- The Pentagon is negotiating funding deals — potentially including equity stakes — with at least three US drone companies: Neros Technologies (Sequoia-backed), Performance Drone Works, and Unusual Machines (a public company with Donald Trump Jr. as a shareholder and advisory board member).
- The goal is not to buy drones directly but to fund production scale-up and drive down unit costs toward the ~$5,000 price cap targeted by the Pentagon’s Drone Dominance program — a $1.1 billion initiative to amass 300,000 low-cost attack drones by end of 2027.
- The funding would flow through the Pentagon’s Office of Strategic Capital, which has ~$210 billion in lending authority and previously backed critical minerals startups; some deals may combine debt and equity, giving the US government an ownership stake in the companies.
- The gap between ambition and reality is stark: US manufacturers currently have capacity for ~100,000 drones a year, most selling for tens of thousands of dollars — versus Ukraine’s four million drones built last year at a fraction of the cost.
What Happened?
The Trump administration, through the Pentagon’s Office of Strategic Capital, is in advanced discussions to fund a group of domestic drone manufacturers with deals that could include both debt and equity components — giving the US government ownership stakes in the companies. The three companies publicly named are Neros Technologies (a Sequoia-backed startup whose small FPV drone appeared in Defense Secretary Pete Hegseth’s announcement video last July), Performance Drone Works (which won an Army reconnaissance drone contract), and publicly traded Unusual Machines (which counts Donald Trump Jr. as a shareholder and advisory board member). The deals are not purchasing agreements — they are designed to fund factory buildout and manufacturing scale-up, with the ultimate goal of driving the cost per drone toward the Pentagon’s Drone Dominance target of ~$5,000. The department has requested more than $54 billion for its drone autonomous warfare group in its new budget, up from $225 million this year.
Why It Matters?
The Iran conflict has made drones the defining weapon of the current military moment — and exposed a massive gap between US production capacity and what wartime demand actually requires. Ukraine built four million drones last year. The US can make roughly 100,000 annually. Most American-made tactical drones still cost tens of thousands of dollars, not thousands. The Drone Dominance program is an attempt to close that gap through a combination of procurement commitments and, now, direct investment. Equity stakes are a notable escalation — they would align the government’s financial interests with manufacturer success in a way that pure purchasing contracts do not, similar to the logic behind strategic mineral investments. The Unusual Machines connection to the Trump family will draw scrutiny, though the company’s technology has been validated through competitive military procurement.
What’s Next?
The deals are still in negotiation and could change materially before announcement. Watch for the equity stake structure — if the government takes direct ownership positions, it sets a precedent for defense-tech investment that goes well beyond traditional procurement. The $54 billion DAWG budget request is the larger story: if Congress approves anything near that figure, it would represent a generational investment in autonomous warfare capability and would reshape the entire US drone startup ecosystem. Companies not in the current deal conversations will be racing to position themselves for the next round. The cost-reduction target — $5,000 per drone — is the real benchmark; whether US manufacturers can achieve Ukrainian-level economics while operating under American labor and compliance cost structures remains the unanswered question.
Source: The Wall Street Journal
