Y Combinator has made headlines by announcing its first investment in Ares Industries, a startup focused on developing smaller and cheaper anti-ship cruise missiles.

Launched recently, Ares Industries aims to address the growing demand for low-cost munitions, particularly in the context of potential conflicts in the Taiwan Strait.

Jared Friedman, a partner at Y Combinator, noted that current missile manufacturers are struggling to meet demand, drawing parallels to the rocket industry before the rise of SpaceX.

The founders of Ares Industries, Devan Plantamura and Alex Tseng, argue that the U.S. military's existing missile stockpile would quickly deplete in a conflict, especially with China.

The startup plans to deliver its initial missile systems to customers by mid-2025, showcasing its commitment to rapid development.

Ares Industries aims to produce missiles that are ten times smaller and cheaper than current options, capable of targeting ships hundreds of miles away.

This investment marks a significant shift for Y Combinator, traditionally known for backing software startups like Airbnb and DoorDash, now venturing into the defense sector.

They emphasize the need for smaller, more affordable cruise missiles to effectively counter smaller Chinese warships and unmanned vessels.

In just 11 weeks since its inception, Ares has made significant strides, moving from concept to flight testing prototypes in California's Mojave Desert.

The surge in interest for defense technology has been notable since Russia's invasion of Ukraine, with venture capital investments in the sector reaching $108 billion from 2021 to 2023.

Friedman highlighted the strategic importance of Ares's innovations in the context of potential military conflicts, particularly in the Taiwan Strait.

As the defense landscape evolves, Ares Industries' approach could disrupt the current duopoly held by major players like Lockheed Martin and Raytheon.