Welcome to the new Fightertown USA: Inside San Diego's AI-powered unmanned aircraft boom

In the past few years, a new Fightertown USA has ascended in its place, largely due to the steady rise of San Diego’s tech sector and a new era of aerial innovation.

The city is now home to several startups building technology known as unmanned aerial vehicles — AI-powered autonomous defense aircraft capable of combat, surveillance, and delivery in conflict zones. Other startups are building technologies in adjacent areas, like drone defense systems and cargo delivery-focused aircraft.

With such a rich history of aerial dynamism, it’s no surprise that San Diego has become a major hub of this technology.

“You can really track naval aviation, in all its combinations and permutations from its origins, to present day, to future, out of the San Diego ecosystem,” said Larsen Jensen, a former Navy SEAL and founder of the San Diego defense tech-focused venture capital firm Harpoon Ventures. “And the future of it is unmanned, autonomous systems that don’t have people being shot off an aircraft carrier, but autonomous drones.”

Startups in this space include Shield AI, the defense technology unicorn that investors recently valued at $2.7 billion, and newer startups like Firestorm, another autonomous defense aircraft builder.

More investors have also started to take notice of the defense tech sector as Palmer Luckey’s Anduril continues its steady climb to become a tech decacorn reportedly valued at $12.5 billion by investors. With more VCs warming up to defense tech after years of casting it aside, AI and autonomous aircraft have the potential to be a game-changing innovation, not only for the military but beyond.

“I fundamentally believe that AI and autonomy will yield multi-trillion-dollar technology giants the same way the internet has,” said Brandon Tseng, cofounder of Shield AI.

Defense, AI, and a warming reception from VCs

Long before AI became a household buzzword, Shield AI launched in San Diego.

“We picked our name in 2015 before it was a hot wave,” said Tseng. “My aha moment was essentially OK, this software technology called AI, it can now be run on physical systems.”

Tseng, a mechanical engineer and former Navy SEAL deployed in Afghanistan and the Persian Gulf, and his cofounder and brother Ryan, the startup’s CEO, presciently decided in 2015 that AI would be a cutting-edge technology for the military.

“It should be powering, commanding, maneuvering every single one of our assets, every drone, every fighter jet, every submarine, every ship,” Tseng said of his thoughts on AI at the time.

Nearly a decade later, Shield AI’s technology has become just as cutting-edge as Tseng had imagined in 2015 — possibly even more.

The startup’s main technology is an AI pilot called Hivemind, which can enable drones and aircraft to operate completely autonomously without a pilot or the need for GPS or other communications. Hivemind allows aircraft to complete missions and make tactical decisions in the field independently.

Hivemind has been in use since 2018, and Tseng said the AI pilot was used in Israel on October 8 of last year to rescue hostages after the Hamas attack. It’s also been used in missions to intercept millions of dollars worth of drugs in the Caribbean Sea, Tseng said. Shield’s AI fighter pilot tech was also on display when a pilotless fighter jet fitted with its AI squared off in a dogfight with a manned F-16.

Shield’s main customers are the US Department of Defense and “allied militaries.” The startup recently inked a $198 million contract with the Coast Guard and also works with the Navy, Air Force, and Marine Corps.

Shield also produces an autonomous aircraft called the V-BAT, a vertical take-off and landing (VTOL) aircraft, which can complete missions typically done by larger, more sophisticated drones. And there’s the Nova 2, a combat-ready autonomous drone that can 3D map terrains or search buildings.

The startup has been on a nearly decadelong journey to this point. When it launched, Tseng recalled a frigid reception from VCs in the Bay Area when trying to fundraise.

“Defense tech wasn’t a thing in 2015,” he said. The team met with 30 investors and got 30 nos.

Tseng added that many investors thought he and his team were embarking on a “noble mission” but that it sounded like a “horrible” market and business idea. Nowadays, that reception is a little warmer, Tseng admitted.

“The advice at the time is ‘It is too hard. You shouldn’t even try.’ And that was the status quo across venture investors across everybody,” said Jensen of Harpoon Ventures.

But with companies like Palantir and SpaceX having success in the past decade, and now Anduril and Shield AI ushering in another wave, investor enthusiasm for defense tech appears to be growing.

That warmer reception is welcome news for newer defense tech companies like Firestorm, a startup building autonomous aircraft that launched in 2022.

Firestorm’s cofounder and CTO Ian Muceus said that even just two years ago when the startup was raising its pre-seed round, defense tech-focused firms like Decisive Point, Marque Ventures, and Silent Ventures wrote checks for that round. But when they raised their seed round, more traditional VC firms participated. And now that the company is raising a Series A, it’s seeing more interest from traditional investors as well, Muceus said.

“On the whole, we’ve seen the entire VC community kind of lean a little bit more into defense tech,” he said.

Also based in San Diego, Firestorm has developed 3D printed modular aircraft that can be quickly tailored for specific missions or altered on the battlefield. These aircraft, called the Tempest, weigh 55 pounds and can fly autonomously but complete pre-planned mission sets — what Muceus calls choreographed autonomy.

Continuing a legacy of military aviation

In 1911, Glenn Curtiss, known as the “father of naval aviation,” demonstrated the first plane that could operate from land and water for the US Navy in San Diego. The A1-Triad plane became the first Navy aircraft, leading to the first aviation squadron established on North Island in San Diego Bay.

San Diego is now home to the US’s largest West Coast military presence, with Navy, Marine Corps, and Coast Guard bases. These bases and their talent and resources are key to the city’s economic engine.

For many startups building in defense tech in the city, they have access and proximity to the military — one of their main customers.

“I think it turned out to be a pretty ideal location to be building and running a company that is involved in defense,” said Grant Jordan, CEO of SkySafe, a startup developing drone detection and airspace management technology.

But being a VC-backed company based in San Diego — whose investors include Andreessen Horowitz and Founder Collective — Jordan said in 2016 when he was raising the company’s seed round, investors always asked if he would move the company up to the Bay Area. But he stuck to his guns and kept the company in the city.

These days, Jordan says the startup’s location isn’t much of an issue with investors. Being in San Diego means SkySafe has direct access to the Navy, one of its first customers, and was able to cultivate that relationship directly rather than trying to do it remotely.

Natilus, an early-stage aviation startup backed by investors including Tim Draper and Soma Capital, was initially based in the Bay Area. But cofounder and CEO Aleksey Matyushev said that quickly became an issue for what the startup was trying to build.

“It really became clear, especially when you think about defense and unmanned technologies, that the airspace surrounding the Bay Area is incredibly complicated,” Matyushev said.

With three regional airports in the Bay Area — San Jose, San Francisco, and Oakland — Natilus considered moving further down in California’s Central Valley to cities like Vallejo for more open areas to field test and build its aircraft, he said.

But San Diego seemed to be a better fit with its access to open land and proximity to the ocean. Natilus relocated to the city in 2021.

Natilus is developing remote-piloted aircraft that can transport more cargo with no emissions. The startup has three prototypes in the pipeline but is first focusing on its smallest short-haul aircraft, the Kona, which will have an 85-foot wingspan and can transport payloads of 3.8 tons. Matyushev said the Kona is about 24 months away from a test flight in San Diego. Natilus’ other two aircraft in development are the Alisio, a domestic vehicle that will transport 60 tons of goods, and the Nordes, a transcontinental aircraft able to carry 100 tons of freight.

The startup also utilizes some of the city’s existing aviation infrastructure, like the world-class wind tunnel facility at nearby San Diego International Airport. And the startup has a 12,000 square feet manufacturing facility and an office at Brown Field Municipal Airport close by, where it plans to build its aircraft.

Being in San Diego means Natilus and other defense startups benefit from the talent pipeline from big defense companies with a major city presence. General Atomics calls the city home, and other companies that are prime defense contractors with the US government, like Northrop Grumman, RTX, and Lockheed Martin, have large presences in the city.

That pipeline continues to feed into the San Diego tech ecosystem, feeding and driving the aerial innovation it has become known for over a century.

“San Diego has always been doing this,” Jensen said. “It’s going to continue to be doing this.”