The White House is negotiating funding agreements with several drone manufacturers as part of an initiative to enhance domestic production and reduce the costs of military drones, according to sources familiar with the discussions. These talks involve drone companies and the Pentagon and have been ongoing for several months. The negotiations also include the Office of Strategic Capital, a lending agency established under the Biden administration to support firms critical to national security supply chains.

While talks remain in the negotiation phase and the companies are still under review, some proposed arrangements could include a mix of debt financing and equity investments, potentially granting the U.S. government partial ownership stakes in these firms. Among the companies under consideration for funding are Performance Drone Works (PDW), which holds an Army contract for reconnaissance drones; Unusual Machines, a drone parts provider with Donald Trump Jr. as a shareholder and advisory board member; and Neros Technologies, a startup backed by Sequoia Capital specializing in small first-person-view (FPV) drones.

Prior Pentagon investments have often involved conditional loans tied to performance benchmarks before funds are disbursed. The Office of Strategic Capital reportedly has $210 billion in lending authority and has made various investments in critical-mineral ventures as well. A Defense Department spokesperson declined to comment on the ongoing negotiations, emphasizing that no final decisions have been made and any announcements will be forthcoming.

The primary goal of these potential funding agreements is to support the expansion of production capacity among drone manufacturers and to help drive down costs, rather than to directly purchase drones. This effort aligns with the Pentagon’s broader Drone Dominance initiative, a $1.1 billion program aimed at building a stockpile of roughly 300,000 low-cost attack drones by the end of 2027. Defense officials have stressed the need to scale up manufacturing while achieving a target price point near $5,000 per drone, a considerable reduction from current prices, which are often tens of thousands of dollars higher.

The United States currently has the capability to produce up to 100,000 drones annually, according to a 2025 estimate, but this falls short compared to Ukraine’s production of approximately four million drones last year. The drone industry has frequently criticized the Defense Department for insufficient procurement volumes that hinder the ability to maintain production momentum.

Neros Technologies, runner-up in a recent Drone Dominance competition, has raised over $120 million in venture capital, while PDW has secured nearly $200 million from investors. Unusual Machines is publicly traded and has invested in other drone ventures linked to Donald and Eric Trump, including projects involving China-made drone components.

If finalized, these agreements would mark significant support from the U.S. military for drone startups. Historically, Pentagon purchases have represented less than 2% of the combined commercial and government drone sales annually in the U.S. However, that share could rise sharply if the Pentagon’s requested budget increases are approved. The department seeks to boost funding for its Defense Autonomous Warfare Group (DAWG), the drone command center, to over $54 billion—up from approximately $225 million this year—highlighting an intensified commitment to drone capabilities in future defense strategies.