The Future of the Drone Economy, Schemes and Mind Maps of Technology

Download The Future of the Drone Economy and more Schemes and Mind Maps Technology in PDF only on Docsity! A Report From Levitate Capital The Future of the Drone Economy A comprehensive analysis of the economic potential, market opportunities, and strategic considerations in the drone economy 1 Disclaimer The information contained herein is intended for general informational purposes only, does not take into account the reader’s specific circumstances, and may not reflect the latest developments. Certain information contained herein has been obtained from third-party sources, which although believed to be accurate, has not been independently verified by Levitate Capital. Further, certain information (including forward-looking statements and economic and market information) has been obtained from published sources and/or prepared by third parties and in certain cases has not been updated through the date hereof. While such sources are believed to be reliable, Levitate Capital does not assume any responsibility for the accuracy or completeness of such information. Levitate Capital does not undertake any obligation to update the information contained herein as of any future date. Levitate Capital LLC disclaims, to the fullest extent, any liability for the accuracy and completeness of the information in this document and for any acts and omissions made on such information. Levitate Capital has invested in a few companies mentioned in this paper, including but not limited to: Dedrone, Elroy Air, Matternet, Shield AI, Skydio, Skyports, and Volocopter. 4 2.5 Oil & Gas 72 2.6 Real Estate 79 2.7 Utilities 83 2.8 Mining 93 2.9 Professional Videography 97 3 Consumer 104 4 Public Safety 112 4.1 Law Enforcement 114 4.2 Firefighting 121 5 Logistics 125 6 Passenger Transportation 138 7 Conclusion 150 8 About Us 157 9 Acknowledgements 158 10 Appendix 159 5 Market Forecast at a Glance Enterprise 3 16 29 2020 2025 2030 Consumer 3 4 5 2020 2025 2030 Market Size $ Billion Market Size $ Billion Defense 8 11 17 2020 2025 2030 Public Safety 0.7 3 5 2020 2025 2030 Logistics <0.1 3 33 2020 2025 2030 Passenger <0.1 0.1 2 2020 2025 2030 6 Geography Forecast at a Glance The U.S. will remain the largest market for aerial drones when defense spending is included 9 Technology Development Timeline This report assumes continuous development in drone aircraft technology 2021 2023 2025 2022 2024 Ubiquitous and improved autonomous flight for system failure responses, dynamic routing, and human and machine handoffs Build out of distribution hubs to load and receive goods from drones Battery energy density of 400 Wh/kg Roll out of UTM solutions and integration with crewed air traffic control Initial introductions of 5G enterprise drones 2026 2028 2030 2027 2029 Initial build-out of vertiport network infrastructure for transporting people and cargo First commercial operations of passenger eVTOLs Battery energy density of 500 Wh/kg 10 Introduction Stakeholders—government officials, regulators, drone companies, corporate adopters, and investors—must understand how the drone landscape is evolving if they want to expand the current uses of the technology and create and capture additional value. To date, many market forecasts for drones have been overly bullish; moreover, many predictions of drones' transformation of our skies have been overhyped. The economic opportunity for drone technology is large, but stakeholders must consider the tethers of regulatory uncertainty, technological barriers, and community acceptance that ground them. The still nascent, $15 billion global drone economy has the potential to more than double in the next five years. At present, hundreds of small and medium-sized drone companies are competing without sufficient differentiation in their offerings and price. The history of most emerging technologies suggests that this lack of differentiation is unsustainable. Prices will fall, margins will compress, and the industry will consolidate behind those companies that provide the most innovative, sticky, and value-added products and services. This report identifies the challenges drones are solving, highlights opportunities and roadblocks affecting their adoption, and forecasts their economic potential. The report also provides a pragmatic analysis of how to strategize in the drone economy, employ drones effectively, and invest in drone technologies. Image from: FLIR; Black Hornet 11 1 Defense 14 $ Billion Market Size Year 2020 2025 2030 8.1 9.0 11.0 11.5 17.0 14.0 23.0 Progressive Base Conservative 14 1.1 Defense: Large Drones Amid rising defense budgets, U.S. drone manufacturers face strong competition in the “large drone” market from companies in China and Israel. The United States is not the only nation that is increasing defense spending. According to the Stockholm International Peace Research Institute (SIPRI), military expenditures are on the rise around the globe.2 Although the U.S. has the largest fleet of high-altitude, long-endurance (HALE) and medium-altitude, long-endurance (MALE) drones, major drone providers from China and Israel have increased the manufacture and export of defense drones for foreign and domestic militaries. The Missile Technology Control Regime (MTCR) – formed in 1987 to limit the proliferation of missile technology – has been interpreted as limiting the export of MALE and HALE U.S. drones. Country Spending 2019 ($B) Change 2019 (%) World Share (%) United States 732 +5.3 38 China 261 +5.1 14 India 71 +6.8 3.7 Russia 65 +4.5 3.4 Saudi Arabia 62 -16 3.2 France 50 +1.6 2.6 Germany 49 +10 2.6 United Kingdom 49 0.0 2.5 Japan 48 -0.1 2.5 South Korea 44 +7.5 2.3 Military spending by region from 2015- 2019 Global military spending grew annually by an average of 3% from $1.67 trillion in 2015 to $1.91 trillion in 2019. Source: Stockholm International Peace Research Institute (SIPRI) 2 0 100 200 300 400 500 600 700 800 2015 2016 2017 2018 2019 U.S. Asia-Pacific Europe MEA RoW $ Billions 732 523 357 222 84 596 436 328 234 82 Top 10 military spenders in 2019 Source: SIPRI 15 1.1 Defense: Large Drones The U.S. is still the largest exporter of drones. In July of 2020, the U.S. government signed a measure to permit the sale of armed U.S. drones that fly under 800 kilometers per hour, to foreign governments that had been restricted from buying them under the MTCR.3 As a result, near-term exports of MALE and HALE U.S. defense drones are expected to increase. Region Number of UAVs Exported between 2015-2019 Value of UAVs Exported between 2015-2019 U.S. 171 $ 1,000,000,000 Asia-Pacific (China) 117 $ 120,000,000 Europe 51 $ 84,000,000 MEA (Israel) 111 $ 681,000,000 RoW - - Defense UAV exports between 2015 and 2019 Although the U.S. led in quantity and value of UAVs exported, most exports were of small UAVs. 147 of the 171 ($405 million) U.S. UAVs exported were less than 500 kg in mass (Boeing ScanEagle, RQ-21A, RQ-7, etc). Source: SIPRI, Levitate Capital Analysis Image from: Shepardmedia; RQ-4 Global Hawk 16 1.1 Defense: Large Drones The future of large defense drones is in stealth and combat MALE drones, such as the MQ-9 Reaper, currently fly in undefended airspace and operate at altitudes where they can be seen and downed; however, the airspace of future war zones may not permit loitering MQ-9s. In 2020, the U.S. Air Force announced it is winding down service of the MQ-9 in favor of a lower-cost replacement with “attritable” technology4 – low-cost, reusable, and expendable technology that can be lost in combat without concern of divulging top-secret engineering. Although the U.S. wants to avoid incidents like the 2011 Iranian capture and eventual reverse engineering of the classified Lockheed Martin RQ-170 Sentinel,5 the U.S. Air Force is likely to continue using stealth intelligence, surveillance, and reconnaissance (ISR) drones like the RQ-170 and Northrup Grumman’s RQ-180 for at least the next five years while also accelerating the retirement of aging unclassified aircraft.6 Human-piloted advanced fighter aircraft like the F-22 and F-35 are likely to reign supreme in aerial combat with autonomous drones for the next decade. However, military R&D investments in new drones suggest that air superiority may shift towards autonomous drones in the long term when advanced autonomous combat offerings develop the situational awareness and processing capacity needed to consistently outperform humans. Image from: Gordo News; XQ-58A 19 1.2 Defense: Micro Drones These five U.S. government-work approved micro drones also compete in the commercial market. Source: Skydio 13 Parrot 14 Altavian 15 Teal Drones 16 Vantage Robotics 17 GSA Advantage 18 Skydio X2-D Parrot Anafi USA Altavian M440 Ion Teal Drones Golden Eagle Vantage Robotics Vesper Flight Time (min) 35 32 37 <50 32-50 Range (km) 10 4 3 3.2 28 Weight (lbs.) 2.75 1.1 3.8 2.3 2.2 Max Speed (mph) Not listed 33 35 50 45 Operating Temperature (°C) Not listed -35 to +43 -20 to +50 -35 to +43 -20 to +45 Wind Tolerance (knots) 25 28 20 26 27 Sensors 4K60P HDR camera with 16x zoom 320 x 256 Thermal Imager with 8x zoom 2x 4K cameras with 32x zoom 320 x 256 Thermal Imager 2x 720P HD cameras with 20x zoom 320 x 256 Thermal Imager 4K 60FPS Sony IMX412 camera 320 x 256 Thermal Imager 2x low light cameras with 18x zoom 320 x 256 Thermal Imager Unit Price $10,200 - $21,600 $14,000 - $16,000 $12,300 $11,700 $7,000 - $7,300 Image from: U.S. Marine Corps; RQ-20 Puma 20 1.2 Defense: Micro Drones Ground forces procurement contracts for micro drones could be lucrative. Small drones in the military are rapidly deployed situational awareness tools. They can be deployed to gain a bird’s eye view of the battlefield or to autonomously navigate a building to clear rooms before troops enter. Modern military ground forces will likely acquire at least one rotary drone per platoon to perform short-range, quick-look reconnaissance missions, resulting in more than 19,000 units acquired by the U.S. Army and U.S. Marine Corps (USMC). Total costs to supply U.S. Army and USMC units with micro drones The progressive case is one drone per squad in a soldier-borne sensor capacity, and the conservative case is one drone per company. Replacements are not included. Source: Levitate Capital Analysis Squad Platoon Company U.S. Army U.S. Marines $1.3B $400M $60M 71% 29% 65% 35% 10 troops 36 troops 200 troops Image from: Skydio; Skydio X2 21 1.2 Defense Defense aircraft forecast methodology In this market analysis, military drones refer to aircraft designed to operate alongside armed forces. These aircraft range from multi-rotor and hand- launched drones to jet aircraft. Comparing the total value of known drones acquired by the U.S. military over the past five years with known drones acquired by other nations, the ratio of drone procurement spending of other regions to the United States was determined to be 14% for Asia-Pacific, 12% for Europe, 5% for the Middle East and Africa, and 6% for the rest of the world. The forecast of future U.S. defense procurement spending is based on the Congressional Budget Office’s projection for U.S. Air Force aircraft procurement.20 In 2019, U.S. defense spending on drones was $6 billion with more than 60%, or $3.7 billion, spent on procurement.21 This report assumes future U.S. defense spending will maintain its historical procurement to RDT&E spending ratio. Investment in drones has historically grown at roughly 7% per year since 201322 and drones have historically represented approximately 3.5% of U.S. Air Force and Navy procurement spending. This ratio is anticipated to increase by 0.25% each year as autonomous aircraft play larger roles in future engagements. The conservative case assumes that drone spending as a percentage of budgets will not grow over time. The progressive case assumes an accelerated reduction in the use of crewed aircraft with an annual increase in drone spending as a percentage of budgets by 0.3%. Image from: Boeing; Boeing MQ-25 24 1.3 Defense: Counter Drone Drone interdiction methods Method Description Pros Cons Laser Destroys vital segments of the drone’s airframe using directed energy, causing it to crash to the ground • Effective at long range • Effective against small and fast moving • Limited by weather conditions • Results in uncontrolled crashes • Must linger on target to take effect RF/GNSS Jamming Generate RF interference to disrupt the radio frequency link between the drone and its operator/ Disrupts the drone’s satellite navigation link to cause it to hover in place, land, or return home • Can interdict multiple drones at once • Effective at medium/long range • Can affect neighboring radio communications • Can result in unpredictable drone behavior High Powered Microwaves (HPM) Directs high intensity microwave energy at a drone to disable its internal electronic systems • Can interdict multiple drones at once • Instantaneous effect • Effective against drones without RF signature • Can disrupt or destroy friendly electronics • Difficult to predict outcome Spoofing Feed a drone malicious communication to take control • Controlled interdiction of drones • Short range • Can affect other radio communications Nets Designed to entangle the targeted drone and/or its rotors • Lower risk of collateral damage • Effective against drones without RF or GNSS links • Relatively low cost • Short Range • Relatively slow reaction R a n g e 25 1.3 Defense: Counter Drone Defense customers deploy a combination of various CUAS technologies. The most promising military opportunities in drone interdiction (removal from airspace) are laser and high-powered microwave technologies. Lasers can eliminate long-range drone threats with great precision, but they need to linger on a target momentarily before disabling it. High-powered microwave weapons fire electrometric radiation to fry internal circuits, and their broad firing arcs makes them effective against autonomous drone swarms. Lasers and microwave technologies have the potential to devastate neighboring electronic systems used for civilian operations. As a result, these technologies will likely be only used as military solutions for the foreseeable future. Each drone detection and interdiction method come with benefits and tradeoffs. The most effective solution for militaries is a combination of counter- drone interdiction methods to protect their many assets. Some details about military counter- drone equipment capabilities are kept confidential in an attempt to keep adversaries unaware of drone attack defense mechanisms. Image from: Defense.gov; DJI Mavic Swarm 26 1.3 Defense: Counter Drone Military CUAS forecast methodology This analysis assumes that all 260 of the U.S. Military’s large and medium sites worldwide25 and all 273 U.S. diplomatic posts26 are in the market for counter- drone technology. (Large and medium military sites are installations of more than $1 billion in value.) In addition, all of the U.S. Navy’s fleet of large-surface combatants (89), amphibious ships (32), and aircraft carriers (11)27 are anticipated to require CUAS technology. For ground troops, this report assumes a total addressable market for vehicle- based solutions at the battalion level (400-1,000 soldiers) and for mobile setup and hand-held solutions at the company level (100-200 soldiers). Defense Customer Global Addressable Market Per system Hardware Cost ($) Key Military Posts 1,000 $5,000,000 Vehicle Based 10,000 $1,000,000 Hand-held 20,000 $40,000 Diplomatic Posts 7,300 $50,000 Estimated defense CUAS detection hardware cost per installation Hardware pricing estimates include necessary RF sensors, pan-tilt-zoom (PTZ) cameras, radars, and jammers for base-level coverage Source: Levitate Capital Analysis Image from: Dedrone; DroneDefender 29 1.4 Defense: Government U.S. companies have many avenues for gaining government support. U.S. companies that will be a part of the drone economy of the future stand to benefit from early-adopter funding from the U.S. federal government and U.S. DoD. The Small Business Innovation Research (SBIR) program enables small businesses to engage in federally funded R&D projects with commercialization potential. Organizations within the U.S. DoD, such as the Defense Innovation Unit (DIU) and the Army Futures Command, aim to facilitate fast-moving enterprise collaboration with the U.S. DoD. Ultimately, these programs provide an avenue for U.S. government investment in U.S. innovation. The best government support model is to drive demand for innovative drone technology. Image from: Shield AI 30 1.4 Defense: Strategies for succeeding in the defense drone segment Strategy Reasoning Talent Add talent with defense procurement experience to your team • Provides direct access to relevant networks that are essential for key introductions and for understanding the end-user’s mission requirements. • Informs the team of the necessary registrations and compliances to be eligible for government contracts. Marketing Focus marketing of specific products and services to targeted customers within defense • Enables better assessments on whether existing capabilities, products, and relationships meet the requirements of specific programs or tenders. • Larger budgets do not necessarily translate to greater opportunities. Solutions that directly address the customer’s requirements are more likely to gain traction. Pricing Use a market- based pricing strategy for contracts where cost is a significant factor • Working backward from the final price to develop a product cost structure will help deliver products that meet performance requirements at the targeted price. • Results in a competitive cost advantage over rivals and a more focused product. 31 2 Enterprise $ Billion Market Size Year 2020 2025 2030 Shipments Million 4 10 15 16 29 21 36 Progressive Base Conservative 5 8.5 13.2 7.1 9.6 6.0 7.0 Progressive Base Conservative 34 2 Enterprise The enterprise drone industry is addressing the technical and regulatory barriers required to scale. Today, most enterprise drone programs are still in their infancy. They are still identifying the applications for drones, the types of data to collect, and the software and storage solutions required to gather and manage drone-gathered data. Many potential enterprise drone users are ill-equipped to store and analyze the terabytes of data drones collect. Most current pilot programs require drone operations to be conducted within visual line of sight. Over the next five years, however, more Beyond Visual Line of Sight (BVLOS) requests will be approved as detect-and-avoid technologies mature and as regulations grow increasingly flexible. In-house drone programs have demonstrated their ability to improve operational efficiency over traditional methods, but many programs do not bring a sufficient return on investment because they consist of ten or fewer drones instead of the hundreds of drones required to scale. By the end of the decade, completely autonomous fleets of drones will be fully integrated into existing Internet of things (IoT) ecosystems. Enterprise drones are still early in the technology adoption lifecycle. Continued success and lessons learned from early adopters will encourage an influx of the “early majority” over the next four years and the “late majority” after 2025. Source: Levitate Capital Analysis Innovators Early Adopters Early Majority Late Majority Laggards 16% 34% 34% 14% 2% Current Enterprise Drone Market Percentile of adopters 35 2 Enterprise Nascent enterprise drone programs will expand as costs come down. In the short term, hardware sales will maintain a robust market share of the enterprise drone sector as end users and service providers build out their fleets. However, hardware and data collection services will become commodities over the long term as more drones autonomously execute tasks. Pricing competition among hardware and service providers will allow differentiated software providers closest to the end-user to capture the most value from enterprises. Prices of drone hardware, software, and services will continue to fall as drone companies compete for market share through penetration pricing. Improved drone autonomy and continued growth in the number of licensed, gig economy drone pilots will further lower the cost of drone adoption. This trend will improve the return on investment for enterprise drones and encourage more businesses to expand pilot programs over the next few years. FAA forecast of registered commercial drones in the U.S. Source: Federal Aviation Administration 2 0 400 800 1200 2019 2020 2021 2022 2023 2024 385 Thousand 507 594 467 633 830 535 731 1031 567 786 1136 586 828 1197 598 Image from: Vjeran Pavic, Verge, Parrot ANAFI 36 2 Enterprise Companies seeking to launch a pilot drone program should first consider the data, economics, and regulations. Enterprise drones complement existing ecosystems of enterprise tools, addressing challenges uniquely suited for aerial robots. Businesses must have a data management plan for processing and analyzing torrents of data, along with a work process integration plan that will enable them to extract the most economic value out of their drone programs. Successful programs will continue to focus on a limited number of applications that address critical problems affecting the bottom line. Businesses must also recognize that many regions restrict drones from flying close to airports, over congested areas, and above people and property uninvolved in the drone's operation. Data Identify the types of data necessary to collect and the process drones should follow to collect that data more efficiently than existing methods Economics Identify the economic rate of return of a drone program and weigh the tradeoffs of having an outsourced, hybrid, or in-house operation Regulation Understand regulatory requirements for when, where, and how to operate drones. 39 2 Enterprise Strategies for succeeding in the enterprise drone segment Strategy Reasoning Positioning Cultivate an ecosystem • Software and hardware incompatibilities narrows the sales funnel of a drone company. • A community of developers will build an ever-expanding library of functionality that creates additional value for the end-user. • As the enterprise market matures, revenues and profits will shift toward software and turnkey solutions. Support Cover the customer’s first trial • Eases adoption frictions and builds relationships quickly to gain mindshare and grow network of potential users. • The team will better understand the busines outcomes customers seek and learn how to shape the offerings to effectively facilitate those outcomes. • Customer service matters. Quality of customer service is equally weighted with price and capabilities as important factors for enterprise end-users when deciding between services. Pricing Use a tiered pricing structure • Maximizes the lifetime value of the customer by tailoring to their needs: • Basic Tier: Penetration pricing of essential features that directly addresses the customer’s core problems at an affordable price. • Standard Tier: Competitive pricing of core features that include all of the basic offerings with features that delight and retain. • Premium Tier: Margin expansion pricing of the latest and most advanced features for large enterprise customers who are heavy users and have prior experience with the product. 40 2.1 Construction The architecture, engineering, and construction (AEC) industry will remain among the largest sectors of the global enterprise drone market through 2030. The construction industry has a reputation for schedule and budget inefficiencies. Large projects typically take 20% longer to complete than scheduled and can exceed budgets by up to 80%.1 Drones are improving the efficiency of construction operations by transforming how construction firms survey land, monitor progress, and mitigate safety risks. As a result, although construction- based drone revenues directly correlate to boom-and-bust cycles in construction, the construction sector is the largest enterprise market to employ drones. Instead of accelerating the retirement of surveying and mapping professionals, drones have proven to be practical tools that enhance the quantity and quality of services that existing professionals provide. Moreover, new AI-powered software helps construction teams accurately plan construction sites, quantify resources, and manage on-site equipment. Image from: Ivan Bandura Unsplash; FLIR MUVE C360 41 2.1 Construction The majority of drone revenues in the construction industry will come from software and services. Lean construction firms run asset-light operations and typically lease equipment on a project-by-project basis. Over the long term most construction firms will outsource their drone operations to providers that offer autonomous data collection bundled with data management and analytics. Consequently, drone software and services are likely to represent the majority of annual AEC-related drone revenues in the long term. On construction sites, drones are already transforming topographic mapping, land surveying, equipment tracking, remote monitoring, site security, personnel safety, and structure inspection. Revenues from hardware vs. software and services Software and services are expected to make up 75-80% of the construction market in the long term. Source: Levitate Capital Analysis 0% 25% 50% 75% 100% 2020 2030 Software & Services Hardware 1.9 5 6 8.5 11 10 14 Progressive Base Conservative 2020 2025 2030 Market Size $ Billion 44 2.1 Construction Equipment tracking Drones can track equipment locations and direct and guide construction vehicles. For large construction sites with a diverse range of equipment, drones help managers monitor and orchestrate where resources are deployed and identify whether the right assets and materials are available on-site. Security Between $300 million to $1 billion worth of construction equipment is stolen every year. The ability to monitor construction site perimeters dramatically increases on-site security. 3 45 2.1 Construction Drones enable “remote construction,” but AEC drone use faces long-term challenges. The impact of COVID-19 on the construction industry varies across regions and projects. Whereas some projects have experienced supply chain, workforce, and financial disruptions, other infrastructure projects have been expedited, taking advantage of reductions in traffic.4 For some construction projects, the pandemic has led to a reduction in the number of workers on site and accelerated the adoption of drones as tools to continue operations, monitor progress, and improve worker safety. In Saudi Arabia, drones are helping construction projects related to Saudi Vision 2030 stay on schedule.5 Many accelerated construction projects are already funded. However, other regions facing reduced tax revenues and smaller budgets have frozen spending and paused construction projects. In the long term, slow GDP growth, high unemployment, and stalled commercial projects will challenge the global construction market. While drone operations can ultimately reduce resources and save money, construction companies facing a liquidity crisis may not be able to make an initial investment in a drone program. Image from: Wingtra 46 2.1 Construction Construction forecast methodology Construction managers are the primary decision-makers for drone adoption on construction sites. While multiple construction managers may use numerous drones on each site, we conservatively estimated a total addressable market of one drone for each of the 476,000 construction managers in the United States.6 Asia-Pacific, the Middle East and Africa (MEA), and the rest of the world have substantially larger construction workforces than the U.S. and appreciably smaller IoT ecosystems to support drone operations. As a result, these areas may have smaller drone-to- manager ratios. While many operators opt for a base DJI Phantom or Skydio 2- like drone to handle simple photography tasks, our model acknowledges that at least half will use specialized drones equipped with GPS modules and advanced sensors to complete more complex tasks. We thus estimate the cost at ~$10,000 per unit. Construction firms typically have projects distributed across multiple regions and are likely to outsource drone operations to regional service providers. Service rates per user are an estimated $400 per week, or roughly $21,000 per year. Drone data and software services are an estimated $300 per month, or $3,600 per year. The conservative case portrays a COVID-induced contraction in construction projects worldwide that curb drone investment and limit market growth to a mature rate. The progressive case illustrates an increased reliance on drones for remote construction wherein drones become as ubiquitous on construction sites as excavators. Region Construction Managers Drone to Manager Ratio TAM of Drones United States 476,000 1 476,000 Asia-Pacific 4,110,000 1:5 822,000 Europe 400,000 1 400,000 MEA 820,000 1:5 164,000 RoW 1,680,000 1:5 336,000 Estimates of the TAM for construction drones Source: Levitate Capital Analysis 49 2.2 BEI: Railway Inspection Drones enable on-demand inspections of remote railway assets. In partnership with the FAA’s Pathfinder Program, BNSF uses rotorcraft drones equipped with high- definition cameras to inspect railway bridges and assess railway network conditions after destructive weather events.10 BNSF inspects more than 32,500 miles of its railway across the U.S. twice a week and uses drones to reduce the cost and difficulty of inspecting track hundreds of miles away from major population centers.11 Unlike BNSF, many companies using drone-based railway inspections in Europe and the United States are still running pilot programs that have yet to scale. The primary inhibitor of growth is thousands of miles of railway networks that require BVLOS approvals for each mission. Railway inspection drones are on track to becoming commonplace fixtures along significant railway routes. In the near term, autonomous inspections will be performed by strategically positioned “drones-in-a-box,” drones that deploy from and return to self-contained landing “boxes.” As autonomous drone railway inspections become widely available, asset-light railroad operators that do not want to manage a distributed team of drone monitors will likely scale down their internal drone programs in favor of an outsourced model. 50 2.2 BEI: Railway Inspection Railway inspection forecast methodology Restrictions on BVLOS flights limit drone-based railway inspections. A significant portion of railroad tracks is located in rural areas. We estimate approximately 75% of railroad tracks are rural. As a result, 75% of the 640,000 miles of railroad tracks worldwide can be inspected by drones, and we calculated the total addressable market based on the assumption that a drone can inspect up to 40 miles of track per day. The conservative case assumes delayed approval for nationwide and worldwide BVLOS missions (beyond 2024), confining most drone-based inspections to railway bridges and towers. The progressive case assumes major railway companies worldwide will successfully deploy BVLOS inspections throughout their rural railway networks before 2024. Region Railway Inspected by Drone (Miles) Drones per Mile of Railway TAM of Drones United States 105,000 1:40 2,600 Asia-Pacific 135,000 1:40 3,400 Europe 120,000 1:40 3,000 MEA 30,000 1:40 750 RoW 90,000 1:40 2,250 Total 480,000 12,000 Estimates of the TAM for railway inspection drones Source: Levitate Capital Analysis 30 100 130 150 200 170 240 Progressive Base Conservative 2020 2025 2030 Market Size $ Million 51 2.2 BEI: Bridge Inspection Aging bridges around the world create an inspection backlog that drones can resolve cost effectively. The tragic August 2018 collapse of the Ponte Morandi bridge in Genoa, Italy, drew increased attention to aging bridge infrastructure worldwide.1 Of the 615,000 bridges in the U.S., 40% were built more than than 50 years ago, and more than 9% are considered structurally deficient.2 National Bridge Inspection Standards (NBIS) require safety inspections in the U.S. at least once every 24 months for public highway bridges that exceed 20 feet in length.3 Current manual methods of bridge inspection are inherently slow. In addition, the frequency of bridge inspections worldwide is likely to increase due to replacement infrastructure project delays. Launching Costs Drone UBIV Drone (Skydio 2 - Matrice 250) $2,000-$10,000 Truck (43 ft. Truck mounted platform) $600,000 Cost of equipment (Batteries, case, cameras, etc.) $5,000 Annual upkeep cost (fuel, maintenance & insurance) $40,000 Training & certification $550 Renting a truck (daily) $2,000-$3,500 First Year Total (own the drone) $8,000-$16,000 First Year Total (own the truck) $640,000 Inspection Costs Drone UBIV Hourly amortized purchase cost (1,000 hrs.) $8-$16 Hourly amortized purchase cost (10 years, 20,000 hrs.) $50 Bridge engineers (x2) per hour $200 Bridge engineers (x2) per hour $200 Inspection Time (hours) 1 Inspection Time (hours) 8 Data storage and analysis (Per day of capture) $1,000 Documentation (Per day of capture) $100 Lane closure expense 0 Lane closure expense (varies) $1,500 Total per bridge ~$1,220 Total per bridge ~$3,600-$5,300 Drones can reduce the cost of bridge inspections by more than 60% Source: Levitate Capital Analysis 54 2.2 BEI: Bridge Inspection Bridge inspection forecast methodology More than 5.2 million major roadway bridges in the world require periodic inspection. To calculate the total addressable market, we assumed that each bridge undergoes inspection every two years; that there are an average of 120 inspection days per year; and that each inspection requires an average of two drones. We applied a per-inspection cost of $1,200 for outsourced bridge inspection services. The conservative case assumes bridge and roadway inspection remains limited to a few regions due to slower-than- anticipated (beyond 2024) nationwide rollout of BVLOS inspection flights. The progressive case assumes that drone-based bridge inspection will be widely adopted by 2025 and become an industry standard by 2030. Region # of Highway Bridges Drones per Bridge TAM of Drones United States 615,000 1:125 5,000 Asia-Pacific 2,500,000 1:125 20,000 Europe 600,000 1:125 5,000 MEA 300,000 1:125 2,500 RoW 1,250,000 1:125 10,000 Estimates of the TAM for bridge inspection drones Source: American Society of Civil Engineers, Levitate Capital Analysis 60 300 350 400 500 475 620 Progressive Base Conservative 2020 2025 2030 Market Size $ Million 55 2.2 BEI: Property Inspection Drones are already essential tools for processing insurance claims. Drones are transforming how building façade inspectors and insurance adjusters examine structures. Building façade inspectors currently rappel down the sides of buildings or construct expensive scaffolding to perform routine inspections on tall buildings every five years.12 Drones will render scaffolding and rappelling unnecessary except for repair work. Drones are already becoming standard equipment for insurance claim professionals. Insurance agencies have been deploying drones since 2015 to accelerate dangerous and time-intensive inspections at claims sites while keeping employees safely on the ground. Travelers Insurance launched its drone program in January 2017. By March 2019, 650 FAA-certified claim professionals completed more than 53,000 Travelers Insurance inspection flights across 48 states.13 In 2019, the FAA granted State Farm the first national waiver to conduct drone operations over people and BVLOS for catastrophic assessments through November 2022.14 As roof scanning and property damage software grow increasingly advanced, more insurance agencies will take to the skies to improve worker safety and inspection speed and accuracy. Image from: State Farm; SenseFly eBee 56 2.2 BEI: Property Inspection Property inspection forecast methodology An estimated 430,000 building inspectors worldwide examine the façades and structural components of aging buildings in five-year intervals. Due to the danger of scaling buildings, we assume all 430,000 inspectors are in the market for inspection drones. Of an estimated 8.6 million insurance adjusters worldwide, only approximately 255,000 property adjusters are assumed to be in the market for drones. The conservative case assumes that nationwide approvals in the U.S. for façade inspection of tall buildings over people in urban environments will occur after 2024. The progressive case assumes property inspection by drones will become industry standard by 2030. It also predicts accelerated insurance company adoption as firms seek to take advantage of the efficiency gains from drones. Region # of Property Inspectors Drone to Adjustor Ratio TAM of Drones United States 446,000 2:5 180,000 Asia-Pacific 4,700,000 7:50 650,000 Europe 820,000 4:25 130,000 MEA 630,000 7:50 88,000 RoW 2,460,000 3:25 300,000 Estimates of the TAM for property inspection drones Source: Bureau of Labor Statistics, Levitate Capital Analysis 0.2 0.8 1.8 1.3 4.2 2 5.4 Progressive Base Conservative 2020 2025 2030 Market Size $ Billion 59 2.3 Agriculture Agrochemical companies sponsor drone services through crop protection services. Only farms with more than $100,000 in sales are expected to be in the market for drone operations. These farms typically exceed 1,000 acres in size. For massive farms or multiple farms that cover vast distances, general aviation aircraft capture data more efficiently than drones. The price per acre for drone services shrinks as acreage increases. At an average industry price of roughly $5-8 per acre for high-resolution surveying, drone services are within the budget of most large farms and agronomy service providers. For context, North American farms invest an estimated $300 per acre on farming equipment, which translates to an annual equipment cost of $75 per acre.6 Even if individual farmers adopt drone monitoring and spraying services, those farmers may be ill-equipped to handle the terabytes of data gathered by flying sensors. Consequently, large agrochemical and crop management companies are the primary sponsors of their clients' drone services. These companies use drone IoT data and connectivity to add technology services to their sales of farm products. Image from: Pyka 60 2.3 Agriculture Drone-gathered data informs R&D efforts. Agricultural drones primarily perform soil and crop monitoring, irrigation and spraying, and health assessment. Agrochemical companies package insights from powerful data analytics with their core products to empower their sales teams, validate their products’ efficacy, and inform farmers of when to plant, treat, and harvest crops to achieve the best yield. Tools for collecting farm data: Drone • Highest resolution • Least expensive • Smallest coverage area • Best for small farms Satellite • Lowest resolution • Most expensive • Largest coverage area • Best for multiple farms Plane • High resolution • Middle range price • Large coverage area • Best for large farms 61 2.3 Agriculture Soil and Crop Monitoring Satellites, general aviation aircraft, and drones can all perform soil and crop monitoring and analysis. High-resolution aerial images can produce 3D maps for crop and soil analysis to design seed planting patterns, manage irrigation and nitrogen-levels, and monitor crop development over a season. Satellites can gather data on a massive scale. However, high-resolution satellite imagery is expensive and limited by revisit periods, a resolution of 20-50 cm/pixel, and vulnerability to weather conditions. General aviation aircraft are less expensive than satellites and can cover more area than drones, making them better suited to surveying large fields. However, planes produce lower resolution imagery than drones. 64 2.3 Agriculture Agriculture forecast methodology Drone-based precision agriculture will likely continue to be provided as a managed service offered to farmers as part of package deals with seed and crop protection companies. Today, these services cost an average of $5 per acre per season, with prices varying slightly with total acreage. The conservative case assumes that precision agriculture subsidies will be stunted as government agencies grapple with reduced tax revenues and that only high-revenue farms will adopt drones in the near term. The progressive case assumes drone- based services become embedded IoT offerings as part of standard seed and crop protection packages from large agrochemical companies. The progressive case also assumes farming subsidies for drone services will increase as governments seek to maintain adequate food supply for their growing populations. Region # of Farms in Market Drone to Farm Ratio TAM of Drones United States 400,000 1:4 100,000 Asia-Pacific 211,000 1:15 14,000 Europe 525,000 1:20 26,250 MEA 350,000 1:20 17,500 RoW 1,285,000 1:10 128,500 Estimates of the TAM for agriculture drones Source: Levitate Capital Analysis Image from: Wageningen University 65 2.4 Enterprise Counter Drone As more consumer, enterprise, and delivery drones populate the skies, drone detection and mitigation will become increasingly important. Defense spending will drive the counter-drone market until uniform counter- drone standards are developed. While hundreds of counter-drone products are on the market, many are unreliable outside of controlled conditions. The absence of uniform standards raises safety concerns for air and ground traffic. Clear rules around civilian counter-drone system use in the United States and many regions worldwide still do not exist. However, the FAA and the Department of Homeland Security (DHS) are conducting testing and analysis of commercial counter uncrewed aircraft systems (CUAS) in order to develop industry standards. The growing number of consumer and enterprise drones in U.S. skies means it is only a matter of time before regulations are passed. In the United States, only the U.S. Department of Defense (DoD), DHS, Department of Energy (DoE), Department of Justice (DoJ), and U.S. Coast Guard are authorized to interdict hostile or unauthorized drones to protect critical infrastructure and designated high-profile events and mass gatherings.1 Image from: Dedrone 66 2.4 Enterprise Counter Drone Current CUAS restrictions leave critical infrastructure and venues vulnerable to malicious drones. Critical infrastructure, government buildings, and mass-gathering venues are currently soft targets for malicious drones. The FAA has warned local authorities and event organizers that unauthorized use of CUAS systems to protect high- profile events may violate FAA, Federal Communications Commission (FCC), and federal aviation laws. In response, organizations such as the NFL are educating fans about drone restrictions and urging Congress to extend CUAS authority to state and local law enforcement in order to impose temporary flight restrictions over large sporting events. Authorized U.S. DHS units take the following actions to protect assets from unlawful drone activity Source: Department of Homeland Security Detect Identify and track the drone Warn Inform the operator of the violation Disrupt Interrupt or exercise control of the drone Seize Confiscate the drone Destroy Use reasonable force to damage the drone 69 2.4 Enterprise Counter Drone Anti-Trafficking From the Malaysia and Singapore 3 to the United States and Mexico, 4 criminals are using drones to traffic drugs and other contraband across borders. Across the United States, drones are also used to smuggle contraband into prisons, resulting in a slight uptick of prisons adopting counter-drone technology. 5 The Federal Bureau of Prisons is concerned that drones will be used to surveil institutions, facilitate escape attempts, or transport explosives. To date, Congress allocated $5.2 million to the Bureau of Prisons to purchase drone detection and mitigation systems. Due to notoriously tight budgets at correctional agencies, prisons are unlikely to adopt counter-drone technology preemptively. Agencies will instead wait for drone-related incidents to occur in order to justify allocating a portion of discretionary budgets to counter-drone solutions. 70 2.4 Enterprise Counter Drone Protected Municipal Airspace CUAS technologies will play a large role in uncrewed aircraft traffic management ecosystems. In the medium term, partnerships between metropolitan areas and CUAS sensor providers will be established to strategically install, operate, and maintain proprietary sensor infrastructure around cities. These sensors will detect, monitor, and manage drones within a city’s airspace. Citywide airspace monitoring and data service will also help federal and local law enforcement protect soft targets and crowded spaces from rogue drones in urban environments. This scalable data-as-a-service model will likely come at minuscule costs to cities as companies race to build their networks and compete for valuable tower and rooftop real estate for sensors and lucrative airspace coverage. 71 2.4 Enterprise Counter Drone Enterprise CUAS forecast methodology As mentioned, the primary end users of counter-drone solutions in the civilian market are airports, nuclear power plants, prisons, and public and private soft targets. Although airports of all sizes are in the market for CUAS technology, our forecast assumes only medium to large airports with more than three million passengers each year will use the technology. We anticipate that all of the roughly 151 nuclear power plants around the globe are in the market for CUAS technology. The conservative case assumes that CUAS technology remains restricted to federal use in the U.S. and most other regions through 2025. The progressive case assumes industry standards expand CUAS in the U.S. market in 2021 and inspire frameworks for other international markets. Civilian Customer Hardware Cost ($) Subscription Cost ($) Airports $800,000 $270,000 Nuclear Power Plant $200,000 $70,000 Prisons $75,000 $15,000 Oil & Gas $75,000 $25,000 Enterprise Airspace $75,000 $20,000 Municipal Airspace $5,00,000 $1,700,000 Civilian CUAS hardware and annual subscription costs Source: Levitate Capital Analysis 0.2 0.4 0.6 0.9 1.7 1.4 3 Progressive Base Conservative 2020 2025 2030 Market Size $ Billion 74 2.5 Oil & Gas Drones perform a wide range of inspection tasks on offshore platforms. Drones can deliver critical supplies to remote oil and gas operations. In August of 2020, Equinor and Nordic Unmanned used a Camcopter S-100 drone to perform the world’s first offshore drone delivery from Mongstad, Norway, to their North Sea-based Troll A platform 100 km away.4 The drone delivered a small 3D-printed part for the platform’s lifeboat system. However, by the end of the decade larger, heavy-lift, middle-mile logistics drones like Elroy Air Chaparral will perform routine and autonomous deliveries of replacement parts and critical supplies to remote operations and offshore platforms. Inspection of riser and installation jackets to limit dangerous rope access Thermographic imaging inspection of splash areas to examine hard-to- detect corrosion Visual and thermal inspection of boom and flare tip to better plan for replacement and maintenance High-definition structural inspection of pedestal crane, drilling derrick, and other hard- to-access areas after severe weather events 75 2.5 Oil & Gas Midstream pipelines represent the largest addressable market for oil and gas drones. BVLOS approvals will allow autonomous drones to inspect hundreds of miles of pipelines more economically than helicopters. Due to the vast networks of oil and gas pipelines in the U.S. and worldwide, the midstream segment will eventually become the largest market for drones within the oil and gas industry. While most pipelines are underground, aerial inspection is still the most effective way to detect above-ground anomalies or disturbances over the length of buried pipeline. These anomalies include weather-induced changes to topography that expose buried pipes, discolored or dying vegetation that can indicate a leak, encroaching trees with underground roots that could damage pipelines, and construction violations that threaten pipeline safety. In the near term, drones equipped with ultrasonic and thermal imaging sensors will perform close-range, nondestructive inspections of exposed pipelines, above- ground storage tanks, and marine vessels. The vast amount of data collected will allow operators to predict the health of critical equipment and forecast potential malfunctions. In the long term, drones-in-a-box, strategically distributed along significant pipelines, will enable remote and on-demand inspection and surveillance missions of long-distance oil and gas assets. Image from: Royal Dutch Shell 76 2.5 Oil & Gas Downstream oil and gas operations are the smallest total addressable market for drones. To support downstream operations, drones provide fixed-site security monitoring and inspect external pipelines and internal wall thickness of storage tanks. Plant operators gain the largest benefit from drone use when drones are able to perform inspections while plants remain open. However, the approximately 700 refineries worldwide pose less of an inspection challenge due to ease of accessibility than midstream and upstream assets. As a result, downstream oil and gas operations will be the smallest market for drones in the oil and gas industry. Inspection of fluid catalytic cracking and coker units Inspection inside of chimneys to detect cracks and anomalies Inspection of storage tanks for corrosion and leaks 79 2.6 Real Estate Drones are already widely used in real estate. Real estate will remain a competitive drone services market. Due to improved autonomy and easy-to- use interfaces, the real estate industry regularly uses drones to showcase and market properties. Today, 64% of U.S. realtors work at brokerage firms that either already use drones or plan to use drones in the future. The skills and time required to compile and edit captured aerial images will continue to drive the outsourcing of data storage, editing, and processing to service providers in the real estate market. Drones have a 64% mindshare among Realtors in the U.S. Source: National Association of Realtors 1 29% 16% 5% 14% 24% 12% Hire a drone professional Don’t know Do not use drones Someone in office uses drones Personally use drones Don’t currently but plan to Image from: Robert Bye, Unsplash 80 2.6 Real Estate Aerial photography can help real estate agents sell homes faster. Photography plays a critical role in real estate marketing. Homes with aerial images sell 68% faster than homes that do not use aerial images. Moreover, homeowners are more likely to list with a real estate agent who uses video for marketing their home.2 Aerial images appeal to prospective buyers’ emotions by illustrating proximity to roads, nearby amenities, and landmarks. Aerial images are also increasingly expected for high-end and expansive properties, especially when an above-ground view enables prospective buyers to fully appreciate the scale of those properties. $800+ $100 - Still aerial photos - Videos with editing - Professional production P ri ce p er l is ti n g $5,000 $20,000 Realtors spend an average of $5,000 annually on marketing 1 in 8 Realtors spend more than $20,000 annually on marketing 3 81 2.6 Real Estate Growing suburban populations and demand for virtual tours are fueling drone real estate services. The 4K cameras on prosumer drones have enough resolution to capture the high-quality videos and images used in real estate. The typical acquisition and operation costs for agents who use drones are $800 for a drone and $1,200 per year in software and services. The Asia-Pacific real estate market is the largest globally; however, most real estate drones are in regions with large suburban populations, such as Australia, Canada, and the United States. The large commercial and residential real estate market in the United States, combined with the suburban sprawl of many U.S. cities, means the United States will remain the largest market for drones in real estate for the foreseeable future. The increasing number of remote viewings during COVID-19 has accelerated the adoption of new technologies to capture images and videos for virtual tours. The rapid growth in real estate drone operations during COVID-19 will continue into 2021 and beyond. 0.1 0.3 0.6 0.6 1.2 0.8 1.6 Progressive Base Conservative 2020 2025 2030 Market Size $ Billion 84 2.7 Utilities: Tower Inspection Drones will help alleviate the maintenance burden of thousands of new 5G towers. Although these new 5G towers will not be as tall as current cell phone towers, routine inspection of each tower every one to three years will require a leap forward in productivity.3 Tower inspection by drone requires proximity flights around each tower. Therefore, they are performed under Part-107 regulation in the U.S. within line-of-sight of an operator and below 400 feet. Tower inspection by drone requires proximity flights around each tower. For new 5G towers in the U.S., these flights occur within line of sight of an operator and lower than 400 feet above ground level, so they meet Part-107 regulatory requirements. Autonomous drones equipped with high-resolution optical and thermal imaging cameras are enabling many inspections to occur from the ground. In such cases, climbers need to scale towers only to perform repairs, increasing safety and efficiency. Remote technicians can perform more in-depth inspections by analyzing drone-gathered images with photogrammetry software that creates digital models of the towers. Technicians can also feed the images into analytics software to perform corrosion and other anomaly detection. Upon widespread regulatory approval of BVLOS operations, strategically positioned drones-in-a-box will remotely deploy to perform tower inspections on demand. 85 2.7 Utilities: Tower Inspection Tower inspection forecast methodology Roughly 560,000 tower inspectors work on the nearly 5 million communications towers worldwide, with thousands of new installations are coming online each year as nations race to build out 5G infrastructure. Our base case analysis estimates an average of one drone per four-person team in the U.S. and Europe and slightly larger ratios in the other regions. The conservative case assumes that training, certification, and compliance requirements will cause friction among tower inspectors and slow market growth. The progressive case assumes drones will become so instrumental to tower inspections by 2025 that every tower inspector in developed markets will have a drone as essential equipment. Region Tower Climbers Drone to Climber Ratio Saturation # of Drones United States 29,000 1:4 7,250 Asia-Pacific 300,000 1:12 33,000 Europe 48,000 1:4 12,000 MEA 28,000 1:6 4,640 RoW 58,000 1:6 10,000 Estimates of TAM for tower inspection drones Source: Bureau of Labor Statistics, Levitate Capital Analysis <0.1 0.1 0.3 0.2 0.6 0.3 1 Progressive Base Conservative 2020 2025 2030 Market Size $ Billion 86 2.7 Utilities: Power Transmission Drones are essential tools for reducing power transmission liabilities and inspection costs. In response to the more than 1,500 fires caused by PG&E over the past six years,4 utility companies worldwide have made power transmission maintenance a top priority. Drones are used by power utilities to check for vegetation growth around power lines and detect damaged or degraded transmission infrastructure before an outage occurs or a fire starts. PG&E has increased its use of drones and helicopters in areas considered to be at extreme or elevated risk of wildfires in order to inspect more than 15,000 miles of electrical lines in California by the end of 2020.5 Helicopter Inspection Cost per mile: $1,200-$1,600 Drone Inspection Cost per mile: $200-$300 89 2.7 Utilities: Power Transmission Power transmission forecast methodology The almost 3,000 power utilities in the U.S.6 translate to an average of just under seven drones per power utility and roughly one drone for every 5 of the 112,000 electrical power line crew in the U.S.7 Although drones have proven to be cost- effective tools for maintaining distributed infrastructure and reducing liabilities, the conservative case assumes a continued slow-moving bureaucratic process that has historically constrained power utility adoption of drones. Heavily regulated utilities may take longer to expand existing drone program budgets. Others may simply wait for more BVLOS approvals and turnkey drone solutions. The progressive case assumes the need to examine aging infrastructure, coupled with improving technology and consistent cost savings, will accelerate the shift of power utility drone programs from discretionary budgets into operational line items. Region Miles of Powerlines TAM of Drones United States 200,000 20,000 Asia-Pacific 400,000 32,000 Europe 165,000 16,500 MEA 50,000 5,000 RoW 300,000 18,000 Estimates of TAM for power transmission inspection drones Source: Levitate Capital Analysis Market Size 0.1 0.2 0.4 0.4 0.6 0.5 0.8 Progressive Base Conservative 2020 2025 2030 $ Billion 90 2.7 Utilities: Wind Turbines Wind turbine inspection drones face direct competition from ground-based solutions. The global energy industry spends more than $8 billion annually on wind-farm maintenance. Total maintenance spending increases each year with the installation of new wind turbines. Around 20% of total maintenance costs are operational, including incidents of gearbox failure at a cost of $300,000- 500,000 per failure.8 Wind turbines require preventive maintenance checkups roughly three times per year.9 Although integrated computers periodically perform self- diagnostic tests, most wind turbine technicians still manually inspect the blades for signs of wear and other irregularities. Drone • Daily inspections: 10-15 turbines • Cost (piloted): $300-$900 per turbine • Pro: Thorough inspection • Con: Can’t fly in heavy winds Ground-based camera • Daily inspections: 3-6 turbines • Cost: $300-$500 per turbine • Pro: Simple and easy to use • Con: Must reposition blades and camera Manual (traditional) • Daily inspections: 2-5 turbines • Cost: $1,500-$2,000 per turbine • Pro: Standard procedure • Con: Slow, expensive, and dangerous 91 2.7 Utilities: Wind Turbines Drone-based turbine inspections are faster and more thorough than other methods. Today, drones are performing close, 360-degree inspections and gathering data in weeks. Manual inspections can take months. Drones also transport tools and equipment from the ground or from boats to repair crews at the top of turbines. In the near term, routine deployment of drones equipped with high-resolution photography, infrared cameras, and light detection and ranging (LiDAR) will autonomously inspect wind turbines for cracks, erosion, and other flaws before problems become more urgent and costly to repair. This type of preventive checkup will also allow operators to minimize the impact of offline turbines. Wind speeds can surpass 20 m/s (45 mph), so drone operators are using large, industrial-sized drones with high wind resistance and shielding from magnetic interference. Moreover, drone operators check for safe weather conditions before launching each mission. In the long term, fleets of drones-in-a- box will perform scheduled or on- demand remote monitoring at onshore and offshore wind farms. Image from: FlightWave 94 2.8 Mining Automatic Surveying and Mapping Drones capture high-quality orthoimages spanning entire mining operations faster and more economically than any other method. Mine operators maximize profits by using detailed aerial photography to identify dense pockets of valuable elements and minerals before digging. Drones are also used to perform autonomous underground surveys in areas that are too deep and dangerous for humans to enter. Stockpile Management Mining operations output stockpiles that span vast areas and grow to great heights. Terrain models of inventory levels allow companies to track stockpile changes and movements and reliably validate financial statements and subcontractor transactions. 95 2.8 Mining Road Haulage Optimization Drones monitor mining haulage road conditions and provide aerial data that allow engineers to plan, design, and perform construction and maintenance activities. Mining giant BHP employs drones to inspect cranes, towers, and flare stacks, dangerous tasks that humans no longer have to perform. 3 Image from: Wingtra 96 2.8 Mining Mining forecast methodology Our analysis estimates that the total addressable market for mining drones is one drone for every mine. The mining industry is one of the earliest adopters of drone technology, and our base case assumes drone use will continue to grow by 20% up until reaching the total addressable market. Both fixed-wing and rotary drones are suitable for mining inspection and surveying. We anticipate a 50/50 split, with fixed-wing drones being used primarily to survey massive mines at a unit cost of $30,000 and rotary drones being used for detailed in-mine inspections at a cost of between $5,000- $10,000 per unit. Drones are already commonplace in mining operations, and the conservative case assumes adoption frictions will cut the growth rate in half. The progressive case assumes drone surveying and underground mapping will become industry standard by 2030. Region # of Active Mines Drone to Mine Ratio Saturation # of Drones United States 13,000 1 13,000 Asia-Pacific 15,000 1 15,000 Europe 500 1 500 MEA 10,000 1 10,000 RoW 7,500 1 3,750 Estimates of the TAM for mining drones Source: National Mining Association, Levitate Capital Analysis Market Size 0.1 0.2 0.4 0.4 0.9 0.6 1.3 Progressive Base Conservative 2020 2025 2030 $ Billion