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A tougher fundraising environment reveals which companies and sectors investors have real conviction in, and which areas aren’t attractive outside of a bull market. AI startups dominated dealmaking this year, but there is another sector that VCs have stayed committed to: defense tech.

We saw the latest example of this trend just this week. On Tuesday, Shield AI raised a $200 million Series F round led by Thomas Tull’s US Innovative Technology Fund, with participation from Snowpoint Ventures and Riot Ventures, among others. The round values the San Diego–based autonomous drone and aircraft startup at $2.7 billion.

The sheer size of the round alone makes this deal interesting. “Mega-rounds” over $100 million have become uncommon enough to warrant raised eyebrows in today’s climate. Through the third quarter of 2023, only 194 rounds above $100 million were raised, compared to 538 in 2022 and 841 in 2021, according to PitchBook. Late-stage fundraising has also been largely muted for much of 2023. Just over $57.3 billion was invested into late-stage startups through the third quarter of this year, much lower than the $94 billion such companies raised in 2022, and the $152 billion we saw in 2021.

Brandon Tseng, the co-founder and president of Shield AI, told TechCrunch+ his company was able to raise in this environment largely because of its metrics. The company’s revenue is growing 90% year over year, per Tseng, and it is on the path to becoming profitable in 2025.

This round is also made more interesting by the space the company operates in, since it’s the latest sign of how much investors have leaned into defense tech in recent years.

Tseng agreed that the investor appetite for companies like his has improved a lot, and he recalled how Shield AI’s first few fundraises were particularly hard.