Pentagon to Recruit Private Investors to Fund American-Made Small Drones

WASHINGTON – The Pentagon is seeking to recruit private investors to invest in a new generation of American-made small drone technology as an alternative to Chinese models.

Ellen M. Lord, the Undersecretary of Defense for Acquisition and Sustainment, told reporters at a midday press briefing Monday that the matchmaking-effort is the first under a new Defense Department program intended to pair “trusted sources of private capital with innovative companies critical to the defense industrial base and national security.”

Over the past several weeks, the Defense Department has assembled a team to manage both capital vetting requirements and industry outreach and matching efforts.

Lord said small drones were chosen as the first focus of the program, officially known as the Trust Capital Marketplace, because “people can understand what these small quad-copters are,” and because the market is currently dominated by the Chinese.

Small quad-copters are small drones that are lifted and propelled by four small rotary blades.

Lord said now that an industry sector has been chosen, the Defense Department hopes to hold an industry outreach event in October.

“I can’t provide any details on dollar amount or company names or numbers, but I’m encouraged,” she said.

Asked whether the Pentagon chose to target the small drones because of concerns “adversarial investors” are eyeing the market, Lord said it is more due to the fact the Chinese have flooded the market with low-cost drones.

Specifically, she pointed to Chinese drone manufacturer DJI, which, she said, “dumped so many low-price quadcopters on the market.”

“We then became dependent on them both from a defense and a commercial point of view … and we [now] know that a lot of information is sent back to China from those, so they’re not something we can use,” Lord said.

Because the Chinese so dominated the market, the industrial base for producing them here effectively dried up, the undersecretary said. “So we thought it was a good time to stand it up [again],” she said.

“Plus, as we meet our defense needs, we feel that these simpler versions of drones will be very, very attractive for the commercial market. So, there is great pathway forward here for industry,” she added.

Most drones used by the U.S. military are large, high-tech vehicles, perhaps best well-known from the grainy on-board camera footage provided to the media when one is used in a strike on a high-profile target.

Because they’re so specialized and technologically sophisticated, they’re difficult and expensive to produce, often costing millions of dollars where the small drones that are the focus of the private investment push would cost in the mere thousands.

Lord said in addition to the planned October event, Defense Department officials will be traveling to cities across the country to meet with both capital providers and industry representatives.

“We’re working on who all those people are right now,” she said.

The meetings are intended to be a mechanism to introduce and allow private entities to work with one another.

Lord said it’s important to understand that while the Defense Department is facilitating these introductions, an invitation to a meeting is not a promise of a future contract.

That said, “These are areas where we definitely have a strong demand signal,” she said.

“What we’re working on right now is how we, as DoD, can invest a little bit and many of these companies will as well so that they could be branded as having DoD contracts. We think that would be helpful,” Lord said.