Drones take off and investor money flies in

Now that the Federal Aviation Administration has published its proposed rules on drones, expect to start seeing plenty of unmanned miniature planes flying over places like AT&T Park in San Francisco, home of the World Series champions. But not when there's a game taking place, of course.

An open field next to the ballpark is where a small team of engineers found itself last week, offering an up close demo of the Ghost, from Chinese drone maker Ehang.

Fresh off a $10 million investment led by GGV Capital, Ehang is staffing up in China and the U.S., and mapping out its initial strategy for getting consumer drones onto retailers' shelves this year.

The Ghost, which sells online for $599 at the basic level or $729 to $799 with a camera holder included, is controlled via smartphone app and designed to be simple enough for anyone to operate. The company will soon release an iPad controller that's even more intuitive, allowing users to guide the planes, change speed, take off and land by tilting the mobile device in the desired direction.

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Embedded with sensors and linked to mapping software, the drones are smart enough to avoid running into buildings or hovering into no-fly zones. The demo in San Francisco was for the Ghost Aerial plus, and the attached video was taken from a GoPro camera on board.

"With current technology—mapping technology, location technology and mobile technology—you can actually make a better flying experience, even for kids," said Jenny Lee, a managing partner at GGV and Ehang board member, who was with the team at last week's demo. "If you know how to use a phone, you can learn how to fly."

Venture investors like Lee are anticipating an explosion of consumer demand for drones, now that advanced technology has brought prices down and regulators have provided some clarity surrounding the regulations.

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According to research firm CB Insights, venture financing in drone start-ups more than doubled in 2014 to $108 million, with Ehang one of at least 10 companies to have received one or more rounds of institutional funding to date. 3D Robotics, the biggest U.S. drone manufacurer, said in a filing this week that it was raising $40 million in a funding round. Forbes reported that the financing reached $50 million and was led by Qualcomm Ventures.

For now, drones will be quite limited in what they're allowed to do. The FAA released its highly anticipated proposals on Feb. 15, and industry representatives and lobbyists have 60 days to offer public comments.

A SteadiDrone QU4D aerial drone fitted with a GoPro video camera.
Dean Hutton | Bloomberg | Getty Images
A SteadiDrone QU4D aerial drone fitted with a GoPro video camera.

Requirements would include flying below 400 feet, keeping the aircraft within eyesight, limiting the plane to 55 pounds, steering at least five miles clear of airports and not flying "near people or stadiums." The rules don't specify whether it's legal to fly over a stadium with no people in it, but perhaps that will be addressed during the comment period.

Regardless, it appears the dream of having Amazon.com deliver diapers and a mystery novel to your doorstep by drone will have to wait.

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The Ghost was created by James Hu, a flight enthusiast who owns a dozen planes in China and is co-founder and curator of the Beijing Aerospace Model Museum. The initial product was launched on crowdfunding site Indiegogo in November, and by the following month had raised more than $850,000. GGV then came in with the venture round.

"This wasn't typical A round financing," said Lee, who's based in Shanghai. "When we saw them, they were flying."

Ehang has competition both in China and the U.S. as it aims to capture consumer attention. In China, the market leader is DJI, which sells drones on its website starting at $1,000 as well as a portfolio of accessories.

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Like with other technologies, the battle for the future is in the software. Ehang, which has 80 to 90 employees now and is expanding rapidly, is pouring resources into winning the controller war. In addition to developing intelligent software for mobile devices, the company is also working on a pair of virtual reality like goggles that would enable users to guide drones with head and body movements.

"Eventually this will become a commodity," said Jessie Lu, director of communications at Ehang, pointing to the Ghost. "We want to focus on the control of it and make it as intuitive as possible. That's our competitive edge."