Matus founded Teal Drones in 2014 when he was a teenager. "At the time, I was 17 in high school and had just become a Peter Thiel Fellow," he says. "I had the idea for the company and was fortunate to find some good support across investors and our internal team."

Drones had caught his attention in junior high school, and he soon started building them himself. "I've always been pretty passionate about aviation and I was too young to get my own pilot's license," says Matus. "For a long time, I was just flying RC planes and helicopters, then drones started becoming a lot more prevalent in the DIY communities."

After starting off with the first consumer drones manufactured in the U.S. -- the Teal Sport and the Teal 1 -- Teal pivoted to the defense market after the U.S. Army banned products from China-based drone maker DJI in 2017.

"We saw a real opportunity and need for the country -- because there was no one else to do this -- to build a military-grade DJI alternative," says Matus. "In 2018, we won our first contract with the Army."

The company's flagship product is now the military-grade Teal 2, a small drone developed for intelligence, surveillance, and reconnaissance applications. "It was originally designed for the Army, but it's being fielded by every other department and NATO countries in Europe and allied countries around the world," says Matus.

"Its hallmark feature is night operation," he adds. "Most military operations happen at night, so they want a product that is fully optimized for nighttime use, and that is what Teal 2 is focused on. We believe it's the best drone in the world for nighttime operation."

Functionality is underpinned by "a very high-resolution thermal camera" in the Teledyne FLIR Hadron 640, says Matus, as well as features "making the drone smart and making the drone modular."

"What we did is put a really powerful processor on board the drone -- which was super unique at the time -- and it would AI and other real-time edge applications to run onboard the drone and start to enable some cool things," he explains. "At the same time, it's fully modular on the hardware side, meaning if any part on the drone breaks, an operator can replace it out in the field within minutes or even seconds. It also means the hardware can be upgraded over time with different sensors, propulsion systems, batteries, which just further expands the capabilities and potential mission sets. "

Matus adds, "Most drones are just flying cameras. The goal with Teal was to build a technology that can push drones beyond that into being more intelligent, more useful, more valuable things."

Teal Drones manufactures at its 25,000-square-foot facility in Salt Lake City nicknamed "The Factory." The company's engineers design printed circuit boards in-house and outsources production to a Colorado-based manufacturer, but aims to be "highly vertically integrated," says Matus. "We've got essentially six functional assembly lines, one for each subsystem of the drone. We've got one for the chassis, one for the arms, one for the payload, another for the battery, and then the charger and the ground control station."

Noting that a Teal 2 has about 600 components in all, he adds, "We want to be able to control the manufacturing of every subsystem. We definitely are on our way, but we still are not at the point where we're producing all of our composites and plastics, and little parts and components, but we do design every subsystem internally so we have control over the design and we do a substantial amount of the manufacturing here internally. All of the electronics come from the U.S. or allied countries."

The facility is working toward being able to manufacture 1,000 drones a month. "We're hoping by the end of this year we can reach that volume," says Matus. "Manufacturing is, I think, super underrated and very hard, and the team has put a lot of work into making sure we can actually scale what we designed."

In 2021, Puerto Rico-based Red Cat Holdings (NASDAQ: RCAT) acquired Teal Drones. DJI's near-monopoly spurred the acquisition, says Matus.

"With all of the investment that has gone into their company and product and scale, it has obviously become really hard for a single company in the U.S. to compete against them on a global scale," says Matus. "What I loved about Red Cat was that they shared a pretty similar vision to Teal in terms of the future that we want to build. . . . The idea is that by bringing in and joining forces with these companies and being able to build a full stack of capabilities across the board, maybe there is a future where America can 100 percent compete against DJI."

Challenges: "Supply chain is tough, but with Red Cat's strong balance sheet, we're able to start ordering raw materials in advance by a year and a half to two years just to make sure we keep the pipeline filled," says Matus.

He also points to a challenge relating to the Russian invasion of Ukraine. "They started flying DJI drones for reconnaissance missions back when the invasion started, and they didn't know the Russians had the ability to track the location of any DJI drone and their operator, so that led to a bunch of unnecessary deaths, so we thought that American military-grade drones would be the next capability that the Ukrainians would want for their missions and operations, and that turned out to be true."

"The challenge comes in on the U.S. side, where all of the funding allocation that the U.S. is sending to Ukraine has been for the really big drones, the old, traditional, legacy programs of record, and because these small drones programs are relatively new, they have seen none of that funding allocation, which has been blowing our minds."

Opportunities: "We think right now -- at least for the next four or five years -- the real growth is going to happen in defense and enterprise," says Matus, citing additional opportunities in public safety, infrastructure inspection, firefighting, and wildlife conservation. "We think over the next 18 months or so, we'll be able to scale the product pretty nicely."

Needs: Talent, especially on the engineering side. "We are definitely continuing to grow the team, so we're always on the lookout for the right folks," says Matus. "We're hoping to significantly grow the team by the end of this year. That, and just ramping up production."