The seed fund has been vital to many local tech startups. Gambit received $3.3 million from the program early on and was hoping to get another $5 million of the Small Business Administration money, which is allocated by the military.<\/p>\n
![\"Workers](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2026\/01\/1768824011_781_.jpeg\")
<\/p>\n
Workers at K2 Space in Torrance, where the startup is building high-capacity satellites for Medium Earth Orbit. (K2 Space)<\/p>\n
(K2 Space)<\/p>\n
\u201cThat funding really helps companies like ours that are putting tech into warfighters\u2019 hands,\u201d Giegel said. \u201cLosing that money becomes more leg work to find other sources.\u201d<\/p>\n
Gambit\u2019s predicament is widely shared across Southern California, which has experienced a proliferation of tech startups<\/a> launched by SpaceX alumni and other entrepreneurs with the support of SBA money.<\/p>\n In 2024, 124 contracts worth $173 million were awarded to 71 California companies through SpaceWERX<\/a>, an El Segundo-based arm of the Space Force that distributes SBA funding to innovative defense startups. <\/p>\n The money also is disbursed by other branches of the military and departments of the government, which do not take stakes in the companies. Gambit received funds through the Air Force.<\/p>\n Other local recipients of SBA funding include Costa Mesa autonomous weapons maker Anduril Industries<\/a>, now valued at more than $30 billion; and satellite platform manufacturers K2 Space<\/a> in Torrance and Apex Space<\/a> in Los Angeles.<\/p>\n The funds are allocated in phases, with initial feasibility awards up to about $300,000 and as much as $2 million for the development of prototypes. A maximum of $15 million is available through a companion SBA-funded program if the companies can bring in other funding. <\/p>\n \u201cI don\u2019t know if I can name a single company that I work with, or that I know of, that did not start with SBIR\u201d funding, said Maggie Gray, a partner at Silicon Valley venture capital firm Shield Capital<\/a>, which invested in Apex. \u201cWe see SBIR as a crucial part of the defense-tech ecosystem. It\u2019s kind of the way to get your initial foot in the door with the government.\u201d<\/p>\n Established in 1982, the SBA program provides more than $4 billion to government departments, with the military receiving the lion\u2019s share. But SBA funding ran out on Sept. 30 as lawmakers clashed over proposed reforms.<\/p>\n Sen. Joni Ernst (R-Iowa), who chairs the Senate Committee on Small Business and Entrepreneurship, introduced a bill that would set a $75-million lifetime cap on funds for individual companies and establish performance benchmarks. The bill also would beef up due diligence to prevent new technology falling into the hands of foreign adversaries and end diversity, equity and inclusion preferences in funds distribution.<\/p>\n The legislation, however, has faced stiff opposition from Massachusetts Sen. Ed Markey, the ranking Democrat on the committee, who contends the reforms go overboard and would crimp innovation. A bipartisan House bill that would have reauthorized SBA funding for a year failed in the Senate amid opposition by Ernst, who is leaving Congress in a year.<\/p>\n While negotiations have restarted on Capitol Hill, there is no guarantee SBA financing will be restored, though the military and other government agencies could fund startups through their own budgets. <\/p>\n The SpaceWERX program, which has played a critical role in Southern California\u2019s resurgent space economy, was established in 2020, just one year after the Space Force was founded.<\/p>\n Director Arthur Grijalva said the program distributes several hundred million dollars in SBA funding annually across the nation and has not had an issue with foreign influence or companies receiving repeat awards without much to show for it. <\/p>\n \u201cEven though it might be small [funding] for a really big company, it\u2019s really impactful for these small companies, these startups, where if they don\u2019t have this funding, they might have to do layoffs, they might have to go into debt, or they might ultimately not be successful,\u201d Grijalva said.<\/p>\n Since September, $94 million in larger contracts has been held up for more than 25 companies, which follow funding for feasibility studies and prototypes, according to SpaceWERX.<\/p>\n The impasse comes at an inopportune time for the Trump administration, which has been overhauling weapons procurement.<\/p>\n Secretary of Defense Pete Hegseth announced in November<\/a> a policy to speed up weapons development by first finding capabilities in the commercial market before the government attempts to develop new systems. Last week he visited several L.A.-area defense companies, including Torrance startup Castelion<\/a>, a manufacture of hypersonic missiles that received SBIR funding.<\/p>\n