Van Espahbodi, a veteran of the aerospace and defense industry, launched the investment firm Generational Partners after selling his stake in the startup accelerator Starburst Aerospace. Since its first investment in January 2023, the firm has backed 14 companies focused on industrial infrastructure, manufacturing, energy, and water desalination.
Espahbodi notes that the current investment landscape is seeing an influx of software-focused venture capitalists moving into hardware and defense technology. He warns that this trend is often driven by a fear of missing out, leading some investors to enter sectors they do not fully understand, sometimes at high valuations for early-stage companies.
The firm’s investment strategy centers on companies that combine creative software talent with commoditized hardware to address significant market demand. An example is Vital Lyfe, a portfolio company that uses a digital approach to mass-produce water desalination devices, which has already secured contracts with the Defense Health Agency and U.S. Special Operations Command.
Espahbodi highlights that Southern California, particularly El Segundo, remains a primary hub for mechanical engineering talent and aerospace innovation. He emphasizes that while Washington, D.C. is influential, major purchasing decisions for the military often originate from the Space Systems Command located at the Los Angeles Air Force Base.
The lines between venture capital and private equity are blurring as startups raise large rounds to build capital for acquisitions. Espahbodi suggests that the most successful companies are those that prioritize commercial business models while remaining mission-aware, rather than relying solely on government contracts.
