By Daniel Berti
Virginia Center for Investigative Journalism at WHRO
Virginia Beach-based drone delivery company DroneUp inked a blockbuster 2021 deal with Walmart to expand its delivery services to stores across the country.
DroneUp executives announced a massive hiring spree and a $27 million expansion of the company headquarters in Virginia Beach. State and local officials jumped on board, gushing praise and showering incentives on the veteran-owned startup.
“This is an impressive and highly impactful project for Virginia Beach, Dinwiddie County, and beyond that represents a new age of technology for our society, and DroneUp is at the forefront of Unmanned Aircraft System development,” said Governor Glenn Youngkin at the August 2022 announcement.
Today, DroneUp’s growth and promise have stalled. Walmart ended its relationship in 2025. The company did not meet the employment goals pledged to the state. Plans to build a drone training facility at Richard Bland College never materialized. The state and Virginia Beach recently cancelled their public funding of the company, which was contingent on job creation.
“ I was always delighted that DroneUp decided to come to Virginia Beach,” Virginia Beach Mayor Bobby Dyer told the Virginia Center for Investigative Journalism at WHRO. “I can't tell you how bad I feel that they are encountering these difficulties.”
DroneUp’s leadership sent a written statement in response to questions from VCIJ at WHRO. Greg James, the company’s vice president of business development, said that the company has changed its strategy in a shifting market.
“We worked collaboratively with the Commonwealth throughout the process, including an amicable grant termination discussion,” James wrote, adding that the company remains confident “in the long-term future of unmanned aviation and the infrastructure required to scale it.”
Drone delivery services ramp up across the U.S.
The Virginia Economic Development Authority has prioritized unmanned aircraft technology as a “key industry” in Virginia, using public incentives to bring nearly a dozen military and commercial drone companies to the state over the past decade. The industry has seen tremendous growth in recent years, spurred by rapid technological advancement and falling manufacturing costs.
Drone delivery services are also growing, driven by breakthroughs in extended battery life and the ability to carry heavier packages.
In 2023, the drone delivery sector was valued at around $52 million, but is expected to grow exponentially to around $1 billion by 2032, according to Global Market Insights, a U.S. market research and consulting firm.
Retail companies and fast-food chains like Walmart, DoorDash and Chick-fil-A are making increasing efforts to deliver goods using drones. Traditional delivery companies like UPS, DHL and Amazon Prime have also taken steps to adopt drone delivery technology.
Jason El Koubi, president of the VEDP, said the state’s proximity to the federal government, major defense contractors, NASA Langley Research Center and NASA’s Wallops flight facility had made it an attractive place for drone companies to locate.
“Virginia is one of the few places in the country where you can do the research and development, you can do the design, and you can do the manufacturing and the deployment of these technologies,” El Koubi said.
DroneUp was a rising star of Virginia’s tech industry
DroneUp was founded in 2016 by former U.S. Navy Officer Tom Walker. In 2020, the company first partnered with Walmart to provide contactless drone delivery of COVID-19 test kits, a major turning point for the startup.
In 2021, Walmart then launched a multi-year commercial agreement for DroneUp to serve as Walmart's exclusive drone delivery provider, eventually reaching hubs across the U.S. Walmart also took a minority stake in the company and had a seat on its board of directors.
This promising technology and its backing from Walmart drew investors and elected leaders. In 2022, the state and Virginia Beach signed an economic development deal to award DroneUp $6.2 million in public funding if the company met certain benchmarks.
In return, DroneUp agreed to create at least 655 new jobs, spend $27 million to expand its Virginia Beach headquarters and build a $20 million training center at Richard Bland College in Dinwiddie County. The deal received high praise from former Gov. Glenn Youngkin and members of Virginia’s Congressional delegation, all of whom touted it as a major job creator for a fast-growing industry.
But intense competition, along with business and technological challenges, thwarted DroneUp’s growth.
In early 2025, Walmart announced it had ended its contract with DroneUp and severed its financial ties with the company. The mega-retailer is still expanding its drone delivery offerings with rival delivery start-ups Wing and Zipline.
DroneUp has since laid off some of its staff, according to reports by CNBC and Axios. The company’s co-founder and CEO, Tom Walker, was replaced by chief technology officer John Vernon in 2025. Walker now serves on the company’s board of directors.
The VEDP initially awarded DroneUp $5 million, but pulled those grants after the company “indicated the scope of their project had changed,” according to VEDP spokesperson Pryor Green.
DroneUp was also set to receive $800,000 in local funds from Virginia Beach, but city spokesperson Ali Weatherton-Shook said the company “had not created any new jobs,” so no incentives were provided.
Dyer, who lauded DroneUp’s expansion when it was announced in 2022, said he was aware the company was downsizing, but wasn’t sure what their corporate plans were.
“Unfortunately, we had to send them a termination of performance back in March,” Dyer said.
DroneUp never fully met the terms of its incentive agreements with the state or city. The company received $47,000 for creating 47 jobs, according to public records. The company did not receive the remainder of the $6.2 million in public incentives announced in 2022, according to public records.
Plans to train community college students ended in 2025
Richard Bland College had big hopes for a partnership with DroneUp.
DroneUp pledged to invest $20.2 million in a testing, training and research center for drone operators at the junior college, located outside Petersburg. The project was expected to create 145 jobs in Dinwiddie County and help expand Virginia’s drone operation workforce.
After signing a three-year agreement with the college in 2022, the company leased campus classrooms, housing facilities and a plot where a temporary drone flight tower was built.
But no students were able to participate in the company’s drone operation courses during the three years it operated its training facility at the college. Instead, the company used the campus to train 220 of its own employees, according to Justin May, the college’s chief enrollment officer.
“DroneUp would send the operators they hired to RBC to complete the program. After finishing, they would go on to work at one of the Walmart sites focused on drone delivery,” May said in an email.
“The $20 million permanent facility never came to fruition,” said Richard Bland College President Debbie Sydow, adding that there are no longer any DroneUp employees at the campus.
When the agreement ended in 2025, DroneUp had not created the expected jobs or a new training center.
While drone delivery services are seen as a rising industry, some experts have noted it still faces significant technical and regulatory hurdles. That has slowed their adoption by major retailers, who have not yet figured out how to generate revenue from it.
Paul Gelhausen, co-founder of Avid Aerospace, a small drone company based in Yorktown, Virginia, has spent more than 40 years working in the field, starting as an aerospace engineer with NASA in the early 1980s. His company has worked extensively on both commercial and military unmanned aerial vehicles.
The drone delivery industry has been plagued by a variety of efficiency issues, Gelhausen said. The industry has struggled to drive down high costs per delivery.
“Think about the efficiency of one Amazon driver with 300 packages versus a delivery drone with one package that has to fly 15 minutes to a single house. It drops it off, then has to come back and have the battery replaced,” Gelhausen said.
“It's a really cool stunt to be able to drop your donuts off with a drone. But I would say the economics behind it are still a little ways off.”
Reach Daniel Berti at danielbertitribune@gmail.com