So where are the early-stage investment opportunities?
Goldman Sachs estimates commercial drone sales market to be $20.6 billion and consumer sales to be $14 billion in the next five years. Even with all of this demand, early stage investors are not likely to invest in hardware or drones themselves but in the services that drones can provide. Why? Most drone hardware is available from China at minimal cost, and the basic software is open source in many cases, meaning that drone makers will face plenty of competition. On the other hand, the companies that adapt them to spray crops, inspect buildings, pipes, rigs, do mapping, and other useful tasks will make money. Like the computer industry, making hardware is easily commoditized. Operating systems are becoming low margin. But using software to solve a problem is high margin.
Near-term commercial demand is being driven by a variety of use cases in media/entertainment, journalism, agriculture, real estate, and public safety , just to name a few. In many cases, it is not economically efficient for buyers to own and operate drones themselves, so companies providing “drone as a service” businesses and tangential services have cropped up and could be interesting investments.