Los Angeles is seeing a resurgence in the aerospace and defense sector, with 10 companies reaching unicorn status in 2025—the highest number since 2021. Among these, El Segundo-based manufacturing firm Amca secured $300 million in Series B funding in late May, achieving a valuation of over $1 billion just 18 months after its founding.
Defense Tech’s New Investment Climate
The current funding landscape for defense startups mirrors the 2021 tech boom, though with a heavier focus on hardware. In 2025, aerospace and defense startups captured 38% of all venture funding in Los Angeles, drawing in generalist venture capital firms for the first time. According to Jim Corridore, a senior analyst at PitchBook, these firms are attracted to the sector because current defense manufacturing now incorporates the “techie” software and hardware integration typical of venture-backed startups.
Did You Know? The U.S. government has proposed a $1.5 trillion defense budget for the 2027 fiscal year, which would mark the largest defense spending request in the country’s history.
The Shift Toward Modern Warfare
The surge in investment follows a shift in the global battlefield, where cheap aerial drones have changed how militaries approach conflict. As U.S. adversaries like China ramped up production of nimble, cost-effective missiles and ships, the domestic industrial base faced pressure to modernize. Andrew Kreitz, co-founder of the El Segundo-based manufacturer Castelion Corp, noted that by the 2020s, the technological capabilities of these adversaries were no longer deniable.
Castelion Corp is currently moving toward proof of concept, having signed an agreement in May with the Department of Defense to manufacture 500 units of “Blackbeard,” described as the military’s first low-cost, mass-fielded hypersonic missile. Despite this progress, industry leaders remain cautious about the long-term viability of the current startup wave.
Future Consolidation and Market Pivots
Amca CEO Jai Malik expects the next two to three years to bring significant consolidation to the defense tech sector. He suggests that the market may not have enough demand from the military to support the current number of startups competing in systems development and innovation. While some companies may struggle as funding fluctuates, others could pivot to commercial applications to survive.
El Segundo Mayor Chris Pimentel believes this “dual-use” approach is critical for the industry’s longevity. By applying technology stacks and manufacturing infrastructure to non-military projects, companies may be able to insulate themselves from the risks of a strictly government-reliant business model.
Expert Insight: The transition from the 2021 software-focused bubble to the current hardware-heavy defense cycle represents a fundamental shift in capital allocation. While the government remains the primary customer, the long-term sustainability of these startups likely depends on their ability to prove that their technology can transcend defense-only applications, a strategy that echoes previous cycles of industrial adaptation in Southern California.
Frequently Asked Questions
What is the primary factor driving the current surge in defense tech funding?
The investment is driven by a need to modernize the U.S. arsenal in response to changing battlefield conditions, such as the use of cheap drones, and the rapid advancement of military production capabilities by adversaries like China.
How does Amca’s recent funding compare to past trends?
Amca reached a $1 billion valuation just 18 months after its founding, making it the youngest unicorn in its class. This occurs in a year where 10 companies reached unicorn status, the highest number since the 2021 tech boom.
What do industry leaders expect to happen to defense startups if funding dries up?
Leaders like Jai Malik and Chris Pimentel suggest that the sector will likely see consolidation, with many companies needing to pivot toward commercial applications to utilize their existing technology and factories outside of defense contracts.
How will the reliance on a single primary customer—the Department of Defense—impact the long-term stability of these newly minted unicorn startups?
