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X6 Ways LA's Defense Industry Soared in the Years Since 9/11
Favot is an award-winning journalist and adjunct instructor at USC's Annenberg School for Communication and Journalism. She previously was an investigative and data reporter at national education news site The 74 and local news site LA School Report. She's also worked at the Los Angeles Daily News. She was a Livingston Award finalist in 2011 and holds a Master's degree in journalism from Boston University and BA from the University of Windsor in Ontario, Canada.
In the decade after the Twin Towers fell on Sept. 11, 2001 and the U.S. invaded Afghanistan, military spending skyrocketed, at one point eating up 20% of government spending.
Although it has since fallen, its legacy can still be felt in Southern California where the military drone was born.
Some of the nation's largest military contractors – Northrop Grumman, Boeing, Lockheed, Raytheon and Aerojet Rocketdyne – all have a large presence in Los Angeles County.
In fiscal year 2020, the United States spent $714 billion on national defense, according to the U.S. Government Accountability Office, a figure that registered as over 10% of total federal spending, according to an analysis by the Peter G. Peterson Foundation.
Many of those dollars poured into Southern California where the defense and aerospace industry have a strong hold. The companies have secured hundreds of millions in military contracts to provide missiles, drones and other technologies to help the U.S. military fight terrorism.
L.A. County has more than 50,000 employed in the aerospace and defense industry, according to the Los Angeles County Economic Development Corporation.
Here are six ways companies in Southern California have benefited from the surge in defense spending:
1. Lockheed Martin acquired El Segundo-based Aerojet Rocketdyne
Aerospace giant Lockheed Martin, which was headquartered in Burbank for decades before moving to Maryland, reached an acquisition deal worth $4.4 billion in December for El Segundo-based Aerojet Rocketdyne. The Federal Trade Commission and the Department of Justice have yet to sign off on the deal.
Aerojet Rocketdyne, known for developing and manufacturing rocket motors for missiles like the Tomahawk, Javelin, Patriot and Stinger, generated $2.1 billion in sales in 2020.
2. Lockheed's Palmdale built NASA's supersonic X-plane
In 2018, Lockheed secured a $247.5 million contract to build NASA a supersonic X-plane, which is being built at Lockheed's Palmdale facility Skunk Works. In 2020, the Palmdale outpost was awarded a $50 million contract from the U.S. Air Force to upgrade the Dragon Lady, a single-jet engine, high altitude reconnaissance aircraft.
Lockheed, the world's largest defense contractor, had net sales in 2020 of $65.4 billion.
3. Part of Northrop Grumman remains in L.A. County
Northrop Grumman's worldwide headquarters were in Los Angeles until it moved in 2010 to Virginia to be closer to its military customers, but its Aeronautics Systems division is headquartered in Palmdale.
One of the world's largest weapons manufacturers and military technology providers, it brought in $36.8 billion in revenue in 2020 up from $30.1 billion two years before.
From 2000 to 2001, sales increased 78% to $13.6 billion in 2001 when it acquired three companies.
4. Raytheon expands its El Segundo campus
Aerospace giant Raytheon Technologies was formed in 2020 after a merger of United Technologies and Raytheon Co. In July, it secured a $320 million contract for Stinger missile production for the U.S. Army. In 2021, it expects between $63.4 billion to $65.4 billion in sales.
Raytheon's 16-building El Segundo campus, which employs about 6,000 people, develops products that include radar systems, sensors and electronic warfare technologies. Last summer it planned to hire more than 300 workers.
5. Military drones were born in Southern California post-9/11
Simi Valley-based AeroVironment was the beneficiary of contracts to supply the devices to the military and grew into a publicly traded defense contractor and is now one of the world's largest drone manufacturers.
In 2021, AeroVironment expects to generate between $390 million and $410 million in revenue.
The Defense Department will spend about $7.5 billion in 2021 for a variety of robotic platforms and related technologies, including drones.
6. Defense stocks have also surged since 2001
The Intercept found that if you purchased $10,000 of stock before the U.S. invaded Afghanistan divided among top defense contractors, Boeing, Raytheon, Lockheed Martin, Northrop Grumman, and General Dynamics, it would be worth $97,295, outperforming the stock market overall by 58%.
Northrop Grumman's stock alone jumped 1,196.14%.
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Favot is an award-winning journalist and adjunct instructor at USC's Annenberg School for Communication and Journalism. She previously was an investigative and data reporter at national education news site The 74 and local news site LA School Report. She's also worked at the Los Angeles Daily News. She was a Livingston Award finalist in 2011 and holds a Master's degree in journalism from Boston University and BA from the University of Windsor in Ontario, Canada.
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Activision Buys Game Studio Proletariat To Expand ‘World of Warcraft’ Staff
Samson Amore is a reporter for dot.LA. He previously covered technology and entertainment for TheWrap and reported on the SoCal startup scene for the Los Angeles Business Journal. Send tips or pitches to samsonamore@dot.la and find him on Twitter at @Samsonamore. Pronouns: he/him
Activision Blizzard intends to acquire Proletariat, a Boston-based game studio that developed the wizard-themed battle royale game “Spellbreak.”
VentureBeat first reported that the Santa Monica-based publisher was exploring a purchase, noting its ongoing mission to expand the staff working on Blizzard’s hit massively multiplayer online game “World of Warcraft,” which launched in 2004.
Proletariat’s team of roughly 100 people will be merged into Activision’s “World of Warcraft” team to work on its upcoming expansion game. Though there’s no release date as yet for the title, “World of Warcraft: Dragonflight” is expected to debut before the end of this year.
Activision did not immediately return a request for comment. Financial terms of the deal were not available.
This Proletariat deal is Activision's latest push to consolidate its family tree by folding its subsidiary companies in under the Blizzard banner. More than 15 years after it bought out New York-based game developer Vicarious Visions, Activision merged the business into its own last year, ensuring that the studio wouldn’t work on anything but Blizzard titles.
The deal could also have implications for workers at Activision who have looked to unionize. One subsidiary of Activision, Wisconsin-based Raven Software, cast a majority vote to establish its Game Workers Alliance—backed by the nationwide Communications Workers of America union—in May.
Until recently, Activision has remained largely anti-union in the face of its employees organizing—but it could soon not have much of a say in the matter once it finalizes its $69 billion sale to Microsoft, which said publicly it would maintain a “neutral approach” and wouldn’t stand in the way if more employees at Activision expressed interest in unionizing after the deal closes.
Each individual studio under the Activision umbrella would need to have a majority vote in favor of unionizing to join the GWA. Now, Proletariat’s workforce—which, somewhat ironically given its name, isn’t unionized—is another that could make such a decision leading up to the Microsoft deal’s expected closing in 2023.
Samson Amore is a reporter for dot.LA. He previously covered technology and entertainment for TheWrap and reported on the SoCal startup scene for the Los Angeles Business Journal. Send tips or pitches to samsonamore@dot.la and find him on Twitter at @Samsonamore. Pronouns: he/him
Snap Officially Launching ‘Snapchat Plus’ Subscription Tier
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
Snap is officially launching Snapchat Plus, a paid subscription plan on Santa Monica-based social media company’s flagship app.
Snap is now the latest media company to tack a “plus” to the end of its name—announcing Wednesday that the new service will provide users with “exclusive, experimental and pre-release features” for the price of $3.99 a month. The first features available to paying subscribers include the ability to customize the style of app’s icon, pin a “BFF” to the top of their chat history and see which users have rewatched a story, according to The Verge.
The new product arrives after Snap confirmed reports earlier this month that it was testing Snapchat Plus—though the version that it has rolled out does not incorporate the rumored feature that would allow subscribers to view a friend’s whereabouts over the previous 24 hours.
Snapchat Plus will initially be available to users in the U.S., Canada, U.K., France, Germany, Australia, New Zealand, Saudi Arabia and the United Arab Emirates. While certain features will remain exclusive to Plus users, others will eventually be released across Snapchat’s entire user base, Snap senior vice president of product Jacob Andreou told The Verge. (Disclosure: Snap is an investor in dot.LA.)
The subscription tier introduces a new potential revenue stream for Snap, which experienced a “challenging” first quarter marked by disruptions to its core digital advertising market. However, Andreou told The Verge that the product is not expected to be a “material new revenue source” for the company. He also disputed that Snap was responding to its recent economic headwinds, noting that Snap had been exploring a paid offering since 2016.
Despite charging users, Snapchat Plus does not include the option to turn off ads. “Ads are going to be at the core of our business model for the long term,” Andreou said.
Snap is not the first popular social media platform to venture into subscriptions: Both Twitter and Tumblr rolled out paid tiers last year, albeit with mixedresults.Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
Bling Capital’s Kyle Lui On How Small Funds Can Better Support Young Founders
On this episode of the LA Venture podcast, Bling Capital’s Kyle Lui talks about why he moved earlier stage in his investing and how investors can best support founders.
Lui joined his friend—and first angel investor—Ben Ling as a general partner at Bling Capital, which focuses on pre-seed and seed-stage funding rounds. The desire to work in earlier funding stages alongside someone he knew well drew him away from his role as a partner at multi-billion-dollar venture firm DCM, where he was part of the team that invested in Musical.ly, now known as TikTok.
Bling primarily focuses on entrepreneurs looking to raise around $1 million to $3 million who are often early in their careers as founders. Lui said Bling evaluates companies on characteristics that go beyond whether they like the founder or feel that the market looks good. Instead, he said they take a hard look at the available company data, and quickly respond.
“And we send it back to them and say, ‘Okay, this is what's working, what's not working’,” Lui said. “And then create the playbook for them on how to find product market fit and get to like, ‘These are the milestones you actually need to hit’.”
When considering companies, Lui said Bling looks at the founder, the market, the company’s current traction and differentiation while asking the founder the questions they would expect to get at Series A and Series B funding rounds.
“One thing that I really admire about what [Ling’s] built with Bling is the consistency and the processes and playbooks— everything from the way that we evaluate deals to the way that we work with our portfolio companies,” Lui said. “Everything is kind of around playbooks and operationalizing things and also iterating to do those processes better.”
As part of its work to support founders, Bling maintains an extensive product council, which connects tech executives with the founders in Bling’s portfolio. Bling also has created numerous self-serve resources for founders so they can easily tap into the fund’s network and shared knowledge.
“We have a bunch of playbooks that we introduce to companies around how to hire efficiently, how to negotiate with counterparties, how to think about the founding team, business development…We just have these different things that we start to train our entrepreneurs on,” Lui said.
dot.LA Editorial Intern Kristin Snyder contributed to this post.
Click the link above to hear the full episode, and subscribe to LA Venture on Apple Podcasts, Stitcher, Spotify or wherever you get your podcasts.
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