Last week, a defense technology and critical infrastructure startup Chaos industry raised $145 million in Series B funding, greater than doubling from last yr.
The funding round was one other sign of an explosion in defense technology investment this yr. The sector has already absorbed more enterprise dollars than ever before, and investment shows little sign of slowing down as defense systems grow to be increasingly dependent on technology, conflicts intensify around the world, and many expect an increase is likely Department of Defensebudget after the last elections.
By mid-November, defense technology startups — defined as those operating in the military, national security and law enforcement sectors — had raised nearly $3 billion in 85 rounds, in response to Crunchbase data.
The dollar figure surpasses the $2.6 billion raised in 113 rounds for the full yr of 2022, which was the previous high for the defense technology industry.
Defense technology gaining popularity (money)
Given this sum of ventures, there have obviously been several large rounds in the sector this yr – including, but not limited to, Anduril Industryperhaps the poster child for defense technology startups.
In August, the Costa Mesa, California-based startup closed a $1.5 billion Series F, co-authored by Founders Fund AND Sands Capital Ventures which values the company at $14 billion, a 69% increase from the $8.5 billion valuation it received after its massive $1.5 billion Series E in late 2022. The company will use a portion of the new proceeds to develop Arsenal-1 – greater than 5 million square feet of producing space dedicated to producing tens of 1000’s of autonomous military systems annually. This was the case earlier this month reported the company is considering building a facility in Arizona, Ohio or Texas.
But that wasn’t the only big defense startup sighting this yr.
in July Helsingawhich develops artificial intelligence-based software for defense, raised roughly $489 million in funding led by Generic catalytic converter which values the company at $5.4 billion. The German startup designs software that helps increase the weapons capabilities of drones and jet fighters and improve decision-making on the battlefield.
Just a week after Helsing’s increase, an autonomous surface ship manufacturer was established Saronic closed $175 million Series B at a $1 billion valuation, led by Andreessen Horowitz — the rise of a defense technology startup as the newest unicorn in a burgeoning sector.
A changing environment
Large rounds and larger enterprise sums raise the query: has the approach of VC investors to the sector modified? In the past, defense technology and enterprise and technology cultures didn’t mix well because many investors fled the space for moral reasons or on account of investor pressure.
However, as with the whole lot, times are changing and the enterprise capital industry has grown significantly, even in the last decade. These investors are looking for more opportunities in more sectors, including defense.
There is also the easy indisputable fact that what is called “defense technology” can often even be used or classified as something else. While some artificial intelligence and cybersecurity, for example, could be used for defense purposes, they can be applied to industrial applications in industries similar to manufacturing and energy. Just this month, the Department of Defense presented her with an award first-ever generative AI defense contract to launch an artificial intelligence-based threat detection tool Jericho’s safety.
Speaking of the Department of Defense, with Republicans now in control of the White House and Congress, many expect the defense budget to extend — although there is some doubt on account of uncertainty about the amount of military aid the United States may provide to some allies.
Any increase in the defense budget could mean more contracts for startups, or at least a larger budget would make the space more attractive to investors.
So far, firms similar to Andreessen Horowitz, Alumni’s projects AND 8VC 1 all have shown significant appetite for defense technologies, and as of 2021, in response to Crunchbase data, all have made at least a dozen investments in this space. Others incl Founders Fund, Sands Capital Ventures, Generic catalytic converter, Valor Equity Partners AND Thomas Tull‘S American Fund for Innovative Technologies have led or co-led large rounds in space.
It’s protected to assume that many of those names will go further on the offensive when it involves investing in defense technologies.
Methodology
According to Crunchbase data, defense technology is defined by the military, national security and law enforcement industries. Most announced rounds are represented in the database; nevertheless, there could also be a slight delay for rounds reported late in the quarter. It does not include incubators or accelerators on account of the fluctuations their investment numbers may show.