Drone Startups Backed By Eric Schmidt and the Trump Family Win the Pentagon’s Latest Competition

Last month, the Pentagon threw up its arms in frustration (metaphorically speaking) when most of the drone startups in competition for $300 million in contracts failed to produce aircraft that met a hard-and-fast specification: The drones could contain no Chinese-made components or materials.

So, even though the competition was well underway, defense officials slipped a new, previously unannounced contestant into the race—Perennial Autonomy, a somewhat secretive drone startup founded by former Google CEO Eric Schmidt.

It was a prescient move. The Pentagon announced last week that Menlo Park, Calif.–based Perennial was one of the big winners in the competition, which included 19 participants. The nine startups that placed will divvy up Defense Department orders for 60,000 drones worth an average of $5,000 each.

For some of these startups, this isn’t the first time they’ve landed government orders. In May, Perennial received a $500 million counter-drone contract from the Pentagon. And in July, another competition winner, Neros Technologies, got a $500 million contract from the Army for 10,000 drones at $2,000 each.

The competition is the latest phase of the Pentagon’s Drone Dominance program, the government’s attempt to develop battery-powered combat drones for the next generation of warfare, along with a U.S.-based industry making all the components.

Participants were required not only to demonstrate their capacity to operate against jamming and other electronic attacks in combat zones, but also manufacture their drones at large scale and low cost.

This is where Perennial and Neros stood out. Neros, based in Torrance, Calif., managed to pump out drones at a faster clip than any of its rivals in the competition.

Perennial manufactures its drones in Germany. The firm has its origins in Ukraine, where Schmidt was visiting in 2023, a year after the Russian invasion. Schmidt became convinced that drones were one of the country’s biggest needs in its war against Russia, and he wrote essays in The Wall Street Journal and Foreign Affairs saying so.

The former Google CEO recruited former Apple, SpaceX and Google engineers to staff the company. They include former Google executive Damon Vander Lind, who had accompanied Schmidt on that 2023 Ukraine trip. Also on that journey was Mark Stonich, former vice president of global sourcing at Google and now vice president of operations and supply chain at Perennial. Another Perennial executive is Hendrik Dahlkamp, a former AI researcher at Apple.

Since then, Perennial has scaled up the manufacture of a midrange kamikaze drone called the Hornet and an interceptor drone, the Merops, which it designed to attack the Iranian-made Shahed drone Russia is using in Ukraine.

Perennial finished first in one of two categories in the competition, called Deep Strike, in which drones had to hit a target after a roughly 9-mile flight, sometimes at night, in which their navigation might also be jammed.

However, Neros, co-founded three years ago by two former drone racers who decided they wanted to make drones for Ukraine, was the only participant to place in both of the competition categories. Neros finished first in the Close Quarters Battle category—in which the drones had to complete a mission in confined spaces, like a building, where GPS did not necessarily work—and third in the Deep Strike category. Perennial declined to comment. Neros did not respond to emails.

President Donald Trump’s family figured in the Drone Dominance competition as well: Donald Trump Jr., the president’s oldest son, is an investor in Unusual Machines, a prominent drone component and battery manufacturer based in Torrance, Calif. Unusual Machines supplied components to four of the nine winning companies in the competition, including Perennial and Neros, according to Needham and Co., an investment bank.

Unusual Machines’ role as a major component manufacturer has made it a lure for investors. Shares of the company are up 71% year to date, including a 5% surge after the competition results, though they later pulled back. Its share price soared in May on a report that the Pentagon might take a stake in the company. The same report said the Pentagon might also invest in Neros. The government has not invested in either company.

Another Unusual Machines customer is competition participant Xtend AI Robotics, an Israeli drone maker in which both Unusual Machines and the president’s second oldest son, Eric Trump, are investors. (Xtend finished third in the Close Quarters Battle category).

Unusual Machines has been broadening the variety of drone parts it offers. In May, it paid $52 million for Upgrade Energy, which supplies drone batteries. Upgrade buys the cells from battery makers like Taiwan’s Molicel and California-based Amprius Technologies, and then engineers them into robust packs that can withstand the punishment of flight into combat.

The Molicel battery aimed at the aviation market, called the P50B, includes a silicon anode made by Group14 Technologies, a Washington state–based startup.

The drone boom has given a shot in the arm to the battery industry, which had been in the doldrums because of slow electric vehicle demand. Alex Kosyakov, CEO of lithium-metal battery maker Natrion, told me he hopes to get his batteries into a future phase of the Drone Dominance program. If so, they will have to be reinforced in a superstrong pack. When the drones are flying, “they are under a lot of Gs,” he said.

Drone startups order batteries from multiple suppliers but tend not to disclose the battery they are actually using for fear a rival might gain an advantage. At this early stage, at least, the CEOs of multiple battery makers told me, the drone companies usually don’t even inform them whose battery they are using in a given drone.

I asked Group14 CEO Rick Luebbe whether he believes his company’s batteries are powering one or more of the winning drones. “Potentially yes,” he said.

Noteworthy

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Steve LeVine is editor of The Electric. Previously, he worked at Axios, Quartz and Medium, and before that The Wall Street Journal and The New York Times. He is the author of The Powerhouse: America, China and the Great Battery War, and is on Twitter @stevelevine