Defense tech start-up Anduril has raised nearly $1.5 billion in the second-largest U.S. venture capital round of the year, marking a milestone for tech startups trying to break into the notoriously difficult field of defense procurement.
Anduril said the investment values it at $7 billion, excluding new funds it raises, compared to $4.2 billion 18 months ago. It comes at a time when the giant investment rounds that were a feature of the recent venture capital boom have all but dried up, while many start-ups are struggling to avoid the “downturns” that force them to accept lower valuations.
Anduril was founded five years ago by Palmer Luckey, who sold his previous startup, virtual reality company Oculus, to Facebook for $2 billion when he was 21. In an interview with the FT, Luckey said he set out to build a large defense company based on new technologies such as AI and drones because many Silicon Valley companies, under pressure from their workers , had turned their backs on the Pentagon.
“The big tech companies in the United States were largely unwilling to work with the [Department of Defense],” he said. “You have all this amazing technological talent that is just unreachable in the DoD. There was never a time in the history of the United States when it was like this.”
Tech start-ups struggle to sell to the military due to the defense industry’s long buying cycles and the challenge of gaining enough trust to win major contracts.
“They made fun of Silicon Valley, a lot of people didn’t believe it could be done,” said Katherine Boyle, partner at Anduril investor Andreessen Horowitz. “The nature of warfare has fundamentally changed and the [large defence contractors] will not be able to meet supply needs.
In the strongest sign yet that the Pentagon is turning its attention to software and AI capabilities from new defense firms, Anduril earlier this year won a US Special Operations Command contract for a worth nearly a billion dollars to act as a systems integrator on a counter-drone project. . Along with a series of contracts with different branches of the US military, Luckey said the company works with “half a dozen NATO allies” and has “hundreds of millions” of dollars in annual revenue.
Anduril is mainly known for its autonomous systems such as drones, as well as surveillance towers used for border security. Most of its engineers work on its Lattice software platform, which brings together data from many different surveillance and weapons systems, most of which are not built by the company.
Russia’s invasion of Ukraine changed attitudes in Silicon Valley and prompted many tech start-ups to consider working with the Pentagon, Boyle said. However, there’s still a heated debate in tech circles about how far companies that weren’t just created to work on defense should go, especially when it comes to offensive weapons.
Luckey said Anduril didn’t walk the line in building weapons but wouldn’t use facial recognition software because the technology could never be reliable enough to trust life or death situations. . He rejected calls for a ban on autonomous weapons, arguing that always requiring a “human in the know” to make the ultimate decision to fire would put the United States and its allies at a disadvantage against countries that used fully robotic weapons. .
Instead, he called for clear lines of accountability on the decision to employ autonomous weapons in particular situations, rather than firing them, but added that only democratically elected leaders should set the rules.
“You shouldn’t want me to make this decision because you shouldn’t want corporate executives to define US foreign policy or military policy,” he added. “We should just be the dumb computer people making these things.”
The latest investment, which brings Anduril’s total fundraising to $2.2 billion, was led by Valor Equity Partners. It was reported earlier this year that the company had begun the process of lifting the round. In the biggest venture capital round of the year, Elon Musk’s space company SpaceX raised nearly $1.7 billion in June.
