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What Do the New FAA Regulations Actually Mean for Ag Drone Startups?

July 1, 2016

The US Federal Aviation Administration has released its long-awaited final rule governing the use of small UAS devices, more commonly referred to as drones, for commercial purposes. In a press release debuting the new set of regulations, the FAA noted that these new rules could generate over $82 billion for the US economy and lead to more than 100,000 new jobs during the next decade.

Drones startups with a focus on agriculture have attracted some of the biggest venture investment dollars, raising over $350 million in 2015, according to AgFunder’s AgTech Investing Report. And agriculture is expected to take over 80% of the drones market in the near future, according to the Association for Unmanned Vehicle Systems International

The general consensus from various onlookers, outlets, and other interested parties, is that the rules generally mirror the draft versions that the FAA had released in months prior. In other words, there aren’t many surprises in the final rules.

Taking effect on August 2016, the rules allow the commercial operation of drones that weigh less than 55 pounds. Most of the restrictions are geared toward limiting safety risks while ensuring user competency. Pilots must keep the unmanned aircraft within their visual line of sight—thwarting some companies’ dreams of using drones for package delivery. Operations during the dawn and twilight hours are limited to drones equipped with anti-collision lights.

There are height and speed restrictions creating physical limits on where drones can be flown, and operators are prohibited from navigating their pilot-less devices over individuals who are not directly involved in the flight operation. You must be 16 years or older and obtain a remote pilot certification with a small UAS rating, or be directly supervised by someone with a certificate, in order to engage in a commercial drone operation. The certification involves passing an initial aeronautical knowledge test at an FAA-approved test center, or an existing non-student Part 61 pilot certificate.

Drone users can obtain a waiver exempting the operation from some of these restrictions if he or she proves that the mission will be conducted safely.

Although the new rules do not specifically deal with privacy issues and the FAA does not regulate how UAS gather data on people or property, the FAA is taking some steps to address privacy considerations in this area. The FAA strongly encourages all UAS pilots to check local and state laws before gathering information through remote sensing technology or photography. Also, the agency intends to provide drone operators with a set of recommended privacy guidelines during the registration process. They’re also available on the agency’s B4UFly mobile app.

With the regulatory restrictions against commercial operation lifted, one important question remains: what will these new rules actually mean for drone startups, farmers, and agtech investors?

“This is just the very beginning,” Tom Nichols, head of business development at AgEagle, told AgFunderNews. “Our phone calls have certainly increased a lot since the FAA issued the rules.”

AgEagle launched in 2011 when CEO and founder Bret Chilcott started investigating whether drones could be a viable application for agriculture. It was one of the first drone startups to create and market drone-focused products specifically for farmers and agronomists.

Nichols and the rest of the AgEagle team applaud the final rules, describing them as a good balance between allowing commercial usage while ensuring safe operation.

“There were too many unexperienced hobbyists buying quadcopters and thinking they could fly them willy-nilly without any consideration for safety,” he explains.

Although Nichol sees some of the rules as posing slight constraints on using drones in agriculture, he sees this first set of regulations as a good starting point.

“Even though the technology on these small unmanned systems is capable of going way beyond the line of sight, until we get avoidance protection set up on all these devices, it’s going to be a little down the road,” says Nichol. “The point is that we’ve started.”

With the new regulations in place, AgEagle intends to continue focusing on servicing the ag sector and to work with companies like Raven Industries, which became the worldwide exclusive distribution partner for AgEagle in February 2016.

What the regulations really mean in Nichol’s opinion is that the drone industry has reached a level of maturity.

“When you get major ag companies seriously looking at this beyond the initial stage of curiosity, you hit a fad stage. Now, you have this maturing industry where the bigger companies are starting to take a look,” he explains. “This indicates that it will not go away. It will get bigger—I think it will be huge.”

Mike Ritter, founder and CEO of drone sensor and analytics company Slantrange, shares Nichol’s sentiments.

“We’re absolutely thrilled to see the regulations come through as they did and when they did,” Ritter recently told AgFunderNews. The company, which raised a $5 million Series A in April 2016, offers clients sensor-based multispectral imagery and analysis.

Ritter says the company had already started incorporating some of the proposed draft rules in its software programs before the final rules dropped, including the line of sight requirement.

“There have been people sitting on the sidelines who want to use the technology and now that the FAA has given some rules, we are seeing more interest in it,” Ritter explains. “We are ramping up to meet that demand.”

This means stockpiling inventory, getting products out the door, and finding a way to streamline the company’s production model.

Of course, the relaxed restrictions on commercial drone use will likely spur several other companies and entrepreneurs to throw their hats in the drone startup ring putting pressure on companies to differentiate themselves.

“With a lot of new customers coming into the market, there’s a chance to get in front of them as a market leader and to take advantage of the market adoption,” says Ritter. “It’s true; there are a lot of drone companies out there, but there are only a few that do what we do—drone sensors and analytics.”

Nichols agrees that the market may soon feel more crowded. For him, companies will need have effective physical platforms, high-quality sensors, and efficient auto-pilot, and co-pilot capabilities, in order to survive the influx.

Companies will also have to ensure that their products can live up to the tough tasks that farmers and agronomists will put them through. Quality and durability will be important considerations as operators who buy less-rugged models lose their cash after a cheaply made device crashes and breaks.

A soon-to-be-flooded market may not necessarily be a bad thing—provided there are enough farmers, agronomists, and other users who are ready to match the supply with demand. Adoption in agtech has been a tricky subject, with a number of farmers and end-users criticizing entrepreneurs for not spending enough time in the field learning what it’s really like to try and tap away on an iPad during a Midwestern Spring downpour. And while several farmers are willing to assist startups with bridging the adoption gap, some have said that it simply takes up too much of their time.

For others, the learning curve is a bit too steep. Nichol recounts the frequency at which farmers who are otherwise skilled in mechanics, crop cultivation, and operating a high-tech combine shudder at the thought of figuring out how to program, pilot, and operate a drone device.

Take for example a farmer in California who operates a $20 million fresh fruit and vegetable operation. Although she may not have the time to figure out how to fly a drone through the fields and orchards, she may be willing to pay someone a per-acre price to fly her property and produce the images for an agronomist or other application.

Although the FAA’s new regulations have removed some of the restrictions against commercial operations that have hampered sector growth, the real answer to whether drones will one day become an integral part of modern farming probably rests more squarely on whether farmers are willing to spend time learning how to use them.

According to Nichol, the real impact that the FAA’s new regulations will have on the industry is allowing for-hire drone operators to solicit their services to farmers who are too busy to give the technology a test run. This may eventually help bridge the adoption gap for drone technology.

“I think what you will see is that farmers want to see the technology prove itself first. So, they will ‘fly-for-hire’ and then see the benefit it yields. They may then start pricing units and say, ‘Hmm, I’ve got a son in high school or a hired farm hand who is always on his smartphone,’” Nichol speculates. “It’s about whether they want to spend their personal time doing this. They value their time.”

Adoption gap aside the agriculture industry is well-positioned to lead the pack compared to other sectors that have had their eye on commercial drone usage.

“It will be the fastest growing segment of commercialized drones,” says Nichol. “We think every farm will not only have one but maybe two drones. A fixed wing to fly a lot of acreage and a rotary to spot check cattle, water systems, and other things.”

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