for transportation, not a transportation company.Calling Uber a taxi company is like calling Google the internet.
Nope, A slack resource? I’ve been using Uber since it’s inception. Like saying edison relied on the slack resources of power companies. The myth is that it is utilizing excess capacity. Take a look at the trends of prices for used escalade in the early Uber days. Uber created a new market where people invested hard earned capital that Uber by itself could never have pulled off on its own.
i am not going to argue facts. I have read that Garret Camp got Intel from town car drivers that their down time was 33%.The news coverage on the new Expa company – Operator.com – specifically quotes the CEO on ‘slack resources’. It’s where I got the phrase. I think they are sticking to what they know works there.It’s immatetail – Uber is a broker not a transportation company. The simplest test is the ‘who do I sue’ test. I don’t know the contract details, but my money is you sue the driver if you get into an accident.
Want to point out that “not owning” is not always good. Might work on a huge scale (like Uber/Airbnb) but in small business it’s not always a good strategy. I had a business way back where I did own “iron”. I could have done w/o the iron and simply brokered everything out without half the headaches, capital and problems. However when it was time to sell that business I had something to sell that people valued. I wasn’t “just another broker” but actually had “a factory” (if you want to call it that). That was very important to potential buyers. I am just pointing this out in case anyone reading thinks that some simple rule can apply to each and every business situation. Business is nuance and each situation and reason for doing something matters. Understanding of course that this blog isn’t dedicated to the other situation but important to point out just the same.
Definitely agree re: market separationIf you haven’t caught yet Matt Waite has a great newsletter on the policy around drones, too. Tends to be more towards the journo / commercial side but there are often links to things that address a range of end user concerns: http://tinyletter.com/mattw…
thanks. i didn’t know about Matt’s newsletter.
I think drones will be huge as well – the biggest winner takes all market for this will be whoever owns the ‘flight control’ market. There will only be 1 system that all drones need to be linked into so they don’t crash into each other in the air, constantly reporting back long/lat in real-time and managing flight paths. Commercial drone operators that use drones for delivery (e.g. Amazon) will need to pay a license fee per yr to be a part of the flight control network.I also think drones will be sold on-demand as a service like AWS. There will be depots, like one downtown, one mid-town, one up-town. An API call from Domino’s will dispatch a drone from the depot to the closest store, it will pick up a pizza and fly it to the destination then the drone will return back to the depot to recharge. Domino’s will pay per hour for usage. Huge opportunity!
First I have to say that as someone that has been flying (as I have mentioned) RC Helicopters since the mid 80’s (gas powered) I find this tremendously exciting. It was obvious to me many years ago (around the time of the AR Drone) what the potential for this was. It reminded me of when I got into desktop publishing based on my knowledge of the time of how regular typesetting was done. (We can call that the “Fred invested in Twitter because he blogged” principle).That said an area of concern here (and once again I think investing in dronebase is a super idea) is that there is little barrier to entry to providing these services. The hardware is cheap and as much as you’d like to differentiate the skill of the pilots, or the way the business will operate, it will be hard to fend off new entrants at the top end of the market and fend off everybody and their uncle at the bottom end of the market. The opportunity is huge and everybody knows that.While it is definitely possible for someone like dronebase to lock up major contracts (when they can appear in many markets) or pilots my fear is that the pricing for this will drop because of the ease of entry. These drones are pretty easy to fly with a bit of practice and photography and editing are already a well oiled machine and back office.Getting business seems not that difficult at least to me or anyone who has cold called before.It is also a bit unclear to me how dronebase will prevent a particular pilot from cutting them out of the loop once they are assigned to a juicy account. So this is not the same as Uber and driving at least the way I am reading the dronebase page (nothing that this is a quick read I may be missing something).
Good point. As someone that has experience in this field, what would incentivize you to stay on their platform and not go direct to the customer / “juicy account”? Would it be a pipeline of endless jobs for you with other customers – the “carrot”. Or, would the fear of being banned from the platform make you not do it – the “stick”?
I can’t answer that for “me” because I am not a target that would be someone who would be a provider of services. This would be like asking “me” what I would do as a uber drive (I wouldn’t be a uber driver so my answer as far as “me” is not relevant).As far as answering for what I think would work I believe the carrot is a better solution. Why? Because someone who is an entrepreneur is generally going to gamble and take chances even if the potential to get slapped on the wrist. If they followed rules, in theory they’d be working for someone else or a corporation with perhaps more certainty in their life.Otoh it is always possible the stick will work if the platform provides so much opportunity that the entrepreneur is not willing to lose the business that it provides. Along those lines I’ve had discussions with contractors who get all their business by dealing with Lowes (instead of independently) who feel it’s worthwhile to not piss off Lowes because of the guarantees and security that they provide. (They tend to be the more docile contractors who may be good craftsmen but they are not hustlers..)
Good choice here Fred, this is a business with a future. I see many current and emerging business uses here. Some of my friends in media now tell me they can no longer imagine going to a site without one.
Interesting but the mobile Web site doesn’t load at all. Good luck!
Hi All,Is the idea of this investement to get it up and running and then look to be acquired? I mean…both Google and Amazon are into drones big time….
Suggestion to keep pilots from flying the coop and dealing direct is to offer a “dronebase back office” option whereby dronebase takes care of all the billing and admin functions allowing the pilots to concentrate on what they do best, flying.Having to manage A/R and dealing with getting paid by organizations is time consuming, aggravating and daunting for the small business person. While it would be great to believe that pilots won’t cut dronebase out of the picture (as mentioned in my other comment) they might. So why not give them a way to do it “officially” and also provide value? With dronebase taking a small cut but allowing the pilot to preserve the customer relationship (if they want)?If you’ve never dealt with large or even small companies who issue PO’s and can take forever to pay you, it is a job to just keep track of getting invoices paid. And that is for people who do pay, not the deadbeats. Not everyone at a corporation will want to use a credit card they want net 30 terms.
Uber for Drones? Guessing that’s the idea, but Fred’s avoiding the “X for Y” cliche.
if you guys were the Drone Service Providers, or an Uber Driver, or Instacart delivery person, what payment terms would you want after you complete a job, ride, or delivery?
Well I could say “as fast as possible” as in “net now” but then that means someone is going to have to cover the float. However it’s probably a good idea to find a way to do that though even though there will be a cost in doig so because it will create a barrier to entry to any other organization and a way to differentiate. It will also (even if it is copied) be a reason why DSP’s might not go direct because they might not be able to wait for invoicing and long payment terms. Not to mention the fact that there is nothing like immediate or near immediate gratification to get people excited. People hate to wait, especially for money.
Drones make sense to me in many commercial applications such as a hedge fund investor that wants to track the number of cars in the Walmart parking lot or an insurance adjuster reviewing an insurance claim, but I’m still not convinced in many of the consumer delivery applications such as a drone delivering my pizza.
I wonder if the cost of surveilling enough Walmart parking lots to generate an investing edge would be more than the value of that edge. But your idea might make sense for an investor in smaller retail stock or commercial REIT.
Surveying retail parking lots has been an investment analysis strategy for a very long time. One only needs a small sample size to determine how well a retailer is doing versus previous reporting periods.
Exactly they do this with aerial photography (say during Christmas time) but it would be interesting to see depending on the number of parking lots that need to be surveyed whether a small private plane is no longer cost effective or not (because with the drone a driver has to drive around if it’s more than one location and maybe the locations are far apart).
This is done today with mobile phone telemetry. Better coverage and easier to analyze.
Europe time is looking more like Hawaii time. :-)Dronebase sounds really interesting, though. Using a marketplace to make more transparent all the options in providers, and thus standardize pricing within the sector, sounds super interesting. I always knew that was at least a minor benefit of a marketplace, but it looks much more major when applied to an early sector like drones.
That also makes it easy to be undercut and for new entrants though, that transparency. Remember you are dealing with business customers and a somewhat homogenized product. Sure relationships do matter but… We aren’t talking UX design here where there could be wide differentiation. (Think wedding videos and how pricing is with that..)
Really? Easy to undercut?When you’re the only marketplace, and you’re the authority on who’s out there and what the services cost, and the average cost of a service is $X, sure, a single off-platform company can offer the same service for $X-Y, but when 90% of everyone else charges $X, you become skeptical. Sure, folks will come from under you, but if you stay on top and have the support of quality perception behind you, then you can stand for quality and label the rest of the folks as cheap knock offs. Which is a pretty familiar story.
I am talking actually selling business to business. Business customers are not like consumers. A nacent industry like this, and specifically like this (because details matter) is not the same as an established mature legacy player in the BtoB market.When you’re the only marketplace, and you’re the authority on who’s out thereHow long do you think that will last for? You think nobody else will do the same idea? You think they have a lock (with 3 employees and seed funding) on this concept?a single off-platform company can offer the same service for $X-Y, but when 90% of everyone else charges $X, you become skeptical.We are not talking about hiring an architect or an engineering firm or a vendor where the personal relationship is key. We are talking about something that is more commodity like. Where it’s even simple to give a new entrant a shot at some work.then you can stand for quality and label the rest of the folks as cheap knock offs. Which is a pretty familiar story.With this filming thing it’s fairly easy to demonstrate your quality. There isn’t “FUD” like there might be with a product that might have to stand the test of time.
Is Dan Burton the veteran who started the delivery business, or was that someone else?
This is great, another USV investment in frontier tech. Has USV put more emphasis in any aspect of the thesis more so than others? (Dronebase seems heavier on the network aspect)
CoinBase, DroneBase…Hmmmm…All your “base” are belong to US…Vhttp://en.wikipedia.org/wik…
Interesting investing in business marketplace for drone. One of the few useful applications of drones. Drone technology is insanely hyped, particularly for consumer applications. Drones will never have a cost advantage on self-driving cars for delivering goods vis-à-vis amazon’s type style. It is really “cool”, and that gets everyone excited, but honestly, drones remind me a ton of how everyone (or at least many of our older brethren here, so I am told) thought flying cars would be a thing. We have them (helicopters and even car / plane hybrids), but they are about 10x the cost of a car and between 5-10x per passenger mile, and way more dangerous at scale (basically impossible to have millions of flying cars.. and probably drones too) in the air at one time. but for business applications such as surveying and remote monitoring they are a 10x improvement
Interesting. I’ve a friend in the UK with longstanding deep experience in this area. His ideas are B2B. Huge potential but very tricky for investors.
Drone manufacturers are aggressively moving toward the service platform model rather than selling drones, essentially building platforms like this. There are a couple reasons for this that are worth raising for people unfamiliar with the state-of-the-art in the drone biz.First, it transfers all the liability from the drone buyers to the drone manufacturers. Where this liability sits turns out to be an enormously important concern and the drone manufacturers are generally in the best position to manage the underlying risk factors. (There is probably an opportunity to insure this risk.)Second, the ability to do adaptive and cooperative tasking will be a critical feature for drone fleets going forward and will significantly improve remote sensing economics. Again, the only people really in a technical position to provide that capability are companies that build and/or operate fleets of drones. Letting an external service try to do that across drone fleets creates large, new risks that no one is ready to manage currently. (See the first point.)Lastly, the emerging high-value drone services right now are not just taking pictures or shooting video. Data is bidirectional. They are doing analysis that compares what it sees now with historical data. This is data intensive in a very bandwidth constrained environment and a lot of effort is being made to optimize in-place processing and data flow between drones. Tasking a drone is not just about telling it to take a picture, it is also moving a lot of data *to* the drone before it can be tasked. Optimizing task throughput is all about optimizing bandwidth, which similar to the second point, is a very long way from spanning unrelated drone swarms.Drones are to computers what drone swarms are to the Internet. The Internet is a more interesting technology to invest in.The combination of engineering constraints and liability concerns will make these services difficult to economically operate unless the software is tightly integrated with the hardware at every level. You can’t separate the drones from the service layer and this will almost certainly have to be driven from the hardware side. Drone manufacturers can clearly see the writing on the wall and are trying to get there as fast as possible.That said, I am not sure that the future giant of this space exists today though.
‘Large networks of highly engaged users [of drones]’I wonder how many years of sequential, 10-figure exits USV will have to announce before folks do anything BUT stand up and clap with each new investment of this sort.This strikes me as what we can now call ‘A Classic USV Move’, and a great one.
https://www.youtube.com/wat… Large network of synchronized drones! Remember, they don’t just fly. There will be drones that walk, microscopic drones that go everywhere.
We had Adam Heesch from The Syrian Air Lift Project at Patriot Boot camp in NYC.It’s a startup looking to provide humanitarian aid via drones started by an Air Force officer Mark Jacobsen they were on BBC.http://youtu.be/w8KPh9106CU
There’s a lot of interesting stuff here, but there’s some stuff I’m struggling with.Liability – I’m assuming operators will need to carry their own insurance, which is not cheap, and, according to the operators I work with, can be difficult to use when accidents happen in residential or highly-populated areas. I don’t know specifically, but I’m also guessing you won’t be able to fly over a job site with explosives going off and still be covered. It’s only a matter of time until one of these falls out of the sky onto a highway, into a crowd, whatever, and seriously injures or kills someone. As one of my best pilots says, “regardless of who you are, it’s not if, but when.”Quality – There’s tons of sub $4,000 rigs you can buy and cameras, like the GoPro, that you can use, but quality can be an issue, and not all drone footage is created equal. How does DroneBase deal with this wide range of options? What happens when your pilot shows up and shoots in the wrong settings and captures the blades and the footage is shaky because they aren’t using a gimbal?Weather – Drones are finicky. No fly days can quickly add up. With the price at only $400 – $500, I wonder how many operators will be willing to take more of a risk to put it in the air because they can’t afford to come back or their schedule doesn’t allow.Price – Video’s a race to the bottom, there’s nothing new there. But $400 for 3-4 videos and an edited piece is tough to understand. Even for the enthusiast. Assuming the time the pilot invests in setting up the job, shooting the job, downloading, editing and exporting all the footage, it’s not necessarily a one-day project, let alone, two. Sure if you’re an enthusiast it’s nice as extra cash, but do you really want someone who’s not flying all time time to take a rig up over your construction site where cranes and other heavy machinery may be operating?Surrounding Neighbors / Permits – I’ve talked to operators who have told me horror stories of neighbors calling the cops and threatening them while they shoot for real estate clients. I’ve also personally had experience with bordering construction sites and private property owners shutting down shoots. Permits are nearly impossible to get and the FAA requires keeping the public 200 feet away from any drone operation. With all those issues, does DroneBase take no responsibility and only the operator does?I’m sure my thoughts have been considered by those smarter than me and I’m definitely excited to watch this grow. There’s so much that can be done with drones and imagery and it’s only now starting to scratch the surface. Low cost options are needed for many and this looks like a possible marketplace to fill that.Finally full disclosure: I am a partner in a video production agency that uses drones for a variety of filmmaking purposes and understand my needs are not necessarily the same as the needs being targeted by DroneBase at this time, but have been dealing with drone issues for the last several years and can personally vouch that they aren’t even close to being plug and play.
Great to see venture investments in our veterans! Thank you for supporting the folks who allow us to worry about the little things each day. Good luck to Dronebase and USV!
Yogabase.com is for sale..
Couple of thoughts:Scale – I guess clients of Dronebase will be the same size/scale of company as those who would consider hiring private security at their premises.Dynamic operations – clients of Dronebase would probably often have new sites or constantly changing sites needing regular monitoring.Remote locations – How far can a drone go?Network engagement – this will probably depend on what Dronebase can do with the video and any other data it is collecting for its clients.
So happy that I lived long enough to see a USV portfolio company in the LA market. :)Congratulations on this exciting new investment!
I guess I’ve never heard “Windows Store First” ….. Anyone ?
I’d assume these enterprise customers primarily use PC + Windows still in the agriculture/mining/construction space.
Now that you pointed it out, it seems so obvious.
A conviction around 10x improvement over helicopters and planes…. but not sure how to find a fit with the USV investment thesis…. seed funding a service provider company. Seems like a great way to learn where you want investments 2, 3, and 4 to be. Not sure this one will be a 10x return, though.
How is Dronebase getting around that fact that the FAA doesn’t allow commercial drone flights?
I wish the Ukrainian army had drones (I mean these kinds of reconaissance drones). The Russian-backed separatists have them, and it’s one of the reasons they’re winning. Getting a drone’s view of the battlefield makes all the difference, even covering as a journalist. A few volunteers have them. Look at the devastation of the Donetsk Airport after the Russians were done with it.https://www.youtube.com/wat…One thing I was really struck by at TechCrunch Disrupt is when a speaker said that the software had to remain proprietary and not open source due to security concerns — the TC reporter asked him about terrorism.Now isn’t that funny. The ideology of proprietary to deflect terrorism when it comes to drones, but not other things like cell phones or web sites or gadgets. So selective. No “thousand eyes” argument here — and good, I support the idea of proprietary software for this application.
Charlie: You say: ‘It breaks down at “network” in this case.’I don’t know what that means. This investment flows consistently with USV’s thesis from where I sit, and I don’t follow the ‘broad interpretation’ label you assign to their decision in this situation.I’m a genuinely curious inquisitor as I write the above questions, as I’ve been a long-time follow of The USV Way — can you elaborate?