Venture-backed companies serving the defense industry have had a lucrative week as global conflicts erode old taboos about investing in technology bound for the battlefield.
Accel-backed Scale AI, which provides AI data training and validation for enterprises and the defense industry, just inked a $1 billion Series F at a $13.8 billion valuation—a whopping 89% jump from its $7.3 billion Series E valuation in 2021.
Some of Scale AI’s fresh funding has been earmarked for its model evaluation work with the US Department of Defense, the company said, where it’s working with the Pentagon to develop a framework for using large language models for military use cases.
Meanwhile, Anduril—the Founders Fund- and Valor Equity Partners-backed startup developing unmanned weapons systems—is in talks to raise around $1.5 billion at a valuation of $12.5 billion or more, The Information reported Monday. Anduril’s last round, a Series E closed in December 2022, valued the company at $8.48 billion.
Assuming Anduril’s deal closes, both rounds will rank among the largest VC checks for US startups written so far in 2024, after cloud computing giant CoreWeave and AI foundation model company Anthropic, according to PitchBook data. Priced at significant up rounds despite the slower deals landscape, they serve as signals of bullish investor confidence in the emerging industry of AI-powered military technology.
A decade ago, large VC checks in hardware-heavy military technologies were unpopular and within many firms—even culturally taboo.
But big swings on national security-minded companies by VC firms like Andreessen Horowitz, whose American Dynamism fund closed on another $600 million last month, as well as the rapid revenue growth of companies like Anduril, Palantir and Shield AI, have brought defense tech onto more managers’ radars.
The war in Ukraine has also driven more demand from military contractors and the US government, both of which are retooling their arsenals using AI technologies developed by startups. Investment has followed. A record 356 aerospace and defense companies raised VC funding last year, securing a total $7.17 billion, and the sector is on track to hit a similar figure in 2024, according to PitchBook data.
Anduril’s annual revenues are projected to hit $1 billion by 2026, the Financial Times reported. The company did not respond to PitchBook’s request for comment.
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