Investment in drone industry continues to grow
We are worried; and we believe it is for a good reason.
Maybe worried a strong word at this point in time, but we are certainly concerned.
As you will see from the figures in the bellow article by drone technology research experts at Drone Industry Insights, investment in the technology continued to grow, despite the fact that the world is still grappling with a crippling pandemic that has rendered a lot of opportunities stagnant for a significant amount of time.
Sadly, this investment – into the hardware and software operations of drone technology – has been increasing everywhere else but in Africa.
The continent has played an important role as a testing ground for medical drone logistics, but start-ups with ideas on how to develop the hardware and software side of the industry still struggle to secure funding for their ventures.
When you look at it this way, you will understand India banned all drone imports last week in a bid to stimulate innovation within its own borders. If you ask us, we would not say protectionist policies are the answer to the drone industry enjoying further growth because there is nothing wrong with measuring your products against the best in the world – but if investment is unevenly distributed, obviously that is an issue that will need addressing.
We do not think it would be ideal to have Africa only consuming drone products without the corresponding innovation. But we figure that is a question that should be addressed at government level, as the Indian government did last week. Perhaps if African governments led investment efforts in drone technology by funding start-ups and enacting friendly drone laws and growth policies, private funders with bigger coffers might see the opportunity and dive in.
But what do we know? Sometimes things are easier said than done.
Another year has gone by, and drone investments have once again reached new heights.
The years 2020 and 2021 brought recessions and uncertainty for various industries thanks to the pandemic that refuses to leave people alone; but these lean years have also provided a chance for investors to put their money into the future.
And the past three years of drone investments have shown one very clear thing: drone technology is the future (and the future is already here).
The latest edition of our annual Drone Investments Database provides the latest information on these transactions, and here are some of the highlights.
The Value of Drone Investments Doubles
In 2021, we registered 199 investment deals involving a drone company. These deals amounted to a total drone investment value of almost $7billion.
When compared to the previous year (2020: $2.4billion), it means that the total amount of investment once again doubled for the second year in a row, and this year it almost tripled. Within this record-breaking amount, the value of venture capital investment was almost $4billion, and the amount can also be broken down by drone industry segment as follows.
Drone Companies working on hardware received $5billion in investment, which also doubled compared to last year.
The reason for this was yet another year of excited investment into passenger drone companies, which received the highest amount of investment ($4billion, another doubling from last year) in comparison to the $1billion of all other drone hardware companies combined.
Drone software companies received $639 million, where investment on counter drones decreased compared to last year and investment on UTM companies increased to $38 million (from $13million last year).
Meanwhile, drone service companies received $1billion, which is a substantial increase compared to last year (2020: $160million). The large influx of drone investments into these companies is not surprising given the heavy amount of activity in drone delivery.
As in previous years, the top regions which attract investment in terms of value were: North America, Europe, and Asia, in that order.
Public Offerings as Drone Investments
Other ways in which drone investments can take place are in the form of an Initial Public Offering (IPO) and a Private Investment in Public Equity (PIPE).
These saw a total investment value of $2.63billion, which was a substantial increase from 2020’s $25million. Moreover, 38 percent of total investment value in 2021 were IPOs/PIPEs, meaning that more than one third of drone investments were of this type.
It’s worth noting that the biggest reason why IPOs and PIPEs saw such a massive increase in activity was the increased attention being given to advanced air mobility. The top four IPO/PIPE investments were all in the passenger drone sector, and the highest-grossing single IPO/PIPE deal in 2021 belongs to Archer, with $857.6million as part of their business combination SPAC deal with Atlas Crest Investment Corp (though Joby had a larger cumulative total).
Given that many passenger drone companies plan on entering the market in 2024, we are likely to see a lot more drone investments for advanced air mobility in the near future, especially since the type certification that they need is an expensive process.
In terms of venture capital investments, BETA Technologies raised the highest amount of money in 2021, which accumulated $511million over the year. The Burlington, Vermont-based aerospace manufacturer develops electric vertical take-off and landing (eVTOL) aircraft for the cargo and logistics industry.
The company has also developed a network of specially designed charging infrastructure to support their aircraft.
Mergers, Acquisitions & Partnerships
Finally, we turn to mergers, acquisitions and partnerships. The number of mergers and acquisitions (M&A) for 2021 was 41, which also represented an increase from last year. Partnerships also saw an increase in activity. In 2021, we registered a total of 190 partnerships by drone companies.
A vast majority of them (77 percent) were between a drone company and a non-drone company, which should provide a good opportunity for drone companies to benefit from the expertise and network of companies outside the industry.
To this end, it makes sense that the most popular type of company to complete partnership deals was “drone delivery”, which complemented drone investments that went into this sector.
Drone delivery companies partnered with companies that produced or distributed medical goods (such as COVID tests and vaccines), and we should expect this pattern to continue.
The second type of company to achieve partnerships were those dedicated to UAM/AAM. Much like drone delivery companies, these depend on other goods being produced so that their services can provide the logistic value, and we can expect many more of these to find partnerships in the coming years.