Aerospace AI startup Air Space Intelligence valued at about $300 million in new financing

Andreessen Horowitz led the funding round for Air Space Intelligence, which counts Alaska Airlines and the US Defense Department as customers.

The new financing brings Air Space’s valuation to roughly $300 million, according to people familiar with the situation who asked not to be identified because the details are private. (Bloomberg)

An artificial intelligence startup targeting air travel has raised $34 million in a funding round led by Andreessen Horowitz to more aggressively pursue deals with the Department of Defense.

Air Space Intelligence Inc. has long sold its tools — which have been described as Waze for air travel — to commercial carriers including Alaska Airlines. The startup's marquee product, called Flyways, can help flight dispatchers pick routes for planes, taking into account factors like flight traffic, weather and airport conditions.

The new financing brings Air Space's valuation to roughly $300 million, according to people familiar with the situation who asked not to be identified because the details are private. The startup declined to comment on its valuation.

This fall, Air Space won two contracts with the US Air Force totaling $2.7 million and has qualified to compete for a third valued at as much as $900 million, the startup said. News of the deals has not been been previously reported.

Air Space joins a growing cohort of Silicon Valley startups seeking to win the US Defense Department as a customer. Earlier this year, it signed an eight-figure, multiyear deal with Alaska Airlines, and the startup says that the segment of its business related to commercial customers is profitable. Now, following a series of small deals with the US Air Force, it's working to expand its government business. Air Space CEO Phillip Buckendorf said that eventually the company aims to build out the government side of its operation to the same scale as its commercial one, “if not bigger.”

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David Ulevitch, a partner at Andreessen Horowitz, said Air Space was an appealing bet in part because of its applications in both the public and private sectors. “The DoD knows they need to level up their mission-critical infrastructure such as air operations and are looking toward the private sector for solutions,” said Ulevitch, who co-leads his firm's American Dynamism practice, which seeks to invest in companies that advance causes like national security and infrastructure. Ulevitch also will become an Air Space board observer.

Air Space has competition. The airline industry has long used predictive software from Boeing Co. subsidiary Jeppesen, Sabre GLBL Inc. and others to monitor engines, set tickets prices and schedule crew. Optimizing routes to save on fuel costs and reduce climate impact continues to be a top industry priority, but it's tricky to assess the effectiveness of software built by Air Space and other startups devoted to that specific goal, said Robin Riedel who leads McKinsey's Disruptive Aerospace group. 

“There's a lot of debate within the industry. Some love it and others are more critical,” he said. “It's not a slam dunk where everyone joins hands and says this is the best thing since sliced bread.” 

Air Space plans to use its latest cash influx to hire more staff — potentially doubling the startup's headcount to 160, and building out its Washington presence. The five-year-old company is based in San Francisco, but Buckendorf moved to DC last year and expects to expand that office. The US has moved increasingly quickly to bring on new technology, he said. Adding, “There's an increasing awareness of how important software is.” 

Existing investors, including Renegade Partners and Spark Capital, also invested in the round, which was oversubscribed and came together in less than three weeks. Bloomberg Beta, the venture-capital arm of Bloomberg LP, also re-invested.

“The way the government business is playing out now is happening a lot faster than I thought it would,” said Renata Quintini, co-founder of  Renegade Partners.