Airware is a drone company that won’t be selling any drones. And it’s not alone: as the emerging market for commercial drones takes shape, a number of startups plan to earn profits by developing software and services for unmanned air vehicles (UAVs), rather than focusing just on the hardware.

San Francisco-based Airware said last week it raised $25 million in a Series B round led by Kleiner Perkins Caufield & Byers to prepare for the launch of its first product—a hardware and software system that will allow other firms to build custom drones. A company that wants to tailor a fixed-wing unmanned vehicle for inspecting crop fields, for example, may want to include a multispectral camera, while a quadcopter designed for inspecting wind turbines will have different sensors and battery life needs.

“There will be lots of different drone companies but a lot of the underlying electronics and software can really be the same,” says Airware CEO and founder Jonathan Downey, who estimates there are about 600 drone companies already. “It makes sense for one company to focus on this horizontal platform that everyone can leverage.”

Much of the attention around drones focuses on the actual devices, the novel images they capture, or the privacy concerns that these flying robots raise. But Airware’s strategy to build components for an ecosystem of drone companies reflects how much of the business value of commercial drones will come from customizing UAVs for specific industries and analyzing the data they collect.

Greenwood Village, CO-based RoboFlight, for instance, sells three types of unmanned aerial vehicles of different sizes and capabilities. But as it grows, it’s beefing up its expertise in data visualization for specific industries. Earlier this year, it acquired Aerial Precision Ag, which specializes in drones for agriculture, and AgPixel, a company that built software designed to interpret and visualize data.

“We recognized that producers [in agriculture] were starting to ask us for more scientific data and imagery that they could turn into quantifiable actions,” said Drew Janes, the former president of Aerial Precision Ag, in a statement about the acquisition by RoboFlight. Similarly, another agriculture drone startup, Wilsonville, OR-based Honeycomb, builds a system that includes a vehicle, mapping and data processing services, as well as cameras and sensors.

This sort of close integration between hardware and industry-specific software is necessary for commercial drones to get beyond the hype and to solve real problems, says Helen Greiner, CEO of CyPhy Works in Danvers, MA, which is making drones for different industries.

Greiner, who co-founded iRobot, notes that most successful robots are machines that combine custom hardware and software, including the floor-cleaning Roomba and military robot, PackBot. “That doesn’t mean we [at CyPhy Works] won’t utilize third-party systems to aid our offering, or open our platform for other developers to build on top, but our focus is on providing a full solution,” she says.

Airware’s Downey predicts that a number of different business models will emerge around drones. A company could make specialized hardware, such as radiation detection sensors or communications systems, that plugs into different UAVs. Other companies will write software or apps. For example, a developer could produce algorithms for analyzing imaging data from bridges and other roadways to detect problems.

Drone service companies will also emerge, Downey says. A company that operates an open-air mine, say, could benefit from aerial inspections of its operations—but it may only need them once a month, so it will turn to companies that have expertise in that particular industry. “That will be a popular business model,” he says.

People often like to draw a parallel between the market for drones (and other robots) and the early days of personal computers, because it’s a technology that’s transitioning from hobbyists to businesses. As PC makers found out, the hardware quickly became a commodity with small profit margins. That’s why the remaining computer hardware makers all sell “systems” that include software and services—a model that drone makers would do well emulating.

“Hardware builds top line revenue and a protective moat around our offering,” says Greiner. “Software and data solutions will allow us to build high margin and recurring revenue with profitability.”

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