California drone operator Zipline raises $250 million

Drone delivery startup Zipline Inc. announced today that it has raised $250 million to expand its operations in Africa and the United States. The funding follows a surge in demand for Zipline’s services in Ghana and Rwanda, where it delivers medicine and other supplies to rural hospitals and clinics.

As traditional supply chains broke down during the pandemic, many healthcare providers relied on the company’s drones to fill the gaps, according to Zipline co-founder and chief executive officer  Keller Rinaudo. “Covid has significantly accelerated all of our timelines,” said Rinaudo. “As more and more health systems were betting on us, we were realizing that the opportunity is bigger and we need to be making big investments.”

Zipline plans to use the new funds to build more hubs and warehouses in Africa, including in Nigeria, as well as to make inroads in the U.S., where it ran a pilot program delivering to a pair of health facilities in North Carolina last year. Investors in the round, which values Zipline at $2.75 billion, include Scottish investment firm Baillie Gifford, Fidelity Investments, and Singapore’s state-owned fund Temasek. Zipline has raised $486 million to date.

“Of all the startups that we have seen in this space,” said Aftab Mathur, director of innovation investments at Temasek, “they are the folks that are actually thinking about it the way a large tech company would.” Where the others tend to focus only on the hardware design, said Mathur, Zipline has also built its own assembly plant, air traffic management software, and distribution centers.

Zipline began serving its first hospital in Rwanda in 2016. Its fleet of hundreds of fixed-wing drones now makes deliveries to more than 2,500 sites, all but a few in Africa. The company expects to reach 6,000 locations by the end of this year.

Orders for traditional vaccines and other medicines have grown tenfold since the pandemic began, according to Rinaudo. In June, when President Joe Biden announced that the U.S. planned to buy 500 million doses of Pfizer’s coronavirus vaccine to share internationally, Pfizer said it would work with Zipline to deliver doses to hard to reach areas.

Over the last five years, the San Francisco-based company has flown 10 million miles and made more than 150,000 deliveries. Its drones launch from catapults and cruise at altitudes of up to 500 feet, navigating autonomously by satellite and dropping their payloads, a few pounds at a time, by parachute. They can cover up to 100 miles round-trip and serve up to 8,000 square miles from a single hub.

Zipline next plans to take on direct-to-consumer delivery, as well as to scale its operations in the U.S., where the Federal Aviation Administration is still working on the rules for unmanned flight. The company, Rinaudo said, expects to begin serving more U.S. hospital networks later this year. Last September Walmart Inc. announced a partnership with Zipline to test drone delivery for medicines and other health products to homes in Northwest Arkansas. “Our hope is to get to most states in the U.S. and most homes over the coming years,” said Rinaudo.

Backyard delivery is the holy grail for the drone industry — the application would allow the technology to disrupt the multibillion-dollar last-mile delivery market. Zipline will be up against efforts backed by Alphabet Inc., Amazon.com Inc., and United Parcel Service Inc., whose operations already have been certified by the FAA as unmanned air carriers. While Zipline has yet to attain this status, it stands apart from its larger competitors as the only company already making tens of thousands of deliveries every month.

“People have a hard time differentiating what Zipline does from a company that might be building a quad-copter,” Rinaudo said, “and might deliver once by duct taping a Snickers bar to the bottom of it.”