A more challenging fundraising climate has highlighted where investors truly believe and where some sectors lack appeal without a bullish market. While AI startups have been prominent in deal making this year, venture capitalists have also shown continued dedication to defense technology.
AI isn’t the Only Industry Avoiding the funding Decline
This trend was exemplified recently when Shield AI secured a $200 million Series F funding round this week. Thomas Tull’s US Innovative Technology Fund led the round, with contributions from Snowpoint Ventures and Riot Ventures, among others. This funding has placed a valuation of $2.7 billion on the San Diego-based autonomous drone and aircraft startup.
The sheer magnitude of this funding round adds an interesting aspect to the deal. “Mega-rounds” exceeding $100 million have become increasingly rare in the current climate. In the first three quarters of 2023, only 194 rounds surpassing the $100 million mark were secured, in contrast to 538 in 2022 and 841 in 2021, as reported by PitchBook.
Late Stage Funding Trends in 2023 and Shield AI’s Success Story
Late-stage fundraising has also been relatively subdued for much of 2023, with just over $57.3 billion invested in late-stage startups through the third quarter, a significant drop from the $94 billion raised by such companies in 2022 and the $152 billion in 2021.
Brandon Tseng, co-founder and president of Shield AI, informed TechCrunch+ that his company successfully secured funding in this climate primarily due to its strong performance metrics. The company has been experiencing a 90% year-over-year revenue growth, and it is on track to achieve profitability by 2025.
What adds to the intrigue of this funding round is the sector in which the company operates. It’s a clear indication of the growing enthusiasm from investors for defense technology in recent years.
Tseng acknowledged the significant improvement in investor interest in companies like his and recalled the initial challenges Shield AI faced during its early fundraising efforts.
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