Defense startup Hermeus has raised $350 million to pursue what it calls the “fastest unmanned aircraft,” in a funding round that took its valuation to $1 billion.
The Los Angeles-based startup said Tuesday it has raised $200 million in equity funding, led by Khosla Ventures. Existing investors Canaan Partners, Founders Fund, In-Q-Tel, and RTX Ventures also participated. The new outside capital comes from media conglomerate Cox Enterprises’ venture fund, publicly traded closed-end investment firm Destiny Tech100, and others.
The remaining $150 million comes in the form of debt, Hermeus co-founder and CEO AJ Piplica told TechCrunch will help the startup and the growing cap table maintain some control.
“We’re building more hardware, expanding our manufacturing capabilities, and if we can fund a larger portion of our spending without cutting back, that’s the way to do it,” he said in an interview.
Hermeus’ promotion comes at a time when venture and business investors are pouring money into defense startups. VC investment in defense technology exceeded $9 billion over 265 rounds around the world last year, according to PitchBook, corporate investors contributed $2 billion in 28 rounds.
But for Hermeus, it’s not just about a good time.
Piplica attributes at least some of the fundraising success to the changes Hermeus has made on the technology side over the past few years. He said the startup spent time and money building its engine, partly out of necessity. After Hermeus fell in love with RTX Ventures – the business arm of RTX Corporation, the defense contractor formerly known as Raytheon – a new opportunity arose.
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Piplica and his team decided to work with RTX subsidiary Pratt & Whitney to modify the aerospace company’s F100 engine to power Hermeus’ hypersonic aircraft.
This puts Hermeus on the fast track with a proven and efficient engine, making it easy to test and iterate while lining up new contracts with the US government along the way. Instead of aiming for one big goal of building a Mach 5 jet, Hermeus was flexible, according to president Zach Shore.
“This accelerates us to Mach 5, and strengthens the business economy while satisfying the near-term needs of the Department of Defense,” he said. “I think that way, you have a lot of concentric circles that are simultaneously strengthening the business, strengthening the customer, and, you know, strengthening the maturity of the technology.”
Last month, Hermeus flew a demonstrator version of its technology equivalent to an F-16 jet. The startup said it’s aiming to make the next iteration of that plane even better. A third plane is also in operation, Piplica said.
This rapid measurement method is difficult to find in aviation, Piplica said. He points to SpaceX as the industry standard for a willingness to build, test, fail, learn, and repeat until the vehicle is ready. That is why the most difficult challenge Hermeus faces is to cultivate or develop talent, Piplica said.
“There is no place in the world where companies build new airplanes every year, clean or otherwise,” he said. “People used to do that, but they’re all dead, which means you have to go and do those people somehow.”
The new round of financing will also help Hermeus continue to build its workforce, which is approaching 300 employees.
Hermeus now has two successful test flights (it flew a demonstrator last year that was three times smaller). But Piplica emphasized the need for Hermeus to be prepared for some kind of failure — which, again, he sees as part of the rapid prototyping process.
“The challenge is, how do you choose the right type of risk to take and use your money over time,” he said. “As, yes, we can crash the plane, and I expect it will happen at some point in our development process. We are set to do that very safely. But this is also why, like the construction of many planes, it is very important. If you don’t build a lot, it will take you a lot longer, because you will go children’s things. You know, we wonder why it takes us 25 years, a new plane?”,
