November 28, 2016

Toronto-based Deveron UAS, drone data service that operates in precision ag, has been collecting data on local farms for the past two years. The startup uses drones to gather on-demand, near real-time field level data to help farmers bolster yields and reduce costs. Now Deveron UAS plans to expand its technology into Western Canada and the Southern U.S. despite persistent regulatory hurdles and a technology whose impact on the industry has lagged behind expectations.

David MacMillan, Deveron UAS President & CEO, tells GAI News the company wants to be the FedEx of drones. “A farmer who wants data in North America can call Deveron and we will collect the data at any given time,” he says, pointing to the company’s fleet of five pilots that can be expanded in response to demand.

While a farmer can go out and purchase their own drone, data collection is a very difficult and time consuming process. The farmer would have to purchase the drone, sensor, software to process the data, hire a pilot and deal with tricky regulation, particularly in Canada where for instance you’re required to have two people observing a drone in flight.

MacMillan suggests a farmer’s time would be better spent by farming out the collection process and using the results to make better decisions. Deveron UAS’ ace in the hole is co-founder Norm Lamothe, a farmer himself who manages a 500 acre Ontario farm.

“That’s where we get our credibility. Every meeting has Norm’s perspective on this is how we use the technology to benefit farms. A lot of tech companies in agriculture have never seen a soybean. You must understand the cycle to understand where drones are going,” says MacMillan.

ROI

Deveron UAS has dedicated the past year in particular to collecting data across Ontario plus select acres in the United States. The approach so far has been to service the world’s largest farm companies with operations in Ontario, including agriculture coops and crop protection companies, to prove the return on investment (ROI). “They have big R&D and they’re always looking at progressive opportunities. They manage business decisions 10 years at a time,” says MacMillan.

Meanwhile, the individual farmer manages business decisions year-to-year. “At the end of the day, why would Mr. Farmer in Saskatchewan buy our data? How is it making him better off? How can I expect a farmer to pay us before we know quantifiably the ROI is a realistic expectation? But if you can show the individual farmer the ROI, he will use it all day long.”

Though Deveron UAS continues to wait on yield data from the fields, there has been some early success, evidenced by ROIs of both 2:1 and 3:1 in potatoes. “We’ve also reduced the nitrogen being put on the field, which is impacting farmers’ pocketbooks. What we would like to do in 2017 is replicate the same results. We see a lot of opportunity in variable rate corn,” says McMillan.

Deveron UAS is looking toward Western Canada and the Southern U.S. for expansion in 2017.

“Right now we’re in discussions with everybody. This is the buying season and people are doing their planning programs for 2017,” MacMillan explains, adding that details surrounding the expansion should materialize in the coming months.

Precision Ag

Despite their potential, drones in farming remain a nascent market whose growth has been stifled amid an evolving regulatory environment and an industry that has been slow to digitize.

“Drones in agriculture had a false start. Everyone said drones in the global agriculture industry were worth $30 billion. That was the hype. But we’re still a long way from that,” MacMillan says.

Nonetheless, a report published earlier this year by PwC [http://www.pwc.pl/pl/pdf/clarity-from-above-pwc.pdf] attaches a $32.4 billion value on “the addressable market of drone powered solutions in agriculture.”

MacMillan will be the first to say, however, that drone technology in and of itself is one piece to a much larger puzzle. “Drones are not the future replacement in agriculture. They’re another tool in the box. They still require boots on the ground for collaboration,” he says. This collaboration, however, can yield powerful results.

For instance, MacMillan points to artificial intelligence and machine learning. Once Deveron UAS’ database reflects historical and variability data, the company can identify signatures to help mitigate the spread of diseases, such as white mold. These signatures will help farmers to recognize the conditions under which such diseases occur. “This can be used significantly to help farmers make better decisions,” he says, adding that farmer decisions will be data-driven rather than emotionally driven.

“The future potential is very amazing, but I have to think about the larger data stack,” MacMillan tells GAI News. “Deveron wants to be the leading provider of the drone layer in a larger data stack that drives improvements in the way that people farm.”

Capital Markets

MacMillan is a venture capital veteran, having previously raised $30 million in debt and equity for mining ventures. “I’ve always been entrepreneurial,” he tells GAI News.

His background as a venture capitalist led him and his team to pursue drones as an investment thesis. “There is a really strong business model for recurring revenue. If a farmer uses drone data to make better predictions on crops that are grown every year, presumably there will be a long, profitable relationship between the farmer and the drone person,” he says.

Since MacMillan decided to throw his venture prowess behind Deveron UAS, the company raised $725,000 in its public qualifying transaction, which closed on June 2016, and began trading on the Canadian Securities Exchange.

“A year ago people said ‘good luck.’ Now see how far we’ve come in 12 short months,” says MacMillan, adding that Deveron UAS has more than doubled its market cap from $3 million to $7 million. “We still have a very long way to go but we’re on the right trajectory.”

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Gerelyn Terzo