The Chinese startup that is behind KFC’s recent drone deliveries in Hangzhou aims to revolutionize the country’s food takeout market.

Ordering food online in China is easy and convenient—One click and your cuisine can arrive within 30 minutes. Now, Hangzhou-based startup Antwork wants to improve it further by using drones instead of delivery drivers.

The backstory: Antwork wants to build low-altitude airspace logistics networks in urban areas that are capable of replacing human labor and cutting costs in China’s multi-billion food delivery and courier markets.

  • Antwork uses drones and autonomous vehicles to provide food and package delivery services in urban areas. The company aims to set up different sites within a city to collect packages from shippers or deliver them to customers, and uses drones to connect these sites.
  • The company is valued at RMB 300 million (around $42.3 million) following its RMB 30 million Series A+ funding led by Panda Capital with support from Unity Ventures, one of its early backers.
  • Antwork was co-founded in 2015 by Zhao Liang and Zhang Lei, who both attended Beijing University of Aeronautics and Astronautics. Zhang holds a Ph.D. in aircraft and avionics. 
  • The company is headquartered in Hangzhou with offices in Beijing and Shanghai.

Unique selling point: Antwork is the first Chinese company to pass the Specific Operations Risk Assessment (SORA), the Civil Aviation Administration of China’s multi-stage process of risk evaluation for certain unmanned aircraft operations. The certification means that Antwork can conduct urban parcel delivery using drones, co-founder and chief operating officer Zhao told TechNode.

  • The temporary approval issued by regulators in July allows Antwork’s drone delivery networks to operate in Hangzhou for one year. After that, the company could obtain formal approvals, which would allow it to expand services to other cities, said Zhao.
  • The cost of delivering packages through Antwork’s drone logistics network is RMB 2 per kilometer at the moment, according to Zhao. He added that the cost could fall as the technology develops and the scale of its network expands.

“We are the first company to obtain approvals to conduct drone delivery in crowded metropolitan areas…It took us from January through July to complete all of the assessment processes from the CAAC, and they were very cautious and strict. This also proves that our technology is recognized by the authorities and is advanced.”

— Zhao Liang

The investors: Apart from Panda Capital and Unity Ventures, the company’s other backers include Gobi Partners, Sequoia Capital China, and Tisiwi. It has closed three funding rounds since 2016, while the amounts for the first two deals were not disclosed.

  • Unity Ventures, a Beijing-based venture capital firm led by a Baidu veteran Shaw Wang, has participated in all three funding rounds

Present condition: Antwork has already started some commercial operations in Hangzhou, where it is working with fast-food chain Kentucky Fried Chicken to deliver food orders by drone, Zhao told TechNode.

  • The company’s other partners include coffee chain Starbucks, state-owned courier China Post, and e-commerce company Suning.
  • The company has around 40 employees, and 80% of them are in research and development, said Zhao.

The landscape: Other players in China’s drone logistics market include hardware maker Ehang and food delivery services Meituan and

  • Guangzhou-based Ehang released its first logistics drone, the Tianying, last year. The company partnered with German postal giant DHL Express in May to launch a drone delivery solution that provides parcel deliveries in Dongguan, Guangdong province.
  • Meituan and both have been testing their drone food delivery solutions in recent years.
  • Antwork’s businesses also face many regulatory obstacles. For example, Beijing, one of China’s most populous cities, doesn’t allow civilian drones to fly in most parts of its airspace. Zhao, however, believes that the regulations will move forward in step with the development of technology.

Prospects: According to Zhao, Antwork aims to eventually become an urban air mobility (UAM) provider, meaning that it will be able to move not only goods but also people by air.

  • The global UAM market will hit $1.5 trillion by 2040 with China becoming the largest market, according to a report from investment bank Morgan Stanley.
  • The sky is less complicated than the ground, so it’s easier to realize autonomous driving in the sky, said Zhao. “Our ongoing goal is to build an autonomous low-altitude airspace logistics network.”

“With the increase in labor costs, machines will finally replace human workers in many industries in the future. Drones have advantages over human beings in terms of speed and efficiency, so they can do better in the logistics sector, where the market is very profitable.”

— Xie Zhenliang, managing director of Unity Ventures, told TechNode.

Writing about semiconductors and telecommunications.

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