Less than a year after scoring a landmark U.S. Defense Department contract, Utah’s Teal Drones will become the flagship portfolio company of Red Cat Holdings in an all-stock acquisition deal announced Tuesday.
Teal joins a quartet of independently operating innovation companies owned by publicly traded Red Cat, all doing work in the fast-advancing drone and drone-related technology sector. No public valuations or deal values were shared as part of the announcement.
Teal founder and CEO George Matus said his company, founded in 2014, was considering a variety of options amid new levels of interest generated by Teal’s selection as one of only five drone manufacturers approved by the Defense Department to provide the remote-controlled vehicles to the armed services and other federal agencies. Red Cat, he said, brings just the right mix of talent, experience and funding opportunities to help propel Teal to the next level.
“We spent some time thinking about what we wanted to do … and what was going to give Teal the greatest opportunity in this market,” Matus said. “Red Cat’s proposal … was the right combination of resources and capital access.
“We’re going to rebuild the American-made drone industrial base and grow the hell out of it.”
Matus said Teal has been ramping up production since the announcement of the new federal designation, and its drones are now in wide use by the U.S. military and numerous other agencies. And, he noted a wide range of private sector companies are also putting the advanced vehicles to work, with tasks ranging from keeping an eye on big infrastructure installations to cattle ranchers using the advanced flyers for herding and locating lost animals. Matus said plans are in place for the company to double its workforce in the next six months.
Red Cat CEO Jeff Thompson said Teal compliments and enhances his company’s current group of holdings that include Skypersonic, a remote inspection company; Dronebox, an analytics platform for cloud-based flight intelligence; Fat Shark, a drone imaging and communication company; and Rotor Riot, a lifestyle operation focused on the consumer market.
“Adding Teal to the Red Cat family is a natural expansion of the group deeper into the enterprise and government spaces.” Thompson said in a statement. “Teal’s Golden Eagle drone platform and its existing access to the Department of Defense combined with the market reach and experience of Red Cat should well-position the joint group for unbridled success as the industry grows.”
On its own, Teal has been growing at a breakneck pace since starting life as a company focused on consumer drones and quickly pivoting to developing vehicles for business and government use (though its marquee vehicle, the Golden Eagle, is available to consumers in essentially the exact configuration as those it builds for battlefield deployments). Matus said Teal has a three-pronged mission of providing the best small-scale drones for use in reconnaissance, public safety and aerial inspection markets.
Teal is well positioned to take advantage of both the U.S. government’s skyrocketing spending on the small drones, over $280 million in 2019, and growing restrictions on foreign-made vehicles and particularly those from market dominator, China-based DJI.
Federal missives include a 2019 alert issued by the U.S. Department of Homeland Security that outlines concerns about the handling of data gathered by foreign-made drones.
“The United States government has strong concerns about any technology product that takes American data into the territory of an authoritarian state that permits its intelligence services to have unfettered access to that data or otherwise abuses that access,” the notice read.
“Those concerns apply with equal force to certain Chinese-made (unmanned aircraft systems)-connected devices capable of collecting and transferring potentially revealing data about their operations and the individuals and entities operating them, as China imposes unusually stringent obligations on its citizens to support national intelligence activities.”
And a federal proposal introduced in 2019, the American Security Drone Act, didn’t make it through the 116th Congress but has been reintroduced in the current session by Sen. Rick Scott, R-Fla.
Teal’s Golden Eagle is a rugged, fast and portable advanced drone that was developed over the course of an 18-month innovation and testing contract with the Defense Department. Matus said six companies, including Teal, were awarded some $11 million collectively to design and complete a prototype that met specifications as outlined by the Army in partnership with the Defense Innovation Unit.
Following the Defense Department’s announcement last August that Teal was among approved companies, Matus said the event marked a turning point for domestic drone innovators that have been dominated by a single Chinese drone maker since the vehicles began to surge in popularity a decade ago.
“We all know that 2020 is going to be remembered for a lot of things, but I’m hoping one of them will be the resurgence of the American drone industry,” Matus said. “The industry has just been getting … pummeled with DJI taking over the market … and almost reducing the U.S. drone industrial base to zero.”
Matus founded Teal Drones in 2014 when he was 16 years old, but his company has since developed and launched multiple, high-performance drone models while attracting over $20 million in venture backing.
But even that chronology is a little deceiving.
In a 2019 Deseret News profile, Matus explained that he had been on the path to Teal since he became enamored with radio controlled planes and helicopters as a boy and developed a skill set that would lead to his first job in the drone industry, as a wizened 12-year-old.
“I got that first radio controlled plane and really fell in love with it,” Matus said. “I started learning as much as I could about hardware and software and flying,” Matus said. “I was running lemonade stands and doing magic shows and babysitting to save up to buy my next $200 plane.
“And when I was 12 became a test pilot for a drone company. I just applied for fun, because I saw an application.”