Vatn Systems: A smart torpedo startup looks to make the drones of the sea

Vatn makes self-steering devices that can carry warheads, cameras or sonar equipment underwater.

• Vatn Systems Inc. is testing its Skelmir S12-class autonomous underwater vehicles, which can dive to a depth of 1,000 feet and are controlled with a Samsung tablet.
• The S12 is capable of navigating for 125 to 200 nautical miles on its own while submerged, and it can carry cameras and sonar equipment for surveillance, as well as small warheads, at a price starting in the mid-six-figures.
• Vatn's approach to innovation emphasizes cost efficiencies, with the company aiming to produce underwater drones that are cheaper and more expendable than traditional torpedoes, such as the Mk-48, which costs about $4 million.

Up the Rhode Island coast from Taylor Swift's oceanfront retreat, Nelson Mills is setting off a torpedo on the Sakonnet River. It's a typical New England spring day - alternating between snow, rain, wind, sun - and Mills and his co-founders at Vatn Systems Inc. are aboard a retrofitted salvage boat, launching another test of one of the company's Skelmir S12-class autonomous underwater vehicles. The long, cylindrical AUVs weigh as much as half a ton, can dive to a depth of 1,000 feet and are controlled on deck with a Samsung tablet.

The ship's crew cranes an S12 down into the chop, and two mates in foul-weather gear hop into a dinghy with a fishing rod. They attach the line to the torpedo and motor after it at a speed of 20 knots in a modern approximation of what whalers once called a Nantucket sleighride. If the S12 whips off course or malfunctions and sinks, it's their job to snap back the rod, triggering a kill switch on the device that causes it to float to the surface.

This low-budget technique for torpedo retrieval illustrates an important aspect of Vatn's approach to innovation: Cost efficiencies really matter. The S12 is capable of navigating for 125 to 200 nautical miles on its own while submerged, and it can carry cameras and sonar equipment for surveillance, as well as small warheads.

But its aggressive price is perhaps Vatn's greatest differentiator. With prices starting in the mid-six-figures, the S12 is at least 50% cheaper than comparable systems.

Vatn's underwater drones are designed to be as important in the Strait of Hormuz as cheap aerial drones have proven to be in the Russia-Ukraine war. As the US conflict with Iran drags toward its sixth month, skirmishes in contested waterways are expanding potential use cases for products from companies like Vatn. Indeed, Vatn announced on July 14 that it's introducing a system to counter naval mines with the Skelmir lineup.

"Undersea superiority is massively important for US dominance," Mills says, noting that, if you control the movement of ships, you control "the lanes of commerce."

Last December, Vatn - the Old Norse word for "water" (it's pronounced "VAHten") - raised a $60 million Series A round to help ramp up manufacturing, including an investment from Lockheed Martin Corp.'s venture arm. Three months later, the USS Charlotte fired two Mk-48s at an Iranian frigate in international waters, sinking the vessel in the Navy's first torpedo hit since World War II. The Mk-48, originally designed in the 1960s and now co-developed by Lockheed and other traditional defense contractors, is among the world's most sophisticated underwater weapons. Each is estimated to cost about $4 million, with the US Navy procuring an average of 70 per year since 2020, according toDepartment of Defense budget data.

Vatn can produce the S12 faster and for the MSRP of a high-end Winnebago, placing it within a figuratively and literally exploding category of "attritable" weapons. Because such weapons are designed for cheap expendability, they are better suited to serve as decoys, hunt for mines, conduct surveillance on high-risk reconnaissance missions and take out vulnerable targets that don't necessitate more powerful ammunition. "The big thing is we don't want to have to waste 'exquisite' weapons," Mills explains, referring to the defense industry's catch-all term for expensive and scarce state-of-the-art munitions. "Does an Iranian frigate really require one of our best torpedoes? Probably not. We can preserve those capabilities for the targets that actually deserve them."

Mills, a sturdy 35-year-old who has the untamed reddish-blond hair and beard of a Viking, grew up on the ocean. His parents originally owned a $10,000 ferrocement boat with a tiny galley and no refrigeration that they'd sail around the Caribbean for large chunks of the year. Mills and his younger brother, Freddie, Vatn's chief operating officer, were homeschooled at sea, which frequently involved learning how to assist their dad in fixing the leaky vessel. "It was kind of like camping," recalls Mills, who ultimately told his mom he was tired of the isolation and wanted to go back to school on land.

Between earning his undergrad degree and MBA at Columbia University, Mills was the project manager for hull development efforts at an electric-watercraft startup in Seattle, and he later worked at a series of venture capital firms in the early 2020s. The maritime-tech industry was then experiencing something of a rebirth, as VCs got interested in defense tech and the Pentagon started worrying about China's naval expansion.

In 2022, Saronic Technologies Inc. was founded to create autonomous surface vessels, while Peter Thiel-backed Anduril Industries Inc. acquired Dive Technologies, a subsea robotics maker in Massachusetts. High-profile events like the Houthis' attacks in the Red Sea subsequently highlighted long-standing vulnerabilities.

"All the writing was on the wall about disruption to free trade - the Strait of Hormuz wasn't the first time there was an issue," says Matthew Kibble, managing partner of Dyne Ventures, an early-stage investor in this so called blue economy. "The oceans are the future of commerce and the future of warfare."

Mills came up with the concept for Vatn in 2023 to pursue lighter-weight, low-cost underwater drones. While Northrop Grumman Corp. and other defense contractors were developing humongous underwater drones - some as large as humpback whales - Mills wanted to pack a lot of their functionality into a casing about the size of a YMCA balance beam.

"I was like, 'This is a f-ing crazy idea. I'm totally in!'" Freddie Mills remembers. Their first prototype, jerry-rigged using off-the-shelf parts, weighed just 50 pounds.

Freddie had been running a maritime logistics and salvage business in Rhode Island, and the brothers initially set up shop at his shed of an office on the Narragansett Bay. Dock workers would give funny looks as they carried torpedo builds by and launched them from the commercial pier. (Vatn and other underwater-drone makers are generally allowed to trial their prototypes in public waters as long as the hardware doesn't contain live munitions.)

Geoff Manchester, Vatn's chief technology officer, says a year of painful trial and error followed as prototypes would "dive to the bottom for whatever reason, come up full of mud, and we'd have to see what the hell happened."

Submarine engineering requires electronics and software operating in some of the darkest and most corrosive environments on Earth. Saltwater absorbs radio waves, forcing AUV makers to develop guidance systems that work without GPS or a cellular connection.

Propulsion is another huge hurdle. Vatn's torpedoes are designed to be dropped in the water, then accelerate from a standstill up to 20 to 30 knots, about the speed of a sea lion. Components that could enable such velocity - say, bigger batteries or motors - invariably mess with Vatn's goals of keeping their devices small and cheap. So the team had to be relentless in minimizing materials that could affect either aim. Initially, for example, they tried building the torpedo's tubing out of carbon fiber, but sourcing delays and waterproofing issues led them to build the prototype from a standard pipe. "Fine-tuning all the appendages with the right hydrodynamic flow: really difficult problem," Manchester says.

By early 2024, Vatn completed its first product design, the S6, a 6-foot-long drone that sells for as little as $95,000. It laid the groundwork for the more powerful S12, which was engineered to share 30% of the same parts to simplify the supply chain. The progress soon helped the company raise seed funding led by Dyne, strike a partnership with Palantir Technologies Inc. and land a contract for S6s with an undisclosed government customer. In May 2025 the company announced it had opened a new factory capable of producing 2,000 AUVs annually and sold its first production run of S12s to more unnamed "government customers." (The company is restricted on how much it can reveal about its customers; Mills says Vatn has won at least $35 million of government contracts to date and has also cited the Pentagon and NATO allies as clients.)

On a visit last April to its factory in Bristol, Rhode Island, rows of Carhartted staffers are hand-assembling electrical wires and molded fairings for the S6 and S12 at workbenches. Manufacturing director Brendan Smith, who joined Vatn from Boston Dynamics and Raytheon, says the longer-term aim is to automate portions of the manufacturing, but right now the focus is on reducing components and costs. "Eliminate complexity to get as close to Lego as possible," Smith says.

Near an array of CNC machines and 3D printers, he shows off a nozzle they produced for $1 or so, rather than source it from a vendor for about $8.

The same ethos steered Vatn away from building its own proprietary software in favor of developing a custom plug-in for an Android ecosystem the US military already relies on for coordinating across multiple battlefield systems. Senior test engineer Everett Collins says it's just way cheaper and easier to teach troops how to map a torpedo route and deploy it on what feels like Google Maps. He points out that it's just a few clicks on Vatn's app to check the status of each Fish and Minnow, their nicknames for the S12 and S6.

The VC world is funneling tens of billions of dollars into defense-tech startups, including Anduril and San Francisco-based Ulysses, another undersea drone maker, backed by Andreessen Horowitz. Some of Anduril's underwater drones are competing at similar sizes as the S12, and more startups may go after the specific type of maritime products Vatn is pursuing. But Mills says that the competition is mostly indirect and that most of these newer contractors are fulfilling a very specific need for the US Navy necessitating different hardware.

Saronic, valued at $9.25 billion, develops unmanned boats for surface operations, for instance; it won praise in June for rescuing a downed Apache helicopter crew off the coast of Oman.

Considering the omnipresent threats in places like the South China Sea, Kibble says the navies of the US and its allies will need different kinds of products for every depth layer of the ocean. And beyond military applications, he sees myriad commercial uses for Vatn's underwater drones, such as protecting offshore assets for the oil industry or monitoring subsea internet cables.

For now, Vatn is building out a 90,000-square-foot factory, 10 times the company's current capacity, which will be so close to the docks that employees can grab a design-tweaked model off the production line and have it validated on the Sakonnet River within 90 minutes. In fact, Mills says, at full-rate production, Vatn can now assemble an S6 roughly every hour, and it's pushing toward every four hours for an S12.

Back aboard Freddie's salvage boat for the S12 test, Mills says such turnaround times are vital to countering adversaries. "If you're shooting down $25,000 Shahed drones with Patriot missiles, you just can't keep up - the asymmetry is problematic," he says.

Dan Hendrix, another Vatn co-founder, says that aerial drone designs in Ukraine are modified every six weeks to avoid obsolescence and that maritime manufacturers need to adapt. "The Navy used to test a program for seven years, and then we'd have it for 30 years before coming up with something new," Hendrix says. "The game isn't what it used to be."