Defense technology continues to get a lot of attention from investors, and today one of the biggest startups in the space is announcing more funding. Shield AI – which develops platforms and aircraft for autonomous flight systems, targeting the US military and its allies as customers – raised $60 million in funding, money it will use to continue developing its technology.
The money arrives as an additional part of Shield AI’s Series E, and it brings the total round to $225 million. Shield AI announced the previous tranche of $165 million in June, which gave the startup a valuation of $2.3 billion. We confirmed with Brandon Tseng, President of Shield AI, who co-founded the company with his brother, CEO Ryan Tseng, that this expansion has come in at the same valuation.
That last $60 million came from a single investor, Hollywood producer Thomas Tull. (The company’s previous investors include Snowpoint Ventures, Riot Ventures, Disruptive, Homebrew, Point72 Ventures, Andreessen Horowitz, Breyer Capital and SVB Capital.) Interestingly, the company actually closed this additional funding a week after the announcement of the last round.
We are in a tricky time for fundraising: investors have tightened their purse strings in response to tech companies, from top to bottom, noting a slowdown in activity. Then, startups having more difficulty raising funds had to cut costs to expand their leads and demonstrate to their backers that they had business ideas that would scale and be profitable. And even if they do all of that, they might still run out of money and have to shut down.
In the midst of all this, defense technology has been one of the categories that has stood out, especially due to world events: tensions between nations, terrorism and wars are all played out technologically these days. this, and that means not only equipping those in combat with better tools, but also potentially using technology to carry out any action to reduce casualties.
“Military and government spending is countercyclical,” Tseng said in an interview. “When you talk to a consumer or a business, spending goes down in a recession. But the government is a Steady Eddie. The modernization of the army requires a path and a plan and therefore it will continue to execute it.
All of this is what drives the business of the best startups in the industry, and it also interests investors.
“Automated defense capabilities will play an increasingly critical role in our defense programs and are critical to our ability to remain competitive,” Tull said in a statement. “Shield AI is a leader in this space, developing some of the most cutting edge and advanced technologies for piloting AI. We’re proud to be able to support Shield AI and the work they do in defense.
Shield AI is based in San Diego, which we’ve previously described as the Silicon Valley of the defense industry: it’s the home base of the U.S. Pacific Fleet, and according to statistics gathered by the Chamber of Commerce of town, outside of Fairfax County, Virginia. (where the Pentagon is based), Greater San Diego receives more defense spending than any other location in the US Shield, among dozens of other major and smaller defense contractors.
The company already has a number of aircraft as well as its Hivemind autonomous flight software in the market and deployed with customers (for example, in the F16 aircraft pictured above) – Shield AI is part of the registration program of the US Department of Defense – and it’s working on a number of other projects, including VTOL autonomous aircraft software and hardware, and swarming capabilities to jam signals or help their customers communicate when their signals are jammed.
Indeed, the large round size of Shield AI, $225 million, is a sign not only of this demand, but also of the high costs associated with developing this industry. It comes just 11 days after Anduril, another defense tech startup working on autonomous systems, confirmed it had raised nearly $1.5 billion at a $7 billion valuation.
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