According to a report by Grand View Research, the commercial drone market was pegged at $552 million in 2014 and was projected to grow 17% annually through 2022. Another report by the researcher estimates stellar growth in the consumer drone market, which is expected to be worth $4.19 billion by 2024. Overall, the drone industry is dominated by Chinese Billion Dollar Unicorn club member DJI.
Shenzhen, Guangdong-based DJI was founded by Frank Wang Tao whose love for flying devices began after he read animated books about the adventures of a red helicopter in elementary school. As a kid, he read a lot about model airplanes and dreamt of having his own device that would fly and follow him with a camera. Wang wasn’t a very good student, but on receiving good marks in an exam, he was rewarded with a remote-controlled helicopter, which he soon crashed. His unimpressive performance at school meant that he could not get into MIT or Stanford. So he ended up studying electronic engineering at the Hong Kong University of Science & Technology.
In his senior year, Wang built a helicopter flight-control system, which did not do too well in the class presentation. But his dedication to the project was noticed by his robotics professor, who then brought him into the school’s graduate program. Till 2006, Wang built prototypes of flight controllers out of his dorm room with his two classmates. In 2006, the three of them moved to Shenzhen where they worked out of a three-bedroom apartment. These initial stages of DJI were funded by Wang and his classmates from whatever was left of their university scholarship. The company grew gradually by selling components for DIY drones. The revenues from the component sales helped DJI support a small staff. By the end of2006, most funding had finished and DJI survived by getting funding of $90,000 from Wang’s family friend Lu Di.
By 2011, the company had established a US presence and a partnership with Colin Guinn who took care of US sales and English-language marketing. That partnership had a bitter ending within two years. But during those two years, the company made significant progress.
By 2012, DJI completed its first complete drone package that included software, propellers, frame, gimbal, and remote control. In January 2013, it released the Phantom – its first ready-to-fly quadcopter. Growth hasn’t stopped since then. Over the past few years, DJI has continued to improve the product and lower prices. By 2015, DJI owned nearly 70% of the global commercial drone market. Its drones have also been in the news for the wrong reasons. It was a Phantom drone that crashed into the White House in January 2015.
DJI has seen strong revenue growth in the past few years. It does not disclose detailed financials, but analysts estimate that sales have at least tripled every year between 2009 to 2014. The company saw revenues of nearly $130 million in 2013 after it launched Phantom. Sales grew to $500 million in 2014 and are estimated to have crossed a billion in 2015. To top it, the company has been profitable. It earned an estimated $120 million in profits in 2014. Net profits are estimated to have more than doubled to $250 million in 2015. DJI expects that number to grow to $460 million in 2016.
DJI hasn’t needed much funding to drive this growth. Since its initial funding by Lu Di and the undisclosed investment by Colin Guinn, it has raised $105 million in funds from investors including Accel Partners and Sequoia Capital. Its last round of funding was held in May 2015 when Accel Partners invested $75 million in the company at a valuation of $10 billion.
DJI remains the market leader in the drone market. Competitors like 3D Robotics have failed to deliver and are now looking to exit the market as they admit their failure to compete with DJI’s might. Market rumors suggest that DJI is now looking at going public this year. DJI has denied such rumors.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
Photo Credit: Richard Unten/Flickr.com
This segment is a part in the series : 2017 IPO Prospects