Dive Brief:
- The Department of Defense issued small drone maker Neros a conditional loan of up to $450 million through its Office of Strategic Capital to support the company’s expansion plans in the United States, the agency announced Monday.
- The funds will help increase Neros’ manufacturing capacity to produce dual-use small unmanned aircraft systems and ground control systems, according to the agency’s press release. The capacity expansion will also enable the company to produce critical components such as motors, radios, flight electronics, sensors and batteries.
- In addition to the Pentagon’s loan commitment, Neros pledged $165 million in equity toward the project, bringing the investment amount to $615 million, the drone manufacturer said in a separate press release.
Dive Insight:
The DOD funding puts Neros on the path to manufacture 1 million drones per year by 2028, co-founder and CEO Soren Monroe-Anderson said in a statement.
In February, Neros announced it moved its headquarters and production from a 15,000-square-foot facility in El Segundo, California, that it opened in 2024 to a 250,000-square-foot building, which Neros calls Millennium One, in nearby Torrance, California.
In addition to scaling small drone assembly, the buildout will help Neros accelerate its team expansion and test operations.
The move aims to help the drone maker multiply its production capacity by 100 in response to national security requests to counteract global threats, Neros said in its Feb. 19 blog post. It also increased its access to “elite” aerospace and technology talent pools in coastal California.
Furthermore, the company said it’s prioritizing rapid onshoring of high-risk components and ensuring that core technologies powering its systems are shielded from “foreign supply threats.”
“M-1 will eliminate critical bottlenecks and adversarial risks in the Western drone supply chain by scrutinizing every dependency on China and scaling resilient, domestic alternatives,” Neros said in the blog post. “We will create the nexus which seeds a diverse, distributed manufacturing network.”
M-1 will serve as Neros’ blueprint for its future factories, with plans to house all of the manufacturing processes needed to output first-person view UAS and other drone types. Moreover, Neros is designing M-1 to support other domestic OEMs with secure component procurement and licensed technologies.
“We will leverage our scale to de-risk the component value chain for ourselves and other manufacturers while creating opportunities for allied players to develop net-new platforms and capabilities.”
Neros has been participating in DOD programs for its small drones. The company took part in the agency’s Drone Dominance Program’s Gauntlet II over the summer, where it received orders for 14,000 of its drones and explosive payloads, valuing at over $100 million.
The DOD funds will help Neros comply with updated requirements under the National Defense Authorization Act for fiscal year 2026. Under the NDAA, DOD would be prohibited from purchasing batteries for weapons and support systems made with materials from foreign entities of concern, such as China or Russia, beginning Jan. 1, 2028.
President Donald Trump took further measures to reshore the defense industrial base in July, signing an executive order limiting defense contractors’ waiver access to procure critical minerals and components from foreign entities of concern such as China, in a bid to safeguard domestic end-to-end supply chains.
DOD’s Office of Strategic Capital has awarded other companies loans over the past month. The agency committed an $80 million conditional loan to drug manufacturer Antheia to scale its key starting materials and active pharmaceutical ingredients for generic drugs, according to DOD’s Oct. 17 press release.
About two weeks later, the Pentagon pledged a $150 million conditional loan to Stoke Space Technologies to help the company build out its second launchpad at its existing launch complex at Cape Canaveral Space Force Station in Florida.
