Thiel, Andreessen-backed Defense Startup Promises Cheap Missiles as US Rebuilds Arsenal
Covenant says its factories will be capable of producing 1,000 missiles each next year, with the goal of scaling up to 5,000 missiles a year.
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A new defense startup has exited stealth mode … and is waging a price blitzkrieg on traditional weapons-makers.
With $250 million in prior funding, the Peter Thiel- and Andreessen Horowitz-backed Covenant stepped out of the shadows Wednesday, touting a trio of factories in Texas, Germany and Israel, and a manufacturing process it says can cheaply mass-produce exactly the type of cruise missiles desired by Western powers.
Cruise Control
Seven months of start-and-stop war in Iran and more than four years supporting the war effort in Ukraine have, by all accounts, left the US missile stockpile in a near perilous state of depletion. According to a Reuters report last month, the US military has already burned through roughly half of its total supply of long-range heavy-payload Tomahawk cruise missiles.
The result has been a massive boom in demand for more arms; Tomahawk-maker Raytheon recently scored a $23 billion deal to boost production of the missiles from about 60 per year to 1,000. But that surge in demand belies tricky economics for the old guard of weapons-makers, and that’s where Covenant says it could be a significant disruptor:
- The company is capable of manufacturing its Anthem missiles at a “mid-six-figure” euros price point, it told the Financial Times on Wednesday; that compares to a price tag as high as $6 million (5.15 million euros) per Tomahawk missile. Anthem missiles can carry a payload of more than 400 pounds, or less than half that of a Tomahawk missile, and Covenant’s goal was to create a weapon with a 2,000-kilometer range, or slightly longer than the Tomahawk.
- Meanwhile, Covenant says its Texas and Germany factories will be capable of producing 1,000 missiles each next year, with the goal of scaling up to 5,000 missiles a year.
Seal the Deal: The company is emerging out of stealth with about $150 million worth of orders in hand, including two initial contracts with the US government. Shares of traditional defense contractors quaked on Wednesday following the splashy debut: Lockheed Martin, which just scored a UBS upgrade, fell more than 2%, while Raytheon parent RTX fell 0.68% and the iShares US Aerospace & Defense ETF fell 1.83%.
