Parallel Flight Technologies is offering equity at an eye-popping $175 million valuation. Companies that raise at such steep valuations so early on have usually achieved a great deal of traction. Parallel Flight Technologies is not in that category. The company has a number of impressive grants and partnerships with government agencies and leading wildfire fighting vendors, as well as $60 million in letters of intent (LOIs) for hopeful future revenue. But it’s unclear whether or not the LOIs are binding. The company is still pre-revenue, and its product has not hit the commercial market yet. Parallel Flight Technologies has spent years and almost $8 million of fundraised capital to develop its drones. $175 million is simply too high of a valuation for a company with so little concrete traction.

Parallel Flight Technologies’ initial focus is the wildfire fighting market. While that market is high impact, it is relatively small. The market for wildfire-fighting aircraft was just $2.4 billion in 2021, with a slow compound annual growth rate of 2.7% expected over the next five years. Wildfire spending beyond aircraft isn’t much larger. The US government spent more than $3 billion fighting wildfires in 2018. (Granted, that number has likely increased as fire seasons continue to worsen.) 

Parallel Flight Technologies will have much better market prospects when it expands its focus to industries beyond firefighting. For example, the drone logistics and transportation market is valued at $11.2 billion in 2022, with a promising expected compound annual growth rate of 21% over the next five years. With Parallel Flight Technologies’ obvious advantages over traditional drones that can only carry small payloads, the company seems well positioned to eat up market share for logistics contracts. 

All in all, Parallel Flight Technologies is focused on a relatively narrow market at the moment, but it has a strong outlook for expansion to additional verticals. The drone industry has good long-term potential to revolutionize a wide variety of industries, and Parallel Flight Technologies’ high-payload aircraft could lead the way. 

Parallel Flight Technologies was founded by Joshua Resnick, an experienced electrical and mechanical engineer. Resnick started his career as a self-employed engineer in the state of Alaska, where he built hybrid diesel electric systems for marine and stationary power installations. After more than seven years of these projects, Resnick moved to California to join Tesla as a senior electrical engineer. During his last three years at Tesla, he focused on Tesla’s semi-truck vehicle line. It was during Resnick’s time in California that he was personally affected by horrific wildfires, which inspired him to start Parallel Flight Technologies. 

The company was co-founded by engineers David Adams and Bobby Hulter. Adams, Parallel Flight Technologies’ director of operations, is a Navy submarine unit veteran with nearly 20 years of electrical engineering expertise. Hulter, director of software and controls, also has almost two decades of electrical engineering experience. The broader Parallel Flight Technologies team includes a number of electrical and mechanical engineers, plus a small number of additional team members in marketing and operations. 

The Parallel Flight Technologies team seems well suited for the task of developing cutting-edge drone technology. Resnick’s experience at Tesla, plus years of expertise creating hybrid diesel electric power systems, is the ideal profile for a CEO in this industry. The company will need to hire more salespeople and businesspeople as the company expands, but its current team is favorable for its current stage of research and development. 

Parallel Flight Technologies’s key selling point is that its aircraft can carry heavy payloads for long periods of time. The company’s Firefly prototype model can carry up to 100 pounds and fly for more than two hours. The vast majority of drones are capable of carrying only a few pounds of payload and must be constantly recharged. That makes them ill-suited for important missions to carry firefighting supplies or other important logistics in remote areas. Plus, Parallel Flight Technologies’ drones don’t have to be flown by a live pilot. While live piloting is an option, most missions are likely to be autonomous. 

If Parallel Flight Technologies can introduce its heavy-duty drones to the market, they have the potential to significantly benefit firefighting and other industries. That being said, the company’s key differentiators are mostly hypothetical at this point. The drones are still in the prototype stage. Investors have to place some blind faith in the assumption that Parallel Flight Technologies’ drones will ultimately be as revolutionary as the company claims they will be.

Parallel Flight Technologies is pre-revenue, so its financial performance isn’t impressive. The company did bring in more than $250,000 in grant revenue in 2021 and seemed to win additional grants. But that grant revenue doesn’t come close to covering the company’s costs. Like many technology companies that conduct a lot of research and development, Parallel Flight Technologies has a high burn rate. The company’s net loss was more than $1.2 million in 2021. 

Financials aside, Parallel Flight Technologies does seem to be gaining traction in research and partnerships. The company has received grants from NASA, the National Science Foundation, and the US Department of Agriculture. It has also partnered with a variety of relevant drone and firefighting companies for wide-ranging tests of firefighting materials, autonomous flight missions, and even non-wildfire-related missions, including one to protect endangered species on islands. 

Perhaps most importantly, Parallel Flight Technologies is making progress toward generating real revenue from clients. The company has more than 30 letters of intent (LOIs), which would result in $60 million in revenue if sales agreements were executed. These LOIs are speculative, so the $60 million isn’t guaranteed (and it’s not clear when that revenue might begin to come in), but they are a strong signal that Parallel Flight Technologies will have interested buyers when the time comes.

Parallel Flight Technologies is a high-risk investment, similar to most companies that involve advanced technology that takes years of research and development to bring to market. Parallel Flight Technologies hasn’t generated any revenue yet (not counting grants), and it doesn’t offer a firm timeline for bringing its Firefly drone to market. Therefore, investors should consider sizable product, financial, and funding risks. If the company hits snags during late-stage product development and testing, that could have negative financial implications, which could trigger an urgent need for more capital.

Parallel Flight Technologies has made a huge jump in valuation from $28 million in its last round to $175 million in the current round. Since its last raise in mid-2021, Parallel Flight Technologies has secured a number of additional grants and partnerships, ranging from an agreement with LIFT Aircraft for the implementation of hybrid technology to a controlled burn exploration with the United States Department of Agriculture. The company has continued testing its core drone technology and can now run successful autonomous flights with 100-pound payloads. Perhaps most importantly, the company has generated more than 30 letters of intent for a total of $60 million in revenue in the sales pipeline, the strongest step yet toward bringing in real income. But at this point, most of Parallel Flight Technologies’ progress has been speculative and theoretical. It has yet to demonstrate enough concrete progress to justify its steep 6.25x valuation increase. That’s why the company has been downgraded from its Deal to Watch rating (based on its 2020-2021 raise) to a Neutral Deal.

Parallel Flight Technologies falls into the category of a moonshot investment opportunity. If all goes well and the product is successful, it could revolutionize a number of industries and make a major impact on human lives. However, there’s a strong chance that Parallel Flight Technologies will fail to bring its product to market and struggle to justify its sky-high valuation. 

The company has generated $60 million worth of letters of intent (LOIs), but those LOIs do not represent sales commitments. All of that revenue is contingent upon continued development and testing of Parallel Flight Technologies’ drone technology, which is extremely complex and subject to any number of issues. While the company’s progress in securing government funding and research partnerships is impressive, that traction isn’t doing anything to solve the company’s high capital burn rate. At a $175 million valuation, Parallel Flight Technologies urgently needs to start generating revenue.

Parallel Flight Technologies seems to have developed game-changing drone technology that could not only generate significant revenue from a wide variety of industries but could also have a tangible impact on human lives. High-payload, long-distance drones could reduce the destructive effects of wildfires, make it easier for healthcare professionals to provide treatment to remote populations, further conservation efforts for endangered species, and conduct any number of other impactful missions. 

The company is well positioned because it seeks to offer highly differentiated technology in a market with good long-term growth prospects. It helps that Parallel Flight Technologies is led by a highly experienced mechanical and electrical engineer who used to work at Tesla, a company known for developing revolutionary technology. If Parallel Flight Technologies can achieve even a sliver of Tesla’s success (emulating Tesla’s successful shift from heavy research and development to sudden and skyrocketing revenue generation), it could be a very lucrative investment.

Parallel Flight Technologies is a drone company building aircraft that fly with a hybrid electric and diesel engine, unlocking the ability to carry heavy payloads for hours at a time. These drones could revolutionize firefighting, healthcare for remote communities, and other lifesaving missions. They could also generate a lot of revenue, if Parallel Flight Technologies’ current pipeline of $60 million in letters of interest is any indication. With a strong founding team and good traction with government partnerships, Parallel Flight Technologies could become a moonshot investment. 

But investors should note that Parallel Flight Technologies has increased its valuation by more than 6x in less than a year, and it hasn’t achieved the traction to justify that jump. A $175 million valuation is simply too high for a company that still hasn’t produced any revenue. The company’s current market opportunity isn’t large, although that could be solved if it expands to different industries. There are a wide variety of risks that could seriously impede the company’s ability to launch its product, and continued high burn with no revenue could be fatal. Therefore, Parallel Flight Technologies has been rated a Neutral Deal. 

For questions regarding the KingsCrowd analyst report or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written on February 10, 2022.