Autonomous drone company Skydio is now valued at $2.2 billion.
(Bloomberg) — Skydio Inc. is known for selling drones to tech heads seeking expensive selfies — but the US company also has hundreds of customers in government and business and intends to expand those offerings after a new fundraising.
On Monday, the autonomous drone manufacturer plans to announce it has raised $230 million. The financing deal gives Skydio a $2.2 billion valuation and reflects growing interest among private investors in backing defense-related technology, a trend that intensified following Russia’s invasion of Ukraine.
“Ukraine has really tragically put an exclamation point on this,” said Skydio Chief Executive Officer Adam Bry. Bry said the Ukrainian military began using drones donated by Skydio at the beginning of the conflict, and is now using “hundreds” of them to document damage done to buildings, compile evidence of war crimes and capture images of complicated terrain before sending in troops.
Founded in 2014, Skydio has a list of customers that includes public safety agencies and businesses like Dominion Energy Inc. and a contractor for Shell USA, which are using the drones to inspect accidents and infrastructure. Last May, the startup won a five-year, $100 million contract with the US Army to perform short-range reconnaissance missions.
Recent years have generated new attention for defense and government-related technology companies, a category that includes drones. Some of the big-name billionaires putting money into the industry are Eric Schmidt and Peter Thiel, as well as VC firms like Andreessen Horowitz, with investments targeting a variety of functions, such as border security and data analysis.
Many startups are finding that a US government agency is a “pretty good customer,” said Chris Moran, general manager of Lockheed Martin Ventures, a Skydio investor. “If you invest in national security, you’ll have jobs for America, and you’ll help the nation as well.” Lockheed Martin Corp. is also a Skydio customer.
CEO Bry says he spent a full year raising the funding round, which proved challenging as the capital markets cratered in 2022. Although he secured a portion of the funding last spring at a valuation of about twice the company’s previous price tag, he kept the round open until he signed on additional strategic investors like public safety company Axon Enterprise Inc. By this year, the total amount committed was high enough and represented the mix of expertise he wanted to support Skydio’s ambitious expansion plans, Bry said.
The company has raised money from individuals including sports legends Magic Johnson and Kevin Durant, and singer Justin Timberlake. Other backers include Andreessen Horowitz and Linse Capital, along with corporate investors like Nvidia Corp., NTT Docomo and Siemens AG.
San Mateo, California-based Skydio will use its latest cash infusion to expand the production at its Hayward, California, manufacturing facility to 10 times its original capacity. It also plans to boost R&D and increase sales and customer support budgets. The startup recently began offering a fully automated docking system that protects drones from harsh conditions. The hardware lets customers with far-flung oil rigs, cell towers and other infrastructure remotely launch and recharge its products with no onsite operator.
New R&D projects will likely include ways to help customers use the images collected by the drones — an area that experts say is still in its infancy. “Really the biggest challenge is integrating the data and using it,” said McKinsey Global Leader of Disruptive Aerospace Robin Riedel. “To make this really big in industries, that’s got to change.”
Riedel said that there are a few startups like Skydio working in autonomous drone navigation, but that many of the most advanced drones are made in China. As the technology becomes more important in battlefields, drones made by geopolitical rivals pose a security risk to US allies, Riedel said. Operators are not only concerned with service disruptions during missions but also what happens with the images once they’re collected, he said.
Thus far, Skydio has focused largely on developing technology that pilots the drone and left it to customers to decide how to handle organizing and analyzing the images collected. Skydio’s newest strategic investor, Axon, has its own system that it sells to its law enforcement customers. Those customers, including the Oklahoma City police department, can now pull Skydio’s footage into the Axon system alongside images captured by Axon’s body and dash cameras to get a fuller picture of events.
Bry didn’t say whether Skydio was planning to build its own such system, but acknowledged that there were opportunities to revamp old industries in addition to expanding its core business.
“It’s still very early days compared to what’s possible,” Bry said. “We are playing a very long game here.”
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