A little-known Texas startup building a new kind of steel plant secured $133.65 million Sunday in what appears to be one of the Pentagon's first direct equity investments in an emerging industrial company. Hertha Metals, which makes ultra-pure iron for electric vehicle motors and wind turbines, pulled together a Series A round co-led by Khosla Ventures and Doerr Capital, with $65 million coming from the Department of Defense's Industrial Base Analysis and Sustainment program through the Economic Defense Unit.
The company wouldn't say what the deal values it at. Clean Energy Ventures, Pear VC, Gates Frontier, Niterra SUISO no MORI Fund, Toyota Ventures, and Siemens Financial Services also participated.
Hertha had raised more than $17 million previously from Khosla, Breakthrough Energy Fellows, Pear, and Clean Energy Ventures, as reported in materials from a 2025 publication.
An Unusual Government Bet
The Pentagon rarely takes equity positions. It typically steers money to defense contractors through grants or other transaction authority agreements that don't involve ownership stakes. Hertha declined to specify the security type, liquidation preferences, or whether the government gets a board seat.
Defense Daily described the arrangement as DoD "taking an equity stake," though venture firms formally co-led the round. The structure suggests Washington is experimenting with new ways to shore up supply chains it considers strategic, a shift driven partly by mounting concern over Chinese dominance in materials essential to both military hardware and the energy transition.
Scaling Up in Conroe
Hertha plans to use the capital to build what it calls Hertha Chalyx, a facility designed to churn out 10,000 tonnes of magnet-grade and steel-grade high-purity iron annually in Conroe, Texas. The company said it intends to break ground in 2026.
Right now it runs a 360-tonne-per-year demonstration plant in the same town. Hertha said it's in qualification talks with major U.S. rare-earth magnet producers, though it wouldn't name them.
The market it's chasing is a narrow but crucial one. High-purity iron accounts for roughly two-thirds of neodymium-iron-boron magnets by weight, according to Department of Energy data. A House Armed Services Committee report from 2025 put China's control of global high-purity iron supply above 90 percent.
New restrictions under the Defense Federal Acquisition Regulation Supplement, which take effect January 1, 2027, will prohibit defense contractors from sourcing any part of the NdFeB supply chain from China, Russia, Iran, or North Korea. That covers everything from mining neodymium, iron, and boron through finished magnet production. The rule is forcing companies to scramble for domestic alternatives.
The government has been scattering capital across the sector. USA Rare Earth received up to $1.6 billion in loan commitments and incentives under the CHIPS program in June for a mine-to-magnet project, according to NIST. DoD has also handed contracts to E-VAC Magnetics and Noveon Magnetics to expand domestic magnet manufacturing.
A Single-Furnace Gamble
Hertha's pitch hinges on a pyrometallurgical process it calls Flex-HERS, which produces molten steel or high-purity iron from iron ore in a single step using natural gas or hydrogen. The startup claims it cuts production costs 25 percent versus blast furnaces and slashes emissions roughly 50 percent with natural gas, up to 98 percent with hydrogen. It hasn't provided independent verification of those numbers.
Trade publications reported in mid-2026 that the company achieved 99.95 percent purity on commercial equipment, a threshold necessary for magnet applications.
Founder and CEO Laureen Meroueh earned a master's degree and PhD from MIT, finishing in 2018 and 2020, and previously ran Alchemr, a hydrogen startup. She was a Breakthrough Energy Fellow. In a February 2026 MIT News profile, she explained that her process runs reactions simultaneously inside a single furnace, collapsing steps that traditionally happen in sequence.
"The industrial technologies that win are the ones that are cheaper, cleaner, and better performing," Ryan Panchadsaram, a partner at Doerr Capital, said in the announcement. LinkedIn listed Hertha's headcount at 11 to 50 employees as of mid-September 2026, a small team for a company aiming to upend global iron supply chains.
Whether Hertha can scale its furnace technology and meet the timelines it's set remains an open question. But the involvement of both blue-chip venture firms and the Pentagon signals confidence that the company might have found a sliver of daylight in a market long dominated by Chinese producers.
