Anduril Industries made headlines earlier this month when it raised another $1.5 billion — matching its own record for the largest defense tech round ever and catapulting total funding numbers to likely new highs.
The massive round — co-led by Founders Fund and Sands Capital Ventures — showed the growing interest in the space by investors. That was not always the case in the venture world for reasons ranging from cultural to political.
However, in the past several years a handful of big-named firms like Andreessen Horowitz and General Catalyst have placed a significant amount of bets in the space as the venture capital world has grown and some norms have changed.
Who’s investing?
Venture funding for defense tech startups is ready to set new records. After Anduril’s huge round, so far in 2024 defense tech startups have raised $2.5 billion — per Crunchbase data — nearly matching the record high of $2.6 billion set in 2022. Last year, such startups collected only $2.1 billion total.
Helping the industry hit those new heights are the aforementioned Founders Fund and Andreessen Horowitz.
Those firms have made the most investments this year — three apiece — of any VC firm and Andreessen the most since 2021 with 14 deals. Earlier this year, Andreessen — an investor in Anduril’s previous rounds — led a $175 million Series B for autonomous surface vessels maker Saronic at a $1 billion valuation.
Not far behind is 8VC 1 with a dozen investments since 2021 — although only one this year, participating in the big Saronic round. Alumni Ventures has done 11 deals in that time, including co-leading a $12 million seed round for Picogrid, which has developed a platform to allow users to control unmanned systems.
The only other firm to have double-digit investments in the defense tech space may not be known to everyone in the venture world, as Dallas, Texas-based Silent Ventures has made 10 deals since 2021 in the sector. However, that’s because the firm specializes in aerospace, defense and national security companies.
Big money
Both Founders Fund and General Catalyst come in next on the list, making eight defense tech deals apiece since 2021. They also both rank high when it comes to leading or co-leading those rounds based on the highest dollar amounts.
The Anduril deal obviously puts Founders Fund and Sands Capital in the lead this year since it was a $1.5 billion deal.
General Catalyst led the next biggest round of the year for Helsing, which develops artificial intelligence software for defense — worth approximately $489 million that values the company at $5.4 billion.
Andreessen is the only firm to lead or co-lead two rounds in the defense sector this year and the only other firm to lead or co-lead rounds totaling more than $100 million. Along with the round for Saronic, it also co-led a $7 million funding for ZeroMark, which creates auto-targeting fire control systems.
Why now?
The big money is somewhat new for defense tech.
In the past, defense tech, venture dollars and the general tech culture haven’t always been a harmonious mix. It’s undeniable that Silicon Valley-developed tech has been used by the military for decades, but many investors have shied away from the space for moral reasons or due to pressure from LPs.
Also, tech companies have been wary of letting their tech be used for military purposes. Perhaps the most recent notable example was back in 2018 when Google workers protested the company’s Pentagon drone surveillance contract for what was called Project Maven.
Nevertheless, venture has grown massively in the past decade, and investors are looking for more opportunities in more sectors. The blurring of the lines between what is defense tech and what is something more also has occurred, as defense can be defined by tanks and bombs and now includes AI and cybersecurity.
That growth in cash and the need for even more tech in defense has opened up VC checkbooks more than ever.
Methodology
Defense tech is defined by the industries of military, national security and law enforcement, according to Crunchbase data. Most announced rounds are represented in the database; however, there could be a small time lag for rounds reported late in the quarter. It does not include incubators or accelerators due to the fluctuations their investment numbers can have.
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Illustration: Li-Anne Dias
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