Neros Inc., a drone manufacturing startup based in El Segundo, has raised $35 million in series A funding.

The round was led by Vy Capital in the United Arab Emirates. Other investors like El Segundo-based Interlagos, Sequoia Capital and D3, along with angel investor and Zipline Chief Executive Keller Rinaudo Cliffton, participated in the round.

It’s a rather quick ascent for Neros, which was founded in 2023 and quickly garnered a high-profile contract that would allow it to send 6,000 first-person-view attack drones to Ukraine in the span of six months.

But the company’s big moves highlight the pressing demand for more innovation in the weapons and war space, and private-sector technology investors are funneling millions of dollars into startups that may be able to deliver.

In North America, deal counts in the aerospace and defense industry raised $6.62 billion with 623 deals in 2024 – an all-time high for the sector, according to PitchBook.

“Neros represents a pivotal force in re-establishing America’s defense supply chain, addressing a critical need in an era where global security demands self-reliance and innovation,” John Hering, a cofounder and partner at Vy Capital U.S., said in a statement. “Their unique vertically integrated platform allows them to control every aspect of production, ensuring quality, cost efficiency and scalability while eliminating dependence on foreign components – a strategic advantage that’s long overdue.”

Companies look to consolidate supply chain

Part of the rise in popularity of weapons’ startups is logistical. Reliance on parts manufactured in other countries, or raw materials sourced from potential adversaries, has driven the demand for companies that can consolidate the supply chain for countries.

Ukraine spent the last three years heavily dependent on consumer-grade drone parts that come from China to build cheap front-line drones, and fewer parts are making their way across the border to the war-torn country. British security and conflict think tank Royal United Services Institute estimates Ukraine loses 10,000 drones a month.

“FPV drones, which stem from hobbyists and drone racing, are heavily based on open-source designs and software. This is the reason they win the cost-to-performance ratio,” Neros Chief Executive and cofounder Soren Monroe-Anderson said in a statement. “However, much of the underlying technology is built on chips, modules and core IP (intellectual property) from China, which means it isn’t enough to just recreate existing components. We have to build new systems that are better suited for the needs of the modern battlefield and can be produced entirely from an allied supply chain.”

This year is gearing up to be a big one for the weapons space as well. More than 80 deals between venture firms and weapons startups have taken place this year, including El Segundo-based Castelion’s $100 million financing that came from a mix of debt and equity.