Drone Technology Investment: Bet On The Picks And Shovels

(Source: Forbes)  

In my recent Forbes post, “Drone Technology Investment: Place Your Bets,” I discussed three sectors for drone technology investment: 1) package delivery services, 2) aerial imaging services and 3) drones and related enabling technologies, discussing in-depth the first two. The third and final sector represents the “picks and shovels” of the industry — and also the best investment opportunities.

Looking back to the California Gold Rush of 165 years ago, most miners put in long hours but failed to strike it rich, while the best, most consistent business returns came from providing the picks and shovels to the miners.

The race to profit from drone technology is no different. No matter who provides drone-based package delivery or imaging services, the “picks and shovels” that enable those services are going to be darn handy to have around.

We’ve identified four areas of these enablement services likely to provide the biggest payoffs:

• Air Traffic Control Systems (ATCS)
• Collision Detection/Avoidance
• Fleet Management Services
• Drones

Air Traffic Control Systems

The FAA regulates the National Airspace System (NAS), generally covering up to 60,000 feet. To fly manned aircraft, the FAA has established sets of rules, one for aircraft operating under “Visual Flight Rules” (VFR), which generally applies to private planes, or “Instrument Flight Rules” (IFR), which generally applies to commercial planes. The FAA cares about protecting human life and will likely adopt many of the same principles used for manned aircraft and apply them to drones.

Taking a selfie with your drone? No problem. That application is considered non-commercial and falls under rules covering model airplanes.

Developing a commercial service to take pictures of a solar farm, bridge, or farm? These drones have to be integrated with the existing NAS regulations. Flying a drone in the presence of a trained drone operator that maintains visual contact with the drone is easier to regulate and hence mostly likely to be legalized first.

Delivering packages? Not so fast. A package delivery service delivers packages over distance, so will likely fall under an “IFR” type regulatory framework. This is a much harder problem to solve and requires the equivalent of an ATCS for drones

A drone will have to log into the ATCS and register the operator, drone type, flight path, maintenance records etc. To fly, the drone will also have to comply with fail safe systems that dictate what happens if it loses power, sensors or communications links. In turn, the ATCS provides services such as no fly zone enforcement, flight plan/takeoff approvals, and potential air traffic congestion warnings.

Airware has raised over $50M and is staking out a claim on this mine. This layer requires cooperation between the FAA and the industry and if they or another competitor pull this off, there is a pot of gold to be found.

Continue Reading at Forbes.com…