Tucson startups are driving innovation, but primes are scaling it | News

The Pima County Fairgrounds are best known for barrel racing, spinning carnival rides and International Hot Rod Association events. But if all goes according to plan, the area may soon boast another high-speed attraction: hypersonic missiles.

California-based Castelion Corp., which recently raised $100 million in funding, is actively seeking a location for its plant. And Arizona officials believe the Tucson area, with its legacy military installations, vast training ranges and, of course, famously clear skies — good not only for astronomical observatories but also for missile guidance platforms that rely on low light pollution and minimal atmospheric interference — would be the perfect home for this startup founded by former SpaceX engineers.

In March, U.S. Sen. Mark Kelly sent a letter to Castelion’s leadership team encouraging them to consider Arizona in their site selection process.

“Arizona is a national hub for the aerospace and defense industry, and Arizona’s economic development community has demonstrated success working with manufacturers to facilitate greenfield expansions,” Kelly wrote. The senator highlighted the state’s six major military installations, the presence of defense giants like Raytheon and Northrop Grumman, and a workforce pipeline strengthened by major university and private-sector partnerships.

Natalia Cárdenas, deputy communications director for the senator’s office, said Kelly’s mail correspondence course has worked before. “He’s long encouraged different companies to consider expanding operations in the state using a variety of tools — including sending letters — as a part of his work to keep growing Arizona’s economy,” she said. As a result, Cárdenas said Kelly helped lure private-sector companies in high-tech manufacturing, aerospace and defense and clean energy technologies to the region.

It just may do the trick again. As of mid-June, Castelion was said to be eyeing a 290-acre county-owned site adjacent to the Pima County Fairgrounds.

From the presence of military heavyweights like Raytheon Missiles & Defense and Davis-Monthan Air Force Base to a fast-growing startup scene pushing battlefield-ready innovations, the defense ecosystem in Tucson and its surrounding communities is in a moment of transformation.

“Workforce challenges are still there. I think that might just be omnipresent,” said Robert Medler, chair of the Southern Arizona Defense Alliance (SADA), a nonprofit dedicated to protecting and expanding the region’s defense assets. “But there’s also a lot of energy right now, especially from smaller firms trying to get into DOD contracting. I’ve had more phone calls about that in the last three or four months than I’ve had in the last 10 years.”

That flurry of activity at the small business level reflects a broader shift in how defense innovation is happening. Rather than relying solely on traditional military contractors, the U.S. Department of Defense is increasingly tapping into agile, startup-driven technologies. That approach has put Tucson’s defense scene on a new trajectory.

Lynndy Smith, president of the Arizona Defense & Industry Coalition (AZDIC), is on the front lines of that transformation. In addition to leading AZDIC, she serves as the only American on the supervisory board of Ukraine’s state-owned defense enterprise, Ukroboronprom (also known as UDI). Her work has focused on connecting Arizona-based startups with Ukrainian defense needs in real time.

“Our priority remains helping to grow the defense industrial base within the borders of Ukraine,” said Smith, who travels frequently between Arizona and Eastern Europe. “But much of that development starts here. Most of the companies I bring to the table for consideration stem from conversations I’m having in Arizona.”

Smith has helped connect Ukrainian officials with Tucson-based startups like Dragoon Technologies, which is exploring defense applications in drone armor and was recently selected by the DOD to develop unmanned aerial systems (UAS). In all cases, the goal is to test, iterate and possibly co-produce new systems directly on the ground in Ukraine.

While startups are earning attention, Southern Arizona’s long-standing military assets remain foundational. Davis-Monthan Air Force Base, the 162nd Fighter Wing of the Arizona Air National Guard, Fort Huachuca and Yuma Proving Ground continue to offer unmatched training and testing grounds.

“We continue to have the best training and testing environment in the nation, year-round,” Medler said. “From the flying and the ranges to the electronic ranges in Sierra Vista, it’s unrivaled.”

Medler also pointed to recent positive developments at Davis-Monthan, which is undergoing a mission transition with support from the Pentagon and local advocates like DM50, a nonprofit, volunteer service organization that helps fund initiatives at the base. “That transition seems to be going well,” he said. “It’ll be a few years of construction and then back up to the same number of airmen stationed there — and potentially more.”

Still, not everything is frictionless. As Medler and Smith both noted, the region faces challenges common across the defense sector: workforce shortages, supply chain vulnerability and difficulty accessing capital.

“We’re doing better, but it takes time to ramp up,” said Smith. “The demand from companies is still so big that I don’t think we’ve quite caught up.”

Smith pointed out a shortage of mid-career technical talent, particularly in engineering expertise. However, she credited institutions such as the University of Arizona, Arizona State University, and Grand Canyon University for their increasing investment in STEM education.

Medler echoed the concern: “You’ve got to continue to be an environment people want to live in. You can have the greatest tax structure, but if a company can’t get their employees to want to move somewhere, that’s a problem.”

Smith believes the strength of Southern Arizona lies in its flexibility and its ability to quickly test, scale, and produce new ideas. This strength is gaining recognition, especially in Eastern Europe.

“At the beginning of the war, a lot of drones were donated (to Ukraine), but there was no one on the ground to revise the drone technology in real time,” she explained. “Within a month, many of them were inoperable. You need to have a presence on the ground. That’s why co-production and collaboration matter.”

And in many ways, what begins in Ukraine could have a ripple effect on Southern Arizona’s growth. Companies that prove their tech in the most demanding conditions are better positioned for DOD adoption.

“There’s a push and pull between the prime companies and startups,” said Smith. “But increasingly, we’re seeing those partnerships work — startups bringing niche innovations, and primes helping scale them.”

As Southern Arizona’s defense footprint evolves, its importance on the national and international stage is growing. From the deserts of Yuma to the labs of Tucson, innovation is meeting necessity.

“We still have excellent military missions here,” Medler said. “And we continue to build on that foundation with new technology, new companies and new global relationships.”

If there’s a unifying theme in this moment, it’s acceleration: of collaboration, of innovation and of opportunity. And Medler feels Southern Arizona is well positioned to lead.

“We’ve got strong bases that are all looking to expand their missions and their processes of getting things done,” he said. “And we continue to have the best training and testing environment in the nation.”