Layoffs Reflect New Turbulence at High-Flying 3D Robotics
3D Robotics, the drone maker that began life in Tijuana and San Diego, has been consolidating its operations after stumbling in its bid to go head-to-head against China’s DJI, the world’s biggest maker of consumer drones.
In an interview yesterday afternoon with Xconomy, CEO Chris Anderson confirmed that 3DR has been reorganizing to focus its drone business on big companies and other enterprise customers, but downplayed the significance of the high-flying robotic company’s layoffs over the past six months.
The Berkeley, CA-based company is closing its San Diego facility, with three years still remaining on its lease, and has reduced its staff at its Berkeley headquarters and in Austin, TX, where it has pared all but a sales and marketing group led by Colin Guinn (formerly of DJI).
The latest staff reductions, disclosed Tuesday, follow more sweeping layoffs that took place at the end of 2015, when co-founder and president Jordi Muñoz left the company. Anderson met Muñoz after creating the DIY Drones website in 2007 to serve a rapidly growing online community of designers and hobbyists who wanted to build their own drones. They founded 3D Robotics in 2009 with the idea of selling both components and drones.
Last year, 3D Robotics also shifted its manufacturing operations from Tijuana to an outsourced manufacturer in China that was dedicated to high-volume production of the Solo, a ready-to-fly quadcopter drone 3DR introduced last year, targeting what Anderson described as the professional consumer market.
— Chris Anderson (@chr1sa) October 12, 2015
In the latest shuffle, Anderson is shifting away from his operational responsibilities to focus more on the external and strategic side of 3DR’s business, although he will continue to be identified as CEO, according to a report posted last night by MarketWatch columnist Therese Poletti. Anderson did not mention the change in his phone call with me yesterday, or disclose that Jeevan Kalanithi, 3DR’s chief product officer, was named president.
In my interview, Anderson described the organizational changes as something that was part of 3DR’s plan all along. “This is a consolidation we’ve been working on since before October of last year. As we shifted from the DIY era to consumer and to enterprise customers, we ended up with a different organization each time,” he said.
But the company had to change its business model, according to a former 3D Robotics employee who would only talk anonymously. The company was more successful at developing and selling its autopilots than it was at selling drones, but according to this source, “They went down the path of developing the Solo drone” in a challenge to DJI’s prominence in the market for consumer drones. The strategy became particularly evident after 3DR hired Guinn to head sales and marketing, as Guinn was previously the CEO of DJI’s North American operations.
“They stumbled in their execution of building these vehicles,” the source said. Meanwhile, DJI was developing its new Phantom 3 line as a consumer-friendly camera drone with popular features like visual tracking and object avoidance. 3DR introduced its Solo quadcopter last April, at about the same time that DJI introduced its Phantom 3.
But a key gimbal frame for mounting a GoPro camera was initially not included with the Solo, and cost an additional $400, which brought the Solo’s total price to $1,400—significantly higher than a similarly equipped Phantom 3. Some drone enthusiasts were not impressed. As Solo sales faltered and the inventory piled up, Anderson came under pressure from at least one investor, according to Craig Issod, a drone blogger and founder of Droneflyers.com.
Anderson said yesterday that 3D Robotics was hardly alone, saying, “The entire industry kind of overbuilt” in 2015. He said 3D Robotics more recently has cut the combined price of its Solo and gimbal to $1,000. Anderson said Solo sales are recovering now, and the inventory has been shrinking.
At the same time, Anderson said 3DR has moved to focus more narrowly on enterprise customers that are interested in using drones for such projects as utility line and pipeline inspections, and construction site inspections. As part of that move, 3DR announced the release of its Site Scan aerial analytics platform earlier this month. The technology enables corporate customers to conduct inspections and scan work sites with the Solo smart drone, and transmit the data to the cloud for processing and analytics.
Still, problems with the Solo product launch necessitated a deeper-than-expected retrenching last year, according to the former employee, who said, “My estimate is that 3DR has laid off or terminated contracts with at least 200 people. They are basically trying to sort out their cash flow and burn rate.”
Anderson declined to confirm the layoff numbers, but said 3DR now has about 100 employees. He also declined to confirm that the company’s workforce had peaked at somewhere between 300 and 350 last year as it prepared to introduce the Solo. (A spokeswoman for 3D Robotics told me last March the company had 300 employees.)
“2016 turned out to be a hard year for consumers, but a great year for enterprise,” Anderson said yesterday in a phone call from the rooftop of 3DR’s Berkeley headquarters. He cited three reasons: aviation regulations have been changing to allow commercial use of drones; 3DR is now ready with products like Site Scan that reflect the company’s move to more of a software-as-a-service business model; and agriculture, construction, utilities, and other industries are ready to use drone-based services.
Nevertheless, these have been trying times for Anderson.
Before joining 3D Robotics as full-time CEO in November 2012, he was the respected editor in chief of Wired magazine and a book author. His star power immediately made 3D Robotics one of San Diego’s up-and-coming companies, and enabled it to raise capital with seeming ease. Last year, 3D Robotics raised $50 million in a financing round led by San Diego-based Qualcomm’s (NASDAQ: QCOMM venture arm—bringing total funding for the company close to $100 million, according to CrunchBase.
If it seemed initially like the sky was the limit, the future at 3D Robotics is more clouded now.
In a memo on “organizational changes” sent to 3DR staff Tuesday (and posted on an RC Groups online forum), the British-born CEO wrote of “the need to consolidate and accelerate our transition into being an hyperfocused machine… this acceleration means that today, we will be saying goodbye to some of our team in Berkeley.
“These situations are tough, there’s no point in sugarcoating it. But we know in our hearts that the right thing to do is to manage the company so that it can continue to realize its potential, react to change, and stay on sound financial footing.”