Maker of small UAV raises $25 million

Good news for Bingen, Washington-based UAV maker Insitu. The company makes unmanned aircraft aiming to tip soldiers off to an impending ambush or track the car of a terrorism suspect, and it has just received $25 million in funding from a group led by Waltham, Massachusetts-based Battery Ventures.

Second Avenue Partners and Pteranodon Ventures which who, with Battery, participated in previous rounds, joined in this fourth round of funding. Red Herring’s Ken Schachter writes that Insitu competes against a other UAV developers in a market that a Teal Group study projects will expand from the current $3.4 billion per year worldwide to $7.3 billion within ten years.

Northrop Grumman’s Global Hawk has a 3,000-pound payload and a 32,500-pound gross takeoff weight. Insitu prefers to make small, lightweight aircraft that can be carried by a single person. Its InSight aircraft weighs about 44 pounds with a full tank of fuel and payload. Its latest-generation Integrator has a maximum gross takeoff weight of 130 pounds. Aside from the major military contractors, Insitu competes against specialized companies such as AeroVironment, a Monrovia, California-based company that went public in January. Insitu’s biggest customers are the Marine Corps, the Navy, and the Australian Army, said CEO Steve Sliwa, who sees an expansion into the civilian market within a decade once the U.S. Federal Aviation Administration (FAA) decides on a system that will let robotic aircraft share the skies with passenger jets and private aircraft. Insitu’s first drone, the Aerosonde, crossed the Atlantic in about 27 hours, using 1.5 gallons of gasoline. The company is a partner with aerospace giant Boeing, which helps market Insitu’s drones and provides systems integration and other support. In 2004 Boeing acquired another maker of unmanned aerial vehicles, Frontier Systems, developer of the Hummingbird and Maverick. Sliwa, a former NASA administrator, says the evolution of drones is reminiscent of the progression of computers from mainframes to personal computers and handheld devices. He said the future will belong to miniature drones like his, while vehicles such as Northrop’s Global Hawk will be pushed to the edge of the market like mainframe computers.

The company, with about 250 employees, is cash flow-positive and expects to turn a profit while notching revenue of more than $75 million in 2007, Sliwa said. And what about Insitu’s future? “There’s the possibility of an IPO or an acquisition,” Sliwa said. “We don’t know which makes the most sense for us.”