At Blume, we have always been passionate about technology, especially which enables non-linear opportunities (ex: UiPath enables Robotic Process Automation). Businesses that enable multiple use-cases in the coming 10-15 years, some of which might even be unconceivable today, is something that we are looking to study and invest in.
The ‘flying machine’ aka the drones have unprecedented potential to create a dent in every single sector that you can imagine. The Indian government was not receptive to the advent of drones in India and had a tight grasp over its use commercially or otherwise, earlier. But the Drone Policy 2.0 has let go of strict regulations thus creating a lot of excitement among the startups that were gearing to get into this space.
With the advent of the new Drone Policy in India, the folks at Blume have directed their attention to the opportunity that drone technology presents in India & tried to find answers to the following questions:
Foreign investments are a big no-no in this space and with the government’s Digital Sky platform set in motion, we can expect an exponential growth in the number of domestic players in this space in the next two to three years. Therefore, this opens an interesting opportunity where the winner stands to capture a large share of the pie ~>20% market share (usually 10-15% only when foreign players are involved) of a slightly smaller market opportunity – thereby making it exciting for venture capital firms like us. At the same time, companies that target global and regional markets are naturally interesting.
Given that the growing Drone hardware market is dominated by large players like DJI, Autel Robotics and Yuneec, innovations by Drone companies in India can largely be expected in the following categories:
Innovation on hardware’s design (Fixed Wings + Quadcopter Design), mostly measured by the higher ranges that can be achieved for emergency responses (largely in healthcare) or a use case like pipeline monitoring.
Automation of manual tasks in flight systems, it can also be extensively used in surveying and mapping.
Software innovation (using Deep Learning) to provide business insights using raw data from drones for multiple industries.
These are not the only areas in which you will see companies building businesses, as we mentioned earlier in the article, the possibilities are many. In fact, there are many companies that are already providing end-to-end services to its clientele. The drone services opportunity is split as Mining (~120 Mn$), Agriculture (~190 Mn$), Construction (~200 Mn$), Security & Surveillance (~250 Mn$), Defense (~150 Mn$) & Emergency Response (where the opportunity is global & quite large). These numbers are a product of Blume’s internal estimate for the year 2024.
In the Indian context, based on our investment thesis and observations of our global parallels, here are the opportunities that are bound to excite us:
Companies that have technology capabilities in implementing autonomous drone systems which can be integrated into the workflow of customers. We like companies that solve one or two problems in any related niches.
Aerospace companies which is into making drones (which can vertically take off/land) with different ranges that can be increased on-demand while maintaining payload features.
How is the tech value chain distributed?
This section provides you context to understand the graph below. All the commercial industries (Mining, Agriculture, Construction, Security, Healthcare etc.) place a certain proportion of value on the following applications:
Asset tracking & Management
Delivery, with varying distribution amongst above use-cases.
Also, these use-cases are formed by a mixture of innovation on (a) Core hardware, (b) Integration with Digital Sky platform, (c) Capturing raw data, (d) Autonomy & (e) Providing business insights (using ML/AI).
Therefore, we have tried to understand the way the tech value chain is distributed amongst industries, it is as shown below: