Unmanned aerial vehicles (UAVs), or drones, are transforming how businesses in a wide range of industries operate. Initially considered something exclusively for military purposes, the drone industry has branched out, developing a multitude of commercial applications, including in oil & gas, mining, agriculture, retail, delivery services and health care. Many companies are realizing the unlimited ways drones can be used, such as data acquisition, aerial photography, remote sensing, mapping and surveying, disaster risk management, environmental monitoring and logistics and operations.
Bennett Jones' Canada-Israel Initiative partnered with Aviram Hazak, M&A partner of the prominent Israeli law firm Herzog, Fox and Neeman to host the latest Maple and Honey Forum webinar on "Unmanned Aerial Vehicles (Drones): Applications and Investment and Collaboration Opportunities between Canada and Israel".
Meeting Canada's and Israel's Security and Commercial Needs
Israel has been a global leader in drone development for decades, and in recent years Canada has also produced several remarkable drone companies. Some of these Canadian companies focus on military applications, such as AerialX Drone Solutions Inc., a Vancouver, B.C. based counter-drone solutions company founded by Israelis. AerialX is creating ways UAVs can be used to defend against airborne threats. Their DroneBullet is designed to intercept and eliminate hostile drones. Another example is L3Harris, located in Mirabel, Quebec, which has teamed with Israel Aerospace Industries (IAI) to offer IAI's Heron TP aircraft for Canada's RPAS (formerly JUSTAS) program.
Meanwhile, other Canadian companies are focused on oil & gas, mining and various industrial applications, offering technologies replacing outdated data-collecting methods. SkyX Ltd., a Woodbridge, Ontario based company, also founded by an Israeli, is making drones an integral part of verifying the integrity of pipelines, monitoring them for corrosion and other external damage, as well as illegal tapping.
Product delivery logistics is another market being served by Canadian drone innovators. At the forefront is Drone Delivery Canada (TSXV:FLT; OTC:TAKOF), a leader in drone product delivery and drone-based logistics systems. DDC has demonstrated how drones can be used to reduce costs in healthcare supply delivery, airport cargo logistics and delivery to remote locations. Israeli company Gadfin Aero-Logistics Systems also serves the delivery market, developing long-range drones for the medical and time-critical deliveries market. Gadfin has received investment from Alberta Green Ventures.
Making a Home in Canada for Israeli Drone Companies
For Israeli drone companies, Canada has a number of advantages as a base of operations. There are thousands of kilometers of open space to test products, and extreme cold temperatures in Northern Canada enable drone companies to develop their drones for operation under harsh conditions. Tax incentives, in the form of Canada's Scientific Research and Experimental Development (SR&ED) credits, offer financial assistance to Israeli companies willing to carry out R&D work in Canada. In addition, National Research Council Canada recently announced the Canada – Israel 2020-21 collaborative industrial research and development call for proposals, which will provide funding for Canadian and Israeli companies partnering to develop technology-based products and services. Combined with Canada's flexible drone regulatory regime and ready access to defence, oil & gas, mining and agriculture sectors, Canada is an ideal place for Israeli companies to grow.
Canada-Israel Cooperation and Investment Opportunities
According to Drone Industry Insights, the rapidly growing drone market is expected to reach almost $43 billion in 2025 globally, up from $22.5 billion in 2020, and sales of drones are expected to exceed 2 million units in five years. Quite simply, drones are becoming "must haves" in a wide range of industries. Our panel speakers shared a number of insights on investment activities in this area.
Henry Shiner, Managing Director of Iberica Investments Pte Ltd., regards the drone industry as one with a huge potential for investment. He notes, in particular, the unprecedented capability of drones in data gathering, as well as its contributions to the virtual gaming and leisure spaces, property management and to police and the military. Shiner adds that the Canada-Israel Free Trade Agreement (CIFTA) has furthered investment and partnerships, and he sees an alignment of interests between Canada and Israel that can make it easy to facilitate entry into each other's markets.
According to Rami Hadar, Managing Director of Claridge Israel, a major investment firm in Israel, with deep roots in Canada, Claridge is on the lookout for investment in the drone industry. They have already made a sizable investment in D-Fend Solutions, an Israeli defense drone company.
Shachar Familia, senior advisor of Canaccord Genuity, says that drone companies will attract investment if they can adapt their products in ways that significantly improve their clients' businesses. According to Familia, the agriculture sector, in particular, is becoming increasingly reliant on drones and is expected to adopt drones as a large-scale data acquisition solution.
IAI is competing in a multi-billion dollar Canadian Department of National Defense tender to grow Canadian capabilities and capacity in the drone sector, which includes procurement of aircraft and associated equipment, munitions, training, materials support and a period of in-service support. According to Eitan Arad, a Director of Marketing and Sales at IAI, in order to meet the requirements of the tender, IAI is seeking to partner with Canadian companies in the following areas: (a) aviation manufacturing; (b) metal work, machining, sheet metal, surface treatments, heat treatments; (c) electrical wiring systems; (d) hydraulics (such as landing gear and other components); (e) companies that provide final assembly, such as system integration, mechanical or electrical avionics, system checks and engine run-ups; and (f) quantum technologies and machine learning.
Special thanks to our panel speakers: (i) Col.(res.) Eitan Arad – Director of Marketing and Sales, Israel Aerospace Industries, Military Aircraft Division; (ii) Ziv Avni – Head of North America, EU & Australia UAS Business Unit of Elbit Systems Ltd.; (iii) Shachar Familia – Senior Advisor, Canaccord Genuity; (iv) Rami Hadar – Managing Director, Claridge Israel; (v) Didi Horn – Founder and CEO, SkyX Ltd.; (vi) Noam Kenig – Founder and CEO, AerialX Drone Solutions Inc.; (vii) Eyal Regev – Founder and CEO, Gadfin Aero-Logistics Systems; (viii) Aviv Shapira – Co-founder and CEO, XTEND Reality Expansion Ltd.; and (ix) Henry Shiner – Managing Director, Iberica Investments Pte Ltd.
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