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States frequently rely on non-state armed groups as proxies to achieve foreign policy objectives. While some states support existing armed groups, others invest in the formation of new armed groups to serve as their proxies. On its face, this behavior is puzzling. Why devote resources to the creation of a new armed group when other potential partners already exist? I argue that states engage in this behavior as a solution to principal-agent problems inherent in many sponsor-proxy relationships. Foreign states can help mobilize, organize, recruit, and train individuals to form new armed groups. In so doing, these state sponsors create trustworthy and capable militant organizations to act as "good" agents. Though it is costly to invest in the formation of a new proxy, states do so under certain conditions. I test this argument with a set of paired studies and an original dataset on state involvement in armed group formation between 1990-2019. This work provides evidence that third-party states can play a prominent role in the proliferation of new armed groups in civil war, and, as a result, influence the onset of new conflicts and fragmentation of existing ones.