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Airware is shutting down after raising $118M (techcrunch.com)
204 points by coloneltcb 65 days ago | hide | past | web | favorite | 137 comments



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.


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?


So, a death by NIH?


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.


At the end of the day, a lot of what NIH ends up being is employees extracting experience and resume value at the expense of business goals. It's kind of funny, then, that the JS ecosystem gives you a better resume if you have keyword soup with trendy frameworks.


Sometimes engineers are just curious about new and exciting stuff and don’t make the right risk/reward calculations.


Yeah it doesn't need to be a conscious and deliberate choice. If some folks have more of a tendency to do this and wind up with trendier resumes, then simply hiring trendy resumes for senior roles gets you there.


That people are choosing js for drones boggles the mind.


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


It makes a lot of sense for high level mission planning (more agile than other languages + it runs everywhere) and interacting with web apps.


“But developer experience!”

Takes 3 weeks to debug.


What’s NIH? Not Inough Humility?



Hah, "Not Inough Humility" seems to apply as well :)


That is so right. We’ll all be giving talks about this soon. NIH: Not invented here, aka not enough humility. :)


"Not In-House" is another common interpretation, in addition to "not invented here"; both mean the same.

I'm absolutely going to add "not inough humility" to the list from now on, it works just too well :)


more like too much easy money to burn


Would Airware have attracted as much funding as it did in subsequent years if it didnt propose a pivot into hardware? Or do you think it could have eventually succeeded by focusing only on software?


Was the engineering leadership all from academia or something?


yes, both ceo and cto recent mit grads


The CTO is a recent MIT PhD, but I don't think either of the CEOs are academics. The original CEO & founder did go to MIT, but as an undergrad and years before founding the company. The most recent CEO has a business/MBA background.


Almost all those things should have been built in C


I'm not sure what conference you were at/what you saw presented, but there is drone software that creates a lot of value for construction, engineering, and mining companies. BVLOS may create a lot of value some day, but there are a lot more technical hurdles that will need to be cleared before it becomes safe and mainstream, just like Level 4/5 self driving cars. (unless you're talking about doing FPV inspections.)

Disclosure, I originally was the product manager for 3DR's flagship software product, Site Scan, which drove our transition from a hardware business to a software business, and I am currently VP of Marketing and Business Development here. Each mine that deploys our software saves, on average, 6 figures per year (after the product cost). This is on man-hour costs alone - the value is greater if you look at the increased safety of taking individuals out of active mines and increasing topography capture that enables analysts to identify issues before they turn into safety hazards on site.

That's just for one industry we serve - cost savings/time savings/improvements in project pursuit are all high for construction and engineering as well.

I think it's likely you saw some presentations from companies that had not done enough customer discovery or they were perhaps just very early in the process of identifying real problems and building the right solutions, but it's not representative of the industry.


>Each mine that deploys our software saves, on average, 6 figures per year (after the product cost).

Where do the savings come from?


They come from man hour savings from generating a topography of the mine and stockpiles. Our mining customers have found our product gives results within 1.1% of the accuracy of laser scanning the mine and is more accurate than the results from traditional methodology performed by an average ~3 person survey crew. It requires only a single person to capture the mine, and customers get the data back in a single day rather than 3 to 4 days later. Thus, they can capture the mine topography far more inexpensively and far for frequently than they could previously.


One other usecase with a lot of potential is inventory control and counting in warehouses. Not small articles, but for industrial warehouses and larger products drones combining bar code scanners and visual artical identification can improve things considerably. Fraunhofer ran some first test like two years in Germany. No idea what came out of it.


I don't know why this is getting downvoted. years ago when we had multiple warehouses our employees would upload pictures of shelves into the cloud at the end of every shift and if a product goes missing we would look at the pictures and inventory record to find out when exactly the real quantity of items on the shelf and inventory level in the system became off. if a drone could fly thru shelves on schedule and AI could count the items that would be amazing


Does that really benefit from a drone vs a wheeled vehicle with a bunch of fixed cameras on it? I would think a gigantic planar environment is pretty much ideal for an industrial SDV; a lot of things get easier when you're no longer worried about weight— you can carry a full day's worth of batteries, not to mention having higher quality optics and safety lasers.

(disclosure: I work for OTTO Motors, which has customers in this space)


Why not both? A large, wheeled vehicle that also carries a small flying drone for the occasional inspection from above.


This is the approach I've been thinking about recently. The landing pad on the wheeled vehicle could have an inductive charger to recharge the smaller multirotor vehicle(s).


wheeled vehicle parked in the isles to take a picture of a space on top shelf would be blocking pallet jakcs and other vehicles that need to move between the isles. may be a railed solution hanging from the ceiling would be better.


Rails are a lot of infrastructure to install and maintain. People complain that sticking down magnetic tape is a pain in the butt.


Exactlly, also a drone is much more flexible in case you change your layout.


other way, you mound cameras ON pallet jacks and other vehicles


I could imagine both. In the case I mentioned the warehouse was euipped with highracks up to 13 meters if I remeber well. Also the drone flew during non-working hours, so yeah some ground based solution would work too.


I always hear people raise this point but there are better solutions than a flying robot inside of a warehouse.


Out of interest, could you name a couple? I just happened to come across a couple students that are tackling this problem via drones.


A vehicle on wheels or a track is orders of magnitude more efficient. It’s not sexy but it’s more effective than having to power a flying vehicle and control it autonomously. If you really want something more drone-like, hang it from the ceiling.


What kind of solution is best depends to 100% on thr warehouse you are looking at.

Take you standard Amazon warehouse for small articles as an example. Maximizing untilisation, meaning the ratio between space used und spa e available, in that case you end up with a never ending mixture of differwnt small articles in the same location. Without RFID chips on every article, which is as of now prohibitively expensive, the only feasible way to count the inventory is using people.

For other warehouses and articles, like white goods or other large stuff that easily identified with out touching it whether a drone, a ground vehicle or something running on rails is better suited depends on a couple of factors. If you might run into situations that require a chenged warehouse layout, which occurs much more often than you think, fixed installations add a lot to the fix costs and rwduce flexibility.

Using ground based solutions runs into issues with high warehouses, storing up to 15 meters in height is not uncommon. Again, density is the main reason for this, getting more inventory at the se number of square meters. In that case a drone is both more flexible and can cover the heights as well.

But thats theory, not sure what came out of the Fraunhofer trials covering white goods.


I think automated drone inspection may be a more profitable niche than it first appears. My school had a couple grad students start up doing NDT analysis with drones. There seems to be a lot of interesting problems that could be solved with drones when they are treated as a platform for specialized equipment. And the specialization in equipment and analysis is good protection against commoditization. But I do agree with you that a lot of these problems don't really scale.


NDT - Non destructive testing? So coupled with "specialised equipment" I assume something like scanning the steel in a bridge for corrosion? Is that feasible - the noise in any feed from distance / stability must mean "usual" specialised equipment cannot be used?


You are probably overthinking this.

Simply being able to fly a high resolution camera with a bright light up underneath a bridge probably saves an enormous amount of time.


assert numBridgePieces == 1


Do you have a view of Airmap?


I’ve not personally used it, so I can’t comment on that part, but, it appears that they have gone with the open, extendable, and most critically - actually for sale - route. That would bode well in my book.

On my soapbox, the big missing piece in drones is a real platform for managing the concept of time series map data for a layperson. There is a lot of dimensions in the data that drones generate (lat, long, alt, color, time, camera stuff, angle of image, etc). Tons of data, and nobody has convincingly showed anything that goes into trend analysis. I’m not sure that any company is really delivering on the concept that this data needs to be controlled and analyzed. Especially in farms, the time series part is important, but it is mostly snapshots and intuition right now.


Back in 2015 Airware was pushing for its own technology stack, coupling an autopilot with mission management/ATC. Only later they pivoted into a software-only solution. Same goes for 3D Robotics.


Agree with your point, this is the vision we are developing at Sterblue !


> 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.


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.)


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

Which two are you talking about?


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.


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.


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.


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 ;)


It depends on your definition of "interesting". Lightning Network, atomic swaps, sidechains (like Blockstream Elements, Liquid), confidential transactions, bulletproofs, MimbleWimble, Non-Interactive Proofs of Proof-of-Work etc. are all interesting tech innovations and have nothing to do with get-rich-quick.


You might want to check out https://twitter.com/buttcoin which aggregates a lot of good cryptocurrency news


> It suggests operators who prefer to be fund manager

It could be suggestive of that, but I'm not sure it is in this case.

Looking at the press around the CDF, they made a couple of co-investments (can't find anything where they led a round or were the first through the door), and it wasn't "in-house" as much as Airware branded: they had LPs and I think it's likely Airwave's involvement was simply being the technical due diligence on a deal and then somebody else doing the paperwork, legals, etc.

It seems like it was a beauty parade for talent, ideas, and future acquisitions.

There's a whole other argument around whether or not that's a sensible idea, but I think it's a big leap to suggest that a market leader in a nascent market setting up an investment vehicle specifically for that market is indicative that they 'prefer' to be investing not operating.


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?


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.


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.


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


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.


It's very traditional. The second you show that you're significantly scaling back you raise questions about whether you're a going concern. They could have canned the japanese office much earlier but then it's possible investors would say 'Hey, we thought the plan was to build strong links with Mitsubishi to prime for an acquisition for an exit, what's the plan now'. So the only real option is to push aggressively and hope it works out.


Fundraising might have fell through at last moment. Some major customer/partnership might've pulled the deal at the last moment. This all happens at startup level cashflow is tight. And all the investors thought there is no way this business with make sense based on the data they might have had on their hands. So they pulled the plug


Airware raised money from Y Combinator and Andreessen Horowitz.

https://blog.ycombinator.com/airware-yc-w13-raises-10-dollar...


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...


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


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.


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.


And then you have your usual suspects: Boeing, Lockheed Martin, Northrop General Dynamics in the US, BAe Sytems in the UK, Dassault and Airbus in France and Germany. Not sure wether the military is really interested in a civilian OS.


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


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"


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?


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/

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


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?


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).


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


Junior creditors frequently receive more under an ABC than they would under a bankruptcy. The reason is that any creditor can preempt an ABC filing by petitioning for an involuntary bankruptcy in federal court. To avoid an involuntary bankruptcy, the senior creditors are usually willing to let the trustee make compromises when settling with junior creditors.


i guess it depends on if they have anything to sell...i bet most software startups would have a pretty significant drawdown unless they've made some unique ip that's worth something.


If they have an office they have stuff like chairs and desks and computers that are at least worth a little bit.

But it’s true most of the money went to employees.


Office liquidators typically offer 2% to 5% of retail on office furniture, although an office manager can try to direct sell the Aerons or new modular units.


Wow. That's way less value than I'd expect. I guess no one really wants to work at a dead company's used desk.


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?


Looks like it's Airwave telling their employees about Airware being shut down. You can see in the first message that someone is telling the channel that Airware informed their employees of the shutdown, and the rest of the messages refer to Airware as "they".


It says in the article. It's a slack channel for previous employees, not from the actual company.


the article mentions that it was their "alumni slack" so I guess it's a portmanteau of "Airware" and "wave goodbye"?


Yeah that jumped out at me as well, I googled the two terms to see if there was some connection or renaming but couldn't find anything.


Slack of Airware alumni


I wonder what the slack channel for Airwave alumni is.


Airwalkaway


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?


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


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)?


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


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


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


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.


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


We actually did have something at that point -- it was based on existing hardware and it did work. I seem to recall the original CEO taking I think someone from A16Z (?) out to a parking lot and flying an aircraft around as a demo


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


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

"Drone"

"AI"

"Blockchain"

etc.


Also VR or even better, AR!


Its all about who you know and how shiny can you look to the outsiders (founders being MIT grads etc).


So, as of the shutdown, is there anything even close to a usable software stack, or is it all just prototype stuff?

Why, if they had all that funding, and assuming that they had good reasons for a custom OS, would they fail to hire an experienced team to build one -- it seems that the time saved by experience would be well worth it?

Bottom line, is there any software of value that some other drone company might want to purchase?

(edit: add last line)


Have you considered joining Propeller Aero?


https://techcrunch.com/2015/04/16/airware/

A few customers listed here: Delta Drone, Drone America.

Sounds like the market didn't want or need a $2500/yr/drone software package for automating flights/data retrieval/storage. And there's simply no competing at the hardware level with DJI, even with $118M in funding.

"Across all prices in North America, DJI represented 50 percent of the market, Snow says. The price range where DJI is not dominant is drones under $500, which are mostly toys, and where there are hundreds of companies competing." [1]

There's money to be made in industrial (non-warfare) drones - but not as much as everyone thinks, and competition is really tough.

[1] https://www.recode.net/2017/4/14/14690576/drone-market-share...


None of those customers ever got an SDK (because there wasn't one) or any software. They only provided vehicles.


sounds like a really frustrating experience. sorry to hear about all the pivots, lack of strategy and vision. a good/interesting idea killed by overengineering and tough competition. sounds like you learned a lot of valuable lessons on someone else's dime while the ride lasted


Thank you —- this makes me feel much better about the time I spent there :)


anon: would be interested to chat if you can reach out: https://www.linkedin.com/company/iridium-dynamics/


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?


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.


> 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.


>>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.


Yeah, but that's the problem of the next CEO and not this one, and all the smart investors want to take anything they can get now and simply jump ship when they see something dark on the horizon. The only ones screwed are those with not much of a voice in leading the company, and/or lack of ability to move themselves elsewhere as easily as big capital can. I think they have all been acting perfectly rationally. After all, working "for the common good" is not anyone's goal, and according to the leading religion - or economic theory - that is perfectly alright and desirable, because invisible hand... I don't think keeping companies around for very long still is a goal of investors other than family businesses.


Hmm that's very interesting. Reminds me of what Netflix did to Hollywood but played out internationally.

China (Netflix) takes what the United States(Hollywood) doesn't want to do/finds little value in. Once China (Netflix) has a foundation of manufacturing know-how (media catalog)they move up the chain to more complex technical (media) products.


Why worry about the long term, when you can get rich in the short term? After you are rich, long term is someone else’s problem.


>SV didn't lose to China; everyone lost to DJI. Their competence was staggering

If anyone is interested look up "robomasters" for a DJI recruitment competition running with teams from >100 Chinese Universities.


> many people on the other side of the ocean should be very wary.

People should be excited.

If Chinese companies all behave like DJI, that's a blessing to everyone.


this is my concern as well. on the hardware side, a Chinese startup can iterate faster & be the lowest cost producer. if design, UX, software, marketing is on par with SV/US competitors. SV is toast (in that industry)


DJI is super interesting. They just have the best products. There was a time when they did not have the best products. Super curious as to how they leapfrogged everyone so quickly.


How many state subsidies went to DJI?


SV is good at Software, UI/UX and, historically anyway, Silicon.

But it can't do end hardware.

And the stuff it has been successful at is designing consumer hardware but outsourcing the manufacturing to another country.

Arduino is Italian. Samsung is South Korean. TSMC is Thai. ARM and RPi is British. Shenzhen is the hardware place to be now. It didn't even steal that crown from SV. It stole it from Akihabara.


Your examples make no sense. Arduino and Raspberry Pi are toys for hobbyists. Samsung is a colossal conglomerate that makes thousands of different consumer products. TSMC is a semiconductor fab, and ARM makes... specifications?


The T in TSMC is Taiwan, not Thailand.


But it can't do end hardware.

There is a great history of end hardware in SV. It has moved off shore chasing lower costs and fewer regulations. Great video tour of the Mac factory in Fremont:

https://www.youtube.com/watch?v=KUjyh2Fhnuk


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


past


Noted


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.


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.


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

Hi buddy, if you are seeing this :)


I guess in the end that air was just vapor


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.


Huh?


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


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.




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