Defense Tech Capital Brief // 006

The week's most useful numbers came from the Pentagon's own drone programme. Within days of each other, it published its Gauntlet II rankings and a Gauntlet I delivery record. Read together, they show the top test score and the drone the services actually accept often belong to different companies.

Elsewhere in the week:

The Navy moved Castelion's Blackbeard missile into production at roughly $99,000 a round.
Canada bought small drones by the thousand and signed Ukrainian co-production into its supply chain.
Shield AI opened talks at a valuation of at least $20bn.
Ondas signed for the fuzing layer of cheap munitions.

Buyers are pricing by the round and paying on delivery. Much of the sector's private capital is still priced on the test.

Top Signal

Buyers are paying on delivery. The test score is a separate number.

1 · Drone Dominance: Gauntlet II

The Pentagon's Drone Dominance Program is a $1bn-plus effort to build a US supply base for cheap one-way attack drones through four competitive rounds, called Gauntlets. On Wednesday 16 September it published the Gauntlet II results. Nineteen companies competed at Fort Carson in August across two missions: Deep Strike, from 15 kilometres stand-off, and Close Quarters Battle, under 2 kilometres in confined spaces. This round added three conditions to testing: repeat runs at night, a controlled kinetic lane, and electronic-warfare runs flown against live counter-drone systems. [DOCUMENTED]

Neros is the only company to place in both missions, so nine companies hold the ten slots. XTEND is the only public company on either list. The companies that missed:

Red Cat's Teal Drones, which missed entirely; Red Cat's stock fell on the news.
Ascent, Auterion, Griffon, Mountain Horse with AG3, and Renegade UxS.
All four Ukrainian-linked entrants: Stellarion, UDD Tech, Grim Tech and Wilcox Cherry.

[DOCUMENTED · Red Cat share move REPORTED]

No money is committed yet. The programme says it will order 60,000 drones across the ten slots, with quantities finalised at contract award, and that awards are not guaranteed. Needham estimates 4,000 to 8,000 drones per top performer. That is a sell-side estimate, not a Pentagon figure. [DOCUMENTED · volume estimate is an analyst figure]

The record that matters is Gauntlet I's delivery performance. As of 10 September, the programme had:

Ordered 24,320 drones across 11 vendors, plus a 2,000-unit bonus order to Neros. The remaining bonus pool of 5,680 drones is awarded on delivery performance.
Received about 19,800 drones, of which the services had accepted 12,080.
Three vendors fully shipped and accepted: Neros (2,400 base order), UDD (2,000) and Griffon (1,920).
Skycutter, the Gauntlet I winner at 99.3, had shipped 1,280 of 2,560. None had been accepted, and all were pending inspection.
Perennial Autonomy had shipped 1,160, with none accepted.

[DOCUMENTED]

All four Ukrainian-linked teams entered through a US vehicle. UDD, the US entity of Ukraine's F-Drones, is one of the three vendors to have fully delivered Gauntlet I, and it did not place this round. Stellarion named the friction: export permits and logistics slowed integration with American components, including warheads. Sourcing components compliant with US defence-procurement rules took extra time. Visa delays kept specialists from fixing technical problems on site. Defender Media's sources say other Ukrainian companies placed by flying their systems under Western partner companies, without publicising their participation. [REPORTED]

The read. The programme's own data separates two things investors tend to price together: a test score and an accepted drone. The Gauntlet I winner and the new Deep Strike leader have no accepted units between them. Both are pending inspection, so part of that gap may be inspection lag. Two of the three vendors that fully delivered Gauntlet I, UDD and Griffon, did not place this round. Neros is strong on both measures, and it holds the only bonus order so far.

With 5,680 bonus drones tied to delivery and no Gauntlet II contract priced, delivery decides allocation from here. A valuation that rests on a Gauntlet placing is pricing the score. [ASSESSED]

2 · Castelion Blackbeard

On 15 September the Navy awarded Castelion a production contract worth up to $200m under MACE, its programme for a low-cost, air-launched long-range strike weapon for the F/A-18. The first tranche obligates $44m for 444 complete rounds. The remaining $156m is set aside for FY2027. Castelion says the first rounds will be delivered and integrated with the F/A-18 by 2028. When the Navy first asked industry for this weapon in 2024, it set a target price in the low hundreds of thousands of dollars. [DOCUMENTED · delivery timing COMPANY-REPORTED]

The first tranche works out to roughly $99,000 per round. That is our arithmetic on the first obligation, and the price at volume is unconfirmed. Castelion raised $1bn at a $13bn valuation in August. Its price per round is documented. Its delivery is still a 2028 commitment. [ASSESSED]

The read across both. The two programmes buy in volume, and each is documented on one side only:

Castelion has a price and no delivery record yet.
Drone Dominance has a delivery record and no Gauntlet II price yet.

An allocator diligencing either company now has government data to check claims against: obligations against ceilings for Castelion, and acceptances against shipments and scores for the Gauntlet field.

Three indicators to watch:

Skycutter's and Perennial's acceptances in the next delivery update.
The quantities in the Gauntlet II contracts.
The unit price in Blackbeard's FY2027 tranche.

Confidence is high on the record. It is medium on how the Pentagon weights delivery against score in final awards. [ASSESSED]

Capital Moved

Reference valuations and the munitions supply chain

Shield AI, an autonomy and drone-software maker, is in talks to raise a Series H at a valuation of at least $20bn, about 60% above the $12.7bn it set in March. The leads are not known, and the company projects 2026 revenue of at least $540m. The round is open and reported by a single outlet, so treat the figure as a floor on talks rather than a close. Carried from 10 September: Mach Industries raised a further $600m at $3.7bn. [SINGLE-SOURCED]

On 14 September Nasdaq-listed Ondas agreed to buy Gate Technologies, an Israeli maker of electronic fuzes for missiles, drones and loitering munitions. Ondas will pay $205m, $105m in cash and $100m in stock, plus up to $185m more tied to targets through 2028. Ondas has now bought 13 Israeli defence companies for about $1bn. It is also in advanced talks to buy Nirosta Zafon, a precision manufacturer that supplies Elbit, IAI and Rafael, for about $250m. At that price seller Iridium would make roughly five times its money over about four and a half years. The deal is unsigned and expected within weeks. [DOCUMENTED · Nirosta SINGLE-SOURCED]

Canada: buying drones by the thousand, and building Ukraine's into its supply chain

On 11 September Canada awarded Draganfly, a Canadian drone maker listed on Nasdaq and the Canadian Securities Exchange, a five-year contract for small reconnaissance drones for the Canadian Armed Forces.

The firm order is 100 systems with ground stations, payloads, data links, spares and training, at a price the company calls commercially sensitive.
Canada holds options on up to 4,900 more, worth about C$24.25m if fully exercised, which would bring the total to 5,000.
The drone is the Astiia. The company says it is combat-tested in Ukraine. It flies 20 to 40 minutes over five to eight kilometres and carries no warhead.

The award is one of the first under Canada's new Defence Drone Initiative Marketplace, a pre-qualified supplier pool for the armed forces and coast guard. Draganfly's CEO puts the programme at up to C$50m across six suppliers. [DOCUMENTED · product claims COMPANY-REPORTED · programme size SINGLE-SOURCED]

The option value works out to roughly C$5,000 a system before any support options. That is our arithmetic, and firm-order pricing is undisclosed. [ASSESSED]

The same week, President Zelensky and Prime Minister Mark Carney attended a presentation in Canada of Ukrainian drones, joint Ukrainian–Canadian developments and component makers, with 21 Canadian companies taking part. The two governments signed a joint declaration on defence and security cooperation, which Kyiv calls the first step toward a Drone Deal in the Americas. Kyiv expects to sign the Canada Drone Deal itself by the end of September. Under it, 30% of drones produced in the joint programme go to Ukraine's forces. A business-to-business session with Deputy Minister of National Defence Christiane Fox and Lt-Gen Darcy Molstad, commander of Canadian Joint Operations Command, drew 44 Canadian companies. [REPORTED · Ukrainian delegation account]

The delegation lists six industrial outcomes. Two are signed memoranda with named Canadian partners:

Greentech and General Dynamics Mission Systems–Canada, to co-produce drones in Canada under Ukraine's Build with Ukraine programme.
SkyFall, whose Shrike drone won Gauntlet I through Skycutter, and Calian, covering drone training, testing, demonstrations and technical support.

The other four are at earlier stages:

Airlogix and Sentinel R&D expect their first system in Ukraine in October 2026. They announced the joint venture in May, alongside a defence-ministry arrangement to support Ukrainian drone production in Canada.
JK Land Vehicles and General Dynamics are finalising a memorandum on co-production.
Ai Drones UA signed with an unnamed Canadian company on its MAUL system.
Himera and Quantropi are integrating software for the Canadian Armed Forces.

[REPORTED · Airlogix–Sentinel background DOCUMENTED]

The read. Canada is running two tracks in the same week: domestic buying through a new marketplace, and hosted Ukrainian production with a share of output committed back to Ukraine. None of the industrial items discloses a value, so read them as positioning until orders post. For Ukrainian manufacturers, a cleared Canadian partner offers what a US partner entity offered in Drone Dominance: an allied-market vehicle for a Ukrainian design. [ASSESSED]

The week's venture rounds: European space hardware

On 16 September Bulgaria's EnduroSat raised $205m, co-led by Riot Ventures and Atreides Management, with the European Innovation Council, GV and Founders Fund participating. The money funds a high-volume factory in the United States and a space and defence manufacturing site on a former military airbase near Sofia. The same week, EnduroSat won satellite work on Vantor's Pulse imaging network.

On 14 September Open Cosmos raised €300m in a round led by European investors including Lightrock and ETF Partners, with the UK's National Security Strategic Investment Fund taking part. The company reports five consecutive years of profitable growth and more than $370m of contracts signed in three and a half years.

[DOCUMENTED · EnduroSat valuation and Open Cosmos financials COMPANY-REPORTED]

Demand: stockpiles and Ukraine's air defence

On 14 September the Army signed a $1.21bn open-ended contract with Lockheed Martin for Precision Strike Missile Increment 2, the anti-ship version of its long-range ground-launched missile. The Army solicited one bid and received one, the contract runs to September 2031, and no quantity is disclosed. The award follows reports that the Army drew its stock of these missiles down heavily in Operation Epic Fury.

On 11 September the European Commission approved another €6.1bn for Ukrainian air and missile defence, ammunition, drones and electronic warfare. That completes the €28.3bn 2026 defence portion of the EU's €90bn Ukraine loan. The approval includes waivers for Ukrainian drones and for US PAC-3 interceptors bought through PURL, the NATO-coordinated scheme for financing US weapons for Ukraine.

[DOCUMENTED]

Ukraine in Focus

In partnership with Defender Media

Ukraine abolishes VAT on defence components, lifting domestic margins.

The president has signed the bill removing value-added tax on defence components. The cut lowers input costs across Ukraine's manufacturing base, which improves margins and unit economics and feeds directly into how domestic producers are valued. It resolves the tax measure flagged as one to watch in Issue 005. [DOCUMENTED · EMBARGOED]

A secretive manufacturer goes public in Canada.

The Canada–Ukraine declaration and industry agreements are covered under Capital Moved. The company-level signal is Greentech, one of Ukraine's largest drone manufacturers and among its most private. Its name on an open memorandum with General Dynamics Mission Systems–Canada is itself the news, and a measure of how far cross-border commercial deals have normalised. [DOCUMENTED]

Ukraine's first specification-based FPV tender targets procurement corruption.

The Defence Procurement Agency has opened its first FPV attack-drone tender built around a technical specification. The General Staff, defence ministry and procurement agency define the requirement. Any qualifying maker can bid, and the lowest compliant price wins. The buyer never names a product or a company, which is the anti-corruption point.

The model governs how a large share of Ukraine's procurement spending is allocated. The risk is already visible: the previous specification-based run, for fibre-optic drones, drew a scandal over its trials. Whether the model holds under pressure is the market-structure question for anyone pricing Ukrainian volume. [DOCUMENTED]

The Drone Deal format is becoming Kyiv's export template.

Drone Deals are the bilateral agreements Ukraine is signing to co-develop and co-produce drones with allies. Canada is next in line, with signature expected by the end of September. Slovenia is also preparing one: Zelensky said so after meeting its foreign minister, Tone Kajzer, and defence minister, Valentin Hajdinjak. The two sides have discussed initial results and possible joint projects, and no timeframe has been disclosed. Slovenia joined artillery-shell procurement for Ukraine earlier in the war and supplied M-55S tanks. A 2024 security agreement between the two countries already provided for joint defence projects.

For allocators, each Drone Deal is a market-access route for Ukrainian manufacturers: a government framework under which a Ukrainian design can be built and sold in an allied market. Canada shows what follows a deal: named company memoranda, and a share of output committed back to Ukraine. [REPORTED · ASSESSED]

Two smaller items round out the week. On 11 September the EU–Ukraine Drone Alliance held its first board meeting, bringing together 18 European and nine Ukrainian firms after July's Drone Deal. Participants are withholding detail, so read it as a statement of intent for now. Brave1, Ukraine's state defence-innovation programme, reported about 6.2bn hryvnia (roughly $139m) in grants awarded since 2023, a cumulative total. [REPORTED]

The Mispricing

One pattern connects several of the week's numbers: the distance between a headline figure and the cash or delivery behind it.

XTEND reached the New York Stock Exchange on 4 September (carried) at a $1.5bn headline valuation. The transaction delivered about $110m in actual capital, on revenue forecasts built from a year-old order book. XTEND placed third in close-quarters assault this week; it has no Gauntlet II order yet.
Fire Point's valuation, anchored by the reported $2.5bn EDGE bid, rests on a stated output of 100 Flamingo missiles a month. The observed rate is a few every several weeks.
Shield AI's $20bn floor sits at roughly 37 times its own projected 2026 revenue, for a round with no named lead.
Castelion is valued at $13bn on a production order whose first obligation is $44m.

[ASSESSED]

The same gap runs through air defence. A Patriot interceptor costs about $4.2m; the jet-powered attack drone it destroys costs about $35,000. Lockheed's cheaper PAC-3 ACE is designed to sell for under half the current round's price, giving up range and some accuracy. On 15 September Kyiv said it had tested a cheap home-built interceptor against jet-powered drones. That is the president's account, and it has not been independently confirmed. [REPORTED]

Pricing a system on unit value and service life produces large numbers. Pricing it on the cost of each successful mission, delivered and working, produces smaller ones. This week the Pentagon's own drone programme added a third measure: a test score and an accepted delivery are different numbers. The valuations and budgets most exposed are the ones priced on unit value or on test results while the threat stays cheap and comes in numbers. [ASSESSED]

Also Tracked

Boeing MQ-25. On 14 September the Navy awarded Boeing $562m for the first low-rate production lot of the MQ-25 Stingray, a carrier-based refuelling drone: three aircraft plus parts for three more. The Pentagon expects initial operational capability in 2029, four years late. [DOCUMENTED]
Anderon. On 16 September the Commerce Department signed a final research award of up to $1bn to Anderon, an IBM subsidiary, for a US quantum-chip foundry in Albany, New York. IBM is adding $1bn. [DOCUMENTED]
Croatia. Carried from 10 September: Croatia signed a €411.8m contract with Hanwha for 18 Chunmoo rocket launchers, with a command system from Poland's WB Group. They will operate alongside eight US-built HIMARS already on order. [DOCUMENTED]
Rheinmetall booked another 155mm artillery shell order in the low hundreds of millions of euros from an undisclosed customer, on a line expanding toward roughly 1.5m rounds a year by 2030. [REPORTED]

Worth Watching

Gauntlet I acceptance and Gauntlet II contracts. The next delivery update will show whether Skycutter's and Perennial's pending units clear inspection, and who wins the 5,680-drone bonus pool. The Gauntlet II contracts will fix quantities and give the programme its first price. Gauntlet 2.5 in October tests drone-dropped munitions, which operators call bombers. Phase three starts in February 2027 and scores the ability to control several drones at once.

Whether Blackbeard holds its price at volume. The $156m FY2027 tranche completes the order. A unit price near this week's would confirm a long-range round under $100,000 is producible at volume. A higher one would say the first tranche was a launch price.

Whether Shield AI closes at or above $20bn, and who leads it. This becomes the reference valuation every autonomy raise cites. A markdown would be the first real crack in defence-AI marks.

Whether Ondas–Nirosta signs near $250m. A close at that level, after the Gate signing, would confirm that Israeli mid-tier defence manufacturing has re-rated sharply.

Canada's Drone Deal and its first orders. Kyiv expects to sign the Canada Drone Deal by the end of September. After that, the signal is option exercises beyond Draganfly's 100 firm units and the first priced order from a Ukrainian–Canadian venture. Slovenia is the next Drone Deal in preparation.

Increment 2 quantities and where the €6.1bn lands. The first PrSM task orders will show how many anti-ship rounds the Army is buying. The first named awards under the EU tranche will show whether the money goes to Patriot rounds or cheaper interceptors.

Counter-drone-at-sea as a new procurement category. Ukraine's Sargan-3000 recorded the first destruction of one naval drone by another (Defender). Watch for a US Navy or NATO request for counter-drone boat weapons.

VAT pass-through. The component tax cut should show up in Ukrainian producers' economics. Watch whether valuations move with it.

Fedorov's Kyiv defence-tech fund still has no disclosed size or first close. Carried from Issue 005.

On the Sourcing

Drone Dominance. Gauntlet II placings, scores, test conditions and order terms are from the programme's official leaderboard (dronedominance.mil). Gauntlet I delivery figures are official as of 10 September, 12:12 EDT. Per-vendor volumes are Needham's estimate. The account of Ukrainian entrants, and the claim that some Ukrainian companies placed through Western partners, is Defender Media's reporting and its sources.

Contracts. Ceilings are separated from obligations. Castelion's $200m is a total order value against $44m obligated, and the Blackbeard per-round figure is our arithmetic. The PrSM Increment 2 figure is a contract value with no quantity disclosed.

Deals and rounds. Shield AI's valuation and the Ondas–Nirosta talks each rest on a single outlet and are unclosed. The Gate terms are company-announced. EnduroSat's valuation and Open Cosmos' financials are company-reported.

Canada. Draganfly's terms are from its release and its 16 September filing. The per-system figure is our arithmetic on the option value. The C$50m programme size is the CEO's figure to one outlet. The Canada–Ukraine declaration, the 30% allocation and the industrial outcomes are the Ukrainian delegation's account.

Ukraine and air defence. The Ukraine interceptor test is the president's account. Fire Point's production shortfall is independent reporting set against the manufacturer's claims. The interceptor cost figures are a range from manufacturer statements and CSIS estimates; cite the range. Ukraine items draw on Defender Media's coverage, and the VAT signing is held to Defender's Friday release. Items dated before 11 September are carried forward.

Defender Media sources cited

Figures as of 18 September 2026.

Palisade Bergschrund · Ukraine in Focus in partnership with Defender Media · Market commentary, not investment advice.