Neros Inc. raised $250 million in a funding round that tripled its valuation to $2.5 billion, money that will boost the defense startup’s drone development and production to meet rising US government demand.
The funding will also be used to expand internationally and help establish sovereign manufacturing efforts in allied countries. Sequoia Capital and American Strategic Technology Fund co-led the equity round in the three-year-old startup, with participation from Thiel Capital and other existing investors.
The move is a milestone for Torrance, California-based Neros. It reflects the venture industry’s conviction that as the Pentagon restocks the nation’s arsenal, it will tap defense startups using AI, autonomy and other technology in new weapons, in addition to more traditional defense contractors. On the heels of major federal procurement reforms late last year that favor new commercial entrants, startups in the sector raised about $35 billion, the strongest six-month period on record, according to the data provider PitchBook.
Like Anduril Industries Inc., Shield AI Inc. and other defense tech startups that have recently surged in value and potential significance, Neros builds relatively cheap drones such as its Archer attack drones that are designed to take out larger, more expensive systems. Neros co-founders Olaf Hichwa and Soren Monroe-Anderson said they decided to accelerate development of the Bandit – its new interceptor drone – following Iran’s attack on a key radar system used to support a US missile defense system known as Terminal High Altitude Area Defense, or THAAD, in the opening days of the war.
Iranian-designed Shahed drones “rain terror on Ukraine because it doesn’t have interceptors,” said Hichwa, the company’s chief technology officer. “The pressure to deploy is real. We don’t have the luxury of toiling in a lab.” The Shahed-136 is a low-cost, one-way attack drone that has been used by Iran and Russia, which now makes its own version.
Neros presented a Bandit prototype to board members during its most recent meeting and aims to have it deployed in combat by the end of this year. The new funds will be used to expand its workforce from 200 to 350 and increase its production capacity of Archer drones to one million a year by 2028. The company’s current production capacity is 14,000 annually.
Last week, Neros hired SpaceX and Astranis Space Technologies Corp. veteran David DiDomenico as vice president of operations to boost production and supply chain efforts.
Monroe-Anderson, Neros’ chief executive officer, said the new funding will be used for other products, including an upgraded handset — used to control the drones — that is easier to charge, and an advanced version of its Archer attack drone. Called Archer AI, Neros says it can maintain target locks and coordinate movements with other drones while operating in places where GPS isn’t available.
The US Army last month awarded Neros a five-year deal for Archer attack drones and other products worth as much $500 million, in part because it uses a secure domestic supply chain independent of China. Monroe-Anderson said the company’s growth plan is aggressive and achievable because it can use many of the same parts for its Bandit and Archer drones.
Automating mass production will take additional effort. Neros has automated flight tests for drones to establish that they meet requirements before being shipped, but other aspects of production remain manual, he said.
“Autonomy is 1,000 different systems. It’s not binary,” Monroe-Anderson said. “Automating too early is a mistake and it’s a common one.”
Written by: Lizette Chapman @Bloomberg
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