Defense technology startup Anduril has completed what is likely one of the largest funding rounds this year, a $1.5 billion deal that values the company at $14 billion.
Anduril has ambitions of becoming the next great American defense contractor, joining a group of companies that has shrunk to just five big names: Lockheed Martin, RTX, Northrop Grumman, Boeing and General Dynamics. These companies make billions of dollars in revenue from business with the Pentagon, giving them near-total control over defense production.
But the defense startup founded by Palmer Luckey is poised to become a formidable rival to those longtime leaders, and recent victories are starting to attract attention: Earlier this year, the company beat out Lockheed, Northrop, and Boeing in a program to develop and test a small unmanned fighter jet prototype. Anduril also believes it can gain an edge on contracts simply by moving faster than its competitors, which means bringing a Silicon Valley mentality to notoriously slow-moving defense manufacturing.
This latest round marks a significant increase from Anduril's previous valuation of $8.5 billion, set in December 2022. The company reportedly told investors that its revenue doubled to about $500 million last year, putting its current valuation at 28x. This is high by many standards for late-stage startups, but especially for traditional defense companies. Lockheed Martin's revenue multiple is about 1.9x based on current valuation and last year's revenue, while Boeing's is 1.3x. However, these lower multiples are based on billions of dollars higher revenue. Lockheed Martin's 2023 revenue is $18.9 billion, while Boeing's 2023 revenue is nearly $78 billion, the companies report.
Anduril's new funding round was co-led by Founders Fund, which led Anduril's Seed round and Series A in August 2017, and Sands Capital, which has participated in several IPOs since Visa went public in 2008. But Founders Fund's participation isn't surprising given the firm's longstanding bet on Anduril; its co-founder and chairman, Trey Stevens, is also a partner at Founders Fund. The round also saw participation from new large institutional investors, including Fidelity Management and Research Company and Baillie Gifford.
The company said in a statement that the new funding will help expand its new software-defined manufacturing platform, called “Arsenal,” starting with the opening of its Arsenal 1 factory. The facility will expand Anduril's production space by more than 5 million square feet and employ more than 1,500 people to produce “tens of thousands of autonomous military systems” per year.
Another manifesto describes Anduril's specific push to scale manufacturing. The company's goal is to “hyperscale” defense production, producing defense systems on a scale not currently possible for sophisticated military systems. But instead of focusing on making a small number of very expensive and sophisticated systems, Anduril focuses on producing products that are many times cheaper that can be hyperscaled by rebooting factories. Arsenal aims to do just that: an adaptable, replicable model that “allows us to expand indefinitely and rebuild the arsenal of democracy.”
But that's not all: Anduril says centralizing software will make the factory even more efficient over time, with the Arsenal Operating System helping to speed up production and reduce costs. This will undoubtedly also have an impact on the products themselves, which Anduril says will be developed to be less reliant on a highly specialized labor force, make the most of readily available components, and be able to make rapid, iterative changes to products.
The seven-year-old company's success with government and private investors has sparked a surge in interest in defense technology, a sector that previously seemed nearly impossible to invest in because of the long wait times for government contracts. But it's unclear whether Anduril's upward trend will truly float all boats, or whether Anduril is (as is often the case in Silicon Valley) the exception and not the rule.