Will Anduril Spark an AI Defense Tech Boom?

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Will Anduril Spark an AI Defense Tech Boom?

For many, Independence Day serves as a reminder of the nation's historical commitment to securing its freedoms through military preparedness and innovation. Many VCs are eager to extend this commitment to funding defense tech and American dynamism. With the rapid innovation in AI, cybersecurity and aerospace of late it’s a good time for a sector update.

Funding ‘American Dynamism’

Defense has traditionally been an area VCs are reluctant to touch, but with the AI boom increasingly private capital is stepping up to fund tech innovation in the sector. VC investment into defense tech startups boomed in 2023 after a $1.b round by AI-focused software and hardware defense tech startup Anduril in late 2022 ignited a gold rush in the sector. This year investment was down 74% to $118M in Q1 compared to $459M in Q1 2023 and down 62% in Q2 but…

Anduril is back, with reports it is raising another $1.5B round at a valuation of $12.5B. Meanwhile, investing giant a16z has been putting its ~$42B in AUM to work on AIdefense, and ‘American dynamism’. It is now exploring starting a Private Equity fund to unlock strategic Middle Eastern capital.

Investing in a Shifting Battlefield

AI is significantly impacting aerospace and defense manufacturers, enhancing capabilities and efficiency and changing the focus. Space capacity is emerging as highly important with Space security firm True Anomaly raising $100M in December. Autonomous fighters are gaining attention too, with AI pilot startup Shield AI raising a $200M Series F in October.

Robotics and Infrastructure is increasingly relevant as military recruitment is at all-time lows. In these areas, infrastructure & robotics defense startup Gecko Robotics closed a $173M Series C extension in December.

Cybersecurity is more crucial than ever in today’s National security and defense landscape. In March this year, Colorado open-source AI national security software systems startup Defense Unicorns raised a $35M Series A and in May satellite tracking startup Privateer raised $56.5M.

A Funding Powderkeg Set to Blow?

American Dynamism is likely healthier than the numbers alone may suggest as overlapping sectors of AI, cybersecurity and robotics have seen an increase in funding. Many of the top AI startups also have strong defense applications and ties. For example OpenAI gave former head of the NSA and retired US Army General, Paul M. Nakasone a board spot. Could Anduril and AI ignite the powder on another defense tech boom in 2024?

“Anduril is a technology partner, not an equipment provider Security threats are evolving faster than the DOD can keep pace… To really outmaneuver emerging threats we need to move past just efficiencies and create clear step changes in capability, quickly.”

Brian Schimpf, Anduril Co-founder and CEO

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