Chinese drone-maker seeks funding at $10bn valuation

DJI, the Chinese maker of remote-controlled "quadcopters" that has led a boom in consumer drones, is looking to raise hundreds of millions of dollars in venture funding at a valuation of $10bn, according to people close to the negotiations.

Its Phantom range of camera-bearing drones has become the market leader thanks to hundreds of videos on social networking sites such as YouTube showing off their high-definition aerial photographs.

The Shenzhen-based company also hit the headlines in January when an unmanned Phantom drone crashed into the White House grounds.

DJI declined to comment on the fundraising, which was first reported by Forbes.

The talks with several Silicon Valley venture capital firms mark out DJI as the latest young private Chinese tech company to potentially achieve a sky-high valuation, after smartphone maker Xiaomi's $45bn round in December saw its price tag leap from $10bn in August 2013.

Xiaomi's valuation made it the highest for a venture capital-funded start-up, beating runner up Uber, the San Fransisco-based car hire app, valued at $41bn.

The soaring valuations are being buoyed by optimism about the potential of China's market, which, with the lowest internet penetration of any major market in the world, has room for growth.

Thanks to a run-up for the Chinese tech sector more broadly since the start of 2014, three of the country's largest internet groups - Alibaba, Tencent, and search engine Baidu - are in the top 10 largest internet companies in the world, alongside Amazon, Facebook, Google, and eBay.

DJI's funding talks come as aviation regulators around the world weigh the risks and opportunities of permitting commercial use of drones, whether for aerial photography, farming or other industrial uses.

In the US, the Federal Aviation Authority in February proposed new rules to allow small unmanned aircraft, weighing less than 55 pounds, to be used for "non-recreational purposes", as long as they are operated within line of sight of an operator and at a maximum altitude of 500 feet.

The FAA also recently gave the go-ahead for Amazon to test deliveries via drone. - something that Chinese ecommerce giant Alibaba is also experimenting with at home.

DJI was founded in 2006 by Frank Wang, now its chief executive and chief technology officer, when he was a graduate engineering student at the Hong Kong University of Science and Technology. The company now has more than 1,500 employees around the world.

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Almost all of its growth has been funded by its own cashflow, after leaked figures showed that its revenues hit $130m in 2013 and likely increased several-fold last year.

It has already raised a small amount of venture funding from Silicon Valley firm Sequoia Capital but the current fundraising, if completed, would be its largest by a considerable magnitude. One person familiar with the discussions said the new funds were to help it to expand, rather than because it needed the money for current operations.

DJI faces growing competition from companies such as California-based 3D Robotics, which this week launched its $1,000 Solo drone to compete with the Phantom.

Projections by the Consumer Electronics Association peg spending by regular consumers on drones at $1bn by 2018, up from $130m this year.

Additional reporting by Charles Clover in Beijing

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