Defense Tech Veteran Warns VCs Against “Tourists And FOMO” As SpaceX Alumni Draw Investor Interest

Van Espahbodi, general partner at Generational Partners, tells Crunchbase News that software investors are increasingly looking toward hardware, defense and industrial technology. He says AI is changing the narrative around hardware by improving digital augmentation, performance and the ability to attack legacy industries with new business models. The shift is also tied to investor concern that AI may weaken traditional software moats, even as Espahbodi cautions that some firms are entering the sector without deep experience.

Espahbodi traces part of the current momentum to SpaceX alumni moving into physical industries beyond space. He says that trend helped push him beyond Starburst Aerospace and into Generational Partners, which invests across industrial infrastructure, manufacturing, energy and water desalination. The firm made its first investment in January 2023 and has backed 14 companies since then, according to the article.

Espahbodi argues that hardware does not always have to be capital-intensive, especially when founders combine software talent with commoditized hardware and clear customer demand. He points to examples involving water desalination, maritime automation and smart factories to show how digital-first teams can rework physical infrastructure. His core test is not whether a company is “hardware” or “software,” but whether it can reengineer a business model to unlock customer value.

Espahbodi says limited partners are pressuring venture firms to participate in the wave of companies founded by SpaceX, Palantir and Anduril alumni. He describes the result as “tourists and FOMO,” with some investors struggling to distinguish durable opportunities from hype. His takeaway for founders and investors is to stay commercially focused but mission-aware, while recognizing that talent, customers and ecosystem depth matter in physical industries.