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Andrew Kreitz<\/p>\nWhile Silicon Beach pierced every industry with cutting-edge technology for many years, legacy defense manufacturers like Lockheed Martin Corp. have held steady as the U.S. government\u2019s top contractors selling systems that were slowly becoming antiquated. <\/p>\n
In recent years, the federal government has gained more options. For instance, in late May, it signed an agreement with Castelion Corp. to build 500 hypersonic missiles a year \u2013 proving the old rules no longer apply.<\/p>\n
The deal was notable on multiple fronts. It\u2019s the first of its kind: a low-cost hypersonic missile program built for mass production. But it won\u2019t be the last. The federal government, which spent decades relying on a handful of seasoned defense contractors that have carried the U.S. through its wars, is increasingly working with defense tech startups. <\/p>\n
\u201cI think there was a perception that nobody\u2019s going to be able to work their way in,\u201d said Andrew Kreitz, co-founder and chief financial officer of the El Segundo-based company which launched in four years ago. \u201cNobody was going to be able to take a startup and go toe-to-toe with Lockheed Martin.\u201d<\/p>\n
Andrew Kreitz<\/p>\n
As the United States marks its 250th year, the aerospace and defense industries find themselves in the middle of their own renaissance \u2013 one being led out of Southern California. More than 1,000 aerospace and defense companies in the region have garnered more than $15 billion so far in 2026, already making it the sector\u2019s busiest and best-funded year, according to PitchBook. <\/p>\n
For decades, the East Coast\u2019s legacy contractors \u2013 which manufactured in L.A. and maintained strong workforces \u2013 set the stage for the region\u2019s startups. These new firms \u2013 some of which have reached unicorn status \u2013 are armed with defense contracts to build the next generation of cheaper, faster, easily scalable frontier wartime technologies. Castelion raised nearly $500 million and achieved a $2.82 billion valuation in the years leading up to its landmark agreement with the Defense Department, proof that venture capital is willing to shoulder the risk that the federal government once undertook on its own. The firm\u2019s deal represents one of many that the department has struck with young companies, offering paths to modernize the U.S. war arsenal as the battlefield evolves.<\/p>\n
\u201cWhat\u2019s really exciting about this is the speed with which the government has moved and their willingness to work with (Castelion) as a new entrant,\u201d Kreitz said. \u201c\u2026Historically, getting to this sort of agreement, taking this sort of step and actually moving towards production, would be an extremely lengthy process and be very, very challenging for a
new entrant.\u201d<\/p>\n
After the Cold War ended, U.S. defense funding began to dwindle slowly. The final blow came in 1993, when then-Defense Secretary Les Aspin and Deputy Secretary Bill Perry invited the top defense company executives to a dinner at the Pentagon. The candid message: the department wouldn\u2019t be able to support every company on the market, and the industry needed to brace for consolidation. <\/p>\n
Known as \u201cThe Last Supper,\u201d the nation then witnessed the rapid collapse of a bustling defense sector. Within seven years, more than 50 companies that made up America\u2019s defense manufacturing base collapsed into five dominant players, a grip they\u2019ve held for decades. This was part of a larger decline in manufacturing overall. Factory jobs in L.A. County decreased by 65% between June 1990 and June 2025, according to the California Employment Development Department. <\/p>\n
\u201cThe end result of that process is that they ended up with five client contractors, and they reduced the number of defense options by 80%,\u201d said Nathan Mintz, co-founder of El Segundo-based CX2. \u201cWell, when you reduce the number of options \u2013 as a consumer you know this \u2013 prices go up.\u201d <\/p>\n
The largest names in defense \u2013 Lockheed\u00a0 Martin, RTX Corp., Northrop Grumman Corp. and The Boeing Co. \u2013 are all based on the East Coast and emerged as the winners of this country\u2019s last defense tech boom, ending the Cold War. <\/p>\n
\u201cThe way that they were operating, it was a low-growth industry,\u201d Kreitz said. \u201cUncle Sam was not putting huge amounts of dollars in there. It\u2019s not like you had any disruption going on.\u201d<\/p>\n
That all changed in the 2020s, when the Russian invasion of Ukraine exposed just how far high-tech weapons and aerial systems had advanced since the West last fought for dominance. Western-made technology sent to Ukraine was slow to build and cost prohibitive. As the war has dragged on, both Russia and Ukraine have leaned on an arsenal of small-scale drones, cheap tracking devices and payload delivery systems that were easy to replace. <\/p>\n
\u201cNo one was able to backfill inventories,\u201d Kreitz said. \u201cIt was this big wake-up call for the whole defense industry that something is very broken here.\u201d<\/p>\n
As the COVID-19 pandemic ravaged the world, both the administrations of Presidents Joe Biden and Donald Trump pushed to bring manufacturing back to the U.S. in order to make the country more self-reliant. <\/p>\n
\u201cCOVID permanently disrupted, I think, the status of supply chains across the world,\u201d said Jai Malik, chief executive of El Segundo-based defense and aerospace manufacturer Amca. \u201cThat was a massive disruption to the status quo of just-in-time delivery and having always more than enough parts relative to what you needed to build.\u201d<\/p>\n
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Defense: Amca builds
mission-critical aircraft components. (Photo c\/o Amca)<\/p>\n
Unlike the last defense boom, fueled almost entirely by the federal government, venture firms are stepping up to the plate. So far in 2026, venture capital has accounted for 65% of all investments in the defense sector, a significant reversal for an industry that limited partners once deemed too controversial.\u00a0<\/p>\n
\u201cThere was sort of a distaste,\u201d Kreitz said,\u00a0 \u201cor there were moral qualms with investing
in defense.\u201d <\/p>\n
Today, L.A.\u2019s defense industry is thriving. Half of all the satellites and vehicles currently in space were built in El Segundo. The South Bay accounts for 88% of unicorn value in Los Angeles, according to PitchBook. <\/p>\n
The aerospace and defense sector added 11,000 jobs between 2022 and 2024, according to the Los Angeles County Economic Development Corp. But industry insiders believe the current boom is unlikely to face its own \u201cLast Supper.\u201d <\/p>\n
\u201cWhat\u2019s fascinating to the point of other booms, like aerospace, as it consolidated in the peace dividends in the \u201990s, is that one of the things that has made this so attractive to the venture space is the dual-use nature of it,\u201d said El Segundo Mayor Chris Pimentel. \u201cVenture wouldn\u2019t follow them (now) because the risk is so high and these things are capital-intensive.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"While Silicon Beach pierced every industry with cutting-edge technology for many years, legacy defense manufacturers like Lockheed Martin…\n","protected":false},"author":2,"featured_media":379001,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27],"tags":[140709,147427,143661,153291,48,52,51,47,50,49,55803],"class_list":["post-379000","post","type-post","status-publish","format-standard","has-post-thumbnail","category-los-angeles","tag-amca","tag-boeing-co","tag-castelion-corp","tag-cx2","tag-la","tag-la-headlines","tag-la-news","tag-los-angeles","tag-los-angeles-headlines","tag-los-angeles-news","tag-northrop-grumman"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/379000","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=379000"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/379000\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/379001"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=379000"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=379000"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=379000"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}