First Breakfast’s Madeline Hart spoke with Kevin Capozzoli, co-founder and CEO of Critical Materials Group. Watch their full conversation and read the profile on his company.
Kingsport, Tennessee would be an unremarkable Appalachian town but for one thing: it’s the home of the Holston Army Ammunition Plant, America’s sole source of certain critical explosives—“energetics” is the industry term—used in nearly every bomb, missile, and artillery shell in the U.S. arsenal. Holston was built from scratch in just 18 months during World War II. This feat feels more impressive—and almost ironic—when you consider that much of our munitions industrial base today is still dependent on this single factory built more than eight decades ago.
The aging Holston is a glaring vulnerability. One industrial accident, like a fire, and America would lose the ability to domestically produce RDX and HMX, two chemical compounds used in most warheads. Worse still, our adversaries have a ripe target for industrial sabotage that could easily be made to look accidental.
The wars in Ukraine and Iran have alerted even casual observers to the manufacturing limitations of America’s most effective weapons. Headlines often focus on production numbers and replacement rates of Patriot and Tomahawk missiles. The energetics bottleneck upstream has received less attention. That’s backwards, because as retired Brigadier General John McGuiness put it in a congressional hearing after Russia invaded Ukraine, “without propellant and explosive, there is nothing else.”
One Texas startup, Critical Materials Group (CMG), is on a mission to commercially manufacture military-grade explosives. CMG just raised a $10 million seed round led by Overmatch Ventures. I spoke with CEO and co-founder Kevin Capozzoli about why a private sector approach is finally viable and what it means for American manufacturing, sovereignty, and prosperity.
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In startup land, where founders are more likely to be 25 years old than have 25 years of experience, Kevin stands out for his humility and maturity. It’s not a false modesty, but rather the reserved affect of someone who accepts he is leading his team on a challenging mission few others would sign up for. His demeanor makes sense when you learn that Kevin spent 25 years in the Army as an infantry officer, with 17 of those years in special operations.
Kevin’s father served in the Army in Vietnam, but Kevin was not an Army brat—he was an Aramco brat. Kevin lived in Saudi Arabia while his father worked for the oil and gas behemoth. It was the 1980s, and young Kevin flew in and out of the Middle East during the Iran-Iraq War, amidst a slew of plane hijackings perpetrated by Palestinian militant groups. War and terrorism were in the air.
Kevin lived outside the bubble of soccer matches and orange slices most American youth are fortunate enough to experience. It made him realize that good ways of life require defending (a perceptive observation for a middle schooler). ROTC and then an Army career were a natural fit.
It was only after Kevin left the service that he learned about the energetics shortage he’d been insulated from while in uniform. Kevin would keep defending America’s interests. But this time, he’d do it as a founder.
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Before we go deeper on CMG, it’s worth taking a step back to answer a basic question. What, specifically, are energetics? At the highest level, they are chemical compounds that store energy and release it rapidly. They fall into three categories.
The first is propellant: things that move things. Propellant burns, and that burn creates thrust. The prime example is the solid rocket motor (SRM), which powers most of the U.S. missile inventory. SRMs have long been a vulnerability in the industrial base. For years, Northrop Grumman and L3Harris enjoyed a duopoly in SRM production, yet capacity remained far below demand. Now new entrants like Anduril, Ursa Major, Castelion, and many others are on the scene. SRM capacity is not a solved problem, but talent and money are pouring into the sector.
The second category is pyrotechnics, which burn slowly to create light and heat effects—think flares and smoke grenades. Pyrotechnics manufacturing is not without vulnerabilities, but the category is a second-tier concern.
The third category—CMG’s focus—is high-energy explosives. These are the chemical compounds that detonate to cause destruction. RDX, HMX, and TNT are the workhorse explosives used in U.S. munitions. Like the physical Holston plant, high-energy explosives are stuck in the 1940s. Research Department Explosive (RDX), while discovered in 1898, did not become mass manufacturable until World War II. It was quickly put to work destroying U-boats. High Melting Explosive (HMX) was discovered soon after as a byproduct of RDX manufacturing. Both RDX and HMX share a similar nitrogen-rich molecular structure, distinct from TNT. That structure gives them a much higher melting point and greater destructive power; RDX and HMX generate roughly 1.7 and 1.9 times the detonation pressure of TNT, respectively.
Since World War II, high-energy explosives research has mostly been a story of stagnation. Although scientists at California’s famed Naval Air Weapons Systems China Lake discovered the eponymous China Lake Compound #20 in the 1980s, the United States did not integrate CL-20 into weapons for largely bureaucratic reasons related to acquisition incentives and risk management. CL-20 is considered the breakthrough explosives formulation of the last fifty years. It has a more energetic molecular structure and is estimated to increase the range of existing weapons by 20 percent. Across the Pacific, China has moved ahead with scaling production of CL-20 while the country that invented it has put it on the shelf.
There are over 300 single points of failure in the supply chain for the munitions industrial base. When Russia invaded Ukraine, America painfully learned what happens when a single point of failure atrophies into a lost capability. The military wanted to surge production of 155mm shells to support Ukraine, but there was a problem: the U.S. no longer produced TNT to fill the shells. America had abandoned domestic production in the 1980s for a familiar mix of cost and environmental reasons, sacrificing sovereignty in the process (and yes, we even became reliant on China as a source for TNT). Today, Poland’s Nitro-Chem is effectively the only Western TNT producer.
The Department of War isn’t blind to these vulnerabilities. In 2024, the Army announced it was bringing back TNT production with a new, contractor-operated facility in Kentucky. The factory will start production in 2029 (In an eyebrow-raising choice, the winning contractor is Repkon USA, the American subsidiary of the Turkish firm Repkon, whose parent company’s equipment was used in the recent 155mm shell production scandal in Mesquite). In July, the Army broke ground on a new ammunition plant in Iowa to replace the state’s World War II-era site. The Army is also standing up a research site in Kentucky to provide an additional site to synthesize RDX and HMX beginning in 2031.
These are critical efforts, but they are years away. Notably, they all focus on extending the government’s empire for energetics—an empire that clearly is insufficient for our military and allies today. While some of today’s ammunition factories are operated by contractors, the sites are owned and financed by the government (an arrangement known as Government Owned, Contractor Operated, or GOCO). The private sector does not take independent bets on energetics—at least, until now.
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I attended an event not long ago with a high-ranking official from the Department of War. Behind closed doors, he expressed frustration that more companies were not interested in the dirty work of energetics manufacturing because it’s perceived as a lower-margin business compared to just about anything else companies could produce for the department. A prominent defense founder and CEO responded that his firm had seriously looked into manufacturing its own energetics, as it would enable better vertical integration of its product. Ultimately, they’d concluded it was a regulatory impossibility to bring a greenfield energetics site online in the United States in 2026.
Neither of these challenges—energetics being historically low margin or the Goliath of the regulatory state—were enough to dissuade CMG from tackling one of the very last defense capabilities that has not been privatized. Far from it. If you ask Kevin, we are in the SpaceX moment for commercially manufactured explosives.
Much like SpaceX proved commercial launch could be a high-performing, profitable alternative to a government-sanctioned monopoly, so Kevin believes privately funded and privately operated commercial factories for energetics make good business and national security sense. Kevin believes CMG can provide capacity and redundancy to mitigate the risks from today’s single points of failure.
Demand for RDX exceeds what Holston alone can supply. Current efforts are focused on increasing America’s production of RDX from eight to 15 million pounds per year. Recent reporting by the WSJ reveals these efforts are delayed by eight years and that production remains at 2017 levels. For reference, during the Vietnam War the U.S. produced 15 million pounds of RDX per month, and during World War II, Holston manufactured over one million pounds of RDX per day. Kevin estimates demand is so great that the market could absorb at least two to three times what the United States currently produces.
CMG’s first product is C-4, a demolition explosive made of RDX and plasticizer. By the end of the year, C-4 will be rolling off the production line at the startup’s first factory in the small town of Ballinger, Texas. (In response to increased demand, the Army recently restarted a C-4 line in Crane, Indiana that’s been mothballed for some 15 years). By 2027, CMG plans to have vertically integrated factories that synthesize the chemical precursors used to produce RDX.
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To understand why a commercial approach to energetics could work, it’s useful to understand what the objections to such an approach have been in the past. An article in the Armed Forces Comptroller authored by a trio of active duty personnel in 2018 spells it out:
“Private firms have no incentive for investing in new infrastructure that would be available past the date of their current contract. GOCO facilities currently have over one billion dollars of deferred maintenance. The health of the munitions infrastructure is a national security imperative that requires more government involvement, not less.”
The reason firms have had no incentive to invest in new infrastructure is that government demand for energetics has been uneven, creating a feast or famine cycle. Work has been low margin not because of factors inherent to the products but because firms are operating government-owned, World War II-era infrastructure.
The Ukraine war and the ongoing conflicts in the Middle East have generated incredible demand for RDX and HMX at home and abroad. Even in the unlikely scenario that world peace emerges tomorrow, the United States and her allies need to rearm and stockpile where necessary. The lesson of the last five years is that industrial power is combat power, which means sustained production is critical to deterrence. There is also real commercial demand for explosives in oil and gas and mining, which further smooths out the demand curve.
Margins have been slim because plants are not tooled for the latest advances in manufacturing and automation. While lack of investment is often blamed on industry, it’s clear that money is only part of the problem. These plants are burdened with accumulated environmental regulations and reviews that dissuade modernization or cost an insane amount to remediate. The government awarded BAE Systems an $8.8 billion contract in 2023 to operate and modernize Holston over the next decade. For example, one of the bottlenecks to expanded production is doubling water throughput capacity from 55 million to 100 million gallons of water per day. Renovations get expensive quick.
But what if you could design a greenfield factory from scratch, one free from decisions made 83 years ago? For Kevin and CMG, deriving the true unit economics from first principles is central to the business case. You may picture explosives manufacturing as immune to technological disruption—a primitive process where workers mix chemicals in vats. In reality, there is an opportunity to transition away from today’s legacy batch processing and toward increased automation.
CMG’s facilities are designed around modular, continuous-flow manufacturing, which has the promise of higher throughput and smaller in-process hazardous inventories. Further, incorporating the latest recycling technologies means environmental limitations don’t have as much leverage over production: less fresh water is required for intake, producing less wastewater on the backend.
CMG’s north star is repeatable, scalable processes because Kevin’s dream is to build CMG factories all over America. Yet another lesson from the last few years of warfare is that traditional assumptions for securing critical infrastructure are broken. The 1940 War Department Site Committee mandated that any ammunition sites be located far enough inland to protect them from naval bombardment or amphibious attacks. That requirement is moot in the age of drone warfare. Ukraine’s Operation Spider’s Web used drones to destroy many of Russia’s long-range bombers, some located as far inland as Siberia. More recently, Ukraine has successfully used drones to target remote Russian oil refineries. Holston increasingly looks like a sitting duck. The solution? Create a distributed network of many factories that will be harder to target, which is CMG’s vision.
There’s one last variable that makes commercial energetics attractive: sovereignty. Today, sovereignty is the watch word, and with good reason. Shipping our supply chain to the cheapest overseas producer has introduced unwanted vulnerabilities and dependencies. A 2020 report on the defense industrial base concluded “A third of DoD’s energetic material is produced overseas, and many materials have direct dependencies on China.” The Department of War is finally attempting to reverse this trend by supporting domestic capabilities. In July, President Trump signed an executive order restricting the use of waivers for defense equipment and materials with components made by adversaries.
Shoring up American sovereignty was a core motivation for Kevin. “I started to dive very, very deep because it was one of those moments where it’s like, man, surely somebody solved this [energetics]. This can’t be this glaring of a strategic vulnerability. And I never found that reassuring, ‘oh, it’s good.’ Like this program that you didn’t know about solves all this.” Hence the creation of CMG.
There are many such cases where founders realize there is no master plan and that if they don’t build, no one else will. In learning about CMG, I’m reminded of the origin story of uranium enrichment startup General Matter. Founders Scott Nolan and Lee Robinson initially assumed the government had a grand plan to enrich uranium. After much investigation, they realized it did not; someone else had to show up, so they did. And it’s easy to forget that were it not for SpaceX, the United States would have been reliant on Russia for crewed launch services to the International Space Station at the outset of the Ukraine war.
Can we afford to rely on Russia to enrich our uranium or China to fill our warheads?
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CMG isn’t the only company pursuing a commercial approach to energetics. Regulus Group, D&M Holding, and Hanwha Defense all have plans for propellant factories in Arkansas. Right now, it doesn’t appear that CMG or these other companies are in real competition with the government. The Department of War is too starved of capacity to turn away any credible producers of energetics. But those conditions could change. If commercial companies successfully produce energetics at higher margins and higher volume than government sites, it will force hard conversations about what responsibilities should remain in the government’s remit.
For decades, the consensus view was that companies would not invest in new infrastructure past the date of their contract. That view proved incorrect. The combination of venture capital and talented founders has produced defense companies that are pouring money into products before they have even a contract in hand. Call it what you will—“venture capital exuberance” or a “defense tech bubble”—but companies have showed up, they’re delivering novel capabilities, and many of them are winning, bigly.
To be fair to the Pentagon, it’s true that many legacy industrial processes have not been attractive private sector investments. But that is due in large part to self-defeating government policies and regulations that are fixable with the right effort. If we can align the profit motive and the national interest, America will achieve outcomes far superior to either force acting independently. CMG is betting on it.