Shift 3: Production As the Bottleneck
For the first decade of the VC-backed defense innovation movement, the central challenge was getting promising technology noticed and breaking into a procurement system that was structurally biased toward incumbents and indifferent to commercial ingenuity. We are now facing a different challenge to demonstrate that this ecosystem that is capable of “building” can manufacture, sustain, and deliver at the volume modern deterrence demands.
The Industrial Gap Is Not Theoretical
Ukraine’s consumption rate of artillery shells, missiles, and drone systems in high-intensity conflict has vastly outpaced assumptions baked into U.S. stockpile and production planning. The Army has missed its own target of producing 100,000 155mm rounds per month. The munitions supply chain, particularly energetics production, where conversion of chemical precursors into usable explosives is concentrated in a dangerously small number of facilities, has no meaningful surge capacity. A Congressional Research Service assessment concluded plainly that the U.S. defense industrial base is operating at a tempo suited to peacetime, not great-power competition. In a major conflict, current stockpiles would run out before the industrial base could replenish them.
Over thirty years of optimization for financial efficiency rather than industrial resilience, the defense industrial base consolidated around high-margin, low-volume platforms. As factories closed and domestic supply chains atrophied, we de facto created a base that can produce exquisite systems in small numbers, precisely the wrong profile for the conflict environment Ukraine has revealed.
“We have a production and scaling crisis in defense technology. Innovative, promising solutions fail to make a real-world difference because they aren’t produced in sufficient quantity. While the ‘valley of death’ is often described as a funding gap that startups must navigate, it is increasingly a physical infrastructure gap that stalls their production potential.
Startups can innovate and prototype, but historically fail to rapidly and cost-effectively transition to scaled production. Bespoke facilities are slow and expensive to build, particularly with funding from a dilutive venture capital raise, and traditional funding sources are disinterested, correctly identifying this category of tenant as higher risk. Unlocking production capacity and disruptive technology from these firms requires a shift - from solving for facility needs one-off to treating startup company scaling needs as transitory infrastructure.
Currently, suitable facilities exist in fragmented pockets and act as a seam, inhibiting a rapid transition to scaled production. Manufacturing capacity is an essential national capability, and it’s time we treated it as such.
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The Broader Picture
This is a challenge that persists across the whole DIB. We are behind in drone production, shipbuilding, microelectronics, and advanced semiconductor manufacturing, while dependent on supply chains that are geographically and industrially concentrated. The reconciliation budget has injected real capital into munitions and industrial base resilience, but rebuilding manufacturing capacity takes years, not months. Capital is a necessary condition but not the only sufficient one.
SVDG's Read
Capital and talent have flowed toward building technology and far less has flowed toward building the factories, supply chains, and manufacturing workforces required to field it. The government's role here is not just to buy product. It is to create the demand certainty, multi-year contracting structures, and financing tools that make it rational for companies to invest in production capacity before the orders arrive.
Indicators to Watch
Multi-year, production-level contracts flowing to non-traditional companies with demonstrated manufacturing capability
New manufacturing facilities coming online with confirmed government demand attached, not speculative pipeline
Energetics, munitions, and drone production capacity growing measurably against stated FY2027 procurement targets
Government-side financing tools (ex. DPA Title III, OSC lending, leasing arrangements) are actively used to de-risk production investment before contracts arrive
“The country is asking advanced nuclear to do something it has not done in fifty years: deliver new reactors, on schedule, at a pace that matters for national security. Antares is relentlessly executing toward this end. A year ago, building a new American nuclear reactor on a startup timeline was a policy aspiration. Today, it is a production constraint.
Policy, technology, and demand are aligning in a way they have not in decades. The DOE stood up the Reactor Pilot Program, the services are putting reactors on installations, and regulators are compressing review timelines without compromising rigor. What policy cannot do is rebuild a nuclear supply chain hollowed out over fifty years of stagnation. That work falls to industry. It means qualifying new fuel suppliers, standing up fabrication lines, and rebuilding a nuclear workforce. Only then can industry deliver on time, at cost, and at scale.
Energy is the precondition for our nation’s critical missions. Building the reactors that power those missions is why Antares exists. Strategic energy is national security.”
