Elroy Air has raised a $40 million Series A, including financing from Lockheed Martin’s venture capital arm, to ramp up the build, testing and validation of its inaugural autonomous cargo drone.

The funding round saw participation from Marlinspike Capital and Prosperity7, as well as existing investors Catapult Ventures, DiamondStream Partners, Side X Side Management, Shield Capital Partners and Precursor Ventures. This latest round brings Elroy’s total raised to $48 million to date.

The four-and-a-half-year-old company was founded by David Merrill and Clint Cope. “We started the company with this dual insight that the enabling technology was within reach, was here to build larger drones […] and that there would be a lot of useful things that larger systems can support,” Merrill said in a recent interview with TechCrunch.

Elroy is focused on building what Kofi Asante, Elroy’s VP of strategy and business development, called “a dual-use system,” fit for both the defense industry and the commercial market. Elroy’s flagship autonomous cargo aircraft, Chaparral, is designed to fly at a 300-mile range, carry 300-500 pounds of cargo, and have automated flying and cargo handling capabilities. The idea is to minimize the need for humans not only in the pilot seat, but on the ground, manually loading and unloading payload.

Unlike other competitors in the space, Chaparral is hybrid electric, equipped all-electric propulsors, a generator, and a turboshaft jet engine. The generator is used mostly during take-off and landing, both of which are energy-intensive, as a way to boost power to the rotors.

Its propulsion system is a key differentiator between Elroy Air’s product and companies that are building eVTOL air taxis, like Joby Aviation. “What we heard from our customers was that they needed longer routes, longer range missions than what today’s battery technology can actually support,” Elroy Air CEO David Merrill said. “It became pretty clear to us that we needed an alternative supply side power plan on a vehicle.”

Another differentiator from other VTOLs is that Elroy has decoupled the cargo pod from the drone via the automated cargo handling function. Through a combination of GPS and sensing technology, the drone can pick up and drop off cargo automatically. The design is meant to maximize efficiency and free up humans for packing and staging the cargo pods.

This functionality could be especially useful in defense settings, as missions like resupply for soldiers can sometimes pose risks to pilot, crew, and cargo handlers.

“More generally, there’s this interest across the national security community of having logistics be more nimble and automated, and this shift from big expensive aircraft that you don’t have very many of to smaller, lower cost aircraft that you can have more of,” Merrill said.

The company has a handful of next steps it needs to take before it starts flying for either defense or commercial customers. On the defense side, Elroy will begin flight validation with the U.S. Air Force and the Navy next year. The company has a Phase 3 Small Business Innovation Research contract with the Air Force via Agility Prime, part of which is doing flight operations with these next systems.

The company would likely be able to start commercial operations abroad, in places that have different regulatory standards, before going through the full certification process here in the U.S. with the Federal Aviation Administration. It will need to achieve both a Type Certificate and a Part 135 certificate before it can start building out its business domestically. They’re staying flexible about potentially selling Chaparral systems to companies that want to operate the network themselves, and operating Chaparral systems itself as a full-service cargo airline.

“The space of drone delivery has risen up quickly with small last mile drones […] and now this new chapter is opening for middle mile [cargo delivery],” Merrill said. “We’re excited that the technology is ready to support this, customers want it, and we’ve built a team and assembled the funds to go after it.”