U.S. defence technology companies are securing large investments as demand for advanced military technology grows.

Shield AI, a defence tech company developing artificial intelligence (AI) pilots for aircraft, has raised $240 million in a new funding round. This latest investment brings the company’s valuation to $5.3 billion, making it the second-highest valued defence tech startup after Anduril Industries. Anduril, known for its autonomous defence systems, was valued at $14 billion after raising $1.5 billion last year. Reports suggest Anduril is now in talks to raise $2.5 billion at a $28 billion valuation, with backing from Peter Thiel’s Founders Fund.

Further, the announcement comes just a day after Epirus, a company specialising in directed-energy weapons, secured $250 million in Series D funding. Epirus is now valued at $1.35 billion. 

Coming back to Shield AI, the latest funding round was led by major defence and aerospace companies, including L3Harris and Hanwha Aerospace, along with existing investors such as Andreessen Horowitz, U.S. Innovative Technology, and Washington Harbour. With this round, Shield AI’s total funding now stands at $1.3 billion.

The new capital will support the expansion of Hivemind Enterprise, the company’s AI-powered autonomy software. This software is designed to help defence contractors, governments, and robotics firms develop and deploy unmanned systems that can operate without GPS or communication signals.

Founded by Andrew Reiter, Brandon Tseng, and Ryan Tseng in 2015, Shield AI has been steadily growing its valuation. In 2023, it raised $300 million at a $2.8 billion valuation and $200 million at $2.7 billion. The company has also been working with L3Harris on AI-powered mission autonomy for defence applications. Its portfolio includes, Hivemind Pilot, Commander, and Forge: AI-powered tools for autonomous flight and mission execution. V-BAT: An autonomous vertical take-off and landing (VTOL) drone designed for military applications and Sentient Vision Systems: Wide-area motion imaging software for real-time battlefield intelligence.

What about European counterparts?

European defence technology startups are growing as governments increase defence budgets. While the region is still developing in the defence tech sector compared to the U.S., several startups have raised significant funding and achieved high valuations.

Helsing GmbH, a German artificial intelligence defence company, secured €450 million in a funding round led by General Catalyst, with participation from Accel and Lightspeed Venture Partners. The company is now valued at approximately €4.95 billion. Helsing specialises in AI-driven software for military systems and has secured contracts with European governments.

Further the governments across Europe are increasing defence spending. France has announced plans to double its defence budget by 2030 compared to 2017. Germany has committed to meeting NATO’s 2% GDP defence spending benchmark, a target that had previously been unmet.

Other defence tech startups in Europe are also expanding. ARX, a German company, develops advanced surveillance and defense systems. QinetiQ, based in the UK, focuses on military technology, robotics, and cybersecurity solutions.