Venture Capital: Drone Startups Draw Big Guns -- At A Glance

1) Drone vs. Drone

Airspace is one of several startups providing counter-drone services. On Thursday it unveiled its new mobile command center, that would allow the technology to be used at special events. PHOTO: AIRSPACE

After venture capitalists funneled millions into commercializing drones, a growing cadre of investors senses opportunity in providing defensive services in the skies. Earlier in March, Airspace Systems rolled out a mobile-command post that can help customers fend off rogue drone flights. Companies like Dedrone, D-Fend Solutions and DroneShield have also arrived on the scene. Dedrone uses a combination of microphones, sensors and frequency scanners to detect drones, and then takes counter measures like catching them with nets or jamming their signals. The startup’s drones monitored airspace above several U.S. presidential debates last year, as well as this year’s World Economic Forum in Davos, Switzerland. Its customers include data centers, prisons, airports and nuclear power plants.

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2) Drones and the Internet of Things

A Verizon vehicle. PHOTO: BRENDAN MCDERMID/REUTERS

In February Verizon Communications acquired Skyward IO Inc., a startup making software for the management of autonomous drones. Skyward IO’s software helps enterprise customers connect their drones to data-services networks, plan flights and follow regulations. Verizon said it plans to make Skyward IO’s services part of its Internet of Things portfolio. Last year Verizon said it would provide wireless data plans for drones. Verizon’s venture-capital arm, which first invested in Skyward IO in 2015, has also backed aerial data-analysis startup PrecisionHawk.

More on WSJ Pro Venture Capital: Verizon Acquires Drone Management Software Startup Skyward

3) From Windows to Drones

Chief Executive Satya Nadella at a Microsoft shareholders meeting. PHOTO: JASON REDMOND/AGENCE FRANCE-PRESSE/GETTY IMAGES

Satya Nadella’s Microsoft Corp. has gone far beyond desktop software and into growth areas like cloud businesses. Now it is backing a drone airspace navigation software startup. Microsoft’s financing of AirMap Inc. marks its first drone-related investment. Separately Microsoft released an open-source virtual-world simulator for training drones and self-driving cars. AirMap data and services are embedded into drones from makers such as SZ DJI Technology Co. and 3DRobotics Inc. as well as flight apps and ground control stations. The 50-person company has raised more than $43 million to date.

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4) Lofty Funding Environment

San Francisco startup Airware raised $50 million in Series C funding, in the drone industry’s largest deal of 2016. PHOTO: AIRWARE

If 2015 was the year drone funding took off from a standing start, last year was when it stayed on a steady flight path. Dollars invested in U.S. drone-related startups increased about 35% in 2016. As enterprise demand for drones and their services grew, more venture-investor attention turned from hardware to software and services. Drones investment exploded in 2015, when it more than tripled to $177 million over 2014 in 22 deals. In 2016, it surged further, climbing to $240 million across 25 deals, according to preliminary data from Dow Jones VentureSource. Long-awaited federal rules governing commercial drone use came into effect in August, reassuring the drone startups’ enterprise customers and boosting demand.

More on WSJ Pro Venture Capital: After Surge, Drone Funding Stays Aloft

5) Failure to Launch

The Lily Camera drone on display at CES Unveiled, a media preview event for CES International on Jan. 4, 2016. PHOTO: JOHN LOCHER/ASSOCIATED PRESS

Not all drone players are flying high. Lily Robotics Inc., which attempted to make a consumer photography drone, said in January it is shutting down before it ever shipped its product. Attempts to raise capital fell short, according to co-founders Antoine Balaresque and Henry Bradlow. Customers prepaid between $499 and $799 for the product. Shipping delays are plaguing hardware startups that often try to get pre-order payments from customers to boost their businesses, even as they struggle with honing a functioning product. Delaying product shipments creates a risk that customers balk and that competitors may overtake it.

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