Palmer Luckey’s defence start-up Anduril raises almost $1.5bn

Defense tech Anduril has raised nearly $1.5bn in the second-biggest venture capital of the year in the US, marking a milestone for young tech companies trying to break into the defense procurement space.

Anduril said the investment is valued at $7 billion, excluding the new cash it is raising, up from $4.2 billion 18 months ago. It comes at a time when large investment judgments, which were a feature of the recent venture capital boom, have completely dried up, while many start-ups struggle to avoid the “round down” that forces them to accept lower property valuation.

Anduril was founded five years ago by Palmer Luckey, who sold his former virtual reality company Oculus to Facebook for $2 billion at the age of 21. In an interview with the FT, Luckey said that he started building a large defense company based on new technologies such as AI and drones because many Silicon Valley companies, under pressure from workers, turned their backs on the Pentagon.

“The big tech companies in the US have largely refused to work there [Department of Defense],” he said. “You have all these incredible technological talents that are just inaccessible to the DoD. There has never been a point in the history of the United States where these things have been.”

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Technology startups have struggled to sell to the military because of the defense industry’s long buying cycle and the challenge of earning enough trust to win big contracts.

Katherine Boyle, a partner at Andreessen Horowitz, an Anduril investor, said: “They laughed out of Silicon Valley, many people did not believe that it could be done. “The nature of the war has changed fundamentally with the [large defence contractors] will not be able to meet their procurement needs.”

In the strongest sign yet that the Pentagon is turning to software and AI capabilities in new defense firms, Anduril earlier this year won a contract from the US Special Operations Command worth nearly $1 billion to act as a systems integrator on a counter-drone project. . Along with a series of contracts with different branches of the US military, Luckey said the company works with “half a dozen NATO allies” and has “hundreds of millions” of dollars in annual revenue.

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Anduril is known mainly for autonomous systems such as drones, as well as surveillance towers used for border security. Most of its engineers work on its software platform Lattice, which pulls together data from many different surveillance and weapons systems, most of which are not built by the company.

Russia’s invasion of Ukraine has changed attitudes in Silicon Valley and made many more tech start-ups want to consider working with the Pentagon, Boyle said. However, there is still a heated debate in technology circles about how far companies that have not been set up purely to work on defense should go, particularly when it comes to offensive weapons.

Luckey said Anduril didn’t draw the line at building weapons but wouldn’t use facial recognition software, because the technology can never be reliable enough to trust in life-or-death situations. He rejected calls for a ban on autonomous weapons, arguing that still requiring a “person in the village” to make the final decision to fire would leave the United States and its allies at a disadvantage in countries that have used fully robotic weapons.

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Instead, he asked for clear lines of responsibility on the decision to employ autonomous weapons in particular situations, rather than actually shooting them, but he added that only democratically elected leaders should set the rules.

“You shouldn’t want me to make this decision because you shouldn’t want corporate executives to set US foreign policy or military policy,” he added. “We should just be the silly computer boys who do these things.”

The latest investment was led by Valor Equity Partners, bringing Anduril’s total fundraising to $2.2 billion. The company reported earlier this year that it had begun the process of raising the round. In the biggest VC round of the year, Elon Musk’s space company, SpaceX, raised nearly $1.7 billion in June.

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