Funding For Drone Delivery Startups Still Flying High Amid VC Downturn

Those who follow the startup world are accustomed to pitches about how our future lives will look. Sometimes it never pans out. Other times, shifts happen surprisingly fast.

For consumer drone delivery, the journey from vision to reality hasn’t been the quickest. It was nearly a decade ago that Jeff Bezos first unveiled Amazon’s R&D initiative around drone package delivery. And while drone startups have a long history delivering vital supplies to remote locales, they’re not yet a presence in your typical American suburb.

If recent startup funding is any indication, however, we could see the pace of rollouts picking up.

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So far this year, more than $1.5 billion has gone to companies in the drone space, with a particular focus on delivery, Crunchbase data shows. The largest funding recipient, San Francisco-based Zipline, is making the case that consumer delivery is a concept whose time has come.

Zipline CEO Keller Rinaudo Cliffton markets the technology as a greener alternative. In a keynote this year, he posited that businesses are “still using the same 3,000-pound gas combustion vehicles driven by humans to make billions of deliveries that usually weigh less than five pounds. This is slow, it’s expensive, and it’s terrible for the planet.”

In Cliffton’s vision, drones are poised to do much of this work. To that end, this spring the company announced partnerships for regional drone delivery with supplements seller GNC and Seattle pizza chain Pagliacci Pizza starting next year. Pagliacci tells customers it will be able to use the drones “to deliver two 13-inch pizzas, a salad and a couple sodas.”

The planned rollout comes amid a broad rise in funding to drone-focused companies. Less than seven months into 2023, seed and venture funding to companies in the drone and drone management sectors has already hit $1.51 billion, per Crunchbase data. That’s almost as much as the entire 2022 fundraising haul for the space.

For a sense of how investment is trending, we charted out annual funding to drone and drone management companies for the past six calendar years below:

Seeing such strong tallies in 2023 is particularly significant given that overall startup funding has fallen sharply. Global investment in the first half of this year was down 51% compared to the second quarter of 2022

The drone space, by contrast, is seeing a flurry of big rounds. To illustrate, we used Crunchbase data to put together a list of 11 venture-backed companies in the drone delivery space that raised funding this year:

After Zipline, the next-highest funding recipient on our list is Silicon Valley-based dronemaker Skydio, which picked up $230 million in Series E financing in February. At the time, the company disclosed that it has logged 30x growth over the past three years.

Skydio says it is currently the largest drone manufacturer in the U.S. Major customers include the U.S. Department of Defense, along with public safety agencies, energy utilities and hobbyists.

Meanwhile, on the other side of the Atlantic, Germany’s Wingcopter picked up $44 million from the European Investment Bank in May to scale its electric unmanned aircraft. The company has deployed them to deliver medicines and supplies to rural communities in Malawi. It’s also launching a pilot project in Germany for groceries and consumer goods.

For now, in the evolution of drone delivery business models, we seem to be at the inflection point of going from need to have to nice to have. Upstarts have already demonstrated they can deliver urgently needed supplies to out-of-the-way places. It’s time to see if they can also fill a niche serving end users who are already close to stores and on delivery routes.

Startups aren’t the only players with big plans for drone delivery. Amazon, Walmart and Google, for instance, have also piloted drone delivery programs. If pilot projects by both startups and large enterprises scale as hoped, unmanned delivery craft could soon become a much more common sight in residential areas.

If they pull it off, soon there may be nothing pie in the sky about getting a drone-delivered pizza.