Autonomous Warship Startup Saronic Raising at $7.5 Billion Valuation
The Takeaway
- Saronic raising $1.5 billion at a $7.5 billion valuation
- Kleiner Perkins agreed to lead round
- Startup generated $200 million in revenue last year
Saronic, a startup that builds autonomous warships, is raising as much as $1.5 billion in a financing that would value the company at about $7.5 billion, before including the investment, two people with direct knowledge of the matter said.
Kleiner Perkins, the storied venture capital firm that has done few defense tech deals until now, has agreed to lead the round, the people said. It would more than double the valuation in a short time frame for Austin-based Saronic, which last raised funding about a year ago at a $3.4 billion valuation, before the funding.
Investors would be betting Saronic is able to win huge contracts from the U.S. Navy in the coming years, far more than it is currently. The startup generated just over $200 million in revenue last year, one of the people said. The funding would value it at 38 times its prior revenue. Saronic has told prospective investors in recent weeks that it is looking to expand production of large unmanned ships.
The funding discussions underline how willing tech investment firms are to write huge checks into capital-intensive hardware companies that will potentially require far more funds to generate profits than typical tech startups. Defense startups are particularly risky because they often effectively have one giant customer, the U.S. military.
Saronic, if it raises the money, would become one of the best funded defense tech firms in an increasingly popular sector for VC firms. Anduril, a larger defense startup that builds drones and submarines, is raising billions of dollars at about a $60 billion valuation, The Information previously reported. Anduril, which recently partnered with Korean shipbuilder HD Hyundai, is likely to compete with Saronic for major government contracts.
The Saronic round also crystallizes a growing debate among tech investors about whether defense startups are worth increasingly steep valuations, given the huge costs of developing their products.
Bullish investors increasingly point to long-term successes like SpaceX, which has built strong competitive advantages in the rocket launch market over many years. Waymo, which has burned cash to build a big lead in the autonomous car rental market over many years, raised $16 billion this year.