Editorial Opinion: 2016 will be the year of the “dot drone” bust as many of the dreamers and schemers succumb to the Reality of Gravity. We’ve already seen the complete failure of Zano Drone, the largest Kickstarter funded drone project (3 million dollars). Other multi-million dollar efforts are also having trouble delivering – Plexi-Drone is another overhyped company unlikely to deliver even a single drone. Lilly (camera drone) just announced a delay until at least the middle of 2016. The GoPro drone (named Karma) may very well be too little and too late as the market has shaved off 75% of the value of GoPro (from 90 per share to as low as 16).
Venture Capitalists (VC’s), however, are still throwing money at Drone companies – a chancy proposition in our opinion. We’ll write more on that later…
It is our view that the largest VC funded Consumer Drone company will soon fall back to earth after a wild ride on the back of 100 million dollars of other people’s money. This company, 3D Robotics, started 2015 with an unprecedented marketing and PR push including the following claims and statements:
“World’s First Smart Drone”
“Anyone not running Linux (3DR operating system) on board next year will be seen as a toy”
“…then we, not DJI, will control the market”
“The world is about to know who 3DR is.”
“3DR Solo does 175 things better than any other consumer Drone”
This is the best consumer ‘copter ever made”
“we think it’s probably the best commercial ‘copter ever made.”
“Gives you Superhuman powers for $1,000”
“(We’ll sell) a lot – I’d like to sell 100,000 units (in the first calendar year)”
While some of these are marketing hype, others are simply untrue – as one example, the Solo with camera and gimbal is $1600+ so it’s not a superhuman 1K drone. Others seem to be optimistic predictions which have not come to pass.
A former hobbyist supplier to DIY drone builders, 3DR decided to shoot for the moon and gathered over 100 million dollars in Venture Capital with the idea of becoming #1 or #2 (after industry leader DJI) in the consumer drone space. Now – a few years after accepting their first Venture Capital, it appears the would-be David may have been slayed by Goliath – or, more accurately, by falling on their own sword.
We reached out to various connected parties – as well as directly to 3DR. Chris Anderson (CEO) has denied that anything is afoot – and asked us for “accuracy in reporting“. We spoke to him a second time and asked him to provide the accurate numbers he desired. He refused to share any such metrics – only claiming that virtually every article, number, projection, etc. reported in the financial and other press is inaccurate. This could be of great concern since many of these articles are interviews with 3DR employees and/or stories 3DR management cooperated in (interviews and promotional pieces). It would seem 3DR has the fiduciary responsibility to correct Inc. Magazine and other such sources if, in fact, their reporting is far from the mark.
An example is an INC. Magazine article from 2014 which listed the full year 2014 revenues at 21.6 million. Such a figure, presumably, was not public so we assume it was provided to INC. by 3DR, whose principals were interviewed in the piece. Chris Anderson has recently claimed his “overall business grew by more than 500% this year” – as of November 1, which – if the INC. article was even close, would put 3DR Revenues at 100+ Million – a figure which is hardly possible. Read on.
More importantly, we have been closely following the Drone industry and delving deep into the details and metrics of the launch of 3DR’s Flagship Product, the Solo Drone. This is their singular product in terms of potential revenue. Our prediction and opinion is based on many data points – some of which we have laid out in this separate article…for those of you who enjoy charts, numbers and revenue projections.
A Short History
Much has been written about the large investments in 3DR – here are some links for readers who may not be familiar with the basics:
Story on raising the last 50 million dollars
Background story on 3D Robotics
To put it in a nutshell….
2009 – 3DR was started to supply hobbyists with parts and information for DIY Projects. They also created an online community to help hobbyists and then worked with others to curate some open source software (and hardware) for the “brains” of drones.
2012 – 3DR started to supply fairly complete units in addition to the parts – however, these were still not consumer models.
2013 – 3DR decides to enter the consumer drone space and creates new models (Iris and Iris+) which largely fail against the competition – however, total sales climb as the market for even their DIY products becomes larger.
2014 – 3DR hires Colin Guinn, former DJI employee, as Chief Revenue Officer and puts him in charge of the effort to create and market a true consumer drone. Additional financing is lined up. 3DR claims that Colin is the “world’s leading UAV product development expert”.
2015 – 3DR introduces the Solo Drone at NAB show in Las Vegas and claims it will sell up to 100,000 units in the first year. 3DR announces partnerships with major retailers including BestBuy, B&H Photo and more. Solo scheduled to be introduced by end of May, 2015. Claims are made of 30K units sold well before launch.
Here is the 3DR Page on their timeline…
The Launch of Solo and the aftermath ended up being somewhat of a fiasco – you can read our article detailing some of the many problems.
Sales have been very slow – this is not only reported, but can be checked by delving into the Amazon sales rank and activity on online forums and elsewhere (please see our separate sources article here). Reportedly approx. 22,000 Solos have been produced and returns and refunds numbers are high – so perhaps sales of 17,000 have been valid. 3DR had targets which called for a minimum number of units, perhaps 30K, to be sold in 2015 – and up to 100K unit in the first calendar year. They may have missed the first targets, possibly triggering a tightening of the reins by the Venture Capitalists involved.
With 100’s of employees and offices in multiple high-rent locations and a vast marketing and sales staff, it would seem impossible for 3DR to pay the bills – unless the VC money continues to flow and/or they sell vast numbers of the Solo. Neither, reportedly, is happening at this time.
What are the Rumors and The Story?
3DR may have run out of rope in early November. The details are sketchy but they may have missed their targets or been burning through cash too quickly. We’d speculate, based on whispers around the industry, that some of the existing Venture Capitalists (led by Qualcomm Ventures) may have bailed out and so refuse to pony up the last of the $$$.
Recently, 3DR has announced they are discontinuing ALL of their legacy products – this includes parts and supplies for their DIY customers – the very customers who brought them success in the first place.
In a strange move, 3DR is selling off much of their stock of supplies at prices FAR below what the open market would fetch. As an example, a motor for the Iris line which is normally over $30 is now $3. This makes little sense since that model is still being sold by some retailers and support for it should continue into the future – IF 3DR is still a viable company. No company should sell products at a value far below what they can fetch – unless they are hungry for cash. Our guess is that perhaps 3DR, and not the Venture Capitalists, own the legacy stock (in Mexico?) and therefore still can sell it.
On Dec. 18 – completely out of the blue – they quietly announced a 20% off sale on all of their major store products including the Solo Drone. This is unlike 3DR – a company which has always taken advantage of their vast marketing department and PR opportunities. Such a sale would usually be pre-announced and set up so as to garner more sales during the busy holiday rush. As it stands, many have already purchased their Holiday Drones…
It also appears the 3DR store no longer accepts paypal – even though their terms indicate this as a method of payment. This is another head-scratcher as pp is a major payment source for most consumer items. The reasons for stopping paypal could be innocent – or it could point to various problems.
So What Next?
Whatever the truth is, most of the insiders aren’t telling. Frankly, they have a lot of reasons not to. Venture Capitalists are like gamblers – they don’t tell stories about their losses. Employees at 3DR may have no inkling of what is happening – until their paychecks run out. A NEW angel investors or company could come along and save the day. We rate that possibility as low – at least when it comes to saving 3DR in its present form (250-300+ employees, multiple offices, etc.).
It’s possible, maybe even probable, that some of the IP and/or products/brands/etc. will be sold – but I wouldn’t expect them to continue the company in the same high profile fashion.
In short – if these reports and data points are true, it could be the end of the supposed “battle” of 3DR as a serious contender in the consumer drone space. Perhaps the name brand or form factor of Solo and/or 3DR will survive – however, if so it will likely be a more humble company that decides to do things with a less aggressive tone than the current team. Competition is good for the consumer and the industry, however the exaggeration of capabilities, over the top marketing and hubris displayed by 3D Robotics during this launch are not. I would hope a new, more thoughtful and gentle 3DR arises like a Phoenix from the ashes.
Note: Companies like 3DR which raise Venture Capital and fail are the rule – not the exception. Less than 1% of the companies which raise a first round end up as so-called “unicorns” or billion dollar companies (3DR had this goal as expressed by their CEO and published online lists of prospects).
More than 3/4 of companies that are funded either die or do not make $$ for the investors (some may be cut loose and survive on their own at a lower level).
The difference with 3DR is they they “bet the farm” on a single product and a single person (Colin Guinn, Chief Revenue Officer). Touted by 3DR as “the World’s Leading Drone Designer”, he was spoken of in interviews as being capable of delivering a world-class product and sales which would put a serious dent in industry leader DJI.
By all accounts he – along with CEO Chris Anderson – failed to do so.
As proponents of this industry we hope our predictions turn out to be pessimistic. However, much of the available data fits – as you can see for yourself in our companion article on the charts and metrics. Moreover, do your own research- use google trends, amazon sales rank, online forum participation and other sources to form your own opinions.
Whatever the 3DR situation, 2016 is likely to be the year of the “dot-drone” bust as reality sets in among all the many companies who are looking for a piece of the drone pie. DJI CEO Frank Wang laid out a plan and prediction for his company to obtain 90% of the mid-range consumer drone market. That leaves only 10% (or up to 20% in our view – as we think DJI may end up with 75-80%) for all the other companies combined.
What Happens Next?
If our sources and data points are wrong…then nothing. 3DR will continue to be funded by the existing investors until they either run out of time/money or succeed in meeting their projections – the original timeline called for perhaps another 10 months from here going forward.
If our predictions turn out to be correct there are various scenarios which could play out. New investors could come in with new money and a new (or the same old) plan. Or, the brand and assets could be sold or taken over. If no one was buying or funding, then 3DR would have no choice but to make the hard decisions which companies must when the money runs low.
12/31/2015 – a 3DR Employee just went public with the statement “2016 will be a trying year for 3D Robotics” – which seems to buttress that that companies is having troubles.
A quick check on linkedin and elsewhere shows some employees having left 3DR in November.
Also, Employee #1 – a Mexican gentleman who has run their manufacturing operations since the first day – is looking to start a new company making drones and/or parts. He’s looking for Venture Capital to do so – if you want more information about investing, contact this fella.
What is your opinion? Will 2016 be a “dot-drone” bust or will some newer entrants flourish? Please use our comments section or the form below to provide your opinions!