Defense technology startup Anduril has closed what is almost certainly one of the biggest funding rounds of the year: a $1.5 billion deal that values the company at $14 billion.
Anduril has ambitions to become the next great American defense contractor, joining a group of companies that has shrunk to just five major firms: Lockheed Martin, RTX, Northrop Grumman, Boeing and General Dynamics. These companies generate billions in revenue from business with the U.S. Department of Defense and have a virtual grip on defense production.
But the defense startup, founded by Palmer Luckey, is aiming to become a serious competitor to these long-standing market leaders, and its recent successes have already attracted attention. Earlier this year, the company beat out Lockheed, Northrop and Boeing in a program to develop and test small, unmanned fighter jet prototypes. Anduril is also betting that it can gain an edge on contracts simply by being faster than its competitors: it is bringing a Silicon Valley mentality to defense production, which is notoriously slow.
This latest round is a massive step up from Anduril’s previous valuation of $8.5 billion, set in December 2022. The company reportedly told investors that it doubled its revenue last year to around $500 million, which would mean the current valuation is pegged at 28x. This is high by many standards for late-stage startups, but especially for traditional defense contractors: Lockheed Martin’s revenue multiple is about 1.9x based on its current valuation and last year’s revenue, while Boeing’s is 1.3x. However, those lower multiples are based on revenue that is billions of dollars higher: Lockheed Martin’s revenue was $18.9 billion in 2023, and Boeing’s revenue was nearly $78 billion in 2023, sources said.
Anduril’s new funding round was co-led by Founders Fund, which led Anduril’s seed round in August 2017 and its Series A, and Sands Capital, which has participated in several IPOs since Visa went public in 2008. However, Founders Fund’s involvement is hardly surprising, as the company has been a long-time backer of Anduril. The company’s co-founder and chief executive officer, Trae Stephens, is also a partner at Founders Fund. Some large institutional investors, such as Fidelity Management and Research Company and Baillie Gifford, also participated in the round.
The company said in a statement that the new funding will help scale a new software-defined manufacturing platform called “Arsenal,” starting with the Arsenal-1 factory. This facility will expand Anduril’s manufacturing space by over 450,000 square meters to produce “tens of thousands of autonomous military systems” per year with a workforce of more than 1,500 employees.
A separate manifesto lays out Anduril’s reasons for scaling up production. The company’s goal is to “upscale” arms production, producing defense systems at a scale not currently possible for exquisite military systems. But Anduril isn’t focused on making a few very expensive, exquisite systems; it’s focused on making many times more cheaper products that can be upscaled using a restarted factory. Arsenal is intended to be just that: a customizable, replicable model that is “infinitely scalable, enabling the rebuilding of the Arsenal of Democracy.”
But that’s not all: Anduril says the centrality of software will make the factory even more efficient over time, as the Arsenal operating system enables faster, more cost-effective manufacturing. This will undoubtedly impact the products themselves, which Anduril says will be designed to be less dependent on highly specialized labor, maximize the use of readily available components, and enable iterative product changes quickly.
The seven-year-old company’s success with government and private investors has led to a boom in interest in defense technology, a sector previously considered nearly uninvestable due to long timelines for government contracts. But it’s unclear whether Anduril’s rising tide will truly lift all boats, or whether (as is often the case in Silicon Valley) Anduril will be the exception rather than the rule.
