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Drone Industry Revenue and Investment Panel | Aerial Cities 2023

Dario Di Martino, CEO and founder of DMD Solutions Consulting moderated the Revenue and Investment panel at Aerial Cities 2023 in Bern, Switzerland. 

Joining him on the panel was Eric Brock, CEO of Ondas Holdings, a leading developer of enterprise autonomous systems. Secondly,  Tim Shattock, Aviation Advisor at Irelandia Aviation, pioneers of the low-cost carrier (LCC), followed by Marcus Rowley, VP Portfolio Development at Falko Regional Aircraft, a leading aircraft asset management company. Finally, also on the panel was Glen Lynch, CEO of Volatus Aerospace Corp, a leading provider of integrated drone solutions.

The panel deep dives into how companies can make money within the UAV sector, and where that money can be found. Dario begins by addressing the backdrop of 2023. With inflation, interest rates and geopolitical issues, 2023 is a difficult year for organisations to raise capital, making this expert panel’s advice more necessary than ever.

What qualities are investors looking for when investing in a drone company?

Kicking off the discussion, Dario asks for Eric’s input on what exactly he is looking for when it comes to investing in a company. 

Eric, CEO of Ondas Holdings,  begins by stating that there are too many drone companies relative to customer activity at this stage within the industry. He explains that there has in fact been a surge in technology spending, however, the industry is struggling to see this money because of the sheer volume of companies.

When looking at investments, Eric believes it's critical to “focus on companies that have technology that's maturing, they have services and customers that are maturing and they're servicing customers well so they can get repeat business.”

Eric discusses how from an investment standpoint, they are mainly looking for companies that are mature and have a solution that can be scaled and integrated, as well as having unique talent and capabilities. 

What are the opportunities for revenue generation in the drone industry? 

Dario brings Glen into the discussion, following on from Eric’s points about investor potential, to ask how drone companies can prove to investors that they are profitable and able to generate revenue. 

Glen commented that whilst there is a lot of work out there, the problem is that the drone industry hasn’t had the human infrastructure, because there was no industry, meaning regulations and training organisations had to rush to catch up. 

When discussing the regulatory side of the drone industry, Glen praised industry regulators adding, that they “are moving faster than I've ever seen in 43 years in aerospace. So I actually am pretty proud to be part of the industry.”

The Volatus Aerospace CEO  added “the big thing is the time to commercialise. I think our industry is waiting for a magic moment. The moment is actually now.” Insights from Drone Industry Insights show the demand for commercial drones continues to grow, with unit sales projected at a steady rate of 9.2% CAGR, offering optimism to the wider industry. 

Though Glen outlined that capital is expensive right now, he remains optimistic it will recover with time. What drone companies need to be focussing on now is driving toward profitability, and seizing opportunities where there is revenue available to scale as fast as possible. 

While discussing this point, Glen mentions several areas he believes to have revenue-generating potential and how drone companies should look for the “demand that needs to be filled”. He outlined activities including pipelines, long linear inspections offshore and moving industries which are still heavily supported by aircraft and helicopters looking to move towards drones. Before this though, we need the regulations and technology to enable long-range, beyond visual line of sight activities “so we can disrupt what we’re doing with piloted aircraft”.

Why the drone industry needs to consolidate 

Glen also addressed the need for the drone industry to consolidate, outlining that as the industry matures, “most of the larger mid-sized and larger players” agree that the way forward for the industry is to consolidate and hit critical mass to allow for more resources to become available. 

Dario brought Marcus of Falko Regional Aircraft into this discussion, asking him if he believes consolidation is important for the drone market. 

Marcus comments that in order to lease, drone companies are  “going to need a balance sheet, a good balance sheet comes through consolidation. They’re going to need diversified revenue streams, and that comes through consolidation”. 

Is 2023 a new phase for investment in the drone sector? 

Tim addressed that investor’s perspectives have now changed, and there has been a shift from being “a lot of silly money thrown around” to investors looking for more definitions of timelines and returns. 

Eric also points out that there is a huge demand for success within the sector, but investors need to see a path to a scaled player. He adds: “You need to put the technical platform, you need to put the services and you need to be able to operate the business because customers are sophisticated… so to service them globally and get the unit economics, you need to drive down prices and improve ROI”. 

This, Eric believes, is what investors find critically important. An issue today within the industry is there are too many players within the market, stopping investors from seeing who is who. Eric believes customers are starting to notice the leaders within the industry, and as these companies become apparent, customers will know where to turn their attention as it will result in long-term opportunity, as “the drone is valuable”. 

Is the drone market stopping its own success? 

Dario turns the conversation on its head, asking Glen whether he believes the drone market is “choking its own success”, which Glen agreed to be the case. 

Talking about small drone businesses, Glen commented that the businesses “have been going like hell again and they’re building up their receivables and they’re chewing up their working capital.”  

In M&A activity, Glen found that small businesses begin looking for working capital once they realise they don’t have any - which is believed to be too late, “You have to be ahead of the curve”.

Glen outlines that drone stocks of publicly traded companies are at an all-time low even though these companies are rapidly maturing.  The Volatus Aerospace CEO comments that the unfortunate thing about expensive capital is that it makes money more expensive. However, from an acquisition point of view, it makes things less expensive, meaning the “price of buying companies and consolidating is less”.

Unfortunately, part of that consolidation will be industry trailblazers who have put their heart and soul into the industry which despite being an unfortunate thing, these are the people who made the first dents on the industry helping it move to the path it is on today. Glen remains positive that “it's definitely the right time to invest in the drone industry”.

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