By Brent Banda
Zenon Dragan held the remote control gently in his hands, eyes fixed on the drone hovering over the crowd. But something caught his attention and he couldn’t help but look. It was a man with green face paint and a silver tinfoil cap. “Another Martian,” thought Dragan. “Typical.”
Dragan was in Roswell, New Mexico. He was at a UFO convention and was being paid to fly his drone around the booths. The year was 1998, and this was likely the world’s first indoor aerial robot with a video camera. It was a silver helium-filled blimp the shape of a stereotypical UFO.
Although Dragan might not have fully foreseen it at the time, he would go on to build a drone manufacturing company that would span over two decades, employ fifteen people, and hold sixteen patents, with eight more patents pending. His business has developed some of the most innovative drone products in the world. One of his drones is even featured in the Smithsonian National Air and Space Museum.
What is a drone?
Drones are flying robots that can be remotely controlled or fly autonomously through a software-controlled flight plan.
They are typically multi-rotor helicopters or fixed-wing airplanes.
MODEL AIRPLANES AND HELIUM BALLOONS
Dragan grew up with a love for model airplanes assembled using balsawood kits. He had some talent, and eventually started selling them. “I’d make virtually no money,” remembers Dragan, “because it took so many hours to build.”
While still in grade eight, Dragan started working at a local hobby shop. He loved the industry and liked the work, but seemed to struggle with a vision for a career. He had a craftsman’s personality and made Ukrainian Easter eggs, selling them from Odessa Deli, which was his father’s meat shop on 20th Street in Saskatoon. He started a geography program at the University of Saskatchewan, but it didn’t capture his interest.
“I’m one of those guys who had no idea what I wanted to do for a living. I knew I liked flying machines, but it was unfortunate that I could not make a good living with my passion.”
How did this young man with entrepreneurial tendencies, a gift for working with his hands, and a passion for building small aircraft get started on the path to building some of the most sophisticated drones in the world today? “It was an accident,” comments Dragan. “I had ordered these surplus fan units from a model airplane magazine. And there was a helium balloon left over from a birthday party at my house. So I taped it on, modified the fan, and started flying it around.”
Dragan called his invention the Flying Saucer and immediately began selling the product. In 1996, he and a friend started a business called Plantraco.
The young entrepreneurs rented a booth in Circle Park Mall across from Radio Shack. They flew their saucer around and got a lot of attention. They even sold some units.
Realizing he needed to build the business, Dragan visited the public library to learn about marketing. The book he pulled off the shelf was How to Market a Product for Under $500! by Jeffrey Dobkin.
IT WAS AN ACCIDENT. I HAD ORDERED THESE SURPLUS FAN UNITS FROM A MODEL AIRPLANE MAGAZINE. AND THERE WAS A HELIUM BALLOON LEFT OVER FROM A BIRTHDAY PARTY AT MY HOUSE. SO I TAPED IT ON, MODIFIED THE FAN, AND STARTED FLYING IT AROUND.
He liked the book so much he bought a copy. Dragan speaks animatedly about that moment as a turning point in his entrepreneurial career. “I still have the book. It’s the most valuable book I have ever read.”
The premise of the book is to tell a compelling story and use press releases to get exposure for virtually no money. Dragan gave it a try. He wrote a press release and sent it with a photo to the New Products Editor at Popular Science magazine. Popular Science featured the product. In fact, the approach worked with several magazines. Sales took off.
Timing worked out well. The partners had just launched their first website and started receiving phone calls from all over the world. “We must have sold at least 10,000 of these flying saucers. I was going to university full time and our revenue was over $1 million per year.”
“People would get our phone number from these promotions or the website and call me from all around the world. Australia, England, wherever. Any time of day. I had an Apple Newton that was connected to my cell phone through a tether cord. I’d be on the phone and use the Newton to fill out this order form, which had their name and address and what they wanted to buy, such as the 36-inch flying saucer and three extra batteries. This would go to our server and generate the order with a shipping label. I had an internal system for placing electronic orders back in 1996, which was before online ordering was a thing.”
Business was brisk. But Dragan was still in startup mode. “I’d pull up to the local drug store that had a postal outlet. I’d have my Ford Explorer packed with boxes that I needed to ship all around the world. Then I’d drive home, load up again, and drive back. Those Canada Post workers just shook their heads at me.”
The business was showing promise, but like many young entrepreneurs the partners were on different career paths and did not see eye to eye. They went their separate ways.
DRAGANFLY IS LAUNCHED
With newfound confidence that he could sell something to people on the other side of the world, Dragan started Draganfly Innovations in 1998. He knew customers wanted products with additional functionality and began experimenting with more complicated designs. He redesigned the flying saucer and began selling his first quad-rotor helicopter, called Draganflyer. The company was a pioneer in the drone industry.
Dragan continued to send out press releases and received a lot of attention. “A one-page ad in Popular Science back then was US$120,000. Well, we’ve had lots of one-page stories written about us in Popular Science, Popular Mechanics, GQ, The New York Times, and literally hundreds of other magazines – some with circulation up to seven million copies.” The world’s largest mail order magazine, Hammacher Schlemmer, placed the Draganflyer on the cover of its catalogue. Draganfly was flexible enough to reach customers through multiple channels, selling through a traditional reseller and at the same time selling directly to customers through its own website.
Dragan got married only six months before launching Draganfly. He and his wife, Christine, both worked in the business, based in their 450 square foot house on Coy Avenue in Saskatoon. Dragan would build product in the garage and basement of the house.
Things were going well. The couple moved into a larger house on Ewart Avenue. Life was busy, and Dragan describes how growth can cause problems. “We hired our first employee. We would work in our basement, but it was getting busy. We hired another staff member. We had lots of trucks from FedEx, UPS, and Canada Post stopping by. The neighbours didn’t complain, but my wife had had enough when our house was no longer a home. We had courier drivers always running up and down our stairs and asking to use our washroom. So in 2001 I bought a building.”
The building Dragan refers to is still the facility that Draganfly Innovations operates from today. It’s a single-storey brick building on St. George Avenue in Saskatoon. With a proper manufacturing facility and office space, Dragan was ready for growth. He hired additional staff.
In the early 2000s, Draganfly Innovations was finding its place in the business world. These were the early days of the internet. Online business models were not yet proven, consumers were highly skeptical, and many of the major online retail platforms were in their infancy. Dragan saw opportunity, experimented, and adapted. His press release campaign directed people to Draganfly’s website. He sold hobby parts through his own online retail store, called RCToys.com, and also through the large online retailers.
“We used to sell tons of stuff through eBay and Amazon. I have crazy stories about how these sites worked. There were these tiny remote-control helicopters that were a fad at the time, and I bought replacement blades and rotors from China by the tens of thousands. People bought them from us. We were selling between $10,000 and $14,000 a day in these parts. I’ve never seen anything like it since because eventually Amazon’s algorithms caught up with how sellers were using their site and now when a seller is doing well Amazon will find a way to control the product. If we had a certain battery charger that we’d sell fifty of in one month, soon after Amazon would be selling the product itself. They would buy direct from the manufacturer and there’s no way we’d be able to get under their price. It’s a lot harder now for entrepreneurs, because Amazon controls the price unless you have a unique product.”
Draganfly was in growth mode during the early 2000s. The Draganflyer quad-rotor helicopter was a leading-edge product in high demand. The press releases worked well and the company had figured out how to use the internet as a sales platform.
Growth creates challenges, and Dragan has had to work through his fair share. Financing has never been one of his struggles, though, thanks to having saved some of the money from his pre-Draganfly success and to sage advice from one of his advisors. “I had to get an accountant when I incorporated. He told me what he sees when companies borrow money. Something goes wrong and they lose their business. Right up to the day I sold the business I never borrowed a dime of money. I had a line of credit for about a year but we never used it, so we shut it down.”
Dragan is realistic about his approach to financing when the industry was still in its infancy. “We were spending a lot of money on research and development, but that was all self-funded through sales. It sounds great, but it limits your growth. We had an amazing product and if we had pushed harder we might have had a much larger company.”
CUSTOMER-FOCUSED PRODUCT INNOVATION
From 1999 to 2005, the company sold roughly 8,000 Draganflyer helicopters. Draganfly grew because it was willing to adjust the product around what people wanted. “We had constant feedback and saw what people were using it for. So we used that customer information to improve the product.”
They installed a video camera, and then improved the way the camera was mounted so it was stabilized. Each version was slightly more sophisticated. It was a premium product. The fifth iteration sold for roughly US$1,000.
Always in touch with consumer trends, Draganfly got into the electric airplane market as the fixed-wing drone trend emerged. The company sold lithium batteries from 2004 to 2016, and at one point was the largest distributor of lithium batteries in Canada and among the top five in the US.
In 2006, competitors had caught up and were selling a product similar to the Draganflyer. Drone manufacturers traditionally created consumer-grade products because hobbyists were the main market in the early years. Gradually, these products were being purchased by police departments and companies for commercial applications. These customers demanded more sophisticated technology and were willing to pay for higher performance.
Dragan decided to focus on these customers with more complex needs. He undertook a two-year research and development process to launch a new flagship helicopter. It contained several new features, including a folding airframe for easy storage. But one dramatic innovation would be considered a game-changer for the industry. Draganfly hired engineers and adopted technology such as an accelerometer, a gyroscope, a barometric pressure sensor, GPS, and all the software to integrate those systems in order to build a full-blown autopilot system. This new model was the Draganflyer X6. It launched in 2008, selling for US$25,000. The X6 won Popular Science’s Best of What’s New 2008 award in the Aviation and Space category.
The drone was now a sophisticated product with tangible value in a variety of use cases. Police departments stored drones in the trunks of patrol cars to assist in surveillance. Park rangers used drones to quickly investigate
potential wildfires. Industrial field service companies used drones to inspect equipment that was difficult to access. Scientists took water samples from the same location in a lake over a period of time by relying on the drone’s programmed flight plan.
AFTER 21 YEARS IN BUSINESS, DRAGANFLY IS THE LONGEST-RUNNING MANUFACTURER OF MULTI-ROTOR DRONES IN THE WORLD.
Much of the drone’s value is in automating the data collection process. Draganfly’s strength is innovating in ways that provide versatility to how data is collected. The current model is the Draganflyer Commander, which sells for US$40,000; nearly all units are customized to some degree for unique situations. Walking through Draganfly’s premises today, you see engineers and sales staff, cubicles and offices, 3D printers and a CNC mill, workbenches, and secure areas to accommodate requirements for International Traffic in Arms Regulations (ITAR) related to military technologies. It’s a craftsman’s workplace.
EVOLUTIONSo how does Draganfly maintain this level of innovation? You have to consider the context of how this company has evolved over time. After 21 years in business, Draganfly is the longest-running manufacturer of multi-rotor drones in the world. This is an industry where competitors have come and gone, and not just scrappy startups working from garages. An example is Airware, a San Francisco–based startup with US$118 million in financing, which recently went bankrupt. And GoPro, famous for its camera used in action photography, exited the drone business in 2019 citing the highly competitive market.
The key to Draganfly’s track record, Dragan explains, is its ability to think outside the box while still understanding what is actually possible. “It’s fun to develop a product that in five years you might be able to use once the technology catches up, but how do you make money in the meantime? People tend to have faith that a product will be ready sooner than it ever is. You have to be realistic about what’s achievable within six months.”
Dragan goes on to credit his team. The core of the company’s staff has been with the business for over ten years. These are talented people, each with more years of experience in the drone industry than most competitors have been in business.
When pressed about what the company could have done differently to manage its growth, Dragan pauses. He’s so used to looking at the future it seems like the past is an unfamiliar place. “We were not good at mass production and I don’t think we were good at managing our distributors to the point where they could grow.”
He has a point. The market for drones and multi-rotor helicopters, in fact, has grown far beyond what this company can serve. Chinese competitors have taken over the consumer market and create products to meet less sophisticated needs. Clearly, this does not bother Dragan. A report by Goldman Sachs estimates that the size of the drone market will be US$100 billion in 2020.
Military use is estimated at 70% of this market: drones provide a safe, cheaper, and more effective alternative to human military surveillance. Other industries adopting drones include construction, agriculture, police, fire, and mining. They all have special use cases where tremendous value is created through custom solutions. Draganfly is well-suited to serve these markets.
In 2015, Dragan was contacted by a California tech firm about selling the business. It wasn’t the first time he had been approached, but the timing was right to exit the business. Drones were viewed as a growth industry and the investors recognized the value of a profitable company with multiple patents and a proven product line. Dragan liked the investors’ vision and their proposal that he continue to run the business as an employee. Dragan sold the company.
As often happens when a business is guided by new owners, Draganfly has diversified into alternative revenue streams. A major focus for the company now is integration, where Draganfly adapts its own and also other manufacturers’ drones to suit a custom application. One local example helps researchers at the University of Saskatchewan address global food security. Draganfly has dual-mounted a 100 megapixel camera with a five-band multispectral camera to provide a more objective and efficient process for crop mapping.
The company is open to new ideas, as Dragan explains. “Flying equipment is complicated and heavily regulated. We diversified and got into ground-based robots.” Draganfly considered unique situations, such as the limitations of current robots used by bomb squads. “Robots have a hard time climbing stairs. So we literally reinvented the wheel. Why does a wheel have to be round? We have now patented a folding wheel system that allows the robot to climb stairs.”
The company has certainly experienced a lot in two decades. But when asked about the source of his passion for the business, Dragan considers a much bigger picture. “We’re focused on the product, but we’re changing the world. We created the first aerial robot that saved someone’s life. It happened right here in Saskatchewan, when an injured man wandered away after a car accident. We encouraged law enforcement to use the product for accident reconstruction, not surveillance, and sure enough that was adopted. All that comes out of this factory.”
“Sure, we grew, but we’re not perfect. I’m not perfect,” Dragan explains. “As an entrepreneur, I’m horrible at managing people.”
The interesting thing about this comment is how it’s received by staff. As Dragan speaks these words, a staff member in the room breaks out in a wide grin and playfully looks over at his boss. They share a moment and it’s clear there is a strong rapport between Dragan and his staff. You can see it when Dragan walks through the facility. People tease him, and he teases back. There are jokes but a sense of mutual respect. Dragan is a bit unconventional in how he manages his staff, but he’s built a strong team that has been able to evolve and remain relevant in a highly competitive industry.
First published in the June 2019 edition of The Business Advisor.