Hypersonic weapons startup Castelion has raised US$350 million in series B funding led by Lightspeed Venture Partners and Altimeter Capital, valuing the company in the billions.

This new funding follows Castelion’s US$100 million series A round in January 2025, which consisted of US$70 million in equity and US$30 million in debt.

The company aims to advance the production of hypersonic missile systems, which are considered critical for national defense.

Founded by former SpaceX executives, Castelion is developing low-cost hypersonic missiles using rapid development and vertical integration strategies.

The company has secured US military grants and completed its first vehicle test in March 2025, advancing plans for scalable hypersonic production.

Castelion is part of the US Army’s 2026 budget under Project HX3, aiming to deliver a prototype by 2026 and begin producing the Blackbeard system by 2028.

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🔗 Source: TechCrunch

🧠 Food for thought

1️⃣ Hypersonic weapons market represents a massive opportunity for startups challenging defense primes

The hypersonic weapons market that Castelion is entering represents substantial financial opportunity, valued at $7.12-8.35 billion in 2023/2024 and projected to grow to $18.94 billion by 2032, with a CAGR of approximately 10-11% 12.

The Pentagon has invested over $8 billion in hypersonic research since 2019, with projected annual spending reaching $5 billion by the mid-2020s, demonstrating the government’s commitment to developing these capabilities 34.

Traditional defense contractors have dominated this space, with Raytheon securing a $985 million contract for hypersonic cruise missiles in March 2023 1. However, venture capital is increasingly flowing to startups like Castelion to challenge incumbents.

This trend reflects broader Pentagon efforts to engage with startups, with over $500 million in venture capital invested in hypersonic technology startups in the past two years alone 5.

Castelion’s rapid funding progression—from $100 million Series A to $350 million Series B within months—demonstrates investor confidence in the company’s approach and the broader market opportunity in defense technology innovation.

2️⃣ The SpaceX model is reshaping defense technology development

Castelion’s approach explicitly mirrors the SpaceX playbook: “build quickly, test frequently, and vertically integrate to drive down costs,” representing a shift in how military technology is developed 6.

This methodology contrasts with traditional defense procurement cycles that can take decades and billions of dollars to field new capabilities, a system that has contributed to the U.S. reportedly falling behind competitors in hypersonic development 47.

The U.S. military’s urgent need to counter China’s rapid advancement in hypersonic capabilities has created an opening for startups using commercial methodologies. The Pentagon’s increasing willingness to partner with non-traditional contractors is evident in Castelion’s multiple contract wins 65.

Castelion’s March 2024 test of its hypersonic vehicle in the Mojave Desert demonstrates the company’s commitment to rapid development cycles, similar to how SpaceX revolutionized the space launch industry through iterative testing 6.

The company’s inclusion in the Army’s fiscal year 2026 budget with a $25 million allocation for Project HX3 indicates that this commercial approach is gaining traction within military procurement channels that have historically favored established defense contractors 6.

3️⃣ Cost-effectiveness is becoming the new battleground in hypersonic weapons

The Army’s stated willingness to trade “a little bit of speed and range for a lower-cost product” in the Blackbeard GL program signals a shift in military procurement priorities away from maximum performance at any cost 6.

This focus on affordability addresses a key challenge in hypersonic weapons development, where high costs have limited widespread deployment despite technological advancements 81.

The Army’s budget document notes that Blackbeard GL will have around 80% of the capability of systems being developed by aerospace primes but at significantly lower costs, potentially disrupting the economics of the defense industry 6.

Castelion’s emphasis on vertical integration targets a persistent pain point in hypersonic development: supply chain vulnerabilities that have prompted the Pentagon to award $25 million in contracts specifically to bolster domestic production capacity for critical materials 9.

If successful, Castelion’s approach could redefine expectations for defense procurement timelines, with the company potentially delivering operational missiles by 2028—a fraction of the time typically required for new weapons systems 6.

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