Drone Incidents and Safety Issues Shake $13B Defense Startup Shield AI
Shield AI's Safety Challenges and Industry Impact
By David Jeans
Recent Safety Incidents Involving Shield AI Drones
NEW YORK, June 5 (Reuters) - A year ago, Ryan Tseng, the head of U.S. defense tech startup Shield AI, announced his company had turned a new page.
After a gory incident that partially severed a U.S. Navy official's fingers during a test of its V-BAT drone, Shield AI had addressed safety concerns with new landing gear and warning stickers near the propeller. "(The) aircraft is, tip to tail, just a radically better airplane," Tseng told Forbes last year.
Now it's happened again.
A Romanian Navy official's hand was caught in a V-BAT propeller on May 12 during a Shield AI training exercise on a boat off the Texas coast – severing two of her fingers and fracturing a third, a spokesperson for Romania's Ministry of National Defence told Reuters.
Unreported Incident and Ongoing Concerns
The incident, which has not previously been reported, comes as Shield AI struggles to overcome years of technical hitches and safety concerns with its V-BAT, according to interviews with 21 former employees, industry executives and investors, and a Reuters review of a whistleblower complaint, a lawsuit related to hostile work environments and company presentations.
Reuters found that the V-BAT has crashed more than 50 times over the past 18 months, that several staff who raised safety concerns were dismissed and that a Cessna plane with a Shield AI employee and his child aboard had to take evasive action to avoid a mid-air collision with a V-BAT.
Shield AI also allegedly obscured technical flaws with its V-BAT, which costs about $1 million, to help land military sales, according to a previously unreported whistleblower complaint filed in May to the Department of Labor's Office of Administrative Law Judges and reviewed by Reuters.
Acquisition and Company Response
Shield AI acquired the V-BAT, a vertical takeoff and landing (VTOL) unmanned aircraft designed for military uses, when it bought Martin UAV in 2021.
The company didn't make Tseng, or Gary Steele, who replaced Tseng as CEO last year, available for an interview. In a statement to Reuters, Shield AI said it had a strong safety record and defended the performance of its drones, saying "operational mishaps are common" for a drone like V-BAT.
"V-BAT remains one of the most operationally proven VTOL aircraft in service today," the company said, adding that the drone had accumulated 18,000 flight hours since 2019.
Shield AI said the May 12 incident was caused by "a violation of established safety procedures, not from a product defect", without disclosing the specific violation.
Romania's defence ministry said it was investigating the incident and that it would be premature to draw conclusions regarding fault or whether the incident could have been prevented.
The Romanian official, whose identity hasn't been disclosed, had operations to reattach her fingers on May 12 and May 16 at the University Medical Center New Orleans. Her condition deteriorated and she was sent to the Walter Reed National Military Medical Center in Maryland, where she remained as of May 25, the ministry said in a statement, without providing further medical details.
Romania's Naval Forces, which signed a $30 million agreement with Shield AI last year for the V-BAT, said the contract remained in effect.
Financial Growth and Industry Position
Shield AI's Valuation and Market Expansion
SHIELD AI VALUED AT $12.7 BILLION
Shield AI, which was valued at $12.7 billion in a March funding round co-led by JPMorgan, has emerged as one of Silicon Valley's largest defense tech bets, positioning itself as a key provider of drones and autonomous software to rearm the Pentagon as wars rage in Ukraine and the Middle East, and as tensions grow with China over Taiwan.
In February, U.S. Vice President JD Vance was touring Armenia when he was shown the latest V-BAT model, which had just been sold under Washington's first arms sales to the country.
"Holy shit. Look at this thing!" Vance said in a video posted on LinkedIn, circling the drone in a gilded hall. "It's going to do great things for you guys."
Industry-Wide Setbacks and Shield AI's Approach
Other drone startups have faced setbacks as they race to deliver nascent technology to the battlefield. Reuters has previously reported that other drone companies have suffered after crashes, and a series of U.S. Navy autonomous vessel tests went awry when unmanned boats smashed into one another.
But Shield AI had a "Silicon Valley mindset, that 'fake it 'til you make it'," said Jacob Miller, a former product manager who filed the whistleblower complaint in which he alleged he was fired after raising air-safety concerns. That philosophy, he said, is "being applied to equipment that can cause severe immediate harm to people and war fighters".
Miller also filed a lawsuit against Shield AI and senior director Trey Lindsey in May alleging he was fired after raising safety concerns.
Responding to Miller's allegations, the Shield AI spokesperson said the company could not comment on ongoing litigation: "We believe these claims lack merit, and we intend to vigorously defend ourselves against this attack on Shield AI and its mission."
Lindsey didn't respond to a comment request.
Technical Failures and Crash Statistics
Company Origins and Growth
DRONE CRASHES MOUNT UP
Shield AI was founded in 2015 by Ryan Tseng - a tech entrepreneur who sold a phone-charging company to Qualcomm - and his brother Brandon, a former Navy SEAL. The firm was among the first venture-backed startups seeking to loosen the grip on major Pentagon contracts long held by so-called prime contractors such as Lockheed Martin and RTX.
Behind-the-Scenes Failures
But alongside its meteoric growth, including V-BAT sales to more than half a dozen foreign militaries, Shield AI's drone has struggled with persistent behind-the-scenes failures.
In the past 18 months, more than 50 of about 200 upgraded V-BATs managed by Shield AI as part of its internal fleet have been destroyed in crashes during testing or training, a high failure rate, according to two people with
