A harder fundraising setting reveals which firms and sectors buyers have actual conviction in, and which areas aren’t enticing outdoors of a bull market. AI startups dominated dealmaking this yr, however there’s one other sector that VCs have stayed dedicated to: protection tech.
We noticed the most recent instance of this pattern simply this week. On Tuesday, Defend AI raised a $200 million Sequence F spherical led by Thomas Tull’s US Progressive Know-how Fund, with participation from Snowpoint Ventures and Riot Ventures, amongst others. The spherical values the San Diego–based mostly autonomous drone and plane startup at $2.7 billion.
The sheer dimension of the spherical alone makes this deal attention-grabbing. “Mega-rounds” over $100 million have turn out to be unusual sufficient to warrant raised eyebrows in at present’s local weather. Via the third quarter of 2023, solely 194 rounds above $100 million have been raised, in comparison with 538 in 2022 and 841 in 2021, in accordance with PitchBook. Late-stage fundraising has additionally been largely muted for a lot of 2023. Simply over $57.3 billion was invested into late-stage startups by means of the third quarter of this yr, a lot decrease than the $94 billion such firms raised in 2022, and the $152 billion we noticed in 2021.
Brandon Tseng, the co-founder and president of Defend AI, advised TechCrunch+ his firm was capable of elevate on this setting largely due to its metrics. The corporate’s income is rising 90% yr over yr, per Tseng, and it’s on the trail to changing into worthwhile in 2025.
This spherical can also be made extra attention-grabbing by the house the corporate operates in, because it’s the most recent signal of how a lot buyers have leaned into protection tech lately.
Tseng agreed that the investor urge for food for firms like his has improved quite a bit, and he recalled how Defend AI’s first few fundraises have been significantly exhausting.