Date: Nov 01, 2015 Author: Tom Henderson Source: Crains Detroit (
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SkySpecs Inc., an Ann Arbor-based company that provides drones for the inspection of wind turbines, bridges and other infrastructure projects, has closed on an investment round of $3 million.
The company has received approval from the Federal Aviation Administration to fly its drones, has landed its first two customers and hopes to hit at least $1 million in revenue next year.
The investment round was led by Jim Adox, managing director of the Ann Arbor office of Madison, Wis.-based Venture Investors LLC, and joined by Ann Arbor-based Huron River Partners, Detroit-based Invest Michigan and some angel investors.
The investment, which will be used to ramp up business development and marketing -- the company employs eight and will soon add another eight or so, according to President and CEO Danny Ellis -- comes one year after SkySpecs won $500,000 as the grand prize winner of the fifth annual Accelerate Michigan Innovation event at Orchestra Hall in Detroit.
The sixth annual event was held last Thursday, with a seventh event in doubt. Accelerate Michigan was launched by the New Economy Initiative for Southeast Michigan, a foundation-led economic development effort.
David Egner, who was instrumental in creating Accelerate Michigan in 2010, recently announced he is stepping down as president of the NEI to become president and CEO of the Ralph C. Wilson Jr. Foundation.
Egner recently told Crain's that the steering committee at NEI has been discussing the possibility of raising a third fund to continue its economic development activities, but nothing has been decided.
"This is a real example of a company that wouldn't be here without state help," Adox said about SkySpecs. "All these guys could have got jobs at drone companies in California. They could have gone anywhere, but they built a company here.
"It was the $500,000 they won last year that allowed them to get to the point where they are now, where they are able to raise a bigger funding round; they have their first customers and are going to start generating revenue," said Adox. "It proves the concept behind Accelerate Michigan."
Adox said he had been following SkySpecs since it was launched in 2012 by three engineering students at the University of Michigan. It is not a licensee of the school.
The company finished third in the student category and won $10,000 at the Accelerate Michigan event in 2012 and was a semifinalist in 2013 before winning last year.
Last year was crucial in another way -- SkySpecs was accepted into a Techstars incubation program in New York, which raised the company's profile and led to informal offers to move the company out of Michigan.
"We shot those down pretty quickly," said Ellis. "We let everyone know we were a Michigan company and were adamant about coming back."
In 2013, SkySpecs won $50,000 for finishing first in the Michigan Clean Energy Venture Challenge, put on by UM and Detroit-based DTE Energy Co. In all, it won $100,000 at various business plan competitions
Also in 2013, the company raised a seed round of $595,000, led by the Detroit-based First Step Fund.
In 2014, it won a small-business innovation research grant of $150,000 from the National Science Foundation, and Ellis was named a member of the 2014 class of Crain's 20 in their 20s.
Adox said a trip to the Consumers Energy Co. wind farm in Bay City early this fall clinched his decision to lead this round of funding.
"There were a record number of drone-company investments in the last year, but based on our due diligence, most of them had nice websites and great animation, but few of them had actually flying prototypes," he said.
"Watching their drones fly was a milestone for me. I could see how easy it was for them to fly and inspect turbines in real time. They didn't crash; they were easy to control; the customer liked it. The proof was in the pudding," said Adox.
SkySpecs' first customer was UpWind Solutions Inc., a San Diego-based company that manages and maintains large wind turbine farms around the country and plans to use SkySpecs for its inspections.
If SkySpecs' funding round can be considered proof of the success of Accelerate Michigan, its relationship with UpWind can be considered proof of the success of a Pure Michigan marketing effort.
In 2013, SkySpecs was invited to show its wares at a booth Pure Michigan rented at the American Wind Energy Association's annual trade fair in Chicago. Ellis said SkySpecs was the only drone company there and caught the eye of Dave Peachey, UpWind's vice president of engineering.
In January 2014, UpWind and SkySpecs formalized a relationship to test and eventually commercialize the drone technology.
Last year, Peachey told Crain's that the plan was, once the FAA gave approval, to use the drones to replace the current inspection process. Those inspections require ground-based cameras and visual inspection by two-person teams, which involves long set-up and take-down times and using ropes to rappel down the surface of turbine blades.
"Now, it takes two or three people a day to inspect one turbine," Adox said. "They'll be able to inspect six to eight a day with one person and a drone."
Ellis said SkySpecs will own its drones and charge on a per-project basis. Originally, SkySpecs planned to manufacture drones. But its business model has evolved to buying off-the-shelf drones, then modifying them with hardware such as lasers and cameras and using its proprietary software to do inspections.
Ellis said the second paying customer for SkySpecs is an Australian firm he isn't at liberty to name. He said that contract will begin generating revenue in the first quarter next year.
Tom Henderson: (313) 446-0337. Twitter: @TomHenderson2
