
Airware is shutting down after raising $118M - coloneltcb
https://techcrunch.com/2018/09/14/airware-shuts-down/
======
abakker
I'm not really surprised by this. At a drone conference in 2016, I first saw
presentations from them among many other interesting technology vendors. They
had a "vision" that they carefully presented on stage of what they would do,
but everyone else at the show was either demoing technology or taking orders.
Airware had a "call us for pricing" kind of attitude.

Meanwhile, its been a year since Verizon acquired Skyward - which was a force
in the drone industry pushing for better flight management tools, better
collaboration with ATC, and an affordable product for small-time commercial
operators that got most of their money as contractors/service providers.

At the enterprise level, Drones just didn't solve a lot of problems. At the
small farmer, construction contractor, gravel pit, etc, drones solved a lot of
problems, but drones were the anti-scale solution. They Reduced the work so
drastically, and improved the result so much that there was no need to scale
up software licenses. In many cases, it just did the work better, in a 10th of
the time, at a much lower cost. But, there was not a giant amount of work in
the queue for those companies. Just a steady flow of the same jobs that used
to take longer.

Now, beyond visual line of sight (BVLS) flights might change that for the
enterprise eventually, Power lines, rails, pipelines, and roads are all good
candidates for remote, automated drone inspection. But, I suspect that it will
be either DJI hardware, Custom Hardware, and some amount of custom software
that really integrates drones into the enterprise process. Flight planning is
only part of the picture. Maybe Airware had it all, but, if so, they were too
early - they couldn't outlast the slow (and rational) pace of aviation
regulatory change.

~~~
anonairwavedev
It has less to do with the space, and more to do with the odd engineering
decisions and multiple pivots.

There wasn't a SDK or platform to build on and we didn't take any actual
orders for anything (so we had minimal success stories or $$$). The hardware
we showed was built by us, and ran a custom OS (not based on linux) that was
nearly impossible to work with. We had a very talented engineer rage-quit
after spending a week attempting to figure out how the OS handled the internal
message bus system to debug an issue.

The hardware was also crazy expensive. We built literally everything: the
vehicles, autopilot, the autopilot OS, the comms board that connected to
motors (and enclosures), the sensor boards (GPS, gyro, etc), the radio that
talked to the autopilot, the flight planning software, and later an entire
enterprise cloud stack written in only the newest of the new JS frameworks and
containers. The team often decided to do things such as not use off-the-shelf
processors like the Nvidia TK1 or existing embedded software solutions --
nothing was 'good enough' so everything was invented.

Oh, and did I mention we also cycled through recruiters like candy?

~~~
romwell
So, a death by NIH?

~~~
BigJono
Certainly sounds like it. I find this bit pretty funny though:

> entire enterprise cloud stack written in only the newest of the new JS
> frameworks and containers

I'm of the opinion that the JS ecosystem is one of the few spaces where a
healthy dose of NIH can save you a lot of time and money in the long run. And
it seems like the only place where they didn't go for a custom solution.

~~~
RhodesianHunter
That people are choosing js for drones boggles the mind.

~~~
IshKebab
They aren't. He said that was for their servers.

------
JumpCrisscross
> _Airware launched its own Commercial Drone Fund for investing in the market
> in 2015_

Lossmaking companies launching in-house VC funds while continuing to raise
money is a huge red flag. It suggests operators who prefer to be fund
managers, two very different roles.

~~~
nostrademons
Also that they have no clue what the real needs within the market are, and so
would rather spread their bets around a portfolio of _other_ entrepreneurs who
they hope have better information than them rather than focus on one single
market opportunity.

I know of at least two really prominent cryptocurrency ICOs that are in this
boat.

(As a side note, I wonder how often the opposite situation - an investor who
gets so excited that they found a company - occurs, and whether that's a
strong positive sign. I can think of at least 2 such big successes - Jeff
Bezos with Amazon and Jim Clark with Netscape - and a bunch of more minor
ones, like FriendFeed or TripleByte.)

~~~
throwawaymath
_> I know of at least two really prominent cryptocurrency ICOs that are in
this boat._

Which two are you talking about?

~~~
nostrademons
EOS and Tron. There are probably others. I went to a couple cryptocurrency
meetups recently that were sponsored by a startup, 6 months old, which had
offices in 3 cities, 2 different product lines, and was launching a venture
capital fund. To me, that's a red flag that they have too much money and no
idea how to deploy it.

~~~
roymurdock
Off topic, but is there anything interesting going on in the cryptocurrency
space? I stopped following circa 2015 after seeing Bitcoin/blockchain co-opted
by a bunch of hucksters for a bunch of get-rich-quick schemes (including
internal projects at more than a few major technology companies). I've heard
stirrings about a few "stablecoin" project with more solid economic
underpinnings, but am skeptical anyone can come up with a better design than
the USD, EUR, or CHF for keeping a currency pegged to a broad basket of goods.

I ask because you're clearly not a crypto shill and it's hard to find unbiased
opinions on cryptocurrencies these days.

~~~
nostrademons
There is a lot of interesting stuff going on in the cryptocurrency space, but
it's all fairly high-risk/speculative stuff. Off the top of my head, there's:

Fixing the transaction delays & scalability problems of Bitcoin (Nano, Iota).

Fixing web advertising (Brave/BAT).

Decentralized prediction markets (Augur).

Tokenizing real estate (lots of startups).

Decentralized stablecoins (DAI).

DApp platforms (Ethereum, EOS, bunch of others now) and infrastructure built
to solve problems with those platforms (Loom Network, Cardstack).

It remains to be seen how much of this will be profitable or even get any
significant user adoption.

I'm thinking back to the dot-com boom, though. The WWW started, fundamentally,
as a communication technology, and it had its biggest impact as a
communication technology. But in between, there was a 5-year period
(1995-2000) when everybody was trying to get rich off dot-coms, usually by
applying them to existing profitable markets that it was completely unsuited
to. And then there was a further 2 year period (2001-2003) where _nobody_ was
getting rich off anything, companies were going bankrupt left and right, but
people were figuring out what the web was _actually_ good for. Once they did,
the resulting companies changed the world far more than Tim Berners-Lee
could've imagined.

Cryptocurrencies are fundamentally financial products, and I bet that their
ultimate use will end up replacing much of the financial industry. We just had
4 years of hobbyist development (2009-2013) followed by 5 years of everybody
trying to get rich off them (2013-2018) by either building platforms or
applying them to existing industries, much of which they're ill-suited for. A
lot of people have recently lost their shirt. I don't know whether this means
we're in the "let's figure out what they're _actually_ good for" phase, or
whether they'll be a further, even bigger bubble. It's likely that
cryptocurrencies will take longer to penetrate the mass market than the WWW
did, because communications (by its nature) spreads virally, while finance is
the underpinning for the entire rest of the economy. But I don't think
cryptocurrencies are a fad that'll die out, at this point...there are too many
people experimenting with them and too many people desperate for an
alternative to the mainstream financial system.

~~~
roymurdock
Appreciate you taking the time to share these thoughts, especially as I don't
have any biz experience from the dot com bubble times, so it's interesting to
get that perspective.

I see cryptocurrencies as an offshoot of people misunderstanding what a
blockchain can/can't do, and those seeking to profit from this
misunderstanding.

I see the blockchain as a new way to structure data, e.g. a new type of
database. It can be used to create a ledger/method of exchange within a
financial system, but to me the underlying technology is not financial in
nature, it's just a new way to structure and store data.

The way the blockchain is implemented in Bitcoin is ideal for a decentralized
financial system, but to me it is much less efficient than a system relying on
a trusted 3rd party for accounting/balancing ledgers. This is the fundamental
tradeoff - efficiency/trust.

Among myself/my friends, I don't see anyone desperate for an alternative to
the mainstream system, I actually see good progress in fintech companies such
as Venmo/TransferWise/Monzo etc. that are getting bought up by the bigger
banks/payments providers. But if I was trying to move more money across
stricter borders, I could see the desire for new financial products/systems
(legality aside).

I'll check back in with you in a year to see what's up ;)

------
pbarnes_1
How do you go from opening a new office in Tokyo to shut down in 4 days?

Unless literally no one is looking at the bank balance?

Did someone log in this morning, see the balance at a negative, and shut down
the company?

~~~
propter_hoc
Usually when things happen this way it means that facts changed in some way.
Either they presumed until today that some sale or financing deal would come
through, or their investors met and decided they had had enough.

~~~
gk1
Yep. I've seen this happen to another startup. They leased a massive (for
them) office space only to shut down a few months later after a funding round
fell through horribly.

~~~
jonwachob91
A few months later is a lot different than 4 days later.

~~~
timr
Big office deals take a long time to start, and have inertia once they're
going. I can easily see someone starting a moderately speculative office
expansion project and then getting distracted with fundraising, only to have
everything fall apart at the same time, many months later.

Said another way: given the number of liabilities at a company that has taken
hundreds of millions in funding and is flying low over the ground, a lease is
probably not you biggest concern.

------
haaen
Airware raised money from Y Combinator and Andreessen Horowitz.

[https://blog.ycombinator.com/airware-
yc-w13-raises-10-dollar...](https://blog.ycombinator.com/airware-
yc-w13-raises-10-dollars-dot-7m-from-andreessen-horowitz-and-google-ventures-
for-commercial-drone-autopilots/)

------
ChuckMcM
_They spared no expense ever._

Ouch. Sadly, not an uncommon failure mode. Raise more than you can easily be
bought out for (> $50M) and spend it faster than you can grow into product
fit.

That said, I am a bit surprised that there isn't more demand for a
domestically developed drone operating system. Given the issues the Army has
with DJI stuff it seems like it would be a natural support a local company
that could provide a similar capability.

[1] [https://arstechnica.com/gadgets/2017/08/army-tells-troops-
to...](https://arstechnica.com/gadgets/2017/08/army-tells-troops-to-stop-
using-dji-drones-immediately-because-cyber/)

~~~
jplayer01
Isn't DARPA investing in this space? Seems like the kind of thing they're
usually interested in.

~~~
ChuckMcM
Sure, but DARPA and their contracts don't move the technology like a bunch of
enthusiasts hacking on DJI drones.

I presume that is why the Army has been doing things with the DJI drones (I'm
sure they do stuff with Boeing drones or equivalents as well but I am also
sure they aren't $1500 off the shelf at WalMart).

It just seems like having a vibrant domestic drone market would be a
strategically useful thing.

~~~
jplayer01
Pretty much all modern technology is based on stuff DARPA and other government
institutions have funded over the past decades. I'm not sure what you expect a
couple of hackers to be able to do without a similar amount of funding.
Research and development is ridiculously expensive.

------
ngoel36
Anyone at Airware looking for a new gig, our aviation team at Uber is holding
drones experts -- shoot me an email, ngoel@uber.com.

~~~
lifeisstillgood
Presumably you meant _hiring_ drone experts, but the idea Uber is kidnapping
flight scientists and keeping them locked up in an underground lair has a
certain attraction :-) It might even make the pitch deck - "How we are
reducing competition in our space"

------
gammateam
Out of curiosity, how much drawdown do the VCs typically deal with during
these liquidations?

They get whatever's left based on their liquidation preference and preferred
stockholder preference, leaving nothing for common stock holders including the
founders themselves.

Whats a typical drawdown look like?

~~~
bmurray7jhu
When VC backed companies shutdown, the logistics are typically outsourced to
specialist firms like Sherwood Partners [1]. Instead of a formal bankruptcy in
federal court, an alternative process called "assignment for the benefit of
creditors" is used to distribute assets to creditors under state law.

Patents are usually sold to patent trolls or companies seeking a defensive
portfolio. An attempt is usually made to sell tangible assets as a lot, but if
there are no buyers, individual assets are auctioned. Silicon Valley
Disposition[2] is frequently selected to manage asset disposition auctions.

[1] [https://www.shrwood.com/](https://www.shrwood.com/)

[2] [https://www.svdisposition.com/](https://www.svdisposition.com/)

~~~
gammateam
yes, I've heard of California's ABC liquidation process, which also blocks
creditors.

whats the drawdown look like? how much money do VCs lose, percentage wise
given their liquidity preference?

there is no scatterplot or case study or statistics at all? maybe an obscure
SSRN article? Publication from a VC itself?

~~~
harryh
Typically companies don't shut down until they are out of money or almost out
of money so VCs lose basically everything.

Common shares go to zero (as they should).

~~~
moritzplassnig
And those companies usually took on debt additionally which is more senior
than the equity investors.

------
teraflop
Maybe this is a dumb question, but why is Techcrunch using a screenshot of
_Airwave 's_ Slack channel in a news article about _Airware_? Is there some
connection between the two companies that I'm not aware of? Or did they just
not bother to read what their "source" sent them?

~~~
romski
Slack of Airware alumni _

~~~
helper
I wonder what the slack channel for Airwave alumni is.

~~~
hanniabu
Airwalkaway

------
bertil
In cases like this, I rarely see the code being shared open source. Is it
because it’s worthless, or because investors sell it to recuperate some costs?

~~~
fipple
It’s because 1) nobody gives a shit and 2) it would need legal review to make
sure that it wouldn’t expose the defunct company to further lawsuits over
copyright or patent infringement. That’s expensive and not worth it for a dead
company

~~~
shpx
Would it be legal to release an encrypted archive and then release the key
after 6 years (or whatever the statue of limitations for patent
infringement/copyright is)?

~~~
jiveturkey
copyright is many years, too many. and NDAs generally never expire.

------
danimal88
a few ways to slice it 1) hardware is still really hard

2) hardware in it of it itself is defensible/a moat because apparently
software first companies may not know how to do it well

3) software for hardware is particularly dangerous because its you can get
pushed off of someones hardware platform in favor of a homegrown, good enough,
alternative

------
danso
I know the article says Airware attempted to go into hardware, but did its
operating system (ostensibly its main product) have users?

~~~
anonairwavedev
Nope, never did. We build 2 OS(s): the first was based on linux with a rtos
package (2013-14?). That was scrapped and a new fully custom hardware package
was built with a fully custom OS (built by a team that never had done this)
and was built for a low power arm processor. We were plagued by huge issues
most of the time due to that OS being nearly impossible to debug or work with.
Also doing that prevented any third-party from building anything because there
wasn't a SDK or even a platform to build on.

~~~
ddtaylor
How do companies raise $10M+ without having a product ready to use? (Real
question I run a startup that needs funding)

~~~
gonational
Please when you find this out let me know as well, as I am also in the market
for some free money.

~~~
quickthrower2
You need to cast the magic spell. The following spells work well:

"Drone"

"AI"

"Blockchain"

etc.

~~~
notJim
Also VR or even better, AR!

------
jakelarkin
so it seems like Drones is one of the first big nascent industries, SV utterly
lost to China b/c of their dominance of manufacturing?

~~~
flyinglizard
SV didn't lose to China; everyone lost to DJI. Their competence was staggering
(I think they kind of slowed down lately being that they're so far out from
everyone; throttling their innovation a bit).

If DJI represents the future of Chinese corporations[0], many people on the
other side of the ocean should be very wary.

[0] edited from "products". In fact what's so impressive with DJI is not just
the products themselves, but also the design, marketing and branding, which is
kind of an Apple/GoPro hybrid. They are not just creating immense value - they
are packaging it the right way.

~~~
smacktoward
_> In fact what's so impressive with DJI is not just the products themselves,
but also the design, marketing and branding, which is kind of an Apple/GoPro
hybrid. They are not just creating immense value - they are packaging it the
right way._

This is what always struck me as so short-sighted about Western corporations
offshoring their manufacturing. Japan and the Asian Tigers proved that it's
possible for nations to successfully climb the value chain, starting off by
doing low-skilled work and then using the experience gained from that to
gradually take over more and more of the overall product development process.
China is just taking that approach and applying it at a larger scale than
anyone has ever done before.

When a company like Apple contracts out its manufacturing to a Chinese firm,
it's betting that Apple will always be able to produce better design and
marketing than that Chinese firm can. But based on history, that doesn't
strike me as a very good bet. Eventually the Chinese firm will climb high
enough on the value chain where they don't need Apple's designers and
marketers to make objects that sell anymore. The Western companies are
training their own replacements.

~~~
toss1
>>short-sighted about Western corporations offshoring their manufacturing

EXACTLY!

While the western corporations think they're taking advantage of cheap Chinese
labor, the Chinese are actually taking advantage of our weakness for short-
term profits over long-term investment and getting us to sellout IP in the
bargain. For western corporations & governments, one of the most historically
stupid geostrategic moves ever.

------
isuckatcoding
Dodged a bullet here. I didn’t make it pass the first interview call back in
2016 lol.

~~~
acct1771
past _

~~~
isuckatcoding
Noted

------
rhizome
When you say Airware I think of two things: they seemed like they could fall
into military contracting or whatever, and -- perhaps related -- they had job
ads on Craigslist SF for _years_ , which was another kind of signal about
them.

------
burdzwastaken
Any Airwave Kubernetes / Infrastructure engineers looking for new work? Our
Core Platform team is always looking here at Mulesoft, shoot me an email at
matt.burdan@mulesoft.com.

------
tehlike
The founders were capable engineers, i am sure one of their next gigs will
stick.

Hi buddy, if you are seeing this :)

------
brian-armstrong
I guess in the end that air was just vapor

------
mvpu
A VC friend once told me that _all_ money coming into VC via LPs represents
<5% of their total assets, so even if all the VCs loose all the money their
raised from their LPs nobody loses breath - only damage is to reputation. So
fund raising is mostly about storytelling and showtime. Fund losing is about
back luck. Better luck. Next time.

~~~
gatsby
Huh?

~~~
bigbadgoose
VCs take money from Limited Partners (LPs). For the LPs, they spread less than
5% of their investable assets across a venture strategy. If it doesn't pan
out, no big deal.

So from their perspective, fundraising is spectacle and excitement, and losing
investments are part of the loss model.

\--

Side note, a return model heuristic for LPs: 1 in 10 yields 10x, 1 in 100
yields 1000x

~~~
nostrademons
From the perspective of the LP, sure.

From the perspective of the VC, if they have a bunch of losers in their
portfolio it means that they're not going to be able to raise another fund in
10 years, they won't have any carried interest (which is where VCs make the
bulk of their compensation - it's their 20% of the total _profits_ ), and
they'll have to content themselves with the salary they drew from the fund
management fees.

BTW, most LPs are things like pension funds and university endowments, along
with hedge funds that pensions & universities invest in. So if you're ever
wondering why your parents' retirement has suddenly vanished or your kids
can't afford to go to college, this is why.

