The drone industry has certainly been a hotbed of innovation in recent years, with potential applications ranging from delivery services to search and rescue operations. Unsurprisingly, the hype around drones translated into significant financial backing — largely from venture capitalists to big tech companies. But 2023 drone funding tells a different story.

That story shifted largely in 2021, when funding into the drone industry hit its peak. 2022 marked the first year since 2017 that the drone industry didn’t clock a new record for drone investment funding. That’s according to an annual data analysis from Drone Industry Insights (DII), a German-based analytics firm, which has been tracking drone industry investments since 2013. 

But not only did funding slowly stall out in 2022 — it sank sharply in 2023.

Here’s what we know about 2023 drone funding — and how it might impact the future of the drone industry:

A meteoric rise, followed by a sharp downturn

Data from Drone Industry Insights reveals that in 2021, drone companies worldwide raked in a staggering sum. That’s because the amount of money funneled into the drone industry doubled twice. First, it was between years 2019 and 2020. But that already-massive 2020 figure doubled again by 2021. 

Big money in 2021 included massive investments from Japan-based Drone Fund, as well as funding from Silicon Valley venture capital giants Y Combinator and Andreessen Horowitz

Alas, that fizzled out by the next year. In 2022, both the total number of deals and the amount of money actually invested in drones decreased. Drone companies took in just $3.3 billion in 2022. Though that may seem like a lot, that’s a drop from the $3.5 billion in investment deals involving a drone company that occurred in 2021.

And this year, figures are even punier — at least according to DII’s analysis.

In 2023, the cumulative total of drone company funding worldwide was just $1.67 billion. That’s only about half of the amount invested in drone companies the year prior in 2022.

Is the sky falling on the drone industry?

Despite what might seem like a concerning drop given that drone funding in 2023 was roughly half what it was in 2022, it’s not all bad news. The $1.67 billion invested in drones in 2023 is still higher than what it had been every year besides 2021 and 2022. It’s even still more than double what it was in 2016, 2017 and 2018, which felt like years when drone mania was buzzing. In those years, it felt like everyone wanted their own camera drone and every news story was about some newfangled drone invention or drone delivery test. For better or for worse, those days are largely past us.

Another reason not to be concerned: DII’s data shows that a huge contributing factor to the massive spike in drone industry funding in 2020 and 2021 had to do with investment in air taxi services like Joby Aviation. Joby has made huge waves lately with news that it plans to operate aerial taxi services in Dubai by 2025.

Joby at one point felt like it would be a drone (i.e. unpiloted aircraft) company primarily. But increasingly it’s leaning into its piloted, electric aircraft capable of vertical takeoff and landings as a starting point — thus not really a drone. With that, DII has since excluded funding for AAM/eVTOL companies like Joby from its analysis. That might be a big factor in why drone industry funding saw that roughly 50% drop this year. After all, some big names that boosted numbers in past years aren’t even considered in the latest analysis.

Drone companies are startups no more

Of course, it’s not just a data discrepancy. A big factor in the reduced funding is the simple fact that most drone companies can hardly be considered startups anymore.

“The value of later-stage venture capital investments has decreased considerably, and this has happened not only in the drone industry,” according to DII’s 2023 investment analysis report. “So at this stage, even if a drone company has developed its product, proved that there is a market opportunity, and has meaningful revenues, the latest global financial trends show that there is now a lower chance of receiving further [substantial] investments.”

Consider other macro-factors

Before panicking that drone industry funding is dropping, consider how other macroeconomic factors have influenced all sorts of tech companies. 

Investors have become cautious in the midst of issues like high interest rates, inflation and ongoing supply chain issues. Geopolitical developments add to the uncertainty.

What drone companies are still getting funding in 2023?

While drone company funding might be stalling out industry-wide, some companies have bucked the trend. Two of the most notable players are drone delivery company Zipline, and enterprise and military drone maker Skydio. Those two companies received the highest number of investments in 2023.

Unsurprisingly, North America received 71% of the global total of funding. Both Zipline and Skydio are American drone companies. European drone companies received the second-largest amount of funding, taking 17% of the share of 2023 drone funding.

Drone companies typically are broken down into three groups: hardware companies, software companies and drones as a service companies (companies that fly drones for you). Typically, hardware companies take in the highest percentage of investments — unsurprising given the high costs of manufacturing hardware. That includes chips, lenses, materials, and any number of other inputs, not to mention the price of testing and repairs to ensure safety.

Skydio is a hardware company. And though Zipline is generally considered a drones-as-a-service company, it also makes its own drones in-house. Drone service companies received the second largest amount of funding after hardware companies in the group.

How drone companies are changing in 2024

If funding is down, then how are companies evolving? DII discovered an interesting trend this year: partnerships. According to DII’s analysis, the grand total number of partnerships  rose to 320 in 2023. That’s up from just 275 in 2022.

What types of partnerships are we talking? Generally speaking, it’s partnerships between drone companies and non-drone companies. We’ve seen all sorts of the like.

The obvious example is in the drone delivery space, where restaurants and retailers are trying to remain cutting-edge by partnership up with drone delivery companies. 2023 gave us some notable drone delivery partnerships, including one between salad restaurant Sweetgreen and Zipline. Another huge delivery drone came in August 2023, when Walmart announced a team up with Google’s sibling company, Wing.

“This is a pattern that has continued over the years and represents a strong sign for the industry,” according to DII’s report. “By forming these partnerships, drone technology can have an impact on new markets while non-drone companies can benefit from working with drone professionals rather than attempting to start their drone operations.”

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