There is money to be made as a growth investor, but you have to understand the industry first.

In a previous article, I explained how the drone industry is predicted for explosive growth this coming decade. I also listed 9 major industries that I expect to be significantly impacted as the drone community comes of age to reach the Plateau of Productivity. Since you’re reading this article, I will assume that you agree with my assessment, or are at least intrigued enough to continue reading.

I’ve often asked myself “How do I invest in the drone industry?”, and that is the very question that I am seeking to answer in this blog series. To start at the basics, let us define just what this “drone industry” is. 

I’ll start by making a comparison to the Automotive industry, which has been in existence for millions of years, and is highly mature. When the typical investor thinks about investing here, the standard automotive manufacturers often come to mind (F, GM, TSLA, etc.).

But these manufacturers do not represent the entirety of the Automotive industry—there are other verticals whose profitability and company value ride the same market waves. Moreover, these verticals do not reside within the same industries, or even market sectors.

Take a look.

  • Automotive Manufacturers
  • Component Suppliers
  • — Engine Manufacturers
  • — Tire Suppliers
  • Factory Machinery Suppliers
  • Vehicle Designers
  • Software Developers
  • Petroleum Suppliers
  • Insurance Providers
  • Highway Construction
  • Repair Services/Suppliers

Wow! This opens up the options for a diversified portfolio that centers upon a single industry, and demonstrates how an impact to one vertical can have carryover effects on others. For example, an environmental or regulatory restriction on petroleum-powered vehicles does not only affect some 95% of the manufacturers; it also reshapes Engine Manufacturers, Vehicle Designers, Petroleum Suppliers, and Repair Services/Suppliers—to the point where companies in these areas are forced to swiftly pivot, or gracefully exit the stage.

Now, let’s make a similar list as it applies to the Drone industry. Drones have only been with us for dozens of years, so the market stakeholders are both broader and shallower.

  • Drone Manufacturers
  • Component Suppliers
  •      o Aircraft Body Manufacturers
  •      o Camera Suppliers
  •      o Battery Suppliers
  •      o Radio Frequency Equipment Suppliers
  •      o Mobile Device Suppliers
  • Factory Machinery Suppliers
  • Aircraft Designers
  • Software Developers
  •      o Flight Control
  •      o Autonomy
  •      o Navigation and Guidance
  •      o Mission Planning
  •      o Image Processing
  • Equipment Retailers
  • Insurance Providers
  • Support Equipment Providers
  •      o Launch and Recovery Equipment
  •      o Docking Stations
  •      o Charging Stations
  •      o Loading and Unloading Equipment
  •      o Data Terminals
  • Repair Services/Suppliers

These generic verticals are a non-exhaustive summary of those companies that are responsible to put a drone into the hands of a pilot and keep it flying. I’ll call these the “Supply” verticals.

Next come those companies that actually fly drones for commercial purposes. Some of them fly a drone fleet internal to the company, while others outsource operations to drone service providers. I’ll call this the “Operations” vertical. The industries in this group are the same I listed in a previous article.

  • Agriculture
  • Entertainment
  • Real Estate
  • Construction
  • Utilities
  • Retail
  • Transportation
  • Financial
  • Healthcare
  • Public Safety

The last decade has seen a variety of use cases involving aerial imagery (daytime electro-optical, infrared, and radar being the top three products). I believe that this coming decade will see cargo transportation rise to rival, or even exceed, what we have seen from drones in the past. The following decade will include use-cases that we cannot even imagine today, but will eventually thrive in their own right.

With some basic terminology and classification behind us, I’ll close with a quick look at the members of the Drone industry, writ large. In general, I’ll break these members into two groups.

  • Companies with multiple lines of effort, only some/one of which include drones
  • Companies whose primary/only line(s) of effort include drones

I’ll refer to the first group as “Drone-Diversified” (drones are *a* thing), and the second group as “Drone-Dedicated” (drones are *the* thing). The former group consists of pre-existing companies that have begun to use drones as tools to enhance their operations; the latter group tends to be new market entrants that are making hefty wagers on the success of this industry. 

As I write this article, the list of publicly-traded “Drone-Dedicated” companies is disappointingly small. The list will grow over time, and I will ensure to capture them in Company Spotlight features as the industry matures.

Drone Industry Taxonomy
Drone Industry Taxonomy

I will close this article with a taxonomy of the drone industry that I intend to refer to as I write about specific market niches and individual companies. You will recognize the categories as items that we discussed in this article, and it should provide a useful quick reference to a company’s role in the Drone industry ecosystem.







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