Many are attracted to the notion of being a "startup" as it conjures up images of young, hip companies working on the newest technology or cutting-edge ideas. It's no surprise, then, that an increasing number of companies have taken to proclaim themselves as such to jump on the hype and draw the attention of potential investors. Therefore, the question would be: what makes a company a real startup company?
Many are attracted to the notion of being a "startup" as it conjures up images of young, hip companies working on the newest technology or cutting-edge ideas. It's no surprise, then, that an increasing number of companies have taken to proclaim themselves as such to jump on the hype and draw the attention of potential investors. Therefore, the question would be: what makes a company a real startup company?
Contrary to many beliefs, this doesn't really have much to do with being a newly established company, but rather it is determined by the purpose for which the company is created. Startup companies are formed primarily to test the waters, whether it is for testing out the potential demand of a new idea or growth in a new market. The setup would also allow entrepreneurs to try out different business models and refine them in order to discover one that they can build upon.
Since they are operating in uncharted waters, success is definitely not guaranteed and risk for failure is high. However, the promise of fast growth in a young, yet untapped, market segment is an alluring bait for investors who are aiming to score huge returns on investment in a short period of time.
The drone industry is currently one of the market sectors that has seen a huge jump in the number of startup companies. According to investment research firm, CB Insights, the amount of equity financing raised by drone startups in 2015 was significantly high, amounting to more than the amounts raised in the last three years combined.
Financing the Dream
Startup companies usually start with an idea, such as a way to formally address an important yet unresolved problem. However, ideas remain ideas if the founders are unable to secure the funding required to transform it into reality.
Some companies are fortunate enough to come up with the funds themselves and there is an advantage to this because this would allow the startup to concentrate on creating and developing the product and not worry about keeping their investors happy. "During our developing phase we felt it important not to include financial stakeholders pressuring us, urging early releases and focusing on only revenue. We needed time to excel, allowing us to closely listen in on actual problems and needs, focusing on creating long-term solutions," said Daniel Sällstedt, CEO of Sky Eye Innovations.
Startup Investing
A lot of startups turn toward outside investment, participating in various investing rounds, each of which represents a particular stage in the development of the company. The first round, the seed round, is an investment made by angel or private investors early on based on either the concept or an early prototype of the product. Flyability recently completed its second seed funding in 2015. With the funds received, they had the means to start shipping their prototypes to their customers, as well as prepare to launch its first professional product this year.
The consequent funding rounds would take place when the business starts to take off and earn revenue. The company might want to build the business by employing more people or allocating money for advertising (round A). They might choose to further expand the business overseas or explore a different market (round B). Ehang was able to secure series B funding; thus, enabling them to explore ways of expanding the use of their drones in both the private consumer and commercial market.
Crowdfunding
Although it has become commonplace for companies to turn toward venture capitalists or private investors for funding, an increasing number of drone startups are raising the money they need from people around the world through various funding platforms, such as Kickstarter and Indiegogo, on the internet.
It is quite apparent that certain drone campaigns do better than others. The public is, of course, more interested in funding projects for devices that they can play with such as for photography or filming purposes. Drones that can be personalized according to users’ specifications are usually a hit. A recent successful project, Spiri, even allowed developers to build apps to customize their drones for specific uses.
Another crowd pleaser is the ability to control the drones using smartphones or tablets; thus, allowing regular users to pilot them. AirDroids' Pocket Drone will even allow them to set the drone on autopilot and "follow me" mode to allow for a hassle-free user experience.