El Segundo, California is trend forward in the innovation business. The near-LAX city is an unlikely spigot for the next generation of American startups. Venture capitalists find fresh opportunity there in military-related projects, channeling patriotism.
Silicon Valley once considered investing in defense to be taboo. A confluence of circumstances has changed that sentiment. One obvious development: The military establishment is at full throttle with international conflict. At $500,000 each, how many Sidewinder missiles can the Pentagon really afford? The question of course is rhetorical. There is enough momentum in the defense-startup ecosystem that more and more names are willing to fund comparatively efficient research and development. The Pentagon nods with approval.
More thoughtful reasons for ecosystem growth in “The Gundo,” is tied to the halo effect of SpaceX and its successes in partnership with the US government, as well as Palantir and Anduril. Meanwhile, the pandemic led to renewed focus on supply-chain issues and a growing preference for domestic sourcing. The number of startups centered in this one-time epicenter of American aerospace may now be modest. We wage that growth will be exponential, regardless of who is in the White House next year.
There is a counterargument to features of this rising tide. America may not need a war machine that produces low-cost weapons systems and related hardware. A recent editorial in the Silicon Valley-based Mercury News argues, “The history of ‘miracle weapons’ does not bode well for the likely outcome of the current military tech surge.” The key point is that these technologies can fail or they can be of limited value in specific circumstances.
Defense startups have attracted as much as $100 billion in venture funding over recent years. Is the secondary sector of the economy—which includes aerospace and computer devices—poised for a renaissance? The underlying verve may be festering anger at America’s lost economic footing. An important quality here is the subtle shift from investing in mobile-phone apps to seeding manufacturing-related opportunities. ■
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