Yariv Bash likes to get to the office by bike. Every morning, he says goodbye to his wife and two children, connects his electric bike to his wheelchair, and takes to the streets of Tel Aviv. In the past year, the route to his downtown office has become almost intolerable, with countless building, infrastructure, and light rail construction sites. But what recently floored him - literally - was the mass of delivery service bicycles and scooters parked outside a famous ice cream chain. As Bash tried to weave quickly between them, his wheel rim got caught on one and he, together with his bicycle, were thrown onto the sidewalk.
Urban mobility, and the risks delivery couriers face, is one of the problems that Bash is trying to solve today. His company, Flytrex, which he founded nine years ago, intends to revolutionize the delivery industry, which in his opinion is in need of urgent care. "The current solution is just bad," he tells Globes. "It’s killing the restaurants. Just ask any restaurateur what they think about current delivery services and their cost. They extort the maximum from the couriers. Ultimately the customer also pays more, while receiving an erratic level of service. Add to that air pollution, traffic congestion, and fast-moving vehicles on the sidewalks and you get the current situation - a veritable catastrophe."
Bash’s solution to this serious problem sounds at first like science fiction: flying couriers or, more simply put: drones. Last year, Flytrex, under his management, became the largest airborne food delivery company in the US, overtaking the services provided by Amazon and Google. As a result, it was cited in a Wall Street Journal feature as one of the technology companies that will change our lives in 2022.
Flytrex’s drones, currently only operating in Texas and North Carolina in the US, cruise from Chili’s restaurants and Walmart supermarkets to customers’ yards, carrying home deliveries of burgers, diapers, milk - even cups of coffee. It may sound dubious, but it turns out that it works. Moreover, Bash says, Flytrex can also lower delivery costs.
Last year, the company participated in the Federal Aviation Administration’s Unmanned Aircraft System Integration Pilot Program (UAS IPP), and received FAA approval to expand its delivery radius to one nautical mile (1.6 km) across all of its operating stations in North Carolina. "Getting FAA approval is at least as challenging as getting drug distribution approval from the FDA," Bash says proudly.
To avoid disasters, drone companies must meet the same standards as aircraft manufacturers, and produce countless mechanisms that will allow aircraft to remain aloft even if the engine is shut off or steering is disabled. In any of Flytrex’s extreme disaster scenarios, the drones are capable of opening a parachute, operating a siren autonomously, and making a landing without harming passers-by. If a customer tries to sabotage a drone by pulling on its extension wire, it is programmed to release the spool and fly away.
"The chances of a crash above people are very low, and even if they haven’t heard the siren, the impact is limited. The chances of being seriously injured are less than 1%. Drones today are the safest way to move goods. Any other alternative - such as a person riding a 10-hour shift on a scooter or bike, and texting their friends while moving - is more dangerous. The proof: the current cost of third-party insurance for Flytrex is one-tenth of that for an Uber driver.
"If you think about it - couriers in US suburbs travel by car. You're basically using a person in a two-ton vehicle to move a hamburger patty from place to place. It's the most wasteful thing in the world. Drones, on the other hand, are robots that always provide the same level of service, don’t get tired, don’t cut off other cars on the road or people on the sidewalk, don’t pollute the environment, don’t make noise, and their cost of service is one-tenth of what the industry offers today."
6.5 minutes for delivery
Two years ago, Flytrex launched a pilot service in suburban Raleigh, North Carolina where its drones were perceived mostly as a curiosity. "Customers would stress-test the system by ordering eggs or ice cream, to see what state they’d be in after being delivered by drone. But they were amazed both by the condition of their order, and the speed at which it arrived."
In the past year, Flytrex has provided suburban Raleigh residents with 12,000 airborne orders at an average delivery time of just 6.5 minutes. Among the most popular dishes ordered: chicken sandwiches, ice cream sandwiches, and boneless chicken wings. Among the most popular packaged products were microwave popcorn, toothpaste, and Ritz crackers. The heaviest order recorded by the company, weighing 3 pounds, contained four containers of ice cream and four large packages of French fries - all loaded on one drone. Flytrex is now launching another pilot service, this time in suburban Fort Worth, Texas.
Bash is fond of the nickname "the Drone Dominator," but Flytrex, at least at this stage, wants to be Sovereign of the Suburbs. Its drones are programmed to land in backyards, of which there are 82 million across the US. Flying at a height of 100-80 meters above the city, they carefully unspool a cable with a package hanging at its end into the customer's yard. To ensure that the landing will be in the correct yard, every few months the company scans the yards in those neighborhoods where service is provided, and updates the possible landing locations automatically. "This is a home delivery experience. The first time, people are excited and take photos. By the third time, they don’t care anymore if their package stays in the yard for a few minutes."
Users place their orders through the Flytrex app, much like the way Wolt and its American counterpart DoorDash work. "A year ago, we realized that in order to run the service successfully we would have to control the whole process, from A to Z." As for whether the service will enter urban areas, he says: "For that to happen, customers will have to go up to the roof or step outside the building. It’s a sort of niche that we may get to later on."
But current conditions pose a challenge, too. Presently, the service cannot operate in strong wind or rain. This means that you will not find Flytrex or its competitors in states like Illinois or Massachusetts. Instead, in the medium-term, Flytrex is counting on states like Texas, Florida and North Carolina, and specifically cities where the weather is clear most of the time.
What sort of faults happen in the service?
"Most glitches happened when the human operators took manual control. So one lesson we learned was to cancel that. The drone is fully autonomous. Humans make many more mistakes than an automatic system. If there is a problem, the drone can land itself, no matter what. If a delivery has to be cancelled and returned to the store, the operator presses a cancel button and the drone returns by itself. What’s still missing is integrating drones into the airspace system. There still aren’t drone traffic control towers set up, such as aircraft have."
Still, is there a human element involved?
"At restaurants and supermarkets, workers hang orders on the drone claw, and send commands via tablet. There’s no joystick. It's like a Tesla without a steering wheel. However, there is a supervisor from a company that operates the service for us in different territories, who is responsible for maintaining and supervising the fleet."
"Many investors got burned"
Flytrex is an anomaly in an industry where, in fact, most of its contemporaries have not survived. Those that did have had to pivot, as often happens at start-ups. And that includes Flytrex.
According to a Bloomberg report published this past April, the market began its recovery in 2019, recording more than $1 billion in investments, but it was too late for companies like Aerobotics and Parrot, which had to cut staff and restructure. The tech giants were also affected by the crisis: just last year, Google parent company Alphabet announced it would be closing Loon, a project to develop a fleet of balloons that would beam high-speed internet to remote parts of the world. Before that, in 2017, Google shuttered its Project Titan, which was designed to launch drones for a similar purpose. Even Amazon - which was largely responsible for creating the sector when it announced in 2013 that it was setting up a drone venture to fly deliveries to customers within half an hour - is still having difficulty in setting up a functioning fleet.
"Ultimately, there aren’t too many people who understand drone regulation, and many investors got burned. Bezos stood on a stage nine years ago and announced that, within four to five years, the problems would be solved. But when we entered this sector, we told ourselves, this marathon had a lot of unknowns. We were patient, we raised exactly the amount we needed, and we didn’t make any unnecessary moves. We worked a great deal with the FAA, including discussions every Friday night, which was a convenient time for them. They checked every screw we put into our drone, and our production facilities. We didn’t grow too much and, on the other hand, we created a revenue stream for ourselves: we sold 'drone brains' - a kind of black box installed on other manufacturers' drones in 70 countries. It was a nice business that put us on the marathon track, even though most of the money from sales went to our manufacturer in China."
Over the last two years, dozens of companies have joined the Unicorn Club, raising hundreds of millions of dollars at billion-dollar valuations. But not Flytrex.
"Just a few years ago, many drone companies failed. Today, investors want to see that you know how to deliver many payloads in a day, and until you prove it to them, they won’t believe you. The thing is that the entire industry is dependent on the FAA, and they set the pace, step by step. If a drone company came along that knew in advance how long it would take to get a commercial license - Boeing would make them a $1 billion purchase offer on the spot."
On the US licensing fast-track
Flytrex, founded by Bash in partnership with friend Amit Regev, is a veteran company, 9 years old. Although almost geriatric in start-up terms, it only recently reached maturity with the deployment of its drone network in North Carolina and Texas. To date, it has raised $60 million from Eran and Eli Barkat’s BRM Group, Eric Benhamou’s Benhamou Global Ventures (BGV) and investor Joey Low, $40 million of which was raised this year. It employs 70 people and has offices in Tel Aviv.
Flytrex’s original vision was to produce a flight controller that would transmit real-time drone tracking data via 3G networks. Two years later, in 2015, it launched its first drone operated via cellular network. Now, the vision was even simpler: enable full control of the drone via mobile phone.
"We built a delivery app without expecting much. But then, we started getting inquiries from companies asking us if it was commercially available. The truth was that it wasn’t yet fully commercialized, but like good Israelis we said ‘yes’, and even created a brochure. We launched a pilot service in Iceland in 2017, and after that we were selected for the fast track to receive a permanent FAA license for commercial use - like delivery drones - which I would describe as the most complicated in the world."
There are 10 companies on the FAA’s fast track, three of which are Israeli: Percepto, whose drone can monitor sites and infrastructure even in difficult weather and visibility conditions; Aerobotics, which maps facilities for security or planning purposes; and Flytrex. Another company on the fast-track is Google Wing - a subsidiary of Google parent company Alphabet - which has reached a very advanced stage and is now Flytrex’s direct competitor in the suburbs of Fort Worth, Texas, after relative success in Australia. Google's flight range may be longer, but Flytrex is capable of carrying a heavier payload. Google will be able to help deliver coffee, pastries or medicines, but family meals and groceries are still the Israeli company’s forte.
The program grants the companies a special waiver that exempts the companies from aviation regulations, and enables them to operate commercial drone services. After undergoing a rigorous durability and reliability process to prove the drones are safe for autonomous operation, they are categorized as commercial aircraft.
In the end everything will stand or fall on your ability to grow fast.
"First of all, wherever we expand to will be near chains like Walmart. But our mission is to show that our service can work in more than just a few suburbs, and prove what delivery services have had a hard time proving to date - that this is a profitable business. It's a crazy mission, but I believe we can make many neighborhoods and cities profitable. Wolt and DoorDash are an expensive service for restaurants and customers. Restaurants pay delivery companies up to 31% on an order, they raise prices to compensate, and the delivery cost is about $10. But drones can be much cheaper. The cost of a drone delivery can be under a dollar. For that to be cost-effective, you can’t use a high-priced drone, you have to use a low-cost one. After all, the courier in Tel Aviv delivering your hamburger doesn’t drive a Mercedes."
And what are the chances of you beating Google on its Texas home turf? The start-up graveyard is filled with would-be Google competitors.
"Texas is a great place to test drones, and FedEx has also just announced it will test unmanned drones there. Remind me - when was the last time a giant corporation beat out a small startup with something completely new unconnected to its original business? And specifically, guess what happened when Google tried to compete with a company called YouTube with a product called Google Video. That aside, Google's current vehicle can carry about 1.2 kilograms, versus our 3 kilograms, which means it is more suitable for coffee and pastries, or aspirin, than for a family meal. And in the US, there are over 82 million private homes that want a family meal."
Published by Globes, Israel business news - en.globes.co.il - on May 25, 2022.
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