Peter Thiel-Backed Surveillance Startup Anduril Is Valued at $1.9 Billion

(Bloomberg) -- Anduril Industries Inc., a Southern California startup that builds technology for military agencies and border surveillance, said it raised a new funding round nearly doubling the company's valuation to $1.9 billion.

Silicon Valley money has rapidly propelled the three-year-old company. Venture capital firm Andreessen Horowitz led the latest financing, which totaled $200 million. The investment firm also participated in a deal about a year ago, along with Peter Thiel's Founders Fund and other VCs, that valued Anduril at about $1 billion. That was four times the valuation from a year earlier.

The business is controversial. Anduril builds surveillance towers and drones, along with software to automatically monitor areas like international borders and the perimeter of military bases. “We founded Anduril because we believe there is value in Silicon Valley technology companies partnering with the Department of Defense,” Brian Schimpf, the chief executive officer of Anduril, said in a statement Wednesday.

But it's Anduril's work with other agencies that draws the greatest criticism. The company's first government contracts were with U.S. Customs and Border Protection, where it put up towers along the U.S.-Mexican border. Mark Morgan, the acting commissioner of the agency, told Congress in February that immigration authorities planned to have 200 autonomous surveillance towers in place this year. On Thursday, Customs and Border Protection said in a statement that the tower system was a “program of record,” meaning it's essential enough to have a dedicated line of funding from Congress, and that the towers would operate 24 hours a day, independent of the electrical grid. 

Few VC-backed startups have seriously pursued military contracts, mostly ceding the field to huge, politically connected defense contractors like Lockheed Martin Corp., Raytheon Technologies Corp., and Boeing Co. This is partially due to the impression that small companies will get too bogged down in government work to become profitable and partially because of political controversies surrounding high-tech surveillance and autonomous weapons.

Anduril was founded in 2017 on the idea that such hesitation is an opportunity. Founders of the Irvine, California-based company include veterans of Thiel's Palantir Technologies Inc.—a major contractor to government agencies including immigration officials—as well as Palmer Luckey, a vocal supporter of Donald Trump whose 2017 departure from Facebook Inc. became a flashpoint in an intramural political debate in Silicon Valley.

Last year, Anduril expanded beyond surveillance, building a system of small drones that will automatically ram targets that enter contested airspace. Its initial pitch is to defend against small drones used to surveil or attack military bases, though Anduril has said the product could be expanded to combat larger targets in the future. Marc Andreessen described Anduril in a blog post last fall as part of a “new generation of Silicon Valley-style defense vendors.”

Anduril now has more than 30 federal contracts which could be worth over $200 million, according to an analysis by Tech Inquiry, a research group. Anduril has said it works with U.S. allies, too, including the U.K. Ministry of Defense.

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