Hermeus raises $350 million to build autonomous hypersonic fighters

Defense startup Hermeus has raised $350 million to further develop what it calls “the fastest drone,” in a funding round that raised 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 money comes from media company Cox Enterprises’ venture fund, closed-end management investment firm Destiny Tech100, and others.

The remaining $150 million comes in the form of debt, which AJ Piplica, co-founder and CEO of Hermeus, told TechCrunch, will help the startup and its growing capital table maintain some control.

“We’re building a lot of devices, we’re expanding our manufacturing capabilities, and if we can fund a significant portion of our spending undiluted, that’s certainly the way to do it,” he said in an interview.

Hermeus’ raise comes at a time when venture and corporate investors are pouring money into defense startups. Venture capital investments in defense technology topped $9 billion across 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.

Biblica attributes at least some of the fundraising success to a change Hermeus made on the artistic side a few years ago. The startup spent time and money developing its own engine, partly out of necessity, he said. After Hermeus turned to RTX Ventures — the investment arm of RTX Corporation, the defense contractor formerly known as Raytheon — a new opportunity arose.

Piplica and his team decided instead to work with RTX subsidiary Pratt & Whitney to modify the airline’s F100 engine to power Hermeus’ hypersonic aircraft.

This put Hermeus on a faster path thanks to a proven engine, facilitating testing and iteration while securing new contracts with the US government along the way. Instead of aiming for one big goal of building a Mach 5 plane, Hermeus is now able to diversify, according to its president, Zach Shor.

“This accelerates us to Mach 5, and also enhances the economics of the business while meeting near-term demand from the Department of Defense,” he said. “I think that way, you have a number of overlapping concentric circles simultaneously that enhance the business, that enhance the customer, and that, you know, enhances the maturity of the technology.”

Last month, Hermeus launched a test version of its technology the size of an F-16 fighter jet. The startup said it aims to make the next version of that plane supersonic. A third plane is also in the works, Biblica said.

This rapid prototyping approach is difficult to apply in aviation, Biblica said. He points to SpaceX as an industry standard for being ready to build, test, fail, learn and iterate until the vehicle is made right. This is why Hermeus’s toughest challenge is cultivating or developing talent, Biblica said.

“Nowhere in the world are companies building new full-size aircraft on an annual basis, clean or otherwise,” he said. “People used to do it, but they’re all dead, which means you have to get rid of these people somehow.”

The new funding round will also help Hermeus continue to build its staff, which is already approaching 300 employees.

Hermeus has now made two successful test flights (it flew a test plane last year that was three times smaller). But Biblica stressed the need for Hermeus to be prepared for some kind of failure, which he again sees as part of the rapid prototyping process.

“The challenge is how to choose the right kind of risk to take and apply your capital to it over time,” he said. “For example, yes, we could collide with an airplane, and I expect that will happen at some point in our development program. We’re prepared to do that very safely. But that’s also why it’s important to build more airplanes. If you don’t build a lot, it’s going to take a lot longer, because you’re going to be doing little things. You know, we wonder why it takes us 20 or 25 years to develop a new airplane?”