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The case is that defense technology needs more than prototypes: it needs qualified suppliers, production capacity and the capital to build them before demand is fully certain. Connor Love and Collen Larson argue that investing in this production layer could create an American manufacturing asset class. That is an investment thesis, not an established asset category or a promise of returns.
What the proposed asset class is—and is not
In their October 2, 2026 article, Connor Love and Collen Larson at Andreessen Horowitz distinguish proving that a system works from manufacturing it repeatedly at scale. Defense technology companies may develop prototypes, but the suppliers beneath prime contractors still need machines, trained workers, inventory, tooling and qualification capacity to deliver production volumes.
The proposed asset class is investment in those lower-tier manufacturers and production capabilities—not simply investment in defense technology companies, factory automation or a new label for publicly traded securities. The authors’ thesis is that capital can strengthen supplier businesses and the processes that support multiple programs. They sum up their framing as: “Manufacturing is capital-in, capability-out.”
This is an American national-security and technology-investment argument. It does not establish standardized criteria for an asset class, prove that any particular supplier investment will succeed, or amount to investment advice.
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Why suppliers can be a constraint on scaling
The authors describe a supplier base made up largely of small firms. Their article reports that the 2022 Economic Census counted 16,876 machine shops. Of machine shops operating all year, it says, 83% employed fewer than 20 people and 95% fewer than 50. It also reports that about three-quarters of 240,644 manufacturing employers had fewer than 20 employees. These are figures as reported by the authors; the underlying census tables and definitions should be consulted before treating them as independently verified.
Small suppliers may have valuable customer relationships, skilled workers and hard-won qualification histories, but lack the engineering bandwidth or equipment to add output quickly. The article also reports that 61% of tier-two-and-below defense manufacturers cited tooling, automation or production-line limits among their top three expansion barriers. It does not specify the survey year or details in the reproduced text, so that figure should be read as the article’s account rather than a universal measure.
Scaling is not just a matter of buying an extra machine. A supplier may have to invest before orders are certain, and production at a different facility or through a different process can require qualification. The authors cite an example in which suppliers reportedly needed about six months to add capacity for Anduril’s Ghost-X program; this is a program-specific example, not a general supplier lead time.
How the authors think capacity becomes financeable
Use credible demand as an anchor
Suppliers are unlikely to fund unlimited defense-specific capacity against speculative demand. The authors argue that a reliable government order or credible production commitment can give systems companies and investors a basis for committing to suppliers earlier, before full-rate production. The mechanism is plausible but not guaranteed: procurement requirements can change, and a request for funding is not the same as an enacted appropriation, contract or delivered order.
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For example, the article says $1.1 billion was requested in FY27 procurement funding for Anduril’s FQ-44 Fury production to begin. That is a dated request figure, not evidence by itself that the money was appropriated or that production demand was secured. Current official budget and contract documents are necessary to establish status.
Finance the suppliers beneath the prime contractors
The target, in this thesis, is often tier-two and tier-three manufacturers and process specialists. Upgrading an existing qualified supplier’s engineering, equipment and workflows may increase useful output; in some situations, new facilities may be needed. The question is whether capital removes a real production constraint and leaves behind more durable capability—not merely whether a company acquires shops or installs automation.
Match the capital to the stage of production
Manufacturing has physical funding needs even when software helps coordinate it. The authors propose a progression from early venture risk to growth equity, private equity, strategic investment and credit as production becomes more proven. This is a proposed financing path, not a prescribed sequence every supplier can follow. The right mix depends on demand certainty, qualification, cash flow, the scale of required equipment and a business’s ability to carry debt.
Why supplier participation in design matters
In a build-to-print arrangement, a supplier may receive a drawing and manufacture to it without helping shape the part for volume production. The authors argue for bringing suppliers into engineering earlier. A manufacturer may be able to suggest changes to geometry, materials, tolerances, interfaces, testing or process that retain system performance while making a component easier to produce reliably.
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This does not require handing a supplier control of an entire defense system. The systems company can retain architecture and integration while giving a supplier bounded responsibility for a component and its production system. Connecting design, test, inspection and production information can help teams carry lessons from early builds into repeat manufacturing rather than treating each stage as disconnected.
Invest in the bottleneck, not automation for its own sake
Software and production data can help identify constraints, coordinate work and link requirements with testing and inspection. But the physical constraint might be a machine’s cycle time, fixture changes, an inspection queue, workforce availability, inventory or supplier coordination.
The authors offer a “two-second transfer test” as an operational heuristic: adding a robot to move a part between machines is unlikely to increase output if the transfer already takes only a couple of seconds and is not the constraint. That example is not a universal automation rule. The useful investment depends on the actual process bottleneck.
What the company examples do—and do not—show
The authors use company examples to illustrate different approaches, not to establish typical results across the manufacturing sector. Hadrian is presented as building digitally enabled factories; Amca as applying engineering software alongside existing factory capacity; and Nominal as linking test and production data. Anduril and Castelion are discussed as defense systems companies that still depend on lower-tier suppliers even as they selectively integrate production or choose commercial components.
The article attributes several performance claims to these examples: Hadrian was described as 10 times faster and more than 40% more efficient than the legacy supply chain in a 2022 comparison, and as achieving 98% on-time delivery for Javelin and TOW components on RTX programs. It says Amca’s six factories and RAPID platform produce more than 50,000 components monthly and reduce development-to-production timelines by 67%. Those are claims reported by the article, not independently established sector-wide benchmarks.
Likewise, the article says 70% of Anduril’s Barracuda-500M components are commodities. It reports $1.37 billion in equity and a $360 million revolving credit facility for Hadrian, with the facility described as funding manufacturing infrastructure, machinery and hardware. These figures describe specific companies and financing as reported in the article; they are not evidence that comparable investments or results are available to other suppliers.
The authors also invoke SpaceX, citing more than 600 Falcon 9 flights and roughly 80% in-house Starship manufacturing as examples of vertical integration. Those examples illustrate one approach, not an argument that every systems company should manufacture everything internally. Their stated whitespace is supplier capacity that can serve multiple programs, with internal production reserved for capabilities the market cannot supply at the needed performance, cost, volume or speed.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to assess whether an investment strengthens production
The article offers a set of useful questions, but not standardized scoring metrics or comparative data for evaluating every supplier. A practical assessment can begin with these dimensions:
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- Demand quality: What orders or commitments exist, at what likely volume and timing, and how exposed are they to procurement uncertainty?
- Qualification and readiness: Which facilities and processes are qualified, and how long would a capacity addition or transfer take?
- The constraint being addressed: Is the investment aimed at equipment, tooling, engineering throughput, skilled labor, inspection, inventory or coordination?
- Customer and program concentration: Can the supplier serve other customers or commercial and allied markets, and would multiple programs become dependent on a single source?
- Engineering role: Does the supplier merely build to print, or can it contribute to design for manufacturing and qualification?
- Capital path: Is the business at a stage suited to venture or growth equity, strategic investment, private equity or credit—and can expected production support the obligations?
- Durable capability: After the investment, are engineering, skills, equipment, qualified output and independent supply options stronger?
Risks that can undermine the thesis
Demand may arrive later—or at a different scale
Suppliers can be left with underused, defense-specific capacity if expected procurement does not materialize. Budget requests and program announcements should not be described as funded, contracted demand without checking their current status.
Capacity may not transfer cleanly
Qualification can attach to a particular facility, process or production configuration. A company may own more machines yet fail to remove the relevant program bottleneck if those machines, workers or processes are not qualified for the work.
Efficiency can create system-wide concentration
A supplier serving several programs may diversify its own revenue while becoming a single point of failure for those programs. The authors therefore favor productive suppliers that can support multiple markets while preserving enough independent sources for critical components.
Capital can strengthen or weaken a business
An acquisition or financing can improve engineering and output, but it can also extract cash, burden a supplier with debt or leave production capability no stronger. The article proposes judging transactions by what they leave behind; it does not quantify how frequently acquisitions achieve that outcome.
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The operational results cited for Hadrian, Amca and other companies do not establish that similar performance is typical or repeatable across suppliers. The authors’ examples support a thesis to investigate, not a forecast of returns. Andreessen Horowitz states that its posts are not an offer to sell securities or a solicitation to buy them, and should not be relied on as investment advice.
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