German defense technology firm Helsing GmbH is reportedly on the verge of securing a bumper $1.2 billion in funding that would bring its valuation to around $18 billion, making it one of Europe’s most valuable technology startups.

A report by the Financial Times cites anonymous sources as saying that the talks are being led by Dragoneer Investment Group, with existing backer Lightspeed Venture Partners acting as the co-lead in the proposed round. The talks are reportedly at an advanced stage, but the timing of any announcement has not yet been agreed. The proposed valuation is a significant jump from less than a year ago, when Helsing raised €600 million ($706 million) in a deal led by Spotify Inc. founder Daniel Ek’s investment firm Prima Materia increased its valuation to about $14 billion.

Investors have shown enormous enthusiasm for tech-focused defense firms in recent years. Money has flowed into the sector as a result of European governments promising to increase defense spending following Russia’s invasion of Ukraine in 2022. The conflict, notable for the proliferation of drone warfare, has sparked growing interest in new battlefield technologies. Though some have warned that the defense technology sector could be entering “bubble” territory, others believe that European governments are spending too much on legacy weaponry such as conventional fighter jets and tanks, when the future of warfare is clearly moving towards autonomous systems.

Helsing’s proposed round is said to be “oversubscribed multiple times,” according to the Financial Times’ sources, highlighting the strong interest investors have in a new generation of defense startups trying to integrate artificial intelligence into weapons systems.

Europe is home to a number of defense technology unicorns, or startups valued at more than $1 billion, including the drone makers Tekever Ltd. and Quantum-Systems GmbH. It’s joined by a number of well-funded U.S. firms, including Anduril Industries Inc., which is valued at $30.5 billion, Shield AI Inc., Mach Industries Inc. and Parry Labs LLC.

Munich-based Helsing, founded in 2021, was originally focused on selling AI software designed to analyze battlefield data and provide insights that enhance military decision-making. However, it has since expanded massively, developing its own kamikaze-style drones, which are single-use weapons designed to fly into enemy targets and explode. It also develops autonomous submarines, and is said to be working on unmanned aircraft designed to fly alongside crewed fighter jets.

The company has faced some questions. Its first kamikaze drone, called the HF-1, was made in collaboration with Ukrainian partners, but came in for a lot of criticism over its high price tag and suspect performance. Helsing responded by building a superior model called the HX-2 (pictured), which has now been approved for frontline use by Ukraine’s military and has already hit a number of Russian targets.

Oleksandr Kamyshin, who serves as an adviser to Ukrainian President Volodymyr Zelenskyy on strategic industries, including the defense sector, is a notable supporter of Helsing, having praised the company’s technology on more than one occasion. The company also has fans in Germany, and it recently landed a €269 million contract to supply its home nation’s military with autonomous drones. That contract includes an option for the military to ultimately spend up to €1.46 billion Helsing’s HX-2 drones if it’s satisfied with them.

Although the proposed funding round is being led by U.S.-based investors, Helsing will remain almost 80% European owned, according to one of the sources.

Photo: Helsing