The Age Of Free Food Delivery: Manna Air Delivery With Bobby Healy

Speaker A: M welcome to FYI the four Year Innovation Podcast. This show offers an intellectual discussion on technologically enabled disruption because investing in innovation starts with understanding it. To learn more, visit ark-invest.com

Speaker B: Ark Invest is a registered investment advisor focused on investing in disruptive innovation. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. It does not constitute, either explicitly or implicitly, any provision of services or products by ark. All statements made regarding companies or securities are strictly beliefs and points of view held by ARK or podcast guests and are not endorsements or recommendations by ARK to buy, sell or hold any security. Clients of ARK Investment Management may maintain positions in the securities discussed in this podcast from ARK Invest. This is FYI the For your Innovation podcast. We've got a great show for you today. There's Daniel Drones McGuire of over here. He's our autonomous technology and mobility analyst and expert. And he and Tasha interviewed Bobby Healy, who's the CEO of Mana, a drone delivery company that originated in Europe and is expanding into the U.S. hello, Daniel. How are you?

Speaker C: Brett, Good to see you. Uh, I've never been called Drones McGuire. I've been called a lot worse before, so I'll take that.

Speaker B: So, Daniel, I have a question for you. You cover a number of moving, um, objects. Call it. Which of these three things is more likely to be, like, a regular part of people's lives in the us? Um, first drone delivery. Robo taxi or, ah, Evtol, like air taxis. Which are we going to see first? Which are people going to regularly experience first? And by drones, I mean over the air, not the rolling robots. I already have those.

Speaker C: Yeah, well, we actually already have two out of those three. So, I mean, drone delivery is occurring in the US today. Uh, Walmart just previously announced that they've surpassed 1 million deliveries. That's with, uh, Zipline, a company in our private portfolio, as well as Wing, which is Alphabet's, uh, drone subsidiary, uh, Mana, who hails from Europe. They've completed, uh, close to 400,000 deliveries already in, uh, Europe and they're expanding now in the US in Oklahoma. EVTOls are a bit more on the long finger. I believe that the EIPP program is really what a lot of companies are targeting in the US to demonstrate flights. I know the Olympics in LA in 2028 is a big, uh, North Star for a lot of those companies. Um, and then Robotaxis again, they're already here today. And Brett, as you know, uh, for disruptive innovation, it's always, uh, slowly, slowly, and all at once. And it feels like for. For drones and, and robo taxis, we're starting to hit that all at one stage. Yeah, I'd encourage everyone to, To, I mean, Google your local area drone delivery. It's possible it's available for you, if not today, the next couple of years. As Bobby teased during the podcast, he thinks it'll be proliferated around the US and, uh, same for robo taxis too. And it really seems like we're starting to hit that inflection point.

Speaker B: Yeah, it does seem like all at once is about to happen, at least for those two at roughly the same time. So it will actually be your robo taxiing home, and you look overhead through the sunroof and you see your meal coming overhead to be delivered on your front door. Um, the drone space, it's kind of. There's all of these different players. There's the aggregators, like the door dashes of the world. There's the delivery kind of companies like Zipline, like Mana, also in our venture strategies, uh, in our private strategies, and then there's the individual restaurants. How do you think about kind of like the shifting power dynamics between these three? And if you were to cast yourself forward into the future and said, oh, this part of the value chain captured most of the economics in the future, would it have all pushed out to the restaurants? Would it be in the companies, like, kind of delivering the goods? Or would it be in these aggregators? Or is it an unfair question?

Speaker C: Yeah, I actually think that's a great question, because the reality is for the consumer, they don't care who delivers it if an aggregator is involved or not. They just want hot food that's fresh and delivered in a timely manner. Um, and that's something that Mana kind of has demonstrated in its partnerships to date. They're partnering both with the aggregators, so the likes of DoorDash, Deliveroo in Europe, but they also have their own app as well. Um, and that gets to the point consumers don't care. But in terms of value of, uh, where the value chain leads, really, it's all to play for at the moment. If you look at some of the strategies from the aggregators so far, Uber, at least on the robotaxi side, they're partnering with a lot of players. Uh, then you have DoorDash, who is partnering with some players, but they also are developing their internal rolling robot. So it seems like that they're still kind of putting all of the feelers out to the industry. It's yet to play out, but I mean it's all to play for. We've done the research and shout out to Tasha. By the end of the decade, we think autonomous logistics could have $480 billion of revenue, ah, split across not only drones, rolling robots, but also autonomous trucks, which again are starting to hit that slowly, slowly, all at once. It seems like we're living in a simulation and we're just starting the most exciting chapter where all of this is starting to take off. So, yeah, I think it's all to play for.

Speaker B: Yeah. Or it's actually the fundamental, like advances in AI are breaking across the capabilities as in convergence. Look at the AI space.

Speaker C: Yeah.

Speaker B: And you see like, hey, all of these um, benchmarks getting saturated. Well, these are real world benchmarks and I think, I suspect, and in fact our forecast suggests that everybody listening to this podcast will probably experience these things in the real meat space world over the next couple years. And so if you listen to Bobby and Mana, you can hear kind of like their angle on the market and how much real volume they're doing already. All of the coffees they're delivering onto people's trampolines because people like to have drones land goods on trampolines for some reason. So it's a great conversation. I hope you enjoy it and, uh, thanks for conducting the interview, Daniel.

Speaker C: Thanks, Brett. Hope everyone enjoys the podcast. So today we are, uh, joined with Bobby Healey, founder and CEO of Manna Drone Delivery. In 2018, Manna AH, has completed over 300,000 commercial deliveries hailing from Ireland and is now on the cusp of expanding into the U.S. bobby, thank you for joining us today.

Speaker D: Thanks for having me. Excited to be here.

Speaker C: Great. So I think for the viewers, Bobby, it might be helpful just to understand why did you found M Mana Delivery back in 2018? What did you see that maybe others didn't? And just founding story for Mana.

Speaker D: Yeah, I live in a, ah, high density suburb called Rat Farnham. Suburbs of Ireland are not terribly different than the suburbs of United States. Um, they suffer from poor access to delivery, particularly of perishable products like food. I'm sitting in my back garden one night at a couple of glasses of wine and over the legal limit and I say couple lightly wanted a bag of chips and called uh, the delivery driver and had to wait an hour for a bag of soggy chips. I'm pretty sure he uh, helped himself a few of the chips in the process. And I could see that, look, this pain point, it's just hard to deliver stuff around using humans in the road. Pretty clear that the world needed a way to automate that. And so that was the start of it.

Speaker C: Great. And then maybe if you look at the overall landscape of drone delivery, it'd be great to kind of explain to the viewers where it is today. How far has it come and where do you think it's going in the future?

Speaker D: Yeah, well, it's definitely hit a pivot point now or moment in time in the United States, almost as a reaction to geopolitics and what's going on in the world. There's four or five major players. It started with Jeff Bezos 15 years ago with Amazon, and now we have other great players. Amazon, Zipline, Google Wing, uh, ourselves, there's not many others. And you can see now in the United States particularly a lot of growth happening, including with ourselves, there's about six major metro areas covered by drone delivery now. And I think you're going to see because of the administration's policies towards regulation in aviation and regulation of drones, I think the market is fully open now in the usa. So we're finally, for us, you know, seven or eight year journey of getting the product ready for scale, getting the manufacturing in place, getting the software, because we design and build our own aircraft, having them regulated by aviation regulators. For us, both in Europe and in the United States, and now for us also in the Middle east, it's been difficult. It's a very difficult product to build a, uh, platform to build it's hardware and software. It's hardware that flies and it's hardware that's regulated. So it's going to be an industry where there's only going to be a handful of players that are going to thrive and grow and it's not going to consolidate for a decade. It's going to be those same handful of players that are just going to grow like crazy over the coming years. And we see ourselves being in the top three subjectively. But I mean, our product is functionally up there. We're all kind of functionally the same, um, some with bigger balance sheets than others. Uh, but it is the moment now, particularly for the United States, which is the market that we've always been interested in. It's the biggest market in the world, but it's also, it's got the biggest ambition in the world. So it's a beautiful time to be alive in drone delivery.

Speaker C: Maybe if you can help explain to viewers, because it seems like magic, you can download an app, you click a button, and then I think as fast as like five minutes in some instance, there can be Something dropping out of the sky and it's your delivery, fresh and ready to eat or a drink or whatever it may be. What happens in the back end when someone presses a button? Maybe talk the viewers through, uh, the process on how it goes from the restaurant to your delivery bay and eventually coming down from, from the sky.

Speaker D: Our record is 4 minutes, 10 seconds from order to arrival. That was a liter of milk for milk manna. Ah. And so what happens when you, when you purchase with us? If you're purchasing through DoorDash or UberEats, the partners that we have, um, that transaction goes to the restaurant or the vendor, um, they prepare just like they would for a road based delivery. Assuming that some guy, you know, with a car is going to arrive. And in this case the product arrives at our base instead, or our base is already at the car park of the restaurant. And we take the bag after the restaurant's prepared it. We, we scan it, we weigh it, because we obviously have to weigh the cargo because it's a plane. We load it on the aircraft and then the aircraft's on its own, it's fully autonomous. So the aircraft finds its own way to your house. You'll have dropped a pin to tell us where you want the product. Um, somewhere in your back garden, your front garden roof, your house, or trampoline, as a lot of people get delivers to trampolines in their garden for some reason. And the aircraft does its own thing. Once it takes off, it's on its own and it'll arrive over your house, wherever you've asked to deliver at about 200ft over the ground. And then it'll descend to about 50ft over the ground. Then it'll open the bomb bay doors and it'll drop the product out. Uh, it'll use gravity to get the product to the ground. And just before it hits the ground, we have a tether to a little biodegradable cotton string and we slow it down so that it touches the ground gently and we can deliver fresh eggs as we do frequently. Coffees. 11% of our order are hot coffees. So it's a very delicate delivery, uh, experience and it's a magical one. So our median flight that we're flying at about 88 kilometers per hour, um, just over 50 miles an hour, uh, in a straight line generally. So it's high speed. Like our median Delivery times are 2 minutes 50 seconds now from when we take off to when it lands in your garden. So it's pretty cool.

Speaker A: And it would be great if you could frame that in terms of the current state of drone delivery, different operators and different drone makers are using different systems, um, and they have different types of drones. Why did you choose the solution and what's unique to Mana, um, versus the competition here?

Speaker D: Yeah, so you'll see there's two main architectural form factors. There's fixed wing, uh, which is very efficient in forward flight and cruise, but difficult in high winds, um, when you're hovering, uh, and for positional control. And then there's copter, which is what we are. So we're an octocopter, so eight motors, uh, 16 rotors. And it's very good for control in very strong winds. And we built a business in Ireland, which is probably the worst place in the world to build a drone delivery industry. Very, very difficult weather conditions with winds, uh, rain and all sorts of turbulence around, wind shear around buildings, all that stuff. So we built it for the hardest, not just weather, but climate. So the suburban density in Ireland is very, very dense. It's much denser than US density. So we have to deliver into tighter spaces, smaller gardens. As I said, trampolines is a key thing. So that architecture lets us do that. And much more importantly, we get eight deliveries per hour per aircraft. And I wouldn't say anything bad about any other player in the industry because they're all great companies, but we get four times the productivity out of an aircraft that anyone else get. And that's because we have a hot swap architecture where we have a cargo bay, which is like a very large box that the cargo goes into and that then slides into the aircraft. And that cargo bay is also the battery, so it's fully charged, so we don't have to wait for the aircraft to charge. Which, you know, uh, on one hand sounds like it's not really a problem. But actually, real estate is a constraint for this industry. So the amount of foot, the physical footprint we might have on the roof of a restaurant or the car park of a restaurant is a factor, and it's a constraint. Constraining factors. We regularly get over 50 deliveries an hour at a one small location with just seven aircraft out of one location. We do that routinely. So having that hot swap architecture is absolutely critical to getting that throughput. And we talk in the same terms as a low cost airline. We talk in terms of turnaround time. Southwest Airlines will talk about turnaround time. Ryanair will talk about turnaround time. Well, our Turnaround time is 35 seconds from aircraft landing to being back up in the air when we're at peak, when we're fully loaded, 35 seconds for the aircraft to be back, productive flying and making money. And that's absolutely critical. So when we think about what's important as we scale this industry, it isn't tech per se. Tech is the enabler.

Speaker C: Mhm.

Speaker D: But it's the operation and the architecture that actually give you the positive contribution, economics that count. And ultimately the winners. I mean, everyone's going to be winner in this industry because we're all going to be scaling into a completely open market. But the winners with very strong economics is much more interesting. And that's where we see ourselves a leader.

Speaker C: And then when you talk about the operations, so it goes from the restaurant to your bay to delivery, I'm sure it doesn't go as smoothly every single time. And it'd be great maybe to hear what are, uh, the pain points or headaches that an onlooker might think about when you think about drone delivery. But it's really a pain point for, for the industry and maybe something that needs to be be addressed to really scale for perishables.

Speaker D: So for restaurants, at peak times, restaurants become clogged and the kitchen is overutilized and so delays will creep in. And so delays in the restaurant side simply usually end up in just consumers waiting for their food and being a little bit angry, but they get their food. In our case, we're mapping on a slots from an airline. So we have eight slots per hour per aircraft, with seven aircraft in a busy base, 50, 60 slots an hour. If restaurants all back up at the same time, suddenly we've got aircraft that may not be busy even though they should be, and then you've got a glut of orders coming in. So managing that queuing process and irregular operations, same thing as an airline would say, is absolutely critical. So knowing having the data that we do of running really high throughput operation for now six years tells us what we need in terms of buffering extra capacity over normal expected things. It's like running an airline. And so you take the training wheels off, you do high volume operations, thousands of deliveries a day out of one location. Teaches you when you're building an infrastructure like this on top of shaky sand or shaky foundations in the restaurant industry, you have to be able to deal with that to be able to scale. So that's one. And that's hard learning. That takes years, I think, of operational practice. And then just outside of that, for us, the most important thing is maintenance on the aircraft. So there's no point having a cool aircraft that does cool things that you have to maintain and inspect every day, because then you just build the maintenance organization that the cost just dwarfs the revenue. So in our case now we've moved to monthly inspection on our aircraft. So getting the hardware and the software systems, the diagnostic systems, you know, ready for an operation that just the aircraft just always work and you don't have an army of maintenance engineers looking after them, uh, is difficult. And so hardware is famously difficult. But hardware that really is flying in harsh environments, that just doesn't need to be inspected regularly is critical. And that takes time. So as I keep saying, it's taken us seven or eight years to get to the point where we can really scale. Well, um, and you really can't accelerate that. You need real world testing for that. So it's a million small things on the hardware side.

Speaker A: And you mentioned regulation opening up. You feel like you're at a point now where it's ready to scale. So what is the gating factor today for our listeners? When should they expect drone delivery in their hometown?

Speaker D: Tier one, Tier two cities, I would say, can rely on having drone delivery within the next two to three years across the United States. Um, for us, we're only in two cities this year, Tulsa and, uh, Dallas Fort Worth. For our friends in Google, for example, they're going to seven new cities. Um, there's a bunch of plans from all of us to scale. So I would think over the next three to five years, the entire of North America, all suburbs in North America of material size, will be getting drone delivery from multiple operators at the same time. So it won't be Mana only coming to, you know, your city. It'll be Mana and Amazon and Google and probably Zipline all going at the same time, powering different locations to the same households. So there will be meshes created by all of us in all of the cities. But it's not some futuristic thing. I mean, everyone will remember Jeff Bezos 15 years ago announcing drone delivery, and you're all going to get it next year. That was obviously little optimistic. Um, but we do have strong regulations now in the United States around, particularly Part 108, regulations that really digitize the American airspace, the low altitude economy. And you have an administration that's very strongly pro this technology and these platforms. So I think it's Greenfield now. It's wide open with almost zero friction. The next level of constraint, if that's the right word, will be local cities deciding their own strategies for this technology, how they want to see in terms of zoning and permitting and those kinds of things. And right now anyway, we see nothing but welcomes from all of the states. We get inbounds from pretty much every US state to bring the technology there. Number of cities are leading the way. Dallas, um, Fort Worth is probably the one city in the United States that really took the lead here. Our own HQ in the United States would be Tulsa, Oklahoma, where I'm living now. Um, but generally we've seen nothing but cities welcoming the technology because of the jobs growth, because of the economic factor around it. And I think that's going to continue.

Speaker C: And then just maybe to, to add to that question, does traffic management become extremely important then across the different drone operators, if you're all operating in the same region and how should viewers think about that, uh, how interoperable maybe your system is versus some of the other players in the industry?

Speaker D: Yeah, I think we're all forced to the same table there because we all have to share the same airspace. So there are standards called UTM and uh, New Space in Europe, UTM in the United States and inter USS that are open standards and actually largely defined by NASA in the early days. And then now all of the operators ourselves, Google, Zipline, Amazon, we've all sat down the table and ironed out the detail of this and we've flown in the same airspace as Google and Dallas. Also in the UK we've shared airspace and you see a number of operators flying in the same airspace simply connecting their utms together. UTM is Unmanned Traffic Management System. It's simply a set of protocols for allocating the airspace. So key thing is you don't need air traffic control and you don't need people. It's fully digitized and it's all instant. So when we, when our aircraft wants to take off, it allocates the airspace itself. It gets all the other operators in the airspace to acknowledge that flight and it's ready to take off a millisecond later. So it's hyper efficient and software defined. And so that's a mature part of the industry already.

Speaker C: And then uh, maybe to focus on like what you're delivering. Mana historically has really honed in on food delivery. Some other players do grocery and some others then also do medical. It would be great maybe for you to dimension to the viewers what food delivery comes with that versus grocery and having to go into the store and maybe medical and why you think food delivery is important to prioritize for manna.

Speaker D: Yeah, and that's the key thing. We're prioritizing it, we're not doing it exclusively. We see ourselves as a mesh logistics platform for a city delivering everything from everyone to everywhere. So we don't constrain ourselves to food. But food is the obvious easy first use case, simply because the economics of food delivery are already very challenging for the aggregators, for the restaurant, for the delivery driver. It's just tough. It's single digit, if not negative margin businesses that want to grow but can't. I mean, DoorDash are doing two and a half billion deliveries a year. Uber Eats are not doing far off 2 billion deliveries a year. And all of these are really difficult to scale using gig economy labor with a poor product experience, generally because it's just hard to make work. So we've chosen food delivery because it's very well documented, it's very well defined, it's well consolidated. There's only really four companies in the world doing it. And we know today there's 6 billion deliveries from those four players and there's probably 3 or 4 billion in the United States alone. So it's very clear that we're solving a huge problem of unit economics and customer experience for a huge market in one cohesive market, the United States. So it's an obvious one. And then if you think about what we really are, we're an infrastructure play. So we're an infrastructure for a city to move goods around. And infrastructure needs utilization to pay for the upfront costs. And the best utilization you'll get is from high frequency products, which is food delivery. Then we see ourselves concurrently. We've already done hospital deliveries, medicine deliveries, uh, defibrillator deliveries, hardware store. We already do all of this. You'll only ever hear us really talking about food because it resonates with the household, it's meaningful for the everyday person, the family at home that are already either delivery users or they become delivery users because drone delivery is so good. But in the end, don't look at us as a food delivery drone delivery company. We're a city based infrastructure to move goods around and create jobs for the local economy.

Speaker A: I'd be curious to ask you more about the medical opportunity here because that's where we saw some of the first drone deliveries happen. And at least from um, a price perspective, I mean couriers can run upwards of $100 per delivery compared with app based delivery. Just um, much lower prices there. And from what we see, food delivery makes sense. It's the largest addressable market out of the three that you've mentioned. But yeah, I would just be curious to hear more about the other two, medical and grocery. Um, is it just pure market size or is it this nice app infrastructure that exists in the food delivery space that really differentiates it?

Speaker D: Yeah, I mean, I think like there's one hospital partner that we've flown for in Dublin that are spending 16 million euros, about nearly $20 million a year on taxis, moving samples from emergency to labs for, you know, quick answers. So that's such a no brainer that shouldn't be happening. Right. So we could do that with our eyes closed, fly off the roof of the hospital, do 300 or 400 deliveries a day and obviously reduce that cost, but save lives while we're doing it. Like our flights across the entire city by six and a half minutes across the entire city. Um, so the samples will be getting to the lab quicker, the results will be coming back to the emergency ward more quickly. So it's a really, really societally beneficial use of the technology. So we love it and we're absolutely going to do it. But that's an easy add on to the existing infrastructure. Don't forget, because we're essentially an airline, we need a city to have a maintenance space. All of the overhead that comes with opening up a city, we want to be spread across the use cases. So we love the health sector and we're going to do it. Uh, parcels we're going to do as well, and in a different way. Sorry, parcels are a different kind of thing to think about and a surprising thing to think about because if you think about food delivery, it's very peaky. Right. Weekends are three times the demand of weekdays and then you got that three or four hours in the evening that are twice the volume of the day. So your utilization curve, curve on the aircraft and all the infrastructure that goes towards those aircraft is very poor. Right. So you need to think about utilization. And for us, we could send, you know, with idle aircraft and that idle time, we can send parcels during that time because parcels have this acceptable latency because they're generally not perishable. So if you think about that, we could be a, uh, centralized delivery network for parcels in the morning, in the afternoon, and then those aircraft reposition themselves to the perishable product locations in the evening. That's what we already do today in Europe. So we love parcels because our marginal cost is next to nothing. Uh, on a flight, it's the cost of the energy for the battery, which is about 10 cents, the depreciation on the aircraft. We use our aircraft for 75,000 flights in their lifetime. So our marginal Cost per flight is very low. So therefore we think about parcels as a really strong improvement to utilization. That's going to be very useful for us. So you got parcels. Medical grocery we like as well. And again, it's a very different one. And we started off doing grocery with Tesco, which is the Walmart of UK and Ireland. And we like it. But what we saw was that frequency of grocery orders is more like frequency of convenience store orders than grocery store orders. So groceries kind of weekly, convenience stores slightly more frequent. But the cost of the basket of a grocery delivery by drone, because we can carry less volume and less weight. So the cost is far less than what it would be for a restaurant delivery. And famously in grocery margin is very low too. So it's more like you're augmenting convenience deliveries out of a grocery store than you're actually doing some new type of product. So we like it also. We like it because it's spread 12 hours across the day. So we operate seven days, 12 hours a day right now, sorry, 13 hours a day now. And, and groceries are there. The inefficiencies in groceries though, the big negatives about groceries are the margin in groceries already low.

Speaker C: Mhm.

Speaker D: Right. So it's a famously low margin business. So therefore the consumer has to pay for the drone delivery ultimately. And while today we're not free, we will get drone delivery to you know, a very, very like sub dollar one cost to the consumer. So grocery, the consumer has to pay, the consumer is less frequent. And then the part that we really, you know, with in grocery is the pick time and the turnaround time of that purchase. So if you look at a big grocery store in North America, you could be looking at 30 to 40,000 SKUs. And to find that product, to get that product from the shelf and to get it to the drone is really significant. It could be 10 to 15 minutes to do that and that's going to involve a human to do that. So we don't like those types of problems. We would like to map grocery delivery network R1 onto more of a dark store type business model. So, you know, a thousand to two thousand SKUs, easily fulfilled, easily picked, located right beside the aircraft. And we've done that. That's what we did in Europe, for example, with DoorDash. In Finland, we operated out of their dark stores. And therefore the pick time and time to dispatch, as we call it, which is the time from the order to when the aircraft takes off was sub five minutes, still quite high. And you know, for us, like our Median received a dispatch time is about one, it's just over one minute. So we get the products in the air in about a minute. So we actually think differently than a lot of players in that we are already a low cost airline and we're scaling a low cost airline, a hyper granular low cost airline. And I think we're very disciplined about that. Uh, so we are doing and we will continue to do grocery but it's, it's, it's less interesting than the problem we're solving with perishable food.

Speaker C: And um, you mentioned earlier about kind of food delivery being dominated by a handful of aggregators and I know you're partnered with some of them. But longer term, how do you think the competitive landscapes look for some of the aggregators? Um, I know for example DoorDash is developing uh, the rolling robot in house and Uber is maybe taking more of the partnering approach. But it'd be great to hear kind of overall view of aggregators positioning in the changing world.

Speaker D: There's definitely twin peaks in the United States. You got two players with two very different strategies. Neither of them are wrong. I mean Stanley and Tony at DoorDash, amazing founders spend uh, some time with them building their own stack on robotics and built and doing the same in drones. And nothing wrong with that. Um, Uber, if you look, if you look at Uber Waymo, you know that, that approach I see parallels with us and our relationship with them across their other industries are doing this in. I think there's no wrong answer today. I think all of them are well served to get into drone delivery, to start delighting their customers with drone delivery. And we'll figure it all out later. That's certainly the mode we're in. And we work with both DoorDash and Uber Eats in North America. We also work with delivery hero Talabad in the Middle east, just eat in UK and Ireland. So we're working with them all and they're all rightfully learning what this means to the future, what this means to the average household, what behavior goes, goes to what customer satisfaction looks like. There's a lot of things you don't see in row based delivery that are the ugly facts of it. So fraud is a big thing. Items go missing, consumers say things are missing from their, their basket drivers might help themselves to some of the fries or whatever. There's a lot of, you know, difficult things that generate gigantic reconciliation problems in the finance team. And you're scaling a huge finance team, the fraud team and all the these things that go away with drone delivery. So you know, aside from the simple, you know the simple, we're just cheaper than road based delivery. There's a lot more that, that makes the industry a lot better with drone delivery. So they're all learning. But I think the ones certainly that are learning the most are the American ones. UberEat. So China Meituan, the biggest road delivery company in the world, are doing this like crazy, doing drone delivery all over China. But outside of China, it's now North America in the lead and I think driven largely by ourselves and our other drone delivery, uh, friends. And then UberEats and DoorDash are 100% embracing it. And I think, you know, when we certainly when we scale, we'll be scaling with those two and that's very exciting for us. But they're both very different, uh, companies I think, I don't think they've crystallized their strategies fully. I think they're just still in learn mode as are we. For us, we don't see ourselves as an aggregator supplier nor a direct supplier, nor anything. We just want to bring a mesh network to every city in the USA as fast as possible so everyone can use it and we want to drive that cost down to near zero marginal cost per delivery. That's what we're focused on. And whoever wants to play with us can play with us. So I didn't mention earlier on in your use cases, Tasha, you missed this one, coffee delivery. And if all we did was coffee delivery by drone, uh, we'd be done. It's massive category for uh, drone delivery to power those coffee brands to reach consumers directly. Coca Cola, one of our biggest investors. So those D2C connections of big brands and households can now be fully digital. So if you think about that, you know, Coca Cola for example that we work with in Ireland a lot, they have a direct advertising relationship and presence with their, with the households that are within our operating area. But we fulfill. So that's a whole other form of distribution for large brands that is not being considered here. So not just aggregators, it's brand direct. Um, there's going to be interesting hybrids I think emerging once we really get throttled up with drone delivery.

Speaker A: And you know, I'd love to talk more about kind of the journey here, you know, with drone delivery we've heard and really with any logistics operation it's like ah, a lot of the hard part is just kind of making the song work of everything moving smoothly to actually get the item to the end consumer. And you know, autonomous flight, uh, like compared to autonomous cars. It's almost like, well, the flight, you know, that might be kind of the easy part. Of course it's not easy. There's regulation involved. I'm oversimplifying it, but yeah, I'd love to talk more about like the, the sort of journey for the package, um, to, or whatever you have, uh, to get in the drone. And um, you all are working on some creative solutions on how to make that journey better.

Speaker D: The ugly truth, as we call it, Tasha, the bit that people don't see. So it's not just flying robots. Uh, the big unanswered question is, well, how does the product get from the restaurant to the drone? And so if I work backwards first from what is the problem we're solving? Who are we solving it for? So aggregators have aggregation clues in the word, right? So they're the real product that aggregators are providing. The consumer is choice. Right? So a consumer opens one of the aggregator apps, they're getting 150 restaurants, so they have choice. So their conversion rate is high and their CAC is lower. They get loyal customers, right? So yes, we're solving logistics and we're solving the cost and we're solving the experience, but we're not solving choice unless we power all of those restaurants. And what works very well for drone delivery because it's in infrastructure play is volume. So therefore our tendency is to work with high volume players. The big brands, like for example in Dublin, kfc, Burger King, all those big players that can give us 200, 300 deliveries a day. But if you think about the aggregators product, it's actually choice. It isn't just those narrow few brands, uh, it's a hundred others. So therefore when we bring drone delivery to a city, we have to be able to provide the smaller guy access to the service just as we can the big guy. So what that means is we aggregate supply by having a drone base close to a cluster of businesses, be they restaurants, hardware store, whatever, bookstore, everything in between, pharmacy. And so that generally means we're going to be in strip malls or we're going to be in car parks of clusters of restaurants. But we still haven't solved for how do we get the product from the restaurant to the drone. And today we do that with runners, otherwise known as human beings. And that's ugly, right? We make it work, but it's our biggest cost in our unit costs. Even though we're profitable on a per flight basis, we still have to hire armies of these people, uh, to do this and that. It's not Scalable, we don't like it, it's highly automated. We know we can automate that. So for us we use ground robots. And it's kind of ironic that we're a mode that competes with ground robots because we're flying robots. But actually, yeah, truth is really, drone delivery has to power choice. That's the first thing, right? You have to be able to aggregate that long or, sorry, the medium tail of choice in any given city. So therefore you have to solve the last 200 meters or 300 meters or yards for this audience. Ah. And so we solve that with ground robots. So we've built our own ground robot stack and we haven't introduced it yet, but we will introduce it in Tulsa as part of our growth there. And so those ground robots will do the work of picking the product up at restaurants and then bringing them to the drone base, which might only be 100, 200 meters away. But again, the other thing you don't see is that travel, right, that, that 100 meters or 200 meters, you know, is quite efficient. You can do a lot of those journeys and you can optimize them if you're at high volume. So it's, you know, it's doable. But the real problem is it isn't the traveling, it's the waiting.

Speaker C: Yeah.

Speaker D: So in a, in a, in a premium burger restaurant, you know, 7:00pm on a Saturday night, they're full, the kitchen is full, and the last thing they want is a delivery driver hanging around their restaurant, right? And the burger's not ready, so they'll keep the delivery drivers waiting there, 15, 20 minutes, half an hour in some cases. And that just ruins our business model. It's just not, it's not something you want to scale. It's something that's out of our control. So actually what, you know, what robots do really well is they just wait. It costs you nothing. They just sit there, Right. And the utilization of the robot doesn't matter because you think about robot in cost terms, in the depreciation on the robot over time, over a number of cycles, right. So we optimize that with these ground robots that will simply wait at the restaurant, pick the product up and bring it to the drone base. And that means we don't need runners, which means that we can power choice. And that means we can be really efficient with really large drone bases, close to a cluster of businesses that we can support with the ground based robots. They go hand in hand. It's a big surprise.

Speaker C: Maybe if I can ask like a higher level Question you mentioned about like the reconciliations for fraud and um, introducing this kind of first mile robotic solution and how does MANA use AI and large language models and you know, agentic workflows to not only maybe enhance productivity but also cut costs? Because we see it in a lot of the companies that we monitor and they give great use examples. It would be great maybe to hear how Mana, uh, does it. And I mean given since you've been around since 2018 with Mana. So how it's changed over.

Speaker D: Well, the great thing is we've a lot of data. By the way, it's 400,000 flights now, not 300,000. You know, that's very important. So AI is, I'm a programmer by the way, that's my trade. Still the biggest coder in Mana, uh, so obviously we get a free ride now with you know, engineering and all that stuff. But the way. So one of the painful things we learned about doing food delivery is 1 in 10, nearly 1 in 10 orders are wrong.

Speaker C: Oh, right. Okay.

Speaker D: So the restaurant just forgets the sauce. Forgets the sauce. They didn't put the lid on properly. The lid spilled. Something spilled or whatever. So it's just, it's just really, it's guaranteed to be unreliable. Right. So therefore there's an interaction with the, with a lot of consumers, uh, one way or the other you're going to be interacting with them because the restaurant's going to get something wrong. And that's just the inevitable inevitability of what they're doing. So that conversation that, you know, keeping the customer happy, that then, you know, it's a marketplace conversation, you're talking to consumer at the same time you're talking to the restaurant or you're talking to the aggregator that's talking to that restaurant. We automate all that so we're completely hands free. You don't see any of it.

Speaker C: Okay.

Speaker D: And like that means that we can now enable a really horrifically ugly business abstract over that and keep the consumer super happy. And it's really straightforward. The actual reconciliation, the financial reconciliation, not so easy. We haven't done that with AI yet. There's definitely a lot of automation to happen there. But it does get ugly when the consumer's so unhappy that there's a refund issued. And that happens frequently. And so the ownership of that refund is critical. Right. So that's why we like our aggregator relationships. Because they've already scaled that. They already know what that looks like. They've got their rules. They're probably moving not to AI, but automation for a lot of those things already. But we still have to have that conversation with a consumer and generally we have to have the conversation with the restaurant too. Um, so it plays a major role for us in scaling the direct part of our business.

Speaker C: And then for like disruptive innovation in general, we always say slowly, slowly, all at once. And it seems like drone delivery is starting to hit that all at once point. Oh, it'd be great to get your thoughts on maybe where you see the industry in five years, 10 years, 15 years down the line. And what's like an ideal drone delivery network look like to Bobby.

Speaker D: Those periods, I think in five years time, I think every city in the USA will have it.

Speaker C: Mhm.

Speaker D: I think Europe's slightly behind on that. Um, I think certainly every city in the USA will have it. The degree to which we've covered every household with the products won't be fully there, but it'll be largely there and it'll be the same players. There's not going to be any new players in this space. It's going to be, uh, the existing players that are there. And I think then. So if you think about population coverage, that's the first kind of, you know, goal for all of us. It's city by city, you know, population coverage, which means within the city, how many of those suburban households are we able to reach? And then you think about depth of coverage. So depth of coverage, meaning for those households, how much choice are we flying those households? How much of relevancy to them are we able to fly to them? So that's kind of the Amazon problem, right? I think there, that's more of a five to 10 years thing where we'll get to 60, 70% of the suburban population. There's 92 million suburban homes in the USA. I think the bulk of them will have some form of drone delivery. And I think all their staples they'll be getting, the only way they'll be getting coffee is by drone. Um, and staples like beverages, things like that, those will be because they're easy to fulfill, you know, they're highly transactional and um, they're kind of commodities as well. Ah, I think everybody like that'll be kind of 90 to 100% coverage of whatever percentage of households we get to. And then what I mean by depth of coverage is can they also get their pharmacy there? Can they get their hardware store? Can they get their, you know, when you think about the number of products Amazon deliver, you know, Amazon are always going to be there, of course, but how many of those local businesses that are near to them.

Speaker C: Yeah.

Speaker D: That have the product that they need. The bookstore, for example, that they might just order from Amazon, that book. Well, actually we could get the book there in five minutes from a local vendor. So what I mean by going deep is when we go to a city, when we go to a suburb, of all those local businesses there, how many of those local businesses can we bring into the drone delivery network? I think that's a longer term play. Um, and it'll, it'll be, it'll form, it'd be a hybrid of dark stores, dark kitchens, strip malls, and then dedicated fulfillment centers purely for drone delivery. It'll be a hybrid of all Those that takes 10 years to play out.

Speaker A: And so what do you think the, what's the limit here? Um, for drone delivery, what do you think the total addressable market is? We've talked in the past about, uh, how this could change consumer shopping habits. And you get your groceries once a week. I know this is your focus more on food delivery over groceries, but you could imagine ordering more frequently. We see more e commerce penetration. So, yeah, what's the limit for drones?

Speaker D: It's incalculable.

Speaker C: The sky's the limit.

Speaker D: I mean, I never heard that one. Look, it's so exciting to see the effect this product has on a household. I mean, first of all, it's the circus coming to town right there. The whole street are out, uh, for the first delivery. Every household. It's a stampede to use our service. When we roll it out to a new town, we can't keep up with demand. It's literally a stampede. We have to manage access to the system so that we can keep everybody happy. That's the first point. Then the virality of the product. We're flying over 600, 700 houses with every flight. And at nighttime we're doing that with flashing green and red lights like Santa Claus almost. Uh, and then we're permanently doing that. So the awareness is constantly being driven that we're there. You might be hungry. Did you not know? You're hungry? Look, there's someone else getting food delivery, whatever. So that's the first part. The second part is the product is so exceptionally better than the alternative. The alternative is getting into your car and going down to local restaurant or going, going into the local bookshop or getting some from something from Amazon the day after. Whatever. And like, our delivery times are so good and the quality of goods delivered are so much better that we see customers that you would never see ever using Row based delivery. They don't like the uncertainty, they don't like the delay, they don't want soggy fries, they don't want a stranger showing up at their door. So what we see is a much stronger mix of families using the service than um, the typical road delivery type customer. So the fact that we see that we see so much more appetite for ordering, for delivery than you would normally see with row based delivery. So you take the existing $350 billion food delivery market, I don't know, multiply by 10. Based on the data we're seeing, the adoption rates, we're seeing over over 80% adoption rates in some of the areas that we're in, um, and the frequency rates far in excess of road based delivery. Um, and why wouldn't they be? We're operating with an NPS of 70 to 80 constantly for the last six years. Um, it's just so much better. And mode physics is on our side. So, so what is the size of the market? You could take just food delivery and multiply it by some number. That number I don't have, but it's some big number. You could take parcel delivery, do the same thing because the speed of delivery and the quality and reliability of delivery is so much better. And you could extend that to every use case, every reason a household would need to get into their car and spend an hour of their lives going out to get something they don't need to do with fully digitized airspace. Um, so the size of the market is obviously in the trillions of dollars. But the job creation and the empowerment of local businesses in local suburban communities to thrive and to do so much better, it's just incalculable. Um, and it's the start of dynasty. It's nascent, right? Collectively the industry will do about 10 million deliveries deploy capacity this year. So we see. And um, last year was less than a million. So you can see it's the start. And that start has been enabled through policy, not by technology. The technology has been there for years. It's enabled by policy and maturity of a handful of players like ourselves and our friends at Amazon, Google and Zipline. So we are at the start of this, uh, uh, the cliche of the hockey stick. It's definitely the there. And I think you're going to see a lot of capital coming into the space. And that capital is pretty much all going to go to operational scaling rather than R and D. The R and D phase is pretty complete now. We're all going to improve in terms of aircraft and ancillary technologies, but it's now a business in growth mode or an industry in growth mode. So look, uh, we'll see. But certainly the anecdotal evidence is that this is going to be significantly strong uplift to existing demand and consumer behavior will go in a different way than it's gone so far. In other words, I think people are going to rely a lot more on getting products delivered to their houses than they did before because of the reliability and predictability of the service over road based delivery.

Speaker A: You mentioned you're bringing down cost, right? App delivery today people are paying double the price of the meal to get it delivered to their door.

Speaker D: Uh, yeah, like the premium, 60, 50, 60% premium and basket in the United States. And actually we know we're going to get drone delivery to virtually free. So I mean it's going to be. Your marginal cost is going to be the energy of the flight, which is for us today about 10 cents and then depreciation, hardware, all that stuff. But your marginal cost where today it costs nearly $10 to make a road based delivery happen with a, with a person in a car and we're going to get that cost to sub $0.50. And just think about the impact that's going to have on the consumer's pocket and also the impact that's going to have on free flow of trade between local businesses and those households.

Speaker C: Great. So Bobby, you're at the cusp of a multi trillion dollar opportunity. You're at the hockey stick of the adoption curve and aiming to get it from the $10 plus to sub 50 cents. So very exciting time for Mana and the drone delivery space in general. And thanks for coming onto our podcast today.

Speaker D: Thanks for having me. Pleasure.

Speaker B: ARK believes that the information presented is accurate and was obtained from sources that ARK believes to be reliable. However, ARK does not guarantee the accuracy or completeness of any information and such information may be subject to change without notice from arc. Historical results are not indications of future results. Certain of the statements contained in this podcast may be statements of future expectations and other forward looking statements that are based on ARC's current views and assumptions and involve known and unknown risks and uncertainties that could could cause actual results, performance or events to differ materially from those expressed or implied in such statements.