Defense startup Hermeus has raised $350 million to keep developing what it calls the “fastest unmanned aircraft,” in a funding round that has pushed its valuation to $1 billion.
The Los Angeles-based startup said Tuesday that it has raised $200 million in equity financing, led by Khosla Ventures. Existing investors Canaan Partners, Founders Fund, In-Q-Tel, and RTX Ventures also participated. New outside money is coming from the venture fund of media conglomerate Cox Enterprises, the publicly-traded closed-end management investment company Destiny Tech100, and others.
The remaining $150 million comes in the form of debt, which Hermeus co-founder and CEO AJ Piplica told TechCrunch will help the startup and its growing cap table maintain some control.
“We build a lot of hardware, we’re expanding our manufacturing capabilities, and if we can finance a large portion of our spend non-dilutively, it’s absolutely the way to do it,” he said in an interview.
Hermeus’s raise comes at a time when venture and corporate investors are flooding money into defense startups. VC investment in defense tech crossed $9 billion over 265 rounds globally last year, according to PitchBook, with corporate investors contributing $2 billion across 28 rounds.
But for Hermeus, it’s not just about good timing.
Piplica attributes at least some of the fundraising success to a change Hermeus made on the technical side a few years ago. The startup had spent time and money developing its own engine, partially out of necessity, he said. After Hermeus courted RTX Ventures — the venture arm of RTX Corporation, the defense contractor formerly known as Raytheon — a new opportunity arose.
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Piplica and his team decided instead to work with RTX subsidiary Pratt & Whitney to modify the aerospace company’s F100 engine in order to power Hermeus’ hypersonic aircraft.
This put Hermeus on a faster track with a proven and functional engine, making it easier to test and iterate while lining up new contracts with the U.S. government along the way. Instead of aiming at one big goal of building a Mach 5 aircraft, Hermeus was now able to diversify, according to president Zach Shore.
“This accelerates us to Mach 5, and also reinforces the economics of the business while satisfying near term demand from the from the Department of Defense,” he said. “I think in that way, you have a number of concentric circles overlapping simultaneously that reinforce the business, that reinforce the customer, and that, you know, reinforce the technology maturation.”
Last month, Hermeus flew a demonstrator version of its technology that was the size of an F-16 fighter aircraft. The startup has said it’s aiming to make the next iteration of that aircraft go supersonic. A third aircraft is in the works as well, Piplica said.
This rapid prototyping approach is hard to come by in aviation, Piplica said. He points to SpaceX as the industry standard for being willing to build, test, fail, learn, and repeat until it gets a vehicle right. That’s why the hardest challenge Hermeus faces is cultivating or developing talent, Piplica said.
“There’s nowhere in the world where companies are building new full-scale aircraft on an annual basis, clean sheet or otherwise,” he said. “People used to do that, but they’re all dead, which means you have to go make those people in one way or another.”
The new funding round will also help Hermeus continue to build out its staff, which is already approaching 300 employees.
Hermeus has now had two successful test flights (it flew a demonstrator last year that was three times smaller). But Piplica stressed the need for Hermeus to be ready for some kind of failure — which, again, he sees as part of the rapid prototyping proccess.
“The challenge is, how do you pick the right kind of chunks of risk to take on and apply your capital to over time,” he said. “Like, yeah, we could crash an airplane, and I expect it’ll happen at some point in our development program. We’re set up to do that very safely. But this is also why, like, building more aircraft is super important. If you don’t build a lot, it takes you a lot longer, because you’re gonna go baby things. You know, we wonder why it takes us 20, 25, years to develop a new aircraft?”