Defense Startup Shield AI in Talks for Valuation of at Least $20 Billion

Shield AI, a startup building drones and AI-powered software for the military, is in talks to raise new funds at a valuation of at least $20 billion, according to a person with knowledge of the fundraise. The funding round, if it closes, would represent a roughly 60% increase to Shield’s valuation from just five months ago.

The planned funding round follows the 11-year-old company’s success winning contracts for its AI software that coordinates drones and aircrafts, called Hivemind, and comes as investors continue to pour money into startups that are building AI-powered weapons and defense systems.

In June, the U.S. Air Force awarded Shield a contract to use Hivemind in a program for uncrewed fighter jets, called the Collaborative Combat Aircraft program. The company in May also won a Pentagon contract to use Hivemind in a pilot program for coordinating drone swarms. The San Diego-based startup also makes autonomous aircraft for the battlefield.

In March, Shield raised $2 billion at a $12.7 billion valuation including the money invested. Private equity firm Advent International and JP Morgan’s Security and Resiliency Initiative investing arm, which backs defense, manufacturing, energy and other hard tech companies, co-led the round, which included Blackstone. The lead investors in this most recent round of financing couldn’t be learned.

Shield AI used some of the funds from its last financing to purchase Aechelon Technology, a defense-tech startup that makes simulation and sensor software, in June. Shield AI has raised a total of over $3 billion from investors including Andreessen Horowitz, Disruptive and U.S. Innovative Technology Fund.

The company also makes the V-BAT, a drone primarily used for surveillance that can launch and land vertically like a helicopter, and the X-BAT, an autonomous fighter jet, which also takes off and lands vertically and doesn’t need a runway. In June, Shield won a $16 million contract with the Polish navy, which is acquiring some V-BAT drones.

The funding talks follow other deals in defense and AI-powered weapons systems. Mach Industries, which also builds autonomous weapons, raised $600 million in September, doubling its valuation to $3.7 billion after the investment. Covenant, a startup that makes missiles, said earlier this month it had raised over $250 million in funding across three rounds led by Andreessen Horowitz, Founders Fund, Lightspeed Venture Partners, Lux Capital, 8VC and others.