Defense tech startup Anduril has closed what will almost certainly end up being one of the largest funding rounds of the 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 class of companies that has shrunk to just five major firms: Lockheed Martin, RTX, Northrop Grumman, Boeing, and General Dynamics. These companies pull in billions in revenue from business with the U.S. Department of Defense, and their stranglehold on defense production is nearly absolute.
But the Palmer Luckey-founded defense startup is looking to become a serious rival to these long-standing kingpins, and its recent wins have started to draw notice. 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 have an edge in contracts simply by moving faster than its competitors: bringing a Silicon Valley mentality to defense production, which moves notoriously slowly.
This latest round is a massive step up from Anduril’s prior $8.5 billion valuation set in December 2022. The company reportedly told investors that it had doubled revenue to around $500 million last year, which would mean the current valuation is set at a 28x multiple. This is high by many standards for late-stage startups, but especially so for traditional defense companies: Lockheed Martin’s revenue multiple is about 1.9x, based on its current valuation and last year’s revenues, while Boeing’s is 1.3x. Albeit those lower multiples are on revenues that are billions of dollars higher: Lockheed Martin brought in $67.6 billion in 2023, and Boeing’s revenues were nearly $78 billion for 2023.
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 multiple IPOs since Visa’s public offering in 2008. Founders Fund’s participation is hardly a surprise, though, given the firm’s long-standing bet on Anduril. The company’s co-founder and executive chairman, Trae Stephens, is also a Founders Fund partner. The round also saw new participation from some major institutional investors, like Fidelity Management & Research Company, and Baillie Gifford.
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. That facility will increase Anduril’s production space by over 5 million square feet in order to manufacture “tens of thousands of autonomous military systems” per year, with a workforce of more than 1,500 people.
A separate manifesto outlines Anduril’s rationale for scaling manufacturing specifically. The company’s aim is to “hyper-scale” defense production and to produce defense systems at a scale that is not currently possible for exquisite military systems. But Anduril is not focused on making a few very expensive, exquisite systems; it’s focused on producing many times more cheaper products, which can be hyper-scaled with a rebooted factory. Arsenal is meant to be exactly that: an adaptable, replicable model that “scales indefinitely and makes it possible to rebuild the arsenal of democracy.”
Not only that: Anduril says the centrality of software will also make the factory even more efficient over time, with the Arsenal Operating System facilitating faster, cheaper manufacturing. This will no doubt have an effect on the products themselves, which Anduril says will be developed to be less dependent upon highly-specialized labor. It can also help maximize the use of readily available components and make iterative changes to products quickly.
The 7-year-old company’s success with the government and private investors has helped spur a boom of interest in defense tech, a sector that had been previously thought of as nearly uninvestable due to the long timelines in government contracting. However, it’s unclear if Anduril’s rising tide will truly lift all boats or if Anduril will be (as is so often the case in Silicon Valley) the exception, not the rule.
The story has been updated to reflect that Lockheed’s 2023 revenue was $67.6 billion.
