Palmer Luckey on Anduril’s growth plans, a future IPO and how ChatGPT has impacted AI – Breaking Defense
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Palmer Luckey, founder of Anduril Industries, speaks during the Bloomberg Technology Summit in San Francisco, California, US, on Thursday, June 22, 2023. (David Paul Morris/Bloomberg via Getty Images)
WASHINGTON — For several years, Anduril and its founder Palmer Luckey have made clear the goal: to become one of the prime contractors of the defense world. With the recent acquisition of a solid rocket motor firm and hints at a number of major programs in the works, the company appears poised at an inflection point for growth.
Luckey recently talked with Breaking Defense in a wide-ranging interview about his plans for the firm, whether an initial public offering might be in the works, and the state of defense in Silicon Valley. This interview has been edited lightly for length and clarity.
BREAKING DEFENSE: In the past you’ve talked about the desire to be a prime contractor, and one who is in business across multiple domains. As we sit here today, how do you feel you’re doing to hit that goal?
LUCKEY: The only way that we’re going to get to the scale of a prime that can change the way a lot of things are done is to work across the same domains that a prime has to do. With the exception of some of the more maritime focused primes, there’s not that many companies that say ‘I’m just going to work in this one little area and become a really huge company.’ You have to fight and win across multiple areas.
I think we are positioned super well, and I think that is not apparent from the things that we are publicly talking about across our product line. And that is probably the most frustrating thing for me as an executive and company founder. In the Oculus days, we could choose what we wanted to talk about and when we wanted to talk about it. In the DoD space, the more entangled you get, the less likely you are to be able to talk about what you’re doing on your schedule. Instead, you’re dictated by somebody else. I can’t talk about the specifics, but I can tell you: There are multiple Anduril products that are selling at already larger scale than some of our products that are on our website, we’ve been selling them for well over a year, they’re doing things that are incredibly cool. And I wish that we could talk about them, if only for recruiting purposes, and I’m not able to talk about them for like another three to six months. And it’s driving me crazy. So I feel like we’re actually very well positioned as a company, but many of the things that make that really apparent are just not in the cards to be talked about yet.
You’ve said in the past that an IPO is something you plan on doing. What’s the realistic timeframe that you’re looking at for going public?
Oh, man. Well, “realistic” is tough. A lot of times the timing around an IPO is driven less by what you are doing and more by how the market is doing. You don’t want to IPO in the middle of a market downturn, where you’re gonna get punished, even if you’re doing well as a business. And also, it doesn’t make sense to IPO when private capital is going to be more willing to fund the types of high-risk plays that you’re making than the public markets. Right now, we’ve been building a company that is exactly the right shape to go through the venture capitalist hole. Building a company that goes through the Wall Street analyst hole is different. And we’re doing that, that is a goal, we’re trying to get there. But we’re not a well-shaped company for Wall Street right now.
Wall Street would look at our company and say, this is still a very high-risk venture they have, they’re making these large investments in programs that may or may not pan out. And the only way that works out for Wall Street is if I can bring their confidence level close to my confidence level. I will never get them all the way in there, but I have to get most of the way there so they agree that our financial model makes sense. And so I feel like that’s what we’re going to be doing over the next few years is trying to shape all of these things so it’s the right shape for a Wall Street weenie to tell his boss that we are a safe part of their institutional portfolio.
That doesn’t sound like you’re thinking the next two, three years then, right? You’re looking further out than that.
I’d say two years, definitely not going to happen. I don’t think that’s going to happen three years from now, but three years out is far enough out that it’s hard to say. But like, I’m also not opposed to — let’s say the market was in a really great state, and let’s say that Anduril wins some of these big [contracts] that we’re trying to close right now — I’m not against being public in three years, if that’s what made sense with the company. That’d be great. And also, the government really likes publicly traded companies, because it means that they don’t have to do the due diligence or don’t feel like they have to do the due diligence to the same degree on the company’s finances.
This has not been a big problem for us at the scale that we’re at right now, to be honest, but I will say, I can’t really imagine a world where something like a Joint Strike Fighter program goes to a privately traded company. I can’t imagine that ever happening. People have said, “Palmer, don’t you want to remain private forever?” And that actually sounds not so bad. But it does mean that I’m going to be putting an upper ceiling on what Anduril will be and do.
Anduril’s Sentry Tower system on display at the AFA’s Air, Space and Cyber Conference on Sept. 20, 2022. (Justin Katz/Breaking Defense)
We’ve all spilled ink over the years about the disconnect between Silicon Valley and the Pentagon. How do you feeling about that relationship — not on the individual worker side necessarily, but in terms of the funding and startup scene?
On the funder side, it’s feeling super good. I’d say there’s a few reasons for this. One, I think that the there was this pretty strong belief, let’s say 10 years ago, when all the tech companies were really heavily courting China, that China was going to be a really significant part of US tech companies. And I think that that’s kind of changed for two reasons. One, because it just hasn’t panned out. Who’s making money in China? Nobody. The people that are making money off of China are well beyond VC stage, just like the Apples of the world. Early stage US tech companies are just not succeeding in China writ large. So, it’s kind of cheap for their attitude to change, it’s easy for your attitude to change when your old attitude wasn’t really making you any money. The other reason I think is the success of things like TikTok in the West has reframed a lot of this. China is now not this market to go into and make money. It’s now this very dangerous, threatening world where they’re your primary competitor, they’re going to steal your ideas, they’re going to come and compete with you and probably win. So that’s gotten a lot of VCs spun up.
Has the war in Ukraine had an impact?
I’d say it’s a combination Ukraine and Taiwan. Everyone who cares about Ukraine is also watching Taiwan, because they know that Taiwan going south is an actual existential threat to many of their investments. And so I think you’re seeing a lot of hawkishness on the part of venture capitalists, that is largely tied to their investment in companies that cannot survive if Taiwan either shuts down temporarily their semiconductor industry, or permanently has it burned to the ground or something like that. So all of those things combined, I think there’s been a very big shift in VC. Sequoia cut themselves off from Sequoia China, they were trying to change their name. It’s not even Sequoia anymore. Sequoia is out there saying that they’re going to be investing in more defense companies. They just invested in Mach Industries, which was their first defense investment they’ve ever done. That’s a pretty big shift. I’ve actually never raised money from Sequoia ever, but they are one of like the blue chip VC leaders. And so for them to make their first defense investment ever is a very good sign of the times.
This is a bigger picture question, but: last year it was all about the Metaverse, and you saw people in DoD starting to chase that. Then that has suddenly disappeared from everyone’s lips in favor of AI, thanks to ChatGPT entering the public consciousness. How do people in your spot in the tech space in your community deal with the you know, for lack of better term, “shiny ball syndrome” with DoD, when it’s well noted that most decision makers in the Pentagon aren’t well versed in this stuff?
Well, how we deal with it depends on what the thing is. Because I’m the Oculus guy, I had to deal with a lot of shiny ball syndrome stuff coming out of the DoD, wanting to do Metaverse and VR stuff with Anduril. And what I tried to stress to people was, listen, I know I’m the VR guy, and yes, I’m the ‘See you in the metaverse’ guy. But that doesn’t mean I think that VR should be used all the time for everything, nor should you start using it for things where it is of minimal utility until you’ve already applied it to the things where it provides maximum gain. You should start with the things where it’s just an obvious, huge game changing win. And they didn’t expect this from me, they expected me to be like, ‘Heck, yeah, VR everything, let’s do it.’ We turned down actually a lot of weirdo VR stuff that people wanted to do with Anduril, because I didn’t think it made sense.
The flip side of shiny ball syndrome is that we are an AI company that has been around for six plus years, and now AI is super hot, and so everybody is talking to us in ways that they weren’t talking to us before. Because we’ve been doing AI and autonomy since the beginning, we’re not seen as one of the shiny ball chasers. It’s very clear that we were in this even when AI was not hot, because we really believed it was going to be important the future of autonomy. So that’s been good for us reputationally. We don’t have many people who feel like we’re like just chasing the hype train, because we’re just doing the same things we’ve always done.
But I will say that ChatGPT has probably been more helpful to Anduril with customers and politicians than any technology in the last 10 years. It’s not because ChatGPT is actually powering our products. It’s because all of a sudden, these people who never really understood AI, they never really understood autonomy at all — all of a sudden, you’ll have congressman who will go and use ChatGPT and he’ll type some stuff in and he’s able to use it and he’s able to see that it does things that he never imagined a computer could do. And then when I see him next he says, ‘You know, I think I really understand what you guys were talking about with AI being a big deal, this seems like it’s gonna be really important.’ It sounds crazy, but it’s just been so true. There’s so many people in the Pentagon and on Capitol Hill who have had that come to Jesus moment just because of the hype cycle around ChatGPT, which I am very happy to leverage in getting them excited about the future.
There are many critical connections being made across the FVL ecosystem that will also serve to modernize the current fleet.
There are many critical connections being made across the FVL ecosystem that will also serve to modernize the current fleet.
“We’re focused on not only the core technology, but the companies and industries that comprise that both in the areas that are kind of more closer to the department… artificial intelligence for autonomy, for example, but also in areas that are deep within the supply chain, like semiconductors,” Jason Rathje said.
By Jaspreet Gill
Topics: Anduril, artificial intelligence, ChatGPT, industry, Interview, Palmer Luckey, Silicon Valley, venture capital VC
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