Shield AI has agreed to acquire Kirkland, Wash.-based Echodyne, which makes compact radar systems that detect and track drones, in a transaction valued at up to $5.3 billion. Echodyne spun out of Intellectual Ventures in 2014 with a $15 million round led by Bill Gates and Madrona, has raised about $200 million in total, and PitchBook put its valuation at $485 million after its last priced round in 2022. The deal is believed to be the second-largest acquisition of a private venture-backed company in Washington state history, behind Okta’s $6.5 billion acquisition of Auth0 in 2021, according to Madrona’s Tim Porter, who noted Echodyne is profitable. San Diego-based Shield said it is raising $2.5 billion, including $1 billion in new funding at a $28.8 billion valuation, more than double the $12.7 billion valuation it reached in March. Echodyne’s radar is built into hundreds of counter-drone and security systems used in more than 40 countries. Echodyne has about 400 employees, up from 260 when it opened a $40 million manufacturing facility in Woodinville, Wash., in July; no layoffs are planned and employees won’t be required to relocate, a Shield spokesperson said. The combined company will have about 2,700 employees, and Echodyne co-founder and CEO Eben Frankenberg will