Defense technology continues to get a lot of attention from investors, and today, one of the bigger startups in the space is announcing more funding. Shield AI — which develops platforms and planes for autonomous flying systems, targeting the U.S. military and its allies as customers — has raised $60 million in funding, money that it will be using to continue developing its technology.
The money is coming in as an additional part of Shield AI’s Series E, and it brings the total round to $225 million. Shield AI announced the previous $165 million tranche in June, which gave the startup a valuation of $2.3 billion. We’ve confirmed with Brandon Tseng, Shield AI’s president, who co-founded the company with his brother, CEO Ryan Tseng, that this extension came in at the same valuation.
This latest $60 million came from a single investor, Hollywood producer Thomas Tull. (Previous investors in the company include Snowpoint Ventures, Riot Ventures, Disruptive, Homebrew, Point72 Ventures, Andreessen Horowitz, Breyer Capital and SVB Capital.) Interestingly, the company actually closed this extra funding a week after the last round was announced.
We’re in a tricky period for fundraising: investors have tightened their purse strings in reaction to tech companies, from the top down, seeing a slowdown in business. Then startups finding it harder to raise money have had to cut costs to extend their runways and demonstrate to their backers that they have business ideas that will grow and be profitable. And even if they do all that, they might still run out of money and have to shut down.
Amidst all that, defense tech has been one of the categories that has stood out, not least because of world events: tensions between nations, terrorism and wars are all being played out on a technological level these days, and that means not only equipping those in combat with better tools, but also potentially using technology to carry out any action in order to reduce casualties.
“Military and government spending is countercyclical,” said Tseng in an interview. “When you talk to a consumer or enterprise business, spending goes down in a recession. But the government is a Steady Eddie. Modernizing the military requires a path and a plan and so it will continue to execute on that.”
All of that is what’s driving business for the best startups in the space, and that in turn is getting investors interested, too.
“Automated defense capabilities will play an increasingly essential role in our defense programs and are critical to our ability to remain competitive,” said Tull in a statement. “Shield AI is a leader in this space, developing some of the most advanced and cutting-edge technology for AI piloting. We are proud to be able to support Shield AI and the work they are doing in defense.”
Shield AI is based out of San Diego, which we previously described as the Silicon Valley of the defense industry: it’s the home port of the U.S. Pacific fleet, and according to stats gathered by the city’s chamber of commerce, outside of Fairfax County, Virginia (where the Pentagon is based), greater San Diego gets more defense spending than any other place in the U.S. Shield is based there, among dozens of other major and smaller defense contractors.
The company already has a number of aircraft as well as its Hivemind autonomous flying software on the market and deployed with customers (e.g., in the F16 plane pictured above) — Shield AI is part of the U.S. Department of Defense Program of Record — and it’s working on a number of other projects, including VTOL autonomous plane software and hardware, and “swarming” capabilities to jam signals or to help their customers communicate when their signals are being jammed.
Indeed, the large size of Shield AI’s round, $225 million, is a sign not just of that demand, but also of the high costs associated with developing for this industry. It comes just 11 days after Anduril, another defense tech startup working on autonomous systems, confirmed that it had raised close to $1.5 billion at a $7 billion valuation.
