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Investing In the UAS Business

Nashville attorney James Mackler cautions investors that because the UAS industry is so new and based upon yet-to-be-determined regulations and ever-changing state and local laws, it’s best to know the waters before making the dive.
By Patrick C. Miller | October 01, 2015

How many stories have I read providing a figure from a study saying that the UAS industry will be worth tens of billions of dollars over the next several years? Such stories are bound to make potential investors see dollar signs and look for opportunities in new or proposed UAS businesses.

Nashville attorney James Mackler with the Frost Brown Todd law firm has written an article for the Nashville Business Journal providing advice to those who see the UAS industry as a potential investment opportunity called “Want to invest in drones? Do your homework first.” He cautions that because the industry is so new and based upon yet-to-be-determined regulations and ever-changing state and local laws, it’s best to know the waters before making the dive.

“People are looking for investors for their companies and talking to people who have money, but the people with the money don’t know the first thing about the industry or the laws governing it,” Mackler said. “So they can’t even figure out how to start deciding whether it’s something worth investing in.”

For example, he said what a UAS startup company plans to do might not even be legal because of federal regulations prohibiting certain aspects of the business plan.  

“It can be a pretty big uphill battle for a startup,” he noted. “The venture capitalist might not necessarily be aware of the regulations or what they mean or how to negotiate around them in some cases.”

In contrast to many established business, Mackler explained that the UAS industry is so new and rapidly changing, someone thinking about investing can have difficulty determining whether the business plan is legal. It’s not wise to find out the hard way.

For example, Mackler said someone might plan a business that conducts infrastructure inspections without acknowledging the issue that arises with flying beyond line of sight.

“It doesn’t prohibit you from doing infrastructure inspection, but it’s a real limitation on your ability to do it,” he said. “If the investor isn’t aware of the line of sight limitations, they don’t even know what questions to ask. They don’t know how the person’s either going to work within those limitations or how the person’s going to work to expand those limitations. They don’t even know to talk about it, and yet that’s a critical piece of the business plan.”

The best advice is to work with an attorney with experience in UAS law and regulation.

“If the attorney doesn’t understand the regulations surrounding drones—as well as more general aviation regulations such as airspace compliance, temporary flight restrictions and those sorts of things—they’re not going to get good advice.”