Autonomous combat drone maker Shield AI buys radar startup Echodyne for $5.3B

Defense technology startup Shield AI Inc. said today it has agreed to buy the Bill Gates-backed radar startup Echodyne Inc. in a massive deal valued at $5.3 billion. The acquisition is intended to enhance Shield’s autonomous drone warfighting capabilities, it said.

Echodyne is a 13-year-old startup that’s best known for its Metamaterials Electronically Scanned Array or MESA technology, which is basically just a fancy name for its next-generation solid-state radar systems that can be integrated with a wide range of weapons and monitoring systems. The technology is designed to detect much smaller targets than traditional radar, including the kinds of compact autonomous drones that have terrorized soldiers on the battlefields of Ukraine and in other modern conflicts.

The deal comes just a couple of months after Echodyne landed a $250 million contract with the U.S. Defense Department’s counter-drone task force JIATF-401, which will see it provide drone tracking technology to the U.S. military.

Echodyne’s advanced radar systems look like a natural fit for Shield AI, which is the developer of the X-Bat and V-Bat vertical takeoff and landing systems, known as VTOL drones. Shield’s V-Bat hit the headlines in the last couple of years after assisting the U.S. Coast Guard in tracking down drug traffickers looking to bring illicit cargoes into the U.S. via speedboats, and notably participated in a number of large maritime drug busts. Shield AI is also the developer of Hivemind, an autonomous software system for piloting unmanned drones, as well as pilotless boats and spacecraft.

Shield AI Chief Executive Gary Steele said the deal will enable his company to accelerate its goal of branching into three different areas of unmanned systems. “We are building a new-generation defense technology company consisting of three fast-growing, high-margin, mutually supporting business units: autonomy software, autonomous systems and mission systems,” he said.

Echodyne co-founder and CEO Eben Frankenberg said Shield AI is a natural partner for his company because it shares the view that autonomous systems must be able to sense their environment to achieve their desired mission outcomes. “By joining Shield, we’re creating a company with the size and breadth to deliver even more value to our broad range of defense, government and commercial customers around the globe,” he insisted.

According to Steele, Echodyne will continue to operate as a standalone entity, as a separate business unit within Shield AI’s mission systems business. Frankenberg will remain with the company, where he will report to Steele as part of its senior executive team. Echodyne is not going to layoff any staff, and nobody will be asked to relocate either, he said. In the longer term, the companies expect tighter integration of Echodyne’s radar systems with Shield AI’s drones.

The deal will see $4.8 billion paid out upon closing, with the other $500 million dependent on Echodyne meeting certain performance targets, which have not been disclosed. Shield AI said it was able to fund the deal with a combination of its own cash and a $2.5 billion cash injection that came via a Series H funding round led by Blackstone and JPMorgan Chase, which was also announced today.

Shield AI has a history of making decisive acquisitions. Its V-Bat and X-Bat drones are heavily based on technology developed by a company called Martin UAV Systems Inc. that it acquired in 2021. In June, it purchased Aechelon Technologies Inc., a developer of high-fidelity simulation and physics-based sensor modeling software, for an undisclosed price.

Steele added that the company may not be done with acquisitions, and will continue to look at making more deals in order to accelerate its growth strategy.

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