99%的无人机公司都会倒闭：为什么 Anduril 的产品不是伦理问题｜Matthew Steckman

You basically can't have a defense company if you don't have a large U.S. business. The government thinks that we can deliver some pretty major stuff now and in the future.

There are very few drone programs that would create a material enough amount of revenue to actually create a real business.

There are lots of VC companies I would love to buy if I had an unlimited checkbook. Is there ever an ethical question of, “Do we agree with sending thousands of missiles to Ukraine?”

Matt, I am so excited for this, dude. I just got off a chat with Christian Garrett and Matt Grim, and they gave me incredibly tough questions. So this is going to be a grueling hour for you. But thank you for joining me, dude.

Yeah, thanks for having me. It’s really great to be here.

I actually want to start with Trey, weirdly, because Christian Garrett said that I had to ask this. He said, “What was Trey like at Georgetown, and what is it about the Anduril founding team that has made Anduril so successful?”

1. What Do Most Defense Founders Get Completely Wrong?

Yeah. Trae and I were classmates. We met freshman year and played ultimate frisbee together on the team, so we went on a lot of road trips with one another. I don’t think Trae has changed at all. Have you ever seen the movie Hot Tub Time Machine?

Yeah.

Yeah, great movie.

Yeah.

There’s a line in it that’s like, “Every group of friends has an asshole, but Trae is our asshole.” You know what I’m saying?

Yeah. That’s Trey in a nutshell. And he’s gone on to such things. It’s crazy how that works. There’s hope for you. Do you know, I’ve never had such a weird start to a show: “Trae is our asshole.” He’ll love that one. Yeah.

In terms of the team itself, I have so many defense companies pitch me, and I think, bluntly, the team is always lacking. What do you think it is about the Anduril founding team that has made it so successful?

Well, first, there’s kind of some magic in the fact that it’s the same leadership team today as it was when we started the company. That implies a whole lot of things. I think mainly it’s that we’re all friends, so I think that’s actually pretty critical. There’s a bond there that basically can’t be separated by business, stress, or life. We all know each other really well.

But then, on top of that, we all come at the industry from really different backgrounds and lenses. Especially in defense, everything works against you to get into the defense market. It’s like every headwind you could possibly imagine. If you don’t have a lot of perspective and knowledge about what’s about to come, it’s hard to think around corners, and you get yourself kind of mixed up and gummed up a lot.

For founding teams, one of the most important things in defense is that some of them can be outsiders—brilliant technologists and thinkers. It does take a lot of inside knowledge. I think one of the things we got right, and keep getting right, is that blend of the outside-inside process: who can think differently and bring in a sort of commercial perspective, a high-tech perspective, add kind of entropy into the system, and then who can really deeply represent our customers—how they think. How does that come together uniquely? That becomes super important to having any success in the defense world.

I think one of the things I most look for, honestly, is GTM experience and ability in a team that I’m looking at in defense. How should we think about analyzing teams for their ability to actually sell and go through procurement? Does it matter if you’ve got technologists and people with military and combat experience, but no one with GTM experience? How important is that?

I know procurement better than fucking anyone. It’s multidisciplinary, right? The challenge becomes, in defense, that if you’re missing any of the 12 different types of disciplines it takes to really capture a large program, you will fail.

One of the things that we’ve done over the years is build up a pretty sophisticated apparatus to round out these teams with all of the various skills in acquisition, budgeting, and technology. Then, again, mission and operational analysis internally—how these types of technologies will integrate into the military. You have to have it all.

I think the one interesting piece here is that there aren’t actually a lot of big programs in government. In a traditional hiring process, you would look for someone who has demonstrated the ability to capture a large program in the past. But since there are so few of these things, you can’t really look for that. Sometimes you luck into it, and great, you should certainly hire people who have shown they’re able to capture large programs. Generally, you don’t actually have that in the hiring pool, so what you ultimately have to do is piece together the right puzzle for everything that you’re going after.

Does it matter if the founding team doesn’t have that experience in terms of going through procurement and GTM?

I think it does. I advise a lot of companies, and if I notice the founding team, at least a portion of it or a person on it, hasn’t kind of been there and done that, the first thing I recommend is that they have to find someone who represents that missing piece of the puzzle on their team.

When you look at the defense companies that you meet today—again, I’m an investor, dude—we have so many different European drone companies. I honestly don’t get it at all. They come with some other thing, and I’m just like, “Matt Grim, please tell me if this is good.” I really do ask Matt about it. It’s very funny. He sees everything in Europe because of me and tells me that it’s fucking shit.

When you look at them, what is the most common red flag that you see when you look at the emerging class of defense companies trying to be, as awful as it sounds, the next Anduril?

I think it’s basically 2 things. The first is not realizing that what they’re doing already exists. There’s too much hubris, I think, in the technology market that, as high-tech people, we can do everything better than everybody else. That causes some companies to think they have an idea that isn’t actually an idea because it already exists. That’s pretty common.

I’ll give you an example. Years and years ago, I was looking at a pitch—or, I forgot, maybe I was advising someone—and they said, “Here’s my idea.” I said, “Well, the thing you don’t know is, in the 1960s, we invented that.”

There’s a hubris to thinking the technology sector has all the answers when, actually, since the ’50s, we’ve had the most brilliant people in the world working on these problems, and a heck of a lot already exists. This is sort of the point: if you don’t actually have the inside knowledge, you don’t know what mistakes you’re making. So that’s one.

The second, which will be more familiar to you, is addressable market. I think there’s, in many cases, an overestimation of addressable market where what they’re ultimately going after is a very small sliver of a problem. That might materialize in a single large contract, but a single large contract is not an enduring business.

2. Can You Build a Billion-Dollar Defense Company Without the US?

This is one of the big challenges that I face when we see a company that is in France saying, “We’re selling to the French military.”

Dude, I don’t know how to say it without upsetting everyone these days. I just get used to it. The French military spends less than I do on Chanel for my mother. I mean, it’s fuck all.

My point is, can you be a European next-gen prime, or do you have to be selling to the U.S. as well? How do you think about that?

Yeah, you basically can’t have a defense company if you don’t have a large U.S. business, right? Fifty percent of defense spending is in the U.S., and 50% is in the rest of the world. If you are cutting off half of your market from the get-go, that’s probably a big problem.

The challenge in Europe is that it’s not like there’s a European Union in defense spending, right? Each country has its own sovereign companies and its own sovereign agenda. You keep getting winnowed and winnowed and winnowed, and you’re like, “Oh, well, Europe is my market.” Well, if you’re a French company, it kind of isn’t, right? France is your market.

3. Anduril's $20BN Army Contract Broken Down

You have to be really careful around how you’re actually analyzing who your ultimate customers can be.

You mentioned that 50% of that spend is in the U.S. You guys signed a $20 billion contract. It’s pretty incredible. It made me feel thoroughly irrelevant when I look at my companies going from $1 to $4 million in ARR for an HR software company, and the whole team’s like, “Ah, bugger.”

My question to you is, what’s actually entailed in the $20 billion? Was it an accumulation of all the little contracts brought together? Because it’s a big headline number, but I didn’t actually get it, and I don’t think a lot of people did.

Yeah. So let’s actually define it, because the stuff I saw posted about it was all over the place.

It was like a rainbow of interpretations.

So think about this as a credit card limit. The government has said they can spend up to $20 billion on a class of Anduril's commercial technology. There's no obligated money, but it basically creates a process that reduces a ton of friction that you would ordinarily see in defense procurement, where each individual office would have to go through financing, contracting, and evaluation. All of these repeatable things now only have to happen once. And they just did.

Maybe “fast track” is probably the wrong word. It's more like, in the arduous process to actually get something contracted, we've cut a lot of the first steps out. There's still a lot of hard work. We've just made it slightly easier for the government to access all of our gear.

Well, when they say “dependent on delivery,” what does delivery mean?

They will obligate the dollars as the products, which are hardware and software, actually materialize. So delivery is revenue to us, right? In our world, when I deliver something, I recognize the revenue. Same thing in government: when we deliver something, the actual procurement orders and dollars flow.

Again, I'm so sorry for being dumb or naive. I'm a venture capitalist for a living. You should be used to us by now. Is this replacing prime spending? Is this net additional? How should we think about this? And is this just the sign that Anduril is now another prime?

It basically means that we have enough business with the federal government to justify putting together what is a fairly sophisticated contracting vehicle. So the short version of it is, yes, the government thinks that we can deliver some pretty major stuff now and in the future. It took a lot of work by a lot of people on the government side to actually make this thing happen. They are not going to do that unless they think that it's worth it.

What do they spend with a Lockheed or a Northrop, for comparison?

So Lockheed, I think, is in the $100 billion revenue-a-year range. I think we'll do a couple billion in revenue this year. So we're still small in the grand scheme of things.

When you look at the software and the hardware element, how do you guys sit internally? Are you a hardware company? Are you a software company? Are you a services company? There are a lot of ways to look at it.

So I think one of the things we've done, maybe uniquely, is we've given our customers a lot of ways to access our company. What I mean by that is we've been very creative. A customer wants a piece of software, but it's difficult in government to contract for software, and so we can wrap it in a hardware appliance, right? Or they want a piece of hardware, but they know the software is the sophisticated piece of it, and so they're willing to pay more for it because of that sophistication.

In government, you get these weird things where money is—it's called the color of money. So money is obligated to certain types of spend. Maybe a customer only has money that they can spend on services. Well, okay, can I do an as-a-service product?

Actually, one of our first major contracts was with U.S. Special Forces for all of their counter-UAS systems. That started as an as-a-service contract where they weren't buying hardware and they weren't buying software. They were literally buying a service that obligated us to defend certain sites from certain types of threats. As long as we were meeting the KPIs on the contract, we were fulfilling the obligations of the agreement.

4. Why Government Contracts Are Brutal (And Why Most Fail)

Quite novel. That contract has since gone in a lot of different directions, and we do a lot of different things on it, not just that. But we have been kind of dogged in our approach to this—basically realizing that the more ways we give our customers to get at us, the better it's going to go.

What's the hardest thing about working with the government when you look at the structures that you have to contort yourself in to get a deal done? What's the hardest thing? I've interviewed Cheyam, who I presume you worked with from your Palanteer days.

Yeah, I worked for Sean for a really long time. He's a good friend of mine. There's a lot of answers to this question, but maybe from my lens, it is how few and far between the large wins are and how hard it is in between those periods of time.

5. How Does Anduril Predict Wars Before They Happen?

So if you look at our business, this year we'll do a couple billion in revenue. We'll do 600 separate contracts this year. Only 20 of those are probably of material revenue size. I think the hardest thing is what happens in between the 20 and what you're doing to position yourself for the 21st. Because it's so concentrated, every single one of those deals is considered risk to the business, right, if it goes right, if it goes wrong.

So why specifically is it hard in between? Is that morale? Is that revenue predictability? What is it that's hard in between?

The government can sometimes tell you where they want you to go, but oftentimes they don't. A lot of this is trying to predict an unpredictable system, right?

So how many lenses can you look at in terms of the next couple of years?

I can look at it through what the government is saying, through their rhetoric and through their budgeting. I can look at it through a warfighting lens and what general officers are saying and what military theorists are saying. I can look at it through a technology lens: what technologies do I think are going to influence the battlefield in the future? I need to blend all of that together today to make decisions on what I want to build that will be available 5 to 7 years from now.

No one is saying today, “This is what I need 5 to 7 years from now.” It's all sort of an educated guessing game over time.

What did you not do that, with the benefit of hindsight, you wish you had done, and what did you learn?

There have been a couple of areas that have kind of emerged where maybe we were a bit slow, and we would have accelerated. I'll give you an example. There's a huge movement, not just in the U.S. but in NATO and the rest of the allies, into offensive cyber warfare. You're seeing this now becoming public for the first time, which is really interesting.

To date, this has been one of the spookiest of all spooky things, right? Something that just no one ever talks about. And now you're literally seeing public officials talking about it for the first time. We should have moved into that 7 years ago and been the first in it. We weren't big enough probably to really even understand it 7 years ago, but in hindsight, it was kind of obvious.

We'll probably try and play some catch-up here and get into the game. But there are a couple of examples like that where you see these things thematically in hindsight, and you're like, “Obviously, 5 years ago I should have done it,” right? And you only realize that today.

What is the fear with offensive cyber when we look at the worst-case scenario, just so I understand it?

6. Why Cyber Warfare Is the Most Dangerous Battlefield No One Understands

Well, it's a lot of things. It's both: what are our adversaries doing, and do we understand it? Are they asymmetrically influencing battlefield tactics? And the answer is yes, they are.

Sorry, can I just stop again before I get lost in your next statement? What does it mean, asymmetrically influencing battlefield tactics?

Yep. So one way to think about this is just cost: for a very low cost, they can create an effect that has major implications for us, NATO, and our allies. That's asymmetric. Often people refer to terrorism as an asymmetric tactic, right?

But this would be like a $10,000 drone that hits, say, $1 million?

Drone warfare is an asymmetric battlefield tactic. Exactly. In cyber, being not only asymmetric, you'll often hear the term “non-kinetic” associated with it. So I'm asymmetric, as in I'm cheaper and more nimble and I can get a large effect, but I'm also non-kinetic.

And why is that so dangerous? Well, when something explodes, we react to it, and we react to it with the full force of the military. When things are simmering beneath the surface in a Cold War-ish type of a way, it actually becomes really hard to react.

In cyber warfare in particular, if assets are affected that we care about, can we do attribution? Do we know where it came from? How do we respond? Do you respond with a non-kinetic attack by going kinetic? Is that an escalation of force? How is that perceived by the global community? Right? So you get into all of these really challenging doctrinal positions because of just how unexplored offensive cyber is.

And then on the flip side, right, it's like, do we have the ability to amass cyber effects on our own? Because what you would want to do is you would want to do tit for tat. You wouldn't want to do, for the most part, a set of escalatory decisions. You would want to match force with force. Do we have the ability to amass the same kind of force non-kinetically?

Right? So all of these are super important questions that, in my opinion, to date have not been debated publicly and absolutely need to be.

Can I ask you what cyber assets we care about versus not care about? What do we care about protecting, or what do we care about affecting?

Both, actually. Protecting, right? Probably the main one is the list of critical industries. The military is included on that list, but think about infrastructure, think about power, think about energy, think about all these things, right?

Okay, so it's like a foreign adversary impacting energy supplies in large cities or water supplies, or—

For sure.

Healthcare data or financial systems, I guess?

Yep. But even now, on the battlefield, it's a foreign adversary impacting our military systems such that we can either not mount an offense or we can not successfully defend ourselves.

Okay, got you. Those are the cyber assets that matter on the defense side. On the kind of offense side—

Yeah.

Do we think the same in terms of proactive action?

7. Why Defense Startups Must Go Wide

Everything that they would do, we would do too. Yeah, exactly. That's the way to think about it.

Is there any part of you that's thinking, “Northrop or Lockheed have a $100 billion spend. With the greatest of respect, we have a $20 billion spend. We're nowhere in offensive cyber. Fuck it. Let's not try and catch up. Let's progress.” I mean it in the nicest way. You can laugh at me, and maybe I'm going to get killed for this, but I don't really care. Let's just accelerate where we're doing great.

Why bother catching up when you're 7 years old? Let's talk about our strategy as a whole. When we started the company, we knew we had to go really wide, really quickly, right? To the point of what other defense companies or newer founders get wrong, it's that addressable-market question.

In every technology class in defense, there's probably 1, sometimes 2, actual programs that, if you capture them, you have a business, and if you don't, you have no business. Take small drones as an example. There are very few drone programs for small drones that would create a material enough amount of revenue to actually create a real business, right? You're basically shooting the moon. You have to create a monopoly. We knew that.

What we did was create a bunch of fundamental technologies that are applicable to a lot of different types of problems. If you read about us, this is called Lattis in a lot of our published literature. It's fundamental technology that allows you to consume data, make sense of it, and then manipulate robots. That's what it is. Those technologies apply to tons of different things.

We have 20 different P&Ls at the company, all going after different parts of the defense apparatus. They take a lot of these fundamental technologies that we build and piece them together in different ways.

Just so I understand, it's kind of like a horizontal, foundational technology that you then verticalize and specialize?

Lattis is a software platform. Exactly. I can talk about software platforms with you. It's hard to actually talk about software platforms with a lot of people because, if you don't actually understand what we're talking about, it gets a bit weird.

Lattis is basically just a software platform that we can branch from, and it's led us into all of these interesting places. As a really crazy example, the first product we built was a sensing tower that allowed us to automatically, through a bunch of computer-vision technologies—and this was, by the way, pre-cool AI. This was old-school CV AI in 2017—spot threats at a distance, automatically, without a person having to look at a screen.

There are pieces of that technology resident in our autonomous jet fighter today. Not all of it—there have been a lot of advancements since then—but there are code blocks that are shared in common between all of our pieces of technology. That becomes pretty magical when you approach whatever the next problem is because you've already got pieces of it solved.

That gives us a head start, allows us to get to market at a usually reduced cost, usually on a better schedule, and hit all of the performance characteristics that our customers care about. So, back to the actual question on cyber: Why go after it? We kind of have to go wide, and we have to believe that we have parts of the problem already solved with the platform in order to even approach a market. We wouldn't get into a market if we didn't think we already had applicable technology or a technology tailwind, but where we do, we're definitely going to go after it.

What you said was fascinating to me. You basically said you have to assume a monopoly market if you want to build a big enough company for drones. Why the fuck are there so many drone companies, then?

Yeah. I don't know. I've seen so many—30 or 40 in Europe, just European ones.

8. How Anduril Decides Where to Deploy $100M+ Product Bets

There will be 1 that wins, right? It's going to be really hard to pick it, I think, is the problem. But there will definitely be 1 winner. I think the challenge for investors is figuring out which one it is.

So we should invest in offensive cyber and defensive cyber. How do we think next, then? Your CEO, your president—are you like, “Great, we should put $1 billion against it and build that out as a separate business unit”? No. Please tell me where I'm wrong, too. What's the subsequent thought to that?

The way that we do this is, when we have a new idea, we basically start a really small tiger team that we generally piece together from various parts of the business. We match our own internal motivation and spend our own IRAD to what the market is whispering to us.

In government, what this generally looks like is that you piece together some technology really, really quickly so that you have a demonstrator, or at least a dart to throw. Then you start to pulse the market and see how close that dart throw was to what the customer actually cares about and how they think about the problem. Do you modify it? Were you totally off, and you just need to scrap it and start over again?

I think in government, uniquely, you know you have something when the customer's excitement starts to match your own, and all of a sudden you're walking down a path together as opposed to this weird vendor-customer relationship. That's always how we identify that we're onto something.

I would say all of these things can be characterized by a singular champion on the other side of the table who gets it, believes in it, and wants to shepherd it. You mentioned Sham; he talks a lot about this kind of heroism. It actually comes down to a single person in government a lot of the time. It's the same experience for us.

If you do it right, it tracks similarly. The first year is low-dollar spend, but there's a lot of learning. You sort of jump from pad to pad. This is what I mean by the 600 contracts in between the 20 that matter. You're basically jumping from contract to contract, trying to figure out: Do I have it right? Is the customer excited? Are they telling me things? Do we keep going? Do we keep spending? Ultimately, the thing you're trying to jump at is something very large.

How do you know when you have something really special and when you should concentrate capital? Again, I think the best founding teams are the best resource allocators. When do you unleash the funding tap and open it up, versus constrain and move from little lily pad to lily pad?

There are a lot of ways to look at our business, but one way I think you hit on it is that we've been very good at allocating capital. We basically guess right most of the time. If you do this correctly, you have enough data to develop conviction and open the tap.

In the beginning, we were working in areas where, if we made a mistake, we weren't too far into the spend. If we pulled back, it wasn't a disaster for the company. I think a lot of the stuff we're building now is quite sizable and expensive, and so you're looking for certain proof points along the way.

That can be formal feedback from a customer. It can be informal. It can be successful-operator feedback. It can be successful engagements with the legislative branch. Remember, in the U.S., your funder is Congress, right? They have a say in all of this.

What it actually is is all of those things pieced together. We run basically an investment committee internally, where these tiger teams ultimately have to present: Here's what we did, here's what we discovered, here's what we want to do next, here are the gates, and here's what it'll cost.

Very similarly to how most financial institutions do it, the investment committee says, “Go.” I think maybe uniquely, when we say “go,” we have the ability to do it faster and at a higher level of spend than most of our peers, which is a huge advantage. When we actually develop conviction in something, we pretty much believe we can get there faster than everybody else because of it.

If we think about it as an investment committee, we're speaking a language that I know now. Which tiger team was the most successful bet, and which was the least successful bet?

The most surprising cases to the upside right now are in our missiles portfolio. We started our missiles business a couple of years ago. If you read about us, the best example is what we call the Barracuda family of systems. It's basically a set of cruise-missile systems—different sizes, different shapes, things like that.

We got into the missiles business looking mainly at the actual military-warfare lens. There was clearly a gap in capability. We clearly believed that we could be ahead of everybody else if we had already developed it and, when the customer asked for it, we would have it. That turned out to be quite prescient.

I don't know if you've seen, but there's a war going on with Iran.

I have seen. Yes.

Yeah. So it's like, okay, we got into this market years ago with a certain set of theses, and geopolitics has now dramatically changed what those theses are—to the upside.

When you say it’s changed them, do you mean it’s confirmed them?

It’s confirmed them, but it’s confirmed them in such a way where it feels wholly different. I think the original theory was: we have to get low cost, we have to get more ubiquitous, and we have to have a mix of exquisite systems and mass.

All of these major theories of warfare are converging at the same time. We have to be able to build something that takes advantage of commercial supply and commercial manufacturing techniques, as opposed to aerospace and defense supply and techniques. It’s this crazy crystallization of a lot of things at the same time.

And now, okay, there’s a war in Iran. We fire a lot of our arsenal. There’s public reporting that a large percentage of our offensive and defensive missile systems have been expended, and they’re really hard to replace. They take a really long time and they’re very expensive because they take advantage of parts of the market that are strange, very specific, and very exquisite.

Just to give you an example, the cruise missile we build—the actual airframe is built like you build a bathtub. We can take advantage of tons of contract manufacturers in the United States that can actually build a bathtub, right? Thinking through the design differently from the very beginning has led us to build something that we can just turn on.

Another way to think about it is that you can handle elasticity of demand for the first time. That’s not really a thing that’s ever existed in the missiles business, where you have a fairly labor-intensive process to increase or, frankly, sometimes decrease demand. I think we’re onto something in that we’ve built a first-of-its-kind system that can handle the ebb and flow of geopolitics and warfare. We can turn lines on and off, and we can scale up and down based on the number of contract manufacturers that we engage.

What do margins look like for these types of products? What is good?

As a business, we run 40%+ gross margin across the board, which, by the way, in hardware and defense is quite good. Every product lives along a spectrum, as you can imagine.

The best way to think about this is that things that you make more of, like missiles, where you’re selling thousands and thousands, tend to have a little bit lower gross margin. Things that you make less of tend to get a decent price for.

Sorry, I’m naive. Why is that? I thought the more you produce, the better the margin, because you have bulk materials and bulk buying. How does that work?

It mostly comes down to customer expectations for what these things should cost over time, and then your ability to gain back margin through cost savings in the long run. Yes, you can close a firm-fixed-price contract. It doesn’t necessarily mean that you can fix that cost forever. Again, it’s just another weird aspect of government business.

9. Should Builders Control How Their Weapons Are Used?

Can I ask you a weird one? Matt did say I could ask it. Is there ever an ethical question of, “Do we agree with sending thousands of missiles to Iran?” I’m not saying right or wrong, but is there ever an ethical question of how your products are used?

If you work in defense and start a defense company, your moral compass tends to be pretty clear on this question. We have a democratically elected set of governments that represent the US, the alliance, NATO, and all of the countries participating. They set the rules, and we abide by those rules.

If you start to mess around with anything within that framework, you create a pretty dramatic set of slippery slopes that, if you play the actual thought experiment to its end, end up in a pretty messy situation. The key here is that people who live in the world that I live in tend to think a little bit differently than a person not connected to the national security community on this front.

We tend to think a bit more long term as well. I’m building missile systems that might only field in 2035, right? If you fundamentally lack trust in democratic institutions, this is not the game and this is not the business for you.

As weird as it sounds, and as horrible as it sounds, is war not great for business?

I think that’s the wrong view. If you look at things that span multiple decades, which is probably the right horizon to think through, everything kind of nets out. You’ll have spikes in conflict, but as an example, there are many companies that are profiting off the war in Ukraine.

I would posit that, for the most part, if those companies are myopically focused on that conflict, they will not have a business coming out the other end. You have to be very careful around over-rotating on the problems of today, because it can really mess up your strategic thinking.

Do you think you took advantage enough of the opportunity in Ukraine?

We were still a baby company when the conflict started. Just as a reminder, we were zero people in 2017 when we started the company, and we’re about 8,000 people today. We were quite small—a couple hundred people—when the war in Ukraine started.

This is lived experience for me and my colleagues: you go to war with what you have. That saying is very true. You do not invent new stuff along the way. You take what you have, see if it works, and then adjust.

We had some stuff in Ukraine, but we were just too small. If you play that forward to today, we’re heavy participants in the current conflict in the Middle East, mainly on the defensive side. We build some pretty sophisticated air defense systems that are widely deployed. It’s a wholly different experience because we’re a wholly different company.

Are your drones used in Iran?

I can’t speak to specific weapon systems used in specific situations. We are, for the most part, a defensive company in the Middle East. We are defending against incoming threats.

If you’ve read about the Shahed drone, we’re one of the principal systems used to defend against that threat in the Middle East. Other than that, it’s hard to get into specifics.

I would hate for you to reveal some inherent military secrets on 20VC. You look pretty good at talking around these things when you do this work.

I know that’s not in my interests either.

Please don’t. I’m really comfortable with my nice life.

10. What Would Anduril Buy If They Had an Unlimited Checkbook?

Can I ask you, if I gave you an unlimited checkbook, what would you spend on that you’re not spending on today?

I think there are some venture-capital-backed defense companies that are making some really awesome technology, and they are entirely unaffordable to us today.

And when you say they’re unaffordable, you mean they won’t sell at an appetizing price to you, given the amount of money that they’ve raised?

Correct. Their valuations are just too high for us to justify the buy. We’ve bought, I think, almost a dozen companies, maybe more, but for the most part, they’ve been more traditional-style defense companies, with what you would command in the commercial market for that type of company.

There are lots of VC companies I would love to buy if I had an unlimited checkbook, but right now, the multiples are so high that they put them out of reach for us.

This was going to be one of my questions: is there a universe of buyers for the massive VC-funded companies that have been generated in the last few years, and what happens to them?

Actually, Trey—I will always remember when he said this—said, “Never be surprised around how long a company can continue to exist.” I think we were sitting around a table saying, “It’s going to come to the point where the multiples will decrease and all this stuff.”

Trey’s point was—and Trey has this annoying tendency to mostly be right; I don’t know if you know that about him—that we don’t know, but it might be a while before we can actually buy these companies.

I don’t know. There’s still a lot of investment in defense tech, and multiples are still very high. I actually think our multiple is quite low compared to most of them.

Why would you say your multiple is low?

Because it is.

Hit me.

I think we’re, like, what, 10 or 14x forward, something like that. But you’re seeing deals at 20x, 30x, 40x forward.

My dear friend, you’re seeing deals a lot more than that. You’re sorely mistaken on that one.

Great. It’s even worse.

20, 30, 40. Why don’t you times that up by 5, dude? I see, like, 200. Who would you most like to buy? But calm.

Man, no, that’s a tough one for me to answer. I would probably either compliment or offend people that I don’t want to compliment or offend, but I’ll give you the classes of technology.

I’m super interested in the space domain. There are a couple of companies that are doing some absolutely fascinating things, both ground segment and on-orbit. There are a couple of companies flying fast.

Why is ground segment and on-orbit interesting?

There’s this interesting thing happening in the space domain where you’ve got the legacy primes on the military side that have these very large contracts, but they perform traditionally, right? It’s going to be very high performance, but it’ll come at a cost and it’ll probably take a while to get there, right?

Then you have SpaceX, which is just dominating on the commercial side, and when their commercial tech applies, they do a bunch of government business as well.

There’s a weird kind of gap in between those two types of companies where the government wants to move really fast, but it’s not necessarily commercially adjacent to what SpaceX is doing. And so there’s a kind of dearth of providers, and it’s certainly something that we want to run at right now. We do a bunch of partnerships, we build a bunch of our own stuff, and we integrate a bunch of really interesting technologies, but it’s a huge open hole in the market that is something we’d definitely run at.

So, we have that as one. Any other categories where you’re like, “That’s prime for the taking. I wish we had more money for that”?

Most of the rest are uninteresting. It’s just consolidating around where we’re already winning.

Do you respect Helsing as a competitor?

I respect everybody as a competitor. I think the worst thing you can do in this business—as I mentioned at the start of the conversation—is hubris. The second you start to think you’re better than everybody else, you’re going to get knocked on your ass. I think, in particular, on our leadership team, hopefully people would agree, I provide a check against the hubris. You have to respect everybody.

You do. You’re unusually humble for the Anduril founding team. Honestly, dude, I love Grimm, but I wouldn’t say he’s super humble.

Yeah, I don’t think I would say that either.

I know Palmer—great dude. I wouldn’t say he’s super humble either.

It takes all types.

It takes all types. And you’re so thoughtful and kind. You’re nice.

Never forget: I am an international arms dealer, so just keep that in the back of your mind.

There we go. It’s like the Nicolas Cage movie. Have you seen this movie?

Yeah, yeah. That’s amazing.

But, okay, I will push back on you, dude. Anduril is one of the hottest companies in a world where capital concentrates toward the few outcomes that are interesting. You could raise—I mean, you don’t need to comment on the fundraise, but it’s reportedly raising $4 billion, $5 billion, or $6 billion, whatever it is, at $60 billion. The amount of SPVs for Anduril—Matt Grimm tweets about it all the time. I see it: you could raise another $1 billion or $2 billion at some crazy price and go and buy these companies. Why don’t you?

It’s not the company we want to run. We want to create an enduring public company, and so we’re running it like that. We’re running it like that right now, even though we’re pre-public.

Protecting the valuation is important. Not getting over our skis is important. The work is still hard, and we will get knocked back if we make a mistake. We don’t have the luxury of making mistakes. A lot of our competitors—the really big ones—if they make a mistake, they get paid to fix it. I think if we make a mistake, we lose money and we lose contracts.

So, there is a bit of conservatism on the team, but I think it’s warranted in terms of the market and overall. We want to be a company in 2050 and 2060, and we’re already thinking like that.

I totally understand. But what I don’t understand is why you would want to go public. We see companies like Stripe that are able to never go public, be brilliant businesses, and avoid the glare of public markets very efficiently. Why would you want to go public?

There’s a pedigree to it in the work that we do. Ultimately, if you are a part of the national security apparatus in the United States, I wouldn’t say it’s an expectation, and no one would ever say it out loud, but when you are a public company, there is an additional level of trust afforded to you that you don’t have when you’re a private company.

Do you want to go public in 2026?

Still a couple of years out, but we’re close. We’re in the window.

It’s in the sniff zone. It’s like, close enough.

Yeah, we’re already spending an insane amount of money trying to do all the internal systems work and all that kind of stuff.

What do you not have ready yet that needs to be ready to be public?

I mentioned that we have 20 products, and only about a quarter of those are in any kind of rate production and throwing money back to the business. Everything else is in low-rate production or development, meaning they’re losing money. It’s kind of your standard product J-curve. We need more of those 20 core products to come up the curve, throw money back to the business, and then trigger the public event.

What does that J-curve look like from a duration standpoint? Is it months? Is it years? And how long do you put up with a losing product before you shoot it?

In defense, typically, in a traditional product curve, it’s 7 to 10 years. We’re doing it in 3 to 5, which is part of the magic of the company and the thing we’ve become known for with our customers: you’re effectively halving the traditional path to rate production. Roadrunner is a good example. Roadrunner was, I think, 24 months from a back-of-the-napkin drawing to a fielded system.

How much goes in during those 3 to 5 years?

So much. It’s a crazy amount of money.

But just from my naive brain, is it $100 million or $500 million?

Roadrunner is a moderately sized air-defense kinetic-intercept system, and you’re over $100 million easily before you’re generating revenue.

And you have 20 of these separate products?

Yeah. So, it’s a lot of investment, right? You really have to believe that they’re going to come up the curve.

And then, to your other question about when you kill a product, we whack it before we even like it. The better way to think about it is: don’t even enter the curve if you don’t have faith that it’s going to come through the other end. We kill a lot of developmental products well before they ever get into high spend, because once you get into that curve, you’re $10 million, $20 million, $50 million, or $100 million-plus in.

We spoke about what you did not do when you set up Anduril, and about the cyber work that we discussed earlier. What did you do that you shouldn’t have done, and what did you learn from that?

Very early on, we got into some technology that we weren’t ready for. We got into some markets that we weren’t ready for. We tried early on to build a pretty sophisticated aerial system, but we didn’t have the core building blocks and we didn’t have the core team. We were $20 million or $40 million in before we realized that it was a scrap.

We didn’t have the sophistication with the customer. We didn’t know how the customer was going to buy a vehicle of that sophistication. The crazy part about all of this is: given all of that, and given that it was clearly not a good business decision by most metrics, do we even get to build the autonomous jet fighter if we had never made that mistake?

It’s hard to replay history perfectly. I don’t think so. I think part of that failure was a stepping stone to getting to success. We probably spent too much money on it and could have gotten out quicker, but I think we had to learn that lesson in order to reapproach the aviation market in a new way, which has obviously been quite successful for us in recent history. If you look at a lot of these failed things that we’ve done, it’s hard to separate that from what came after it.

Final one before we do a quick fire. I always think about the question of the biggest challenges in life. It sounds so corny, but not iron or gold—unmade decisions. I never made the decision to move to Silicon Valley, and everyone always reminds me that it will be the decision that haunts my career. Is there an unmade decision that ever haunts you?

No, but I’m kind of weird that way. I have trouble separating indecision and failed decisions from the current success that we’re actually seeing as a company. I just do.

People talk a lot about these overblown ideas around, “You have to learn from failure and fail fast.” Yes, all that’s true. Most people suck at actually doing that, and for me, I deeply learn from indecision and from bad decisions. But it doesn’t haunt me, and I’m not going to kill myself over it. I’m going to move on and make the next best decision.

11. Quick-Fire Round: The Future of War, VC Mistakes & Career Advice

Dude, I want to do a quick fire with you. I’ll say a short statement, and you give me your immediate thoughts. Does that sound okay? What’s one belief you have about modern warfare that most people think is insane?

I think a lot of my beliefs, and our beliefs that we started the company on, are now becoming a bit more commonplace. When we started the company, maybe we were a bit out on a limb with the idea that we could replace every single mission that the current set of technology provides us with an autonomous system. I believe that is true in the long run.

I also believe that we’re not even close to where a lot of people think we are on it. I think we’re still in the early days on tons of this technology. But as time goes to infinity, absolutely every single mission can be replaced with this new way of thinking. In 2017, when we started the company, not only was that not widely held, but it was a headwind for us. I think that’s changed pretty dramatically.

What do VCs fund in defense that you think will most go to shit? What are you like, “Oh, it’s really companies where there is only one large program to capture”?

That’s fundamentally what it is. In defense, you have to be wide by the very nature of how acquisitions occur. I think anything is a risk where it’s like, “Nope, there’s kind of one program, and if you don’t win it, you’re not a good company.”

When you think about your kids, what do you tell your kids—or kids graduating college—about the world when it comes to career advice, knowing and seeing all that you do?

Yeah, I mostly say a couple of things. I think it’s about the community that you surround yourself with. That’s a reflection on my own personal story. Everything that I’ve done in my career has been the community of people around me who have helped me, gotten me jobs, and afforded me responsibility. It’s not like some big machine or process. It’s really just the people you surround yourself with. I like to think I made some pretty good choices early on that helped.

The other piece would be that I think people tend to overthink a lot of their steps and don’t appreciate how much you can just learn along the way. I talk to a lot of military folks who are transitioning out into the commercial world, and for the most part, they hem and haw over what company they should go to. My main advice is that I actually think you just need to start, and you’re actually a really smart person. If you don’t like it, you can leave. If you like it, you got lucky.

You should talk to a lot of companies. You should pick, and you should change your mind when you need to. I think oftentimes there’s a hesitance to change your mind, right? I don’t think that’s actually true. It doesn’t need to be true.

Final one for you, and this is the most unfair of all, and it will get you most in trouble. When you look at the founding team, in a hypothetical world, in 10 years’ time you start another company, but you can only take 1 of them with you as your co-founder.

Which one and why?

I can’t take them all.

I can’t. It’s a trick question, because there’s no way that I’m starting another company after Anduril. I don’t know if you know this, but starting companies is really tiring.

No, I’m a venture capitalist. We know it’s tiring. We’re much wiser than you.

I’m just going to retire to the countryside and live with my family, and I’m going to do that.

Dude, you’ve got to choose 1.

Yeah, I’m not choosing. Don’t make me choose. I live in Washington, DC. I’m very good at not answering questions. Maybe it’s Bobic, just because the contrast of his baldness and my hair would make us a pretty formidable duo.

Do you think Palmer’s brand is helpful?

I do, unequivocally. In defense, anything highly regulated, every single thing is a headwind, right? The main thing you do to cut through a headwind is try to establish trust relationships with people who matter. I think Palmer is an N of 1 when it comes to establishing trust relationships with people who matter.

I’ve loved this. This is so not how I thought it would be, to be totally honest. It was so nice. It was so fun. I learned. I totally didn’t do anything that I thought I would, but thank you. This reminds me why I love doing what I do.

This was great. Honestly, it was great to meet you. I do listen to the pod—most episodes. I love listening to it, so thanks for having me on. It was cool.