Shield AI is raising a $2 billion late-stage funding round at a post-money valuation of $12.7 billion.

Shield AI Inc. today announced that it’s raising a $2 billion late-stage funding round at a post-money valuation of $12.7 billion. Three quarters of the capital will be provided through a Series G round led by Advent International, a large private equity firm. The remaining $500 million will come from Blackstone in the form of preferred equity financing. That’s a type of transaction in which the investor receives shares and an annual dividend. According to Shield AI, Blackstone will also provide it with a $250 million loan. The defense startup will use some of the proceeds to finance a newly announced acquisition. Shield AI is buying Aechelon Technology Inc., a provider of flight simulation software and data storage systems. The terms of the deal were not disclosed. San Diego-based Shield AI makes hardware and software for the defense sector. One of its flagship products is a drone called the V-Bat (pictured) that takes off vertically like a helicopter and then flies like a plane. Shield AI is also developing a second, significantly larger aircraft called the X-Bat that can cover up to 2,300 miles per flight. Both drones are powered by an artificial intelligence platform called Hivemind. According to Shield AI, it’s optimized to run autonomous flight algorithms and enables the host system to operate without GPS access. Hivemind is built on a middleware engine called EdgeOS that manages low-level tasks such as moving data between software modules. EdgeOS has a deterministic design, which means that it ensures calculations are always carried out within a specific time frame. That prevents unexpected processing delays from slowing down the host system at key moments. Hivemind also includes certain other tools. There’s a CI/CD, or continuous integration and continuous delivery, module that helps programmers test AI models before installing them on a drone. It also eases certain related development tasks. Aechelon, the company that Shield AI is acquiring, provides flight simulation software geared towards the defense sector. Its applications generate synthetic aerial footage designed to simulate a pilot’s field of view. Aechelon says that its synthetic footage can incorporate weather simulations, radar measurements and infrared data. The company’s software can be used to train not only pilots but also autonomous flight algorithms. Hivemind, Shield AI’s aircraft operating system, includes a module called Pilot that helps customers implement autonomous flight features. It includes prepackaged software building blocks that remove the need for developers to create everything from scratch. Aechelon offers its flight simulation software alongside several other products. It sells a line of data storage systems called Nexus that includes an extensive set of cybersecurity features. Another product, Project Orbion, provides a virtual replica of the Earth that is based on satellite imagery and radar data. The Aechelon acquisition isn’t the only reason Shield AI raised funding. It will also use the proceeds from the deal to finance the development of its X-Bat autonomous aircraft. The company plans to begin production in 2029.

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