Utah's Teal Drones scores $260M defense contract for battlefield drones

SALT LAKE CITY — A five-year journey full of twists and turns for Utah-based Teal Drones came to a landmark conclusion Tuesday when the company, founded by entrepreneur George Matus when he was still a teenager, announced it had secured a U.S. Army contract for small reconnaissance drones that could be worth over $260 million.

While there were signals ahead of the official announcement this week that Teal would emerge victorious in the final round of a multiphase federal contract process that culminated with the little-known Utah company in a head-to-head competition against its much better financed drone development competitor Skydio, Matus sounded both relieved and energized by the news.

"One of my favorite quotes is the one that goes 'be so good they can't ignore you,'" Matus told the Deseret News. "I've never wanted to focus on hype and marketing or the approach of under promising and over delivering. I've always felt strongly that if we built something good, something purposeful, everything else would come. I am super proud of our team and the work we've done to get here."

And the Army decided Teal hit the marks when it comes to good and purposeful in developing the Black Widow drone, a roughly 3½-pound quad copter that has a cruising speed of around 25 mph and can capture high resolution imagery during daylight hours as well as in darkness. Thanks to onboard computing power, and a host of innovations pioneered by Teal, the aircraft has the capability to operate completely on its own, using its camera vision to travel to and from its mission destinations. And it comes equipped with mechanisms to thwart efforts to jam its signals and disable the vehicle, a capability that was successfully field tested against the latest Russian electronic warfare technology.

Matus founded Teal Drones in 2014 when he was 16 years old, and his company developed and launched multiple, high-performance drone models in its early years and had attracted over $20 million in venture backing before being acquired by Red Cat Holdings in an all-stock acquisition deal in 2021. Puerto Rico-based Red Cat raised $60 million in a secondary IPO following the Teal acquisition, capital that would help fuel Teal's research and development efforts as it qualified for a second round of the Army's short range reconnaissance drone contract competition that same year.

While California-based Skydio bested Teal and four other competitors in an earlier phase of the Army's contract process, issues that later arose during field use of Skydio's SRR drone led to another round of competition, one that only included Teal and Skydio to vie for the final contract.

That contract includes an acquisition objective of 5,880 SRR systems over the next five years, with each "system" comprised of two drones and a controller, also developed by Teal. During an investor meeting earlier this week, Matus noted the system price comes in at around $45,000, depending on configuration. At that pricing, Teal's new contract has a potential value of over $260 million over the term of the deal and is well positioned for other prospects. Those include potential drone orders from other branches of the U.S. military, other U.S. government operations like U.S. Customs and Border Protection (which is already using earlier Teal-developed surveillance drones) and even orders from U.S.-allied international state defense organizations.

Black Widows

Red Cat CEO Jeff Thompson noted that battlefield deployment of drones has undergone a seismic shift, one fueled in large part by the military tactics that have been employed since Russia invaded Ukraine in 2022.

"Warfare has undergone a dramatic transformation over the past two years, with a significant shift toward drone technology, exemplified by the SRR Black Widow," Thompson said in a press statement Tuesday. "It is an honor to support the U.S. Army by delivering the Black Widow to our warfighters. We believe this advanced technology will enable the Army to shape the battlefield, save soldiers' lives and serve as a powerful tool in their arsenal. This long-term contract will give us the capability to continue to improve the Black Widow, scale production and improve margins."

While Black Widow represents the third-generation of Teal-developed SRR drones, following the Golden Eagle and Teal 2, Matus said the new craft was designed from the ground up and includes novel new design attributes, including a modular build that allows specific systems to be upgraded without the need for a full redesign.

Matus said while the Black Widow met the Army's lengthy list of technical requirements, he believes Teal's success in securing the contract was driven by a powerful underlying factor unique to his company.

"Let me tell you why I think we won and what was important to the Army," Matus said during the investor town hall meeting. "We were told a long time ago the winner would be based on technical requirements, manufacturability, system cost, and soldier feedback. But ultimately I think our success came from being a mission-driven company. Our goal from the beginning was to build an American-made drone that helps warfighters win on the modern battlefield."

Matus added that Black Widow was "purpose built" and designed to meet the Army's 100 technical requirements but also incorporated soldier feedback from the very start.

"Every single part, every square millimeter of the drone was thoughtfully designed to make sure that it could actually survive on the battlefield and get the job done," Matus said.

The Black Widow drones will be manufactured at Teal's 25,000 square foot facility in South Salt Lake, and the company has already begun the process of adding new staff to ramp up production.

Overcoming challenges

While Teal's journey to securing the Army's SRR contract, the biggest small drone contract ever issued, was full of tumult and challenges, Matus seems to have foreseen the successful outcome from the beginning.

In a 2019 Deseret News profile of Teal that coincided with the company's first steps in the contract process, Matus was effusive about the prospects of transitioning from being a maker of high-end, hot-rod drones to designing a totally new aircraft that would meet the fast-evolving needs of battlefield soldiers.

"We're taking everything we've learned, all the experiences and all the mistakes that we've made from these last few products that we've launched, and taking that into this next generation with us," Matus said. "It is going to be quite an evolution and something that is going to blow a lot of people away with its capability."

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