SALT LAKE CITY — When George Matus was in high school in Salt Lake City, he had a vision of small drones flitting at people’s shoulders to help them explore. At 17, he founded Teal Drones, named after a speedy breed of duck.

“At the beginning, it was more focused on the joy of flight,” Matus said.

But after launching Teal Drones in 2015, Matus was soon struggling to keep it afloat. A drone-maker in China called DJI had dominated the global market with sleek, easy-to-use consumer drones at prices that were simply impossible for a U.S.-based company to match.

At some point, Matus realized that if he wanted to keep his dream alive, he’d have to change the dream.

Today, Matus says Teal sells most of its drones to the Pentagon to help soldiers with reconnaissance, with other sales to municipal police departments and U.S. Customs and Border Protection (“They’ve got our drones deployed on both borders,” he says). The company adopted the slogan “Dominate the Night” to tout its drones’ ability to spot targets in the dark.

“Most of our focus is DOD (Department of Defense),” said Matus, now 26. “Since the invasion of Ukraine, it has become very clear that drones are incredibly impactful to war.”

The U.S. small drone industry is experiencing a renaissance after having been all but given up for lost, due to the impossibility of competing with China on production costs.

The reason for the resurgence is a grim one: Small drones have proven a potent battle tool in the Ukraine war, with soldiers strapping bombs on them and sending them on one-way missions.

The Pentagon has announced a “Replicator” program to produce thousands of U.S. small drones, in an initiative that U.S. drone makers hope will help provide them with steady sales and help offset their higher production costs. Jeff Thompson, whose company Red Cat Holdings acquired Teal Drones in 2021, said other governments across North America and Europe are also ordering thousands of drones, wary of being caught flat-footed if another war breaks out.

“Everyone wants to make sure they have the drones before something happens,” Thompson said. “Hopefully everyone buys a whole bunch of drones, and no one wants to invade each other anymore. That’d be great.”

Pivoting to defense

When Matus launched Teal in 2015, investors anticipated a commercial boom: Amazon’s founder Jeff Bezos had announced ambitions to deliver packages by drone nationwide as early as 2017. (Bezos owns The Washington Post.)

But the drone-based consumer lifestyle never materialized. Sorting out the licenses to fly the devices was complicated and varied by state. The technology was still not reliable enough. There was also a reflexive ick-factor from the public over the idea of eagle-eyed drones flying over their homes all the time.

“The concept is cool and exciting,” said Adam Bry, CEO of the San Mateo, Calif., drone maker Skydio, of the idea of delivery drones. “The actual delivery of working product has turned out to be phenomenally complicated.”

Then in 2016, China’s DJI launched a 1.6-pound drone called the “Mavic Pro” for $999, which pretty much demolished the hopes of U.S. players.

The Mavic Pro could capture 4K video and 12-megapixel still photos. It could lock onto a subject and follow them automatically and live-stream video from more than four miles away. With its four wings folded, the 3.3-inch by 7.8-inch device could be carried in a pocket.

Matus tried to match the Mavic Pro’s thousand-dollar price point, but he would have to lose money on every drone he sold. He was forced to winnow his staff of 45 down to 10.

Alex Wishart, 58, Teal’s technician manager, recalled it being “touch and go for a while,” though he said the company never missed paychecks, even during tough times.

Teal, Skydio and the few other remaining U.S. drone makers were thrown a lifeline in 2018, when the Defense Department banned the use of DJI drones in the U.S. military, citing security concerns of using a China-based supplier.

The Army began looking for domestic vendors.

“We went all in on defense,” Matus said. “We knew that would be our future.”

Skydio also made the shift, closing down its consumer drone division in 2023 to focus on government customers.

Matus’s team is now up to nearly 100 people, the most ever. That’s still a far cry from DJI’s 14,000 employees, who operate automated assembly lines in China, with rows of robot arms churning out some 70% of the world’s drones.

Matus still faces an uphill battle. Even in the Salt Lake City area — Teal Drones’ own backyard — police are skeptical there’s a need to buy domestic. They say China’s DJI remains the gold standard in functionality and price, and they believe the cybersecurity risk is minimal when the devices are run disconnected from the internet.

Kyle Nordfors, drone search-and-rescue coordinator for Weber County, just north of Salt Lake City, said that while he hoped to see U.S. drone brands become more competitive, DJI’s are still the best. He said DJI’s better functionality makes the difference between life or death when his team is searching for hikers lost on snowy slopes.

“Unfortunately, the U.S. manufacturers are still years behind,” Nordfors said. “If these anti-Chinese laws go into effect, it will cost American lives. And this isn’t hyperbole. I can give you actual names of American citizens that would have perished if I was forced to use an American drone.”

The prospects remain difficult for any consumer-oriented U.S. drone company to survive in the face of competition from DJI. Teal’s parent company, Red Cat, had also owned two consumer drone startups, Fat Shark and Rotor Riot, which sourced from China to keep their costs down. Red Cat recently sold those two startups, keeping only Teal.

“With us working with the government daily now, we’ve got to split ourselves,” Thompson said. “We can’t say ‘Made in USA’ and I’m on the phone at 2 o’clock in the morning ordering a bunch of stuff from China.”

The last American consumer drone model, Matus says, had been Snap’s Pixy, which the company issued a recall on in February due to overheating batteries that sometimes caught fire.