Drone Startups Expect Funding Boost From New Rules
India currently has 76 drone startups, and its drone market is expected to be just short of $1 billion by 2020.
India, the largest importer of unmanned aerial vehicles for defence, allowed their use in commercial mapping, surveys and photography. Startups operating in the nascent industry hope that would boost investor interest.
The nation has about close to 76 drone startups, compared with 681 in the U.S. and 129 in China, according to data shared by Tracxn. Most of them provide software services like using artificial intelligence and image processing algorithms to build aerial imagery, and less than a dozen actually make drones. Only 10 have been able to raise funds—$27 million in all.
“It is a very investment driven business,” said Vipul Singh, co-founder of Aarav Unmanned Systems, a maker/service provider which has been able to raise capital.
Our external funding is less than $1 million, a very small investment when it comes to scaling businesses. People with the same calibre have raised $10-20 million globally and are now doing things at scale.Vipul Singh, Co-founder, Aarav Unmanned Systems
India’s drone market is expected to be just short of $1 billion by 2020, as per a report titled, Make In India for Unmanned Aircraft systems by EY and industry chamber Federation of Indian Chambers of Commerce and Industry. That compares with $100 billion estimate for the global market by 2020, according to Goldman Sachs.
To be sure, the country contributed 22 percent—the highest globally— to drone imports between 1985 and 2014, according to a report by Stockholm International Peace Research Institute, an independent global conflict-research institute. There could be about 40,000 UAVs in India, Singh estimates, priced from Rs 60,000 to about Rs 2.5 lakh.
Singh said a growth-level drone startup would need $5-10 million. So far in India, the single highest investment in the industry has been $10 million in Ideaforge by Infosys Ltd., according to Crunchbase. That compares with $700 million in funding China’s DJI, the world’s largest drone maker, has raised, data with Tracxn showed. Its single largest round has been $500 million.
Bootstrapped Quidich Innovation Labs is among the startups that have struggled to tap investors.
“We have been trying to raise funds from a long time and 60-70 percent backed out because of the uncertainty in regulations,” Rahat Kulshreshtha, chief executive officer of the firm, said over the phone. “The growth trajectory would have been different by now had we raised some capital.”
From surveys in hazardous areas like mining and oil exploration to mapping land for infrastructure projects, unmanned aerial devices can be used by businesses. Railways can deploy them to identify faults on tracks accurately, construction and mobile tower firms can inspect and assess work by drone imagery, farmers can survey crops, geologists can explore unchartered territory and government can deploy them for relief work.
Vignesh Santhanam, president of Drone Federation of India, said lack of clarity in rules was the impediment as the use of drones was restricted to defence and security. With the policy in place, he said private enterprises “which have been hesitant so far are going to pick up in a big way”.
Agreed Sheetal Bahl, managing director of early-stage investment firm GrowX Ventures. Her firm, which backed Aarav Unmanned Systems, is among the few that made investments. “There has been a fair amount of interest among the investor community over the applications and technology, and with policy in place, it is set to pick up.”
No Pizza Delivery By Drones For Now
The rules, which will come into force on Dec. 1, will enable drones to be used for purposes like mapping, surveying, and photography. Initially, drones will be permitted to operate only along the visual line-of-sight during the day, with a maximum altitude of 400 feet, according to rules framed by the Directorate General of Civil Aviation.
- Drones classified as nano (less than or equal to 250 grams), micro (250 grams to 2 kg), small (2 kg to 25 kg), medium (25 kg to 150 kg), and large (greater than 150 kg).
- Nano drones do not require to be registered for identification or permissions on the Digital Sky platform if flown under 50 feet.
- Other than nano drones flying under 50 feet, the rest need to obtain Unique Identification Number from DGCA.
- Unmanned Aircraft Operator Permit is also required for drone operators, except for nano-drones operating below 50 feet and micro-drones operating below 200 feet.
- The ministry has formulated an online Digital Sky Platform for operators to seek permission before undertaking flight.
- Operators to file flight plan at least 24 hours before actual operation and obtain air traffic control clearance from nearest ATC and air defence clearance from the nearest IAF unit.
The regulator has not allowed use of drones online marketplaces such as Amazon, which has filed for a patent in India for exclusive rights on a type of delivery drone, will now have to wait until the regulator tweaks rules. The government has agreed to consider that in future.
As both technology and regulatory approach evolve, the rules will become less stringent and practical, said Anirudh Rastogi, founder at Ikigai Law , a Delhi-based law firm that specializes in new-age technology areas like drones and cryptocurrency. It will take some time for technologies like drone delivery and drone taxi to take off in India, he said. “The technology exists but confidence is not there at this time.”