Investment in drone market expects slight dip compared to 2015
Venture funding in drone start-ups rose 214% in 2015 and investment activity is now moving to drone software and media companies. This year's totals won't surpass 2015's, but drone deals are holding steady and on track for a less than 5% fall compared to last year, while funding is set for a -30% drop. On a quarterly basis, deals have fallen for two consecutive quarters, peaking at 23 in Q1 2016 and falling to 17 in Q3 2016 – an 11% decrease in deals and a 54% fall in funding.

However, the last two quarters have seen deals drop.

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Drones may still be having a land-grab moment. Startups in the category have already seen significant investment, with venture funding booming by 214% in 2015. And now the category is evolving beyond hardware, with investments and activity moving to drone software and media companies. For example, Drone Racing League recently forged a partnership with ESPN to broadcast competitions.

Corporate venture arms are also ramping up investments and corporations are developing their own offerings. Consumer electronics companies like Go Pro are already hitting the market with drones (though Go Pro’s Karma drone has been plagued by recalls), and chip giants like Intel and Qualcomm both have drone projects in the works.

Using CB Insights platform, we looked at financing trends to drones startups.

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Annual trends

This year’s totals likely won’t surpass 2015’s blockbuster year. However, deals are holding fairly steady compared to last year when drone deals more than doubled. At current run rates, deals to drones are on track for a less than 5% decrease compared to last year, while funding is on track for a ~30% drop. Some of the largest fundings of 2016 include deals to Airware ($30M Series C), Skydio ($25M Series A), and DroneDeploy ($20M Series B).

Quarterly trends

While in aggregate deal volume to drones is on track for only a slight decline, on a quarterly basis deals have fallen for two quarters in a row. Deals peaked at 23 in Q1’16 but have fallen to 17 in Q3’16. Quarter-over-quarter, Q3 represents an 11% fall in deals and 54% drop in funding.

Large deals in Q3’16 went to management platform DroneDeploy ($20M Series B), Drone Racing League ($12M Series B), and last mile delivery platform Matternet ($9.5M Series A).

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