Valued at €660 Million, can Parrot compete with DJI for the Drone throne?

Dec 10, 2015
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Last month Parrot announced that they would seek to raise €300 Million, including €90 Million contributed from CEO & founder Henri Seydoux himself & another €30 Million from BPIFrance. Since October, Parrot’s stock (listed on the Paris-based Euronext) has dropped from a high of just over 45€ to a low point of 20€ – the market cap at the time of publishing is around €750 Million, still higher than the €660 Million valuation that the new fundraising round would suggest.

Parrot is pulling in increasingly large percentages of its revenue from its Drone sales, which has steadily surpasses its historical activity of selling infotainment systems for cars; however, next to China’ DJI, which recently raised $75 Million at a $10 Billion valuation, it’s difficult to see how one can compete with the other.

Seydoux is often credited with having seen consumer drone interest coming well in advance – Parrot was arguably the first manufacturer to hit it big among drone enthusiasts – however, today’s fight against increasing competitors (and notably DJI), pits not only a publicly listed company against a venture-backed private one (whose valuation is determined by a handful of investors who have an interest in the company being seen as an unstoppable train), but pits Venture Capital against a family-owned business.

Although the roles are reversed, I’d liken the ensuing battle to that of Mattel & LEGO, a publicly listed vs. a family-owned business (respectively), who have competed for the #1 spot among children for the past 30 years. Each has seen their days in the lead and their days in trouble, including notably in the early 2000s when the LEGO founder’s grandson Kjeld Kirk Kristiansen injected 800 Million kroner into LEGO in order to bail it out (something that’s quite difficult when you don’t have a single majority shareholder with a family legacy, like Seydoux with Parrot).

The consumer Drone interest has evolved into Drone sports & enterprise applications (delivery, surveillance, entertainment/recording), meaning that the market appetite for Drone’s is only going to grow. In their Q3 earnings announcement last month, Parrot showed that revenues were up 33% over last year, tracking €324 Million in full-year revenues (source: Reuters). Parrot needs money in order to move as fast as DJI, who is raising new rounds from strategic investors every quarter, making strategic investments in order to boost its portfolio, and is pushing aggressively into new markets – exactly what Seydoux & Parrot should be doing as well.