Defense startup Mach Industries has raised $5.7 million in a seed round led by Sequoia Capital, the first-ever defense tech investment in the venture capital giant's history, the two companies said.
Sequoia's funding of a technology that aims to use hydrogen creation on the battlefield signals the latest interest from Silicon Valley investors in backing technologies that bolster U.S. national security and working with the Department of Defense.
"There is a technology transition happening, and recent events like the war in Ukraine have highlighted the gap in current defense systems," Shaun Maguire, a partner at Sequoia who co-led the deal with partner Stephanie Zhan, told Reuters via email.
"There is a major modernization effort underway to advance the U.S. defense technology and build a new generation of military systems."
Founded by MIT dropout and Thiel Fellow Ethan Thornton in 2022, Mach Industries focuses on building a hardware solution using field-sourced hydrogen creation and combustion techniques. It is working to develop a weapon system that uses the chemical reaction of oxygen and hydrogen to create a powerful explosion that could fuel unmanned aerial vehicles and aerial protection devices.
Headquartered in Austin, Texas, Mach said the funding will be used for product development, hiring talent, and expanding facilities.
"We've built out facilities in Boston and Austin and are now moving towards production. We are looking to have deployed systems within the next year," Thornton said in a phone interview with Reuters, adding that the company already works with the Pentagon on research.
The defense tech market is expected to surge to $184.7 billion by 2027, driven by the U.S. government's growing demand for innovative technologies to meet its national security goals, according to research from PitchBook.
Silicon Valley investors have for a while been reluctant to invest in defense technology, due to profitability and reputation concerns over how the technology will be used.
However, growing recognition of the importance of defense technology in protecting national security has prompted venture capital firms including Andreessen Horowitz and Founders Fund to become vocal about funding defense technology startups, including Anduril and Palantir.
In 2022, venture capital firms invested $34.3 billion in defense technology startups, doubling the amount of investment in 2019, PitchBook data shows.
Sequoia Capital, which just announced it has cut ties with its China and India investment franchise to focus on investing in tech startups in the U.S. and Europe, is looking to back founders working on broader defense applications.
"The future of defense technology will be shaped by many of the advancements we're seeing today in artificial intelligence, autonomous systems, and space-based capabilities, among other areas," said Sequoia's Maguire.
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