UPS Helps Raise $22M for CyPhy Works Drones

United Parcel Service Inc. is among the investors that have given $22 million to aerial drone startup CyPhy Works Inc. UPS claimed that it is investigating delivery of medications by drones for disaster response, and CyPhy Works said the investment will help it commercialize its tethered PARC drone. However, the funding could position the strategic partners as rivals to Amazon.com Inc.’s work on drone package delivery.

In addition to the UPS Strategic Enterprise Fund, the Series B funding came from Bessemer Venture Partners, Draper Nexus, General Catalyst Partners, Lux Capital, and Motorola Solutions Venture Capital. Motorola previously invested in Danvers, Mass.-based CyPhy and is giving the drone maker access to public-safety and Asian markets.

CyPhy Works previously received $3.5 million in investment from Draper Nexus and raised nearly $900,000 in the Kickstarter campaign for its LVL 1 unmanned aerial vehicle (UAV). The untethered drone uses geofencing for safety and electronic image stabilization rather than a bulky, breakdown-prone camera gimbal.

The LVL 1 is intended to be relatively affordable for consumers and business users. Crowdfunding supporters could get the ruggedized LVL 1 at $500, and the eventual price may be higher when it is available for retail next year.

Commercializing PARC

The latest investment will help CyPhy Works commercialize its tethered Persistent Aerial Reconnaissance and Communications (PARC) system, said CEO Helen Greiner. The company will be hiring engineering, sales, marketing, and customer-support staffers.

Greiner, an MIT graduate who helped develop iRobot Corp.’s Roomba, added that the funding will help “accelerate adoption of drones into public safety, construction, agriculture, journalism, mining, defense, and other fields.”

The U.S. military and law enforcement agencies have contracted for PARC, which can fly up to 500 feet for as long as 100 hours at a time, for communications and surveillance.

“It’s more like a near-earth satellite than a drone,” Greiner told Fortune. “So we’ve gone a different way than the rest of the industry.”

PARC isn’t capable of carrying large payloads, but UPS said it is interested in learning more about drones. As a strategic partner of CyPhy Works, UPS said it would like to use untethered UAVs to deliver supplies in disaster-response situations.

Neither UPS nor Greiner would confirm that CyPhy is working on regular package delivery to rival Amazon. “I’m going to have to let you use your imagination on that one,” she said.

Drone deliveries are increasingly possible, Greiner told Tech Crunch last month.

“From a technical point of view, we can do it, [but] it will take regulatory and cultural changes,” she said. “The FAA is right to not allow it today, but more experimentation would be great for the community. [The FAA] has signaled they are open to changing the rules if we can prove it is safe.”

California Governor Jerry Brown recently vetoed a bill that would have restricted drone operation beneath a certain altitude.

On the drone front, CyPhy Works faces competition from China-based Shenzen Dajiang Innovation Technology Inc. (DJI), France-based Parrot SA, and Berkeley, Calif.-based 3D Robotics Inc., among others.

Nor is Amazon the only business looking at robots for deliveries. Ride-sharing app company Uber Technologies Inc., which is conducting self-driving vehicle research, said it is expanding its delivery service from New York to Chicago and San Francisco.

The drone market is expected to grow from $639.9 million last year to $1.2 billion by 2020, according to BCC Research.