In 2011 we started fundraising again. By December of 2011, we had put together a great deal where we secured investment from a group that was comfortable with a company in the defense/government space, we received economic incentives from the state for job creation, and we negotiated with the city to refurbish a derelict building to become our new home. At the end of 2011, it had all come together for us. In 2012 the government shut down for what would end up being the whole year. We went through some tough times. 90% of our revenue that year was frozen or put on hold, and because of the rolling nature of the continuing resolutions and continuous starts and stops, we didn’t know this until the year was over. When we were in the middle of it, the news was always “next week everything will be better”. The problem was that it wasn’t. We lost a lot of great people that year, and I think that I will remember that as one of the toughest times that we went through.

To survive, the company had to pivot. We loved our military customers, and loved being a part of the mission, but we couldn’t sustain our business just on government revenues. We knew we had to diversify. Diversification meant looking at the commercial market. For 10 years the coming commercial market was supposed to be the holy grail for the drone industry. As new regulations allowed law enforcement to use unmanned aircraft, we thought that this would become the new hot market. Unfortunately this wasn’t the case- with drone technology being too cost prohibitive for these agencies. Even when they were purchasing systems, there wasn’t any support infrastructure in place.

We got a break when the FAA opened up the 333 exemption process which could be used by businesses to operate aircraft for commercial purposes. We were able to get one of the first exemptions, and we were able to start looking at potential commercial operations. We were fascinated by certain heavy industries which had sets of needs similar to those of the military. We focused on those and quickly made inroads with large companies.

Once again we rebuilt our business from almost nothing in the year of the government shutdown to a thriving business again by 2014. This time the environment had changed. Companies were springing out of nowhere, hundreds of millions of dollars were flowing from venture capital funds into California based “drone” startups. We needed to raise money. We had a mix of commercial and military customers, we had added additional vehicle platforms to our product portfolio, and the time to act was now.  We began fundraising in the beginning of the year and by June we had a term sheet to raise a significant amount of capital at a good valuation. We worked for 4 months to close the deal, but at the end of October the deal fell apart. The fund wasn’t able to call the capital. They had been delaying continuously and we now know that they had this problem in multiple deals. The company was strapped. Venture backed businesses burn cash at higher than normal rates. They rely on being able to get additional capital. It was the last week of October. With this eleventh hour deal implosion, we had some hard decisions to make.