According to a recent report from Allied Market Research, the global digital battlefield industry is set to reach $156.8 billion by 2031, being driven by factors like higher rates of 5g adoption, rapid robotics developments, advanced data analytics, artificial intelligence, and a meaty defense budget. While this piece isn’t focusing specifically on this segment of the defense space, we did want to point it out, because it’s part of an overall trend: rapid evolution of defense capabilities and the need for more.
For instance, it was just announced that the U.S. Naval Research Laboratory (NRL) and Naval Warfare Centers have signed a quantum computing memorandum of understanding with the Air Force Research Laboratory (AFRL) Information Directorate. This will allow them to really get the ball going on projects to create quantum computing capabilities for the U.S. Department of Defense (DoD) that will stretch beyond the theoretical realm to that of the actual battlefield.
A Rising Appetite
What does all this mean? It means the movers and shakers are going to be getting in on the future of the battlefield playing out now… we’re seeing global geopolitical shifts combining with a singularly important moment in time technologically to create an environment as rich in the defense space with opportunities as the wide-open sandbox of a gaming environment.
As it turns out, we’re evolving our defense technology in an important way right when our country needs it, and business will need to rise to the occasion. And, while it is true that the aerospace and defense market experienced some hiccups in the last few years, that is exactly all it was… a hitch. There’s no world where defense isn’t of the utmost importance or hold room for opportunity to flourish.
In fact, the global aerospace and defense market is expected to reach $1,047 billion within the next three years, up from $700 billion in 2021. Now that companies, and the world, have had a moment to catch a breath, reassess, and begin to rework operations, we’re seeing movement… which is good. We’re also seeing where the chips are falling, and where there are needs and problems that must be solved.
Sustainability really is king, even here, in the aerospace and defense industry. Whereas in the past, when our climate situation was plausibly deniable, these two spaces didn’t immediately seem to go together. That is no longer is that the case. As such, concessions are finally being made by holdouts, and those who were stubbornly clinging to our past modalities are getting on board. What that ends up looking like is a flock migrating to operating within sustainability as a base, even in defense.
Venture capital is glancing side-eyed, with fresh interest, at defense… and here’s why we think this is so. For a time, it was fashionable to shun defense, but no longer. We think that enough time has passed, that the population at large is practical enough at this juncture in this more chaotic world, to admit that defense is a big deal… that it’s vital to our continued prosperity and growth. It’s okay to invest in defense again, because putting on the façade of outrage in 2023 simply is not in style.
Also, at a practical level, this just tends to be a safer space when the word recession gets tossed around, as it does. This is proving to be so, as the pentagon continues modernizing with efforts in robotics, cybersecurity, analytics, and space equipment… the funding exists. We’ve recently seen a parade of companies in this space being awarded funding, including Anduril, Skydio, and SpaceX.
Names To Watch
Movers and shakers in this space include Anduril and Shield AI, both bringing us AI-based defense solutions. Anduril develops defense systems powered by artificial intelligence. This company may be a startup, but they are already working with serious funds, raising an additional $1.2 billion via Series E last spring. Which, at the time, made it the second largest funding round of the year behind SpaceX. The company was set up by Palmer Luckey, founder of Oculus.
Anduril also recently won a 10-year contract worth almost a $1 billion with the U.S. Special Operations Command and has also signed a $100 million contract with the Royal Australian Navy. The firm has set up an additional office in Australia. The company, which is best known for its autonomous systems surveillance technology, counted Founders Fund, Lux Capital, Human Capital, Lightspeed Ventures, and multiple others as amongst those participating in these most recent funding efforts.
Shield AI is a venture-backed company currently in the field actively supporting operations with the U.S. Department of Defense and allies through their AI pilots for aircraft. The company, which was built from the ground up with talent from national security experts, seasoned executives, highly experienced warfighters, and AI engineers, has recently raised $225 million via Series E funding.
The mission: build the world’s best AI pilot. Funds are available to the company through the U.S. Innovative Technology Fund (USIT) and will help propel this evolving leader in the space even further toward that mission. The company is already working on some of the most advanced and cutting-edge technology for AI piloting available, and hopes to use the technology to end future conflicts before they even begin. They anticipate automated defense capabilities will be vital to defense, and they are ready.
Where the DOD used to be the hands-down leader in R&D, that’s not the case anymore. That’s a tad concerning, given certain global factors, as well as the fact that we’re in a bit of a jog alongside China in our hurry toward supremacy in battlefield technologies. However, this now means that, in true rise-to-the-occasion fashion, the commercial sector is bringing us the best of the best in this space… and all of this spells fresh opportunities to meet needs and solve problems. Come back next week, we’ll have more from the world of IPOs!