Los Angeles tech startups get big cash infusion

One weapon being tested can be dropped into the stratosphere thousands of miles from its target and can deliver an explosive with precision even without GPS. Another is a cruise missile that takes off vertically without a runway so it can deliver a strike from at least 180 miles with the accuracy of a helicopter-launched rocket.

The weapons have not only drawn plenty of interest from the Department of Defense, but also from venture capitalists who are backing their manufacturer — Mach Industries, a Huntington Beach, California, startup founded by an MIT dropout with big ambitions. The three-year-old company has received $185 million in venture funding and last year moved from Texas to Southern California, where it opened a factory to draw on the area’s wealth of aerospace and defense talent.

“If there is a single sort of success criteria for Mach it is the ability to deter a war in the Pacific with China over the next decade, and so I think that calls for massive investment,” said company founder Ethan Thornton, who is just 21. Mach’s speedy rise is remarkable, but it’s just one of a number of startups in the region benefiting from a change of heart in Silicon Valley, where venture capitalists, company founders and employees have for decades resisted the lure of the defense industry — and the government contracts that come with it. That attitude has shifted markedly in just a few years as China has massively built up its military, leading to fears of a Pacific war, and the Russia-Ukraine conflict has upended conventional military thinking with its use of drone warfare.

“We need folks who are going to make things smarter, faster, cheaper than what we’re getting now, because the geopolitical environment is getting more complex,” said Dale Swartz, a partner at McKinsey & Co.’s Silicon Valley office who focuses on national security innovation.

That military imperative is reflected in where investors — including such firms as Andreessen Horowitz, Khosla Ventures and Sequoia Capital — are putting their money. This year, venture capital deals in L.A.-area defense tech companies have exceeded $4 billion, more than double the $1.8 billion raised in all of 2024, according to data from PitchBook. The figures include deals in Los Angeles, Long Beach and Santa Ana. Leading the pack is Anduril Industries, a Costa Mesa, California, maker of drones and other autonomous defense systems co-founded by entrepreneur Palmer Luckey, which raised a startling $2.5 billion in the second quarter. That included $1 billion from Peter Thiel’s Founders Fund.

Impulse Space, a Redondo Beach, California, firm developing in-space transportation technologies, raised $300 million; Chaos Industries, a Hawthorne, California, company that makes advanced threat-detection systems, raised $275 million, and Apex Space, a Los Angeles manufacturer of small satellites, raised $200 million in the quarter. But it’s not just notable venture capitalists on Silicon Valley’s famous Sand Hill Road that are plunging in. So, too, are leading legacy companies, as well as the new generation of artificial intelligence startups that have disrupted the tech world. In July, Google, Anthropic, OpenAI and xAI were each awarded contracts worth up to $200 million by the Department of Defense in support of the agency’s “adoption of advanced AI capabilities to address critical national security challenges.”

Those deals are an about-face for the Valley, which has had a queasy relationship with the defense industry since Vietnam — and more recently has witnessed tech workers protest military contracts and raise ethical concerns about technology for mass surveillance or weapons development. Once known for the motto “Don’t Be Evil,” Google didn’t renew a controversial Pentagon contract known as Project Maven in 2018 after thousands of workers protested that the company’s AI would be employed to analyse drone surveillance video.

To be sure, Silicon Valley has a long defense history and, in a sense, the recent investments are something of a full circle.

Hewlett Packard, founded in a Palo Alto, California, garage in 1939, worked with the US military in World War II to develop microwave technology to disrupt enemy radar. Founders Bill Hewlett served in the Army during the war and Dave Packard served as deputy secretary of Defense in the Nixon administration.

In the late 1960s, the Defense Department — with the assistance of Stanford and other universities — developed the internet’s predecessor, ARPAnet, to keep military and government computers secure in the event of war. After the end of the Cold War, military spending collapsed, shrinking the LA area’s defense industry, which saw several major contractors slash jobs in Southern California, including Northrop Grumman and Raytheon. But military spending has steadily risen over the last decade, reaching a record $2.7 trillion in 2024, according to the Stockholm International Peace Research Institute.

The growing arms race with China and the geopolitical conflicts in Ukraine, Gaza and elsewhere boosted spending, which grew 9.4% last year. The U.S. spent the most — nearly $1 trillion — making up roughly 37% of global outlays. The spending looks to only accelerate after President Trump’s January call for the military to develop a “golden dome” defense system costing $175 billion. The system is intended to protect against “ballistic, hypersonic, advanced cruise missiles, and other next-generation aerial attacks from peer, near-peer, and rogue adversaries,” according to the White House order. One early analysis estimates that a fully functional Golden Dome might actually cost as much as $3.6 trillion over two decades.

“They realised that there’s so much money in the U.S. military that it was a way where they could get their VC 100x returns,” William Fitzgerald, a former Google employee who protested Project Maven, said of today’s shift in Silicon Valley thinking. Now, at Stanford, Harvard and other universities, students are pursuing careers in defense tech, while the military is reaching into the tech world to increase its proficiency in AI and other advanced software. In June, the Army announced an effort to recruit senior tech executives to serve part time as advisers to help fuel initiatives, including one that “aims to make the force leaner, smarter, and more lethal.” The Army swore in executives from Meta, OpenAI, Palantir and Thinking Machines Labs as reserve lieutenant colonels. The military also has offered defense startups key support with seed funding through Small Business Administration money it controls, in a convergence of interests with venture capitalists. Anduril was one of the first companies to benefit when it was initially awarded a $50,000 check and went on to receive millions more a few years after it was founded in 2017, with its focus on autonomous weapons and bringing Silicon Valley innovation to the military. Since then, a host of defense tech and aerospace startups with potential military capabilities have benefited from the funding, particularly in Southern California. They include Impulse Space; Epirus, a Torrance electronic-warfare company; and Vast, a Long Beach company building a space station.