The sky is the limit with new policy, but will drone-based startups take off?

Be it agriculture and surveying or surveillance and traffic monitoring, drone tech is here to stay. Industry experts are hopeful that the drone policy will help startups scale and make money.

Dhruv Kubsad, a Mumbai-based high school student, built a drone-based application that could sense methane in garbage dumps. The drone scans dumping grounds and brings to official eyes areas where methane gas could cause fire and spread to surrounding civilian areas. The application was built on Drona Aviation’s PlutoX platform, which allows people to open source drone applications to build a drone-centric community and create use cases for drones in industry.

Youngsters like Dhruv have helped Drona Aviation raise more than $35,000 to manufacture their first set of drones and ship them to users. “We want to build the largest open source community for drone applications,” says Apurv Godbole, founder of Drona Aviation. He says regulations allow drones below the weight category of 250 grams to fly without permission. “I believe this will spark the community’s interest in designing applications that can be used as business ideas in the future,” he says.

Drones were hailed as the next big thing about four years back.

This was led by retail giant Amazon’s announcement that drones would be used for logistics and delivery. Amazon never went beyond the testing phase for this, but inspired many to invest in drone-based business models.

Once the preserve of the military, drones are now widely used in civilian roles such as surveillance, traffic monitoring, search and rescue, firefighting, weather monitoring, agriculture, and videography.

No surprises then that more than 35 drone-based startups emerged. Three years later, only two of them - IdeaForge and Aarav Unmanned Systems - have managed to scale up beyond Rs 4 crore in India. Of the 35 startups, only five are generating more than Rs 20 lakh; the rest are registered but have no revenues to show.

Some of the 35 companies that are doing some work on drones are Aerizone, Aerologiks, Bubblefly and Indrones.

But that does not mean it’s a gloom-and-doom scenario. New companies like VDroneAgro (agriculture) and Drona Aviation (platform for drone applications) can revive the drone story in India and usher in a new age.

It’s imperative to understand what could be behind the scant success and low revenues. YourStory research found:

• Business models were built without paying customers.
• Ideas in consumer entertainment photography did not work.
• Ideas to help farmers with thermal imaging and crop maintenance yet to gain traction as there are no specific business models and everyone is figuring out who pays for the drone services. Whether it is the farmer, the government or the corporate that pays, the business is still being tested.
• Chinese hobby drones flooded the market; the market for indigenous drones died.
• Government regulations did not allow drones to be commercially flown in India - apart from surveying land and photography after necessary permissions.
• Investors did not find companies that had business plans that could go global.

IdeaForge, a drone company incubated in IIT Bombay in 2007, the only company that has been able to scale its business and is close to Rs 38 crore in turnover. It was also one of the few companies that won an investment ($10 million) from IT Services major Infosys. Infosys wants to use IdeaForge’s data collecting techniques from the field and facility management globally.

Ankit Mehta, founder of IdeaForge, had said drones were just a method to collect data, which - when analysed for insights - could be very powerful. IdeaForge serves the Indian military and armed forces and does not disclose its clients. On the other hand, Aarav serves corporate customers.

Aarav Unmanned Systems’ drones can be seen surveying the rural landscape or a mine in villages across Maharashtra or Karnataka. The Bengaluru-based startup has raised an undisclosed round from a clutch of investors, which includes 3One4Capital.

“Corporates are using drones to survey the land before they build a road or create a site for mining operations,” says Vipul Singh, co-founder of Aarav Unmanned Systems. He adds that building a drone is no walk in the park; it involves software programmed to understand the physical world, the tasks it has to capture, the images that have to be analysed, and finally making it available to corporates to make decisions on site.

Companies like Aero360 have been attempting to do the same since 2012 and have clients like Godrej Properties and Ministry of Earth Sciences, Government of India.

The regulation and the opportunity

Traffic in the sky – not counting aircraft - could soon be reality in India as the government has given a strong indication that unmanned aerial vehicles (UAV), or drones, could be used for delivery of ecommerce packages. Drones could be used for commercial delivery by December 2018 if certain permissions are taken from the Indian Air Force.

“Ecommerce has already tasted success in India. The delivery and pickup of goods by drones will boost logistic capabilities and the viability of many-to-many commerce. Facilitating drone delivery will need developing an entirely new logistics support system,” the Civil Aviation Ministry said.

But don’t expect the deliveries to begin anytime soon, keeping in mind the state of the drone startup ecosystem. The industry has had no serious money coming in apart from IdeaForge and Aarav Unmanned System.

The Director General of Civil Aviation in August end announced the policy for drones, which will come into effect from December 1, 2018. The drone industry believes the new policy opens up many avenues for business applications.

Ankit of IdeaForge says: “The fact that regulations have been formalised is a very big step because India is a very security conscious country.” He adds that the policy has created an environment for drone players to scale up their operations despite the enforcement measures.

The policy had active participation from the industry players, who were part of the various sub-committees and provided inputs.

Vipul, of Aarav Unmanned Systems, says, “The release of a very pragmatic regulation is a big relief for the entire Indian drone industry. The implementation of Digital Sky as a single-window channel and no permission, no takeoff as a compliance will lay down the foundation for more complex set of applications like logistics and drone taxis in India.”

Digital Sky

The Digital Sky platform is one of the biggest highlights of the Drone 1.0 policy. It calls for a no-paperwork scenario for all permissions to fly UAVs; it aims for everything to be facilitated through an online app.

The platform will work as a national unmanned traffic management (UTM) platform where for every flight, users will be required to seek permission to fly on a mobile app. The automated process will permit or deny the request instantly. The UTM will operate as a traffic regulator for the drone airspace and will coordinate closely with defence and civilian air traffic controllers so that these flying objects do not stray from their approved aerial paths.

The limitations

However, the first version of the drone policy has also been limiting on various counts, especially with the kind of limitations it has set on operators. For example, the definition of visual line of sight (VLOS) under which drones can operate can be limiting for many players. The regulation states that all flying drones should be visible up to a certain distance or height, and can operate only during daytime.

Industry players felt that some parts of the policy could be heavy-handed, especially when the drone operator has to take multiple permissions or considering the limitations on flying these objects.

Despite this scenario, the drone policy has given a fillip to the civilian usage of UAVs in the B2B and B2C scenarios. The B2C segment now has a legal framework for videography through the use of drones at functions like marriages. In the enterprise segment, the use cases are many - mapping of areas, image capturing for 3D modelling etc.

Ankit, of IdeaForge, says despite the limitations, there is a provision in the regulation which allows for certain exemptions on a case-to-case application. IdeaForge has a significant market share in the defence market; its micro UAV is used by the armed forces and it has 600 UAV units.

Vipul, of Aarav Unmanned Systems, says they have worked with more than 40 government and corporate clients, and claims to have surveyed more than five lakh acres across 200 villages.

“We hope the requirement to take separate permission from Air Traffic Control (ATC), Air Defence Clearance (ADC), and Flight Information Centre (FIC) can also be facilitated through the Digital Sky platform soon for smoother deployment," Vipul says.

V Balakrishnan, Chairman, Exfinity Ventures, a private equity and VC firm, believes people used to be “wary” about investing in drone companies as regulations were not in place. “Now that the government has a policy, it will help drone startups to raise money,” he says.

Balakrishnan feels the adoption of drones will be mainly in the industrial sector, including mining, and oil and gas, and in other areas such as ecommerce. “There’s still some way to go because there are concerns in the areas of security, area of operation, etc,” he adds.

Will the drone policy give a boost to the manufacturing segment in the sector? Currently, a majority of the drones operating in the country are imported from China. The drone policy may encourage people to put their money into manufacturing, but it will need major money to champion the currently absent business models in the drone industry.

Everyone in the sector is asking the same question: Will 2019 be the year of drone-based startups?