The Battle for Drones Hottest Markets: Construction and Mining

DroneDeploy’s $20M Series B (which is pretty large round for a drone startup) clearly indicates that investors are bullish on unmanned aerial vehicles and ecosystem is rapidly evolving.

We at Skolkovo Foundation have been studying drone ecosystem in-depth for a long time and verticals we see to have the biggest traction is Construction and Mining.

And a lot of industry influencers would agree. For instance, Goldman Sachs projects construction to be the biggest portion of the global commercial drone market, with over $11,2 bn. to be generated by the construction

Moreover, there have been some events on the market, proving the hypothesis that construction & mining are the most promising verticals for drones at the moment:

  • 3D Robotics pivots from consumer market towards enterprise solutions, focusing on construction
    Chris Anderson’s company 3D Robotics, which was previously known as consumer drones manufacturer (with Solo and Iris) had a tough year including layoffs of staff and slow sales has made a pivot into commercial segments with its Site Scan product — aerial data analytics SaaS solution, rolled out jointly with Autodesk and Sony.
  • DJI establishes enterprise services 
    Avoiding blaze of publicity, DJI — undisputed drone champion launched a website dedicated to enterprise-related use of their drones. Moreover, company partnered with Measure (drones-as-a-service provider), Propeller Aero (UAV software company) and DroneDeploy (cloud-based drone mapping and analytics platform) in June to roll-out a set of solutions aimed for various verticals with a focus on construction and mining particularly. All of this clearly indicates DJI’s ambitions in enterprise market.
  • Kespry raises $16M Series B
    Menlo Park-based startup Kespry, building right-out-of-the-case data gathering drone solution, focusing on mining at the moment raised $16M Series B in June 2016 from DCM Ventures and Lightspeed Venture Partners, Rothenberg Ventures and some other investors joining the round. Company is rumored to have 100+ customers and millions in revenue and partnered with NVIDIA on implementing deep learning capabilities on commercial-grade drones.

Other companies building solutions for construction and mining markets worth to mention are Skycatch (US-based startup, backed by Autodesk, Komatsu and Qualcomm Ventures among others) and TraceAir (recently graduated from 500 Startups Batch 17 — here is the pitch), both developing full-stack drone-enabled SaaS products for construction industry and Redbird, US-French startup, mainly focusing on mining.

Platform Solutions are Striking Back

On the other side, there is a competition from the “platform” drone companies, such as DroneDeploy and Pix4D, that started with providing “basic” capabilities, such as flight planning/photogrammetry, but then began launching “vertical-specific” features after a while, such as volume measurements one — an essential feature for implementing drones on construction/mining sites

DroneDeploy’s volume measurement feature

Supporting this thesis — just in the end of June, DroneDeploy rolled out new elevation and volume tools for mining and construction (worth to mention that company has been established in 2013). Another supporting detail: in the beginning of August DroneDeploy announced new contour export capabilities — which provides better integration with various construction-related CADs.

Thereby, competition among various “types” (vertical-focused vs. platform) of drone companies for construction and mining market really heats up.

And as it can be challenging to directly compare companies mentioned above, due to difference in their stage, traction and funding — let’s focus just on the functionality.

Functionality Teardown

First, let’s deep-dive into “vertical-oriented” startups, building products for one specific industry:

  • Volume measurements and BIM/CAD integration is a must — such capabilities are provided by every single startup out there
  • For the rest, range of capabilities, provided by each company is rather similar and implementation of every next one (e.g., «maps annotation” or “plans overlay”) depends more on the needs of current and potential customers of a particular company

Moving further and comparing vertical-oriented startups with ones taking “platform” approach, a really interesting trend can be identified:

  • Platform startups, in addition to basic features, have already implemented some “vertical-specific” capabilities, namely — the most important and general ones, such as volume measurements and BIM/CAD integration
  • Analyzing other “vertical-specific” capabilities, “plans overlay” one can be expected to be launched next, as it’s the most widespread feature after volume measurements and BIM/CAD integration (taking into account the trend towards implementing specific features into platform solutions)

As it can be seen, a set of capabilities, provided by “vertical-specific” and “platform” startups is pretty similar — indeed some kind of competition can be identified.

However, before making any conclusions, it’s necessary to understand and who are the target customers for the companies mentioned above and how they are interacting between each other in the ecosystem.

Customers

Actually, vertical-focused and platform companies are really competing for a customer. However, if we take a closer look they don’t really compete for an equal ones.

Vertical-focused startups are doing a lot of hand-holding with their customers and focusing more on the large construction companies. As Patrick Stuart, Director of Product, Web and Mobile at Skycatch points out:

“ We’re specifically taking care of construction and related industries which allows us to focus and go deep on their needs. Only solving the needs of this vertical in the way nobody else can do because they haven’t spent the time in the field with customers. And having the backing of some of the most innovative construction companies in the world both as investors and customers allows us to get a level of access to the industry”

On the other side, as platform companies are not such laser-focused on the particular vertical, they’re aiming everyone who wants to use drone for a commercial purposes (e.g. observing construction sites) as Jono Millin, co-founder and CPO at DroneDeploy points out. Accordingly, their customers are not only large construction firms (as in the vertical-focused startups case), but small drone-enabled businesses (service companies) in many vertical as well — which is definitely a bigger addressable market size.

Speaking of features, by definition, platform solutions do have some tradeoffs and compromises to accomodate their software for everybody. However, worth to mention, that even taking into account platform companies are taking horizontal approach (and lack of vertical-specific features in some extent), some of them have experienced significant growth with construction (e.g. DroneDeploy — take a look on their Industry Trends report) and have signed contracts with pretty large firms.

Trends

Speaking of the directions “Drone + Construction/Mining” market is moving towards, 3 trends can be outlined:

  • More demand for accuracy
    High accuracy of the data collected via drone is one of the most important issues defining practical applicability of aerial data — so companies are constantly improving this. As an example, Skycatch is developing its high-accuracy drone (while being closely tied with DJI on hardware at the same time)
  • More demand for frequent data capture
    As Mike Winn, CEO of DroneDeploy points out, aerial data provides more value, the more it is relevant and timely. This vision includes up-to hourly visibility, analytics and automatic alerts — some kind of “subscriptions” to the changes happening on the construction site. Patrick Stuart of Skycatch also mentions importance of the frequent data capture for company’s clients:
“…being able to fly every day and make sense of the rapid change you’re capturing is becoming more and more important for our customers.”
  • Expanded integration into existing workflows
    Integration into customer’s workflows is another important aspect defining applicability of aerial data on construction and mining sites, and the deeper the integration the more opportunities for drone-captured data can be discovered. Patrick Stuart from Skycatch says:
“…broader market is only barely stepping into it with basic uses of drone data such as progress photos. The most advanced innovators are finding ways to pull this new information into every workflow on a project from design to logistics planning to quality tracking, etc.”

Also, Colin Snow, CEO of Skylogic Research alludes on the experience of implementing data from drones into design and preconstruction workflows (take a look on “CAD/BIM integration above”) of such top-tier commercial construction and architectural firms like The Beck Group, DPR Constructions and SANDIS in his report “The Truth about Drones in Construction and Inspection”.

Conclusion

While implementation of the new feature doesn’t require that much resources, and both vertical-focused and platform companies are constantly developing their product adding similar capabilities in some cases — there is definitely a fierce competition and functionality can’t be competitive advantage.

Speaking of the market opportunity, platform startups have a bigger one as they’re aiming not only on the large construction companies (e.g. DPR), but on the small drone-enabled businesses as well. And while vertical-focused startups are targeting large customers and assuming this means really complex sales — their traction now is probably more about various pilot projects.

On the flip side, partnerships with big construction firms is an opportunity to win large long-term contracts, and such contracts definitely can be achieved only by a lot of hand-holding with potential customers — exactly what vertical-focused startups are doing and what platform companies don’t

Taking into account all above it can be assumed that the first company to gain significant traction and approve its business model would be a champion, however, considering construction & mining industry represents tremendous market opportunity — this would unlikely be “winner takes all” case. Thereby, “Drones + Construction & Mining” is definitely an area worth to take a closer look on, taking into account that all key market players (both consumer and commercial) are moving towards these verticals.

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