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Indiana University strengthens tomorrow's workforce with practical real world experience. IU grads make a difference in your community, serving as teachers, nurses and engineers who rise to tomorrow's challenges and meet them. Learn more at iu.edu impact,
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Bloomberg Audio Studios Podcasts Radio News.
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C
I've been looking forward to this a lot. You and I talk often, yes, but it's always, it's always pretty fast and honest specific piece of news. But you are the, the executive chair of Andrew and then you have this complete even split with being one of the the 12 investing partners at Founders Fund and we probably get to talk about the Founders Fund part a little bit less, I'd say. So we'll try and do an even split with this. You're a busy guy. You know, I think the stated intention of our conversation was to, to probably talk about defense technology in the current context of the war in Iran to start with there and explaining the basics of what Anduril is. What role has Anduril played to date in that conflict or not? And what is the current role of Anduril as part of the defense apparatus of this nation? I think that's a big question for you to kick us off with. I'll sit back and you take it away.
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B
Thank you. That's really meaty. Yeah. So when we started AnRule nine years ago, almost exactly, actually June 6, 2017, so we're coming up on nine years. The idea was that, you know, we had this, we have this defense ecosystem that's dominated by a handful, five or six large defense companies that have been, you know, kind of a consolidation of the entire defense industry that existed during the Cold war. And the capabilities that we have are really incredible. I mean we have these amazing, exquisite defense systems like you know, four class aircraft carriers and joint, the Joint strike fighter, the F35, the Patriot missile. These platforms take decades to develop build and hundreds and hundreds of billions of dollars just to sustain. So for example, like a Patriot missile, which was initially developed in 1969, this is like kind of the creme de la creme of interceptors for counter air capabilities. You know, this is like a, it's a 70 year old system at this point. Every missile costs millions of dollars, literally like between two and a quarter to $5 million per unit basis. Per unit basis. And these were built to shoot down Mig 29s. You know, when you're shooting at an airplane that costs tens of millions of dollars, you can afford to shoot a $3 million missile to do that. This is not the nature of threats as they exist today. And so Anduril, when we came on the scene, our goal was to figure out ways that we can introduce software autonomy on the production side of the house as well as on the kill chain, the tactical side of the house, to massively reduce the cost of engaging with a modern threat profile. And so when you look at something like the war in Iran, most of the threats that we're seeing are low flying cruise missiles or shaheds, which is sort of like a loitering munition. These are, you know, generally pretty slow, but they're, you know, mobile, dynamically controlled. You don't want to shoot a $3 million cruise missile at a $200,000 weapon. The economic trade off is bad. And so, you know, we originally started working entirely in kind of the surveillance reconnaissance space. And now the kind of plurality of a lot of our work is actually related to air defense, Lowering the cost of engaging with threats that are incoming to not only the United States, but also our allies and partners in the regions around the world where these threats are most present.
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C
That's an interesting point on not just the United States, because there are deployments of an technology in the Gulf. As an example, you yourself, you know, you have been and will go very soon to the Middle East. How does that work in practice? Being an American company that serves the US Military and the, the, the Department of Defense, but also allies, you know, you must spend a lot of time meeting with the defense apparatus and governments of other nations, right?
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B
Yeah, I would say it's like one of the most common questions we get on ethics. These are important questions from new employees, younger people that are talking about joining. They'll lean forward very dramatically and say, how do you make decisions about where we sell our capabilities? And I'm like, well, it turns out there's this whole thing called foreign military sales that actually the United States government decides where our things get sold. So those are very clear rules. It's not like I'm making a decision about like, oh, I really think we shouldn't sell to this country. It's like, yeah, the government has already kind of pre decided that that's the case. But yes, you know, it is important for US Foreign policy in a bipartisan way. Not, it's, this is not a partisan issue. In a bipartisan way is an important, it's important for US Foreign policy to provide capabilities to our allies to make sure that they are fully integrated into our joint operations, which is really important, but also that they have the capabilities to defend themselves. Utilizing US Production that may or may not exist in many of these countries. Like they don't. You know, our allies, many of them are not going to fund and build a fifth generation fighter plane on their own, nor are they going to develop really complex multimillion dollar counter air missile systems. And so this is a role that we play in the ecosystem is to go out and say, you know, to two countries like Ukraine or like, you know, the United Arab Emirates or Saudi Arabia or Qatar, hey, the United States has the capability. We want you to have that capability as well. And this is how we're thinking about the cost curve for deploying these capabilities and kind of the layered approach that you can take to reducing the cost per intercept or whatever it is. Now the tricky thing about all this is that there's a big difference between being a startup that is designing and developing a capability which is great and there's a lot of really interesting efforts that are happening there, and being a producer of those capabilities. And this has really been the name of the game for Anduril over the last few years, is transitioning out of just being a really innovative technology company and focusing almost all of our effort on how do we produce at scale in a way that allows us to not only supply the US customer, which is our primary customer, but also be supportive of that foreign policy mission and supplying those same capabilities abroad. So this is really about manufacturing and production more than almost any that takes us to Ohio.
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C
Right. So In January of 2025, you guys phoned me and said, come to Ohio. This is where our next facility will be. Arsenal one. Remind me there's a reason there's a one next to it. We should get to that in a second. But fast forward, present day, production is underway. You built that, that place incredibly quickly. What is it doing? Why Ohio? I think why, why did you settle on that state and that specific location?
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B
Yeah, I mean again, transitioning from a startup where you're hiring a bunch of very well compensated, you know, software engineers and things like that to build things to a world where, where producing with a very different type of labor force, a very different type of skill set that's required. We recognized that we needed to go to a place where we were going to have the ability to scale our footprint, literally that there was going to be enough workforce, skilled labor that had manufacturing experience to fill out that footprint. And in a place that we felt like we could get the on the ground support from the local government, from, from the economic development organizations to do this as rapidly as we Possibly could
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C
you know Ohio well as well?
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I know Ohio well. It didn't help. I want to be clear, I'm from Ohio originally. When we narrowed it down to our last three locations, I sort of recused myself from the process because I'm like, man, if we pick Ohio, everyone's going to think I put my thumb on the scale. And then at the launch event that you were at, Governor DeWine got up and he said, first off, I'd like to thank Trey's mom. I was like, oh, man, you're blowing the whole narrative here. But yeah, I think Ohio is this incredible place for manufacturing, you know, has a long, long history in manufacturing. Just in my family alone, between my uncles and my grandparents, grandfathers, we have worked at Ford, General Motors, Frigidaire, National Cash Register, Luxor, Exotica. I mean, there's a tremendous history of manufacturing. But much of that evaporated. You know, we had a sort of a bipartisan policy around globalization for decades. And it's really easy from sitting on the coast, whether you're in New York or San Francisco, to kind of forget about what happened in the middle of the country during that 20, 30 year run starting in the early 90s. But every single one of those companies that I just mentioned no longer has factories in Ohio. And there's a lot of people that have been fighting for their lives to find employment. And some of that's coming back now. I think DeWine's administration has done a great job of incentivizing companies like Enduro to come in to build new factory campuses. So it's kind of like, kind of catching back up. There's some wind in the sails. And, you know, we're really excited for what we're going to be able to do there.
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C
You know, Anduril has had growth in lots of different ways, right? The valuation that you've, you've grown the company to, but also the footprint. We're short on time. So I want to just address the arsenal one thing. It indicates that there is going to be an Arsenal 2 and an Arsenal 3. Is that in the United States or is it time now where Anderil says, okay, well, if we are serving Western allies, we should maybe manufacture locally to where our technology is deployed.
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I think it's both, actually. You know, Arsenal 1 is primarily going to be focused on production of Fury, which is our collaborative combat aircraft. Aircraft, basically an autonomous fighter plane. Initial units will be rolling off the line this summer, so that production is already underway in the first 800,000 square feet that we have up and running. We later this year we're going to start doing Barracuda, which is our low cost cruise missile, and Roadrunner, which is our reusable interceptor missile. Both of those will start coming out of Arsenal 1 in Ohio as well. But you know, there are other factories that are going to come online. Some of those are domestic shipyards that, that we're building out. There could be additional production facilities in the United States. Right now we have 16 production facilities across the United States, which some of those are being consolidated back into that Ohio footprint. But to your point, internationally, you know, we are. The United States is not the only country that has a national prosperity agenda. Obviously all of these countries want to, want to see increased investment in their local economy. And so we feel very aligned in making sure that as we go in and we do some of these larger deals to bring those capabilities to bear with our allies and partners. We want to build that local production piece to feed back into their economic growth as well.
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C
Final one on Android. Probably spent more time on Android than I expected. But a lot of people that know Andrew, they know Palmer. Lucky, you know, you're the executive chair, Palmer is cto, a co founder, there are other co founders and then Brian is the CEO. And I mean this with massive respect, but I guess Brian, until quite recently got less of the limelight. How does it work between the three of you and Matt and others that are running the company? How do you divide responsibility and decisions?
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Yeah, you know, Andrew, because of the way that we approach our business, we have many business lines, we have dozens of SKUs, different products that we sell, and almost every single one of those is a scaled startup in its own right. And so there's no way that this company could be run with a kind of a very light or thin executive team. We focused really intentionally on building as deep of a bench as we can. And that has been honestly the most important asset to the company since the very beginning. So across the four co founders, we've kind of divided the world up into pieces and we each have different chunks of accountability. You know, Palmer is incredibly talented at what Palmer does. You know, the Palmer show. As many people who have interacted with Palmer know, Brian is naturally more introverted, but he is the boss, like he is the chief executive officer. His say is the final say and it is actually required really. Palmer and I pushing him out the door a little bit to say, look, you need to be out engaging. Because his natural tendency as an engineer, he's the most brilliant software engineer I'VE ever worked with in my career. His, his, you know, personal preference would be I just want to sit back and work with the, that run the product lines. But I think it's really important to get him out there. And you know Matt Grimm, our other co founder who's the CEO, he runs the entire operational side of the business and you know that that is an incredibly hard job. There's no way I would want to do that. But I think having those really clear swim lanes is really important.
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C
You trades are this fascinating job of evenly splitting your time between Andrew and being one of the investing partners that Founders Fund a much better job than I've done. I've done three quarters of this on Andrew. But in the time we have left, what is that like for you at being one of the investing partners at Founders Fund and just straight away in a firm that's preparing to be one of the, the big beneficiaries of an IPO of Space X?
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B
Yeah, you know, I think there's all sorts of different ways you can approach venture capital. I think for some people they really want to focus on kind of growth and doing diligence. There's other people that are pure intuition that are just like, you know, measuring founders to, to make early, early stage bets. The kind of strategic slice that I found that works best for me given my own personality is I'm an operator at my core. Like I'm much more comfortable working at a startup than I am working at an investment firm. But that's actually a really interesting lens into the startup market because I have exposure every day to what, what software are we using that works? What are the strategic challenges that we're encountering as it pertains to the rise of AI? Like these are questions that I'm dealing with on a company level. And so when I have the ability to interact with other startups, I think I have the ability to kind of identify areas where wow, that would actually be really helpful. Or I've seen three or four other things that approach this in a way that I, that I think is better. So you know, everyone has their own set of advantages. I feel like doing both in parallel has has been a great asset both to Founders Fund and to Andrew.
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C
Is there a Founders Fund Space X thesis that in aggregate across long the all the investing partners you hold or is there a trade thesis that you apply?
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B
I mean we all have very different opinions on every portfolio company. We are a very debate driven culture. I think Space X is kind of a unique encapsulation and A microcosm of the way that Founders Fund works. Because we invested very early, like around
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flight to, okay, 2008.
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It was way before my time, like six or seven years before I joined the first fund. And at that time, obviously it would have been crazy to think about, like, you know, the Starlink as a part of the business. And even when we made the, you know, the Starlink era bets in Space X, it would have been very difficult to imagine how AI would have impacted, you know, data centers in space and all these other things that are going on. And so now, you know, you look at Space X and you're thinking like, wow, like, what is Elon and is in the team working on pertaining to, like getting humanity to being a Kardashian type 2 civilization? These weren't the questions that we were asking when we made the original investment where it was like, can we get a rocket into space? Very different companies that you have to
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C
like refresh in real time. The thesis refreshes. I mean, how much does the venture capital industry need this, this ipo? I think what's interesting about the Founders Fund investment, not just how early it was, but when it continued, it was across several funds. You know, it's a big moment for the LPs as well. You know, how much are they kind of banking on this? And we have been waiting on this.
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Well, yeah, we have, we have Space X investment in almost every fund, both across our venture funds and our growth funds. So there's a ton of exposure for LPs that were with us since the very beginning and even the ones that joined us very recently. I think, you know, the core lesson that everyone has learned from this experience is never bet against Elon. It's just a bad idea. And, you know, I think getting the opportunity for people to see liquidity that they've been hanging to for 18 plus years is a, is a tremendous opportunity to see some of those gains and also reinvest those in, you know, whatever the next Space X is going to be.
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C
Very quickly, the firm has 12 investing partners. Could you just explain how it works with Peter? Peter right now is in Argentina. But like, does the firm do the classic Monday morning meeting thing? Does he zoom in? Are you constantly, the 12 of you talking to each other? I think people, there's still a mystique that.
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Yeah.
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About how it actually works.
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I'll be honest, there's still a mystique. To me, I'm not really sure how it works either. Peter is, he's, you know, an inn of one he is a very interesting personality. His location is. It's like a point of frequent conversation that I don't really understand because he's as accessible as he's always been, regardless of where he is. You know, for anyone that's read his book, Zero to one, you can kind of imagine how that would translate to a venture fund. You know, there are Monday meetings, for example. We don't do Monday meetings. Why don't we do Monday meetings? It's not because we're lazy. It's because when you create a process, a tracking system for how you move something from step one to step two to step three, you end up making relative rather than absolute judgments. So you're like, well, this is the best company I met with this week, so I'm going to bring it to the partnership. And then they say like, well, this is the most interesting company that we as a fund have seen this month. And so by the time it gets to the end of the process, you're like, well, it's made it this far. Maybe we write a small check. And there's just like not a lot of conviction that's built into that. So we have created a ton of friction in the process of getting a deal through because we have no standing meetings. And so if you want an investment to be made, you have to go and wrangle all of the other people that are required to get that deal done. And any one person.
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C
You mean internally with each other?
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Internally with each other. And any one person can basically torpedo a deal. And so you have to go charging in as hard as you can with really high conviction. And what that means is that we make as a fund significantly fewer investments by number, not by dollar amount than any other venture fund of our size. But we're highly, highly concentrated into the bets in the fund. So, you know, call it 40% of every fund is concentrated in just a couple of companies. And I think that really is because we've created an enormous amount of friction. It's just really hard to get anything done.
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