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Y Combinator\u2014the start-up incubator that helped launch DoorDash, Airbnb, Reddit, and Instacart\u2014is backing a weapons maker for the first time, betting that it could shake up the defense industry with low-cost, anti-ship missiles.<\/p>\n
Ares Industries launched on Tuesday, promising to make missiles that can take out ships hundreds of miles away, but 10 times smaller and cheaper than what\u2019s currently available.<\/p>\n
\u201cA war with China in the Taiwan Strait would look nothing like what we\u2019ve seen in Ukraine or the Middle East,\u201d founders Devan Plantamura and Alex Tseng wrote in a post<\/a>. \u201cWargames within DoD and military experts are in agreement that the most useful weapons in such a conflict would be long range anti-ship weapons or cruise missiles.\u201d<\/p>\n In the event of a war, the stockpile of U.S. missiles would be depleted within weeks, and there isn\u2019t enough industrial capacity to build them at a sufficient pace, they warned.<\/p>\n But $3 million missiles weighing 3,000 pounds aren\u2019t necessary to sink smaller Chinese warships, not to mention swarms of $200,000 unmanned surface vessels, Plantamura and Tseng added.<\/p>\n \u201cThe DoD needs smaller, less expensive cruise missiles, and lots of them! But no one has delivered on that promise yet,\u201d they said.<\/p>\n Ares built multiple prototypes and flight-tested them over the summer in California\u2019s Mojave Desert. The founders said they are on track to deliver \u201cearly working missile systems\u201d to their first customers by mid-2025.<\/p>\n Ares and Y Combinator didn\u2019t immediately respond to requests for comment.<\/p>\n In a series of tweets<\/a>, Y Combinator partner Jared Friedman explained some of the reasoning for the incubator\u2019s inaugural dive into the defense industry.<\/p>\n \u201cThere are two forces in the world that make this a particularly good idea now: the current missile producers have become bloated and can\u2019t meet demand, and drone ships mean we need smaller missiles,\u201d he wrote.<\/p>\n Friedman then compared today\u2019s dominant missile makers to the companies that dominated the rocket business more than 20 years ago, when Elon Musk started SpaceX.<\/p>\n By developing reusable launchers, SpaceX dramatically lowered the cost of reaching orbit and is now the leading space-launch company. In fact, NASA just turned to SpaceX<\/a> to bring back astronauts from the International Space Station after malfunctions on Boeing\u2019s Starliner capsule.<\/p>\n \u201cWhen SpaceX entered space launch vehicles in 2002, Lockheed Martin and Boeing had formed a duopoly,\u201d Friedman wrote. \u201cSimilarly, Lockheed Martin and Raytheon are the only two big players that supply cruise missiles today.\u201d<\/p>\n While Silicon Valley and the venture capital community had long kept their distance from the defense sector, Russia\u2019s invasion of Ukraine in 2022 helped spur more interest<\/a>. <\/p>\n Between 2021 and 2023, investors\u00a0funneled<\/a>\u00a0$108 billion into defense tech companies, the\u00a0Washington Post<\/em>\u00a0reported in February, citing PitchBook data.\u00a0Meanwhile, data mining company Palantir and defense tech startup Anduril have also created more buzz in the sector.<\/p>\n During a July 17 panel at\u00a0Fortune\u2019s<\/em>\u00a0Brainstorm Tech conference<\/a> in Park City, Utah, investors also noted the rise in U.S. nationalism and the growing conservatism in Silicon Valley.<\/p>\n \u201cDefinitely we\u2019re seeing a trend towards conservatism, and I think this is one of the reasons why investing in defense technology is no longer taboo,\u201d Jenny Xiao, a partner at Leonis Capital, said.\u00a0<\/p>\n<\/div>\nRecommended Newsletter: <\/strong>High-level insights for high-powered executives. Subscribe to the CEO Daily newsletter for free today. Subscribe now<\/a>.<\/div>\n