Dive Brief:

• Flirtey, the drone startup which already has demonstrated its delivery capabilities in partnership with 7-Eleven, has raised $16 million in Series A funding, a round led by its seed investors Menlo Ventures and Qualcomm Ventures, according to TechCrunch.

• The funding comes after Flirtey raised $120,000 in seed funding in Oct. 2015. The Reno, NV company also participated in the Y Combinator accelerator program.

• Menlo Ventures Managing Director Mark A. Siegel said that his firm invested in Flirtey in particular because it’s already leading the drone delivery sector and has thus far successfully navigated emerging drone regulatory requirements. “People will be very surprised when they find out real this is,” he told TechCrunch. “The regulatory environment will benefit those companies with most flight hours and safest track records.”

Dive Insight:

Flirtey may have been one of the most interesting new names to emerge in retail in 2016, even though it's not a retailer. When it worked with 7-Eleven to carry out the first live drone delivery involving a customer in the U.S., the convenience store retailer may have gotten more of the attention, but it was Flirtey that did much of the hard work, including earning the necessary Federal Aviation Administration approval for the project.

Flirtey's early success probably has surprised many in the sector who were expecting bigger names like Amazon or Google to achieve such early market milestones. Those companies and others were disappointed when the FAA acknowledged that it wouldn't have a fully body of drone delivery regulations for a while, but Flirtey quickly showed that drone companies can still work productively with regulators to advance work on pilot projects.

However, its next trick will be a bit harder to perform. After a difficult 2016 in the drone delivery space, 2017 is shaping up to be a year when more retail drone delivery projects start making more progress. That means Flirtey will have more competition to deal with, not only from the likes of Amazon (which suddenly is collecting a lot of drone delivery patents) but also from companies like Matternet that may compete with Flirtey for the attention of retailers looking for a drone partner.

Drone delivery hopefuls also may be more focused than they were last year as they tried to sort out what was happening on the regulatory front. What that all adds up to is an environment in which Flirtey is going to need more money to help it grow and to help it distinguish itself from the crowd. $16 million is a nice start.