Y Combinator’s first bet on weapons targets SpaceX

Ares Industries launched Tuesday with a promise to construct missiles that may take out ships from a whole bunch of miles away, but are ten times smaller and cheaper than those currently available.

“A war with China in the Taiwan Strait would look very different from what we have experienced in Ukraine or the Middle East,” Devan Plantamura and Alex Tseng wrote in a post“War games within the Department of Defense and military experts agree that the most useful weapons in such a conflict would be long-range anti-ship weapons or cruise missiles.”

In the event of war, US missile stockpiles can be exhausted inside weeks and there wouldn’t be enough industrial capability to construct them on the required pace, they warned.

However, $3 million, 3,000-pound missiles usually are not needed to sink smaller Chinese warships, let alone swarms of $200,000 unmanned surface vessels, Plantamura and Tseng added.

“The Department of Defense needs smaller, less expensive cruise missiles, and lots of them! But so far no one has delivered on that promise,” they said.

Ares has built several prototypes and flight-tested them in California’s Mojave Desert over the summer. The founders said they’re on the right track to deliver “first working rocket systems” to their first customers in mid-2025.

Ares and Y Combinator didn’t immediately reply to requests for comment.

In a Series of tweetsY Combinator partner Jared Friedman explained a few of the reasons behind the incubator’s first foray into the defense industry.

“There are two forces in the world that make this a particularly good idea now: current rocket producers are bloated and can’t keep up with demand, and drone ships mean we need smaller rockets,” he wrote.

Friedman then compared today’s dominant rocket manufacturers with the businesses that dominated the rocket business over 20 years ago when Elon Musk founded SpaceX.

By developing reusable launch vehicles, SpaceX has been capable of dramatically reduce the associated fee of reaching orbit and is now the leading company in space launches. In fact, NASA just turned to SpaceX to bring astronauts back from the International Space Station after Boeing’s Starliner capsule began to malfunction.

“When SpaceX entered the launch vehicle development business in 2002, Lockheed Martin and Boeing had formed a duopoly,” Friedman wrote. “Similarly, Lockheed Martin and Raytheon are now the only two major cruise missile suppliers.”

While Silicon Valley and the enterprise capital community have long kept their distance from the defense sector, Russia’s invasion of Ukraine in 2022 helped increase interest.

Between 2021 and 2023, investors funnel-shaped 108 billion dollars invested in defense firms, WashingtonPost reported in February, citing PitchBook data. Meanwhile, data mining company Palantir and defense technology startup Anduril have also caused more of a stir within the industry.

During a panel discussion on 17 July within the Fortunes At the Brainstorm Tech conference in Park City, Utah, investors also noted the rise of U.S. nationalism and growing conservatism in Silicon Valley.

“We are definitely seeing a trend toward conservatism, and I think that’s one of the reasons why investing in defense technology is no longer taboo,” said Jenny Xiao, partner at Leonis Capital.