When former Space
His software would allow unmanned tanks and swarms of armed drones to communicate and adapt in real time – without human intervention.
The company now employs more than a dozen people and has contracts with the military that tests its software. But its growth has been clouded by a funding dispute on Capitol Hill over… Small business innovation research The SBIR program, which provides companies with seed capital to develop new technology that can help the government. Funding for it and related programs ended in September.
Seed funding has been vital for many local technology startups. Gambit received $3.3 million from the program early on, and was hoping to get another $5 million from Small Business Administration funds, which were allocated by the Army.
Workers at K2 Space in Torrance, where the startup is building high-capacity satellites for medium Earth orbit. (K2 area)
(K2 area)
“This funding really helps companies like ours that are putting technology in the hands of warfighters,” Geigel said. “Losing that money becomes hard work to find other sources.”
Gambit’s predicament is widely shared across Southern California, which has seen a proliferation of tech startups launched by SpaceX graduates and other entrepreneurs backed by SBA money.
In 2024, 124 contracts worth $173 million were awarded to 71 California companies spaceworksan arm of the El Segundo-based Space Force that distributes SBA funding to innovative defense startups.
The money is also disbursed by other branches of the military and government departments, which do not have stakes in the companies. The exercise received funds through the Air Force.
Other local recipients of SBA funding include a Costa Mesa independent gun manufacturer Anduril IndustriesWhich is now worth more than $30 billion; and satellite platform manufacturers K2 space In Torrance and Apex space In Los Angeles.
The funds are being allocated in phases, with initial feasibility awards of about $300,000 and up to $2 million for prototype development. A maximum of $15 million is available through a companion SBA-funded program if companies can bring in other financing.
“I don’t know if I can name a single company that I work with, or know about, that didn’t start with SBIR funding,” said Maggie Gray, a partner at a Silicon Valley venture capital firm. Shield CapitalWhich invested in Apex. “We see SBIR as an important part of the defense technology ecosystem. It’s kind of a way to get your first foot in the door with the government.”
The SBA program, established in 1982, provides more than $4 billion to government departments, with the military receiving the lion’s share. But the SBA ran out of funding on September 30, as lawmakers disagreed over proposed reforms.
Sen. Joni Ernst (R-Iowa), who chairs the Senate Committee on Small Business and Entrepreneurship, has introduced a bill that would place a $75 million cap on individual business funds and set performance standards. The bill would also strengthen due diligence to prevent new technology from falling into the hands of foreign adversaries and end diversity, equity and inclusion preferences in the distribution of funds.
However, the legislation has faced stiff opposition from Massachusetts Sen. Ed Markey, the ranking Democrat on the committee, who argues that the reforms go too far and would stifle innovation. A bipartisan House bill that would have reauthorized SBA funding for a year failed in the Senate amid opposition from Ernst, who will leave Congress within a year.
While negotiations have resumed on Capitol Hill, there is no guarantee that Small Business Administration funding will be restored, although the military and other government agencies can fund startups through their own budgets.
The SpaceWERX program, which has played a critical role in Southern California’s resurgent space economy, was created in 2020, just one year after the Space Force was founded.
The program distributes hundreds of millions of dollars in SBA funding annually across the country and has never had a problem with foreign influence or companies receiving frequent awards without much to show for it, said Director Arthur Grijalva.
“Although it may be small [funding] “For a really big company, it really impacts these small businesses, these startups, where if they don’t have that financing, they may have to lay off workers, or they may have to go into debt, or they may not be successful in the end,” Grijalva said.
Since September, larger contracts worth $94 million have been deferred to more than 25 companies, which are pursuing funding for feasibility studies and prototypes, according to SpaceWERX.
The impasse comes at an inopportune time for the Trump administration, which has been working to reform arms purchases.
Defense Minister Pete Hegseth Announced in November A policy to accelerate weapons development by first finding capabilities in the commercial market before the government attempts to develop new systems. Last week he visited several defense companies in the Los Angeles area, including… Torrance startup castilliona hypersonic missile manufacturer that received SBIR funding.
Kirsten Bartok Tu, Managing Partner of New Vista CapitalAmazon, which invested in Castillion, agreed that the program may have flaws, but said it played an invaluable role in attracting venture capital to companies that had attracted funding.
“This is an important signal to the market, which is saying: ‘You have to invest in more of this technology, because this is the technology we want and need,’” she said.
A This month’s report The National Academies of Sciences, Engineering, and Medicine found that one dollar of funding distributed by the military attracts more than four dollars of venture capital or other third-party investment.
Markey’s office said last week that it had submitted a proposal to Ernst that includes making the SBIR program permanent, increasing allocations, a performance measure, foreign due diligence standards, and fellowships for disadvantaged small businesses, among other provisions.
“This law [his] “A second attempt to break the deadlock and restart these important programs to ensure America’s smartest allies — small businesses — aren’t destroyed,” a Markey spokesperson said.
An Ernst spokesman said last week that the senator “remains focused on ensuring that taxpayer investments in research and development do not benefit China and actually deliver cutting-edge technology to our warfighters.”
Geigel said that while he is optimistic that future SBA funding may come for Gambit, he is not counting on it. He now assumes he will have to look for other sources of money to grow the company, which has already attracted undisclosed venture capital.
“We are trying to find operational relevance faster,” he said.