The News
The defense tech company Anduril, flagship for a new generation of well-funded and ambitious startups, faces a wave of bad news about crashing drones, failing undersea vehicles, and testing mishaps.
The company defends these incidents as a trial-and-error innovation, born out of its Silicon Valley ethos.
But Anduril Co-founder and CEO Brian Schimpf was blunter in an interview with Semafor: “This is what happens when you disrupt an industry. It’s like people get grumpy, like they don’t like it and they’re gonna look for ways to knock you down.”
The PR strategy, he said, mirrors what SpaceX went through when it sought to lower the cost of space travel — an area then dominated by incumbent military contractors.
“To be honest, it’s the right response for them to take. They should try to knock us down a peg, and they’re gonna fight dirty,” he said.
While Schimpf is dealing with allegations that its technology isn’t reliable and a slog through a skeptical Washington, he’s eyeing an initial public offering, which will bring even more scrutiny from public market investors and analysts. One such critique is that Anduril’s total addressable market — the United States government and its allies — is limited.
Schimpf says that’s a mistake: “The Department of War is not one monolithic entity,” he says, likening the various branches of the military to individual customers. “And even within that, there are all these different groups constantly experimenting, trying to figure out what works, what won’t.”
Know More
Anduril was founded in 2017 by Palmer Luckey, who was pushed out of Meta after it acquired his Oculus virtual reality headset. Luckey made the shift to defense tech, hoping to help modernize a US military that had fallen behind technologically. Unlike most defense contractors, which bid on government projects and received payments in advance, Anduril promised to develop new technology first and then sell it to the government.
Schimpf joined Luckey from the early days of Palantir, where he worked as a “forward-deployed engineer,” embedded inside companies to help customize and deploy the company’s technology.
Anduril’s timing proved perfect, despite Silicon Valley doubts and moral qualms. The nature of war was changing. Low-cost Chinese drones were being repurposed as cheap weapons that expensive military technology had no way of stopping. Outdated, inexpensive missiles could be obtained by terrorist groups, requiring high-tech, multimillion-dollar missiles to shoot down.
By the time Russia invaded Ukraine in 2022, Ukraine was able to hold off a far bigger and better-funded military invasion with a technology-enabled defense that included off-the-shelf Chinese drones assembled by civilians at home.
Anduril has reaped the rewards of being an early mover. It recently won a $159 million contract to develop a night vision and mixed reality system for the US Army; a $2 billion anti-drone contract with the US special forces; and a $1.1 billion contract to make underwater, autonomous drones for Australia. And it’s working on the Collaborative Combat Aircraft with the Airforce.
Step Back
Anduril’s strategy has led to a flood of new, venture-backed startups aiming to break into the defense tech space, with varying levels of success. But Schimpf said it’s closer to the historic norm, when the defense industry drove cutting-edge technological development. “This is just too stagnant. Everyone has viewed this as a monolith that can’t change, and it actually isn’t even very historically accurate.”
And then there’s the somber reality that global conflicts are on the rise. “I’m not sure we’ve had this many state-on-state conflicts in about the last, I don’t know, 80 years. It’s a little bit of a spicy time right now.”
Anduril’s biggest technological advances, though, may not even be on the battlefield itself. Because it needs to manufacture products inside the US, it’s at the forefront of figuring out low-cost manufacturing and robotics. Today, Schimpf says it doesn’t make sense to set up robotic assembly lines. “The actual dollar contribution of labor to our products is often relatively small,” he says. “Robotics today is about where ChatGPT was back in the day. And over time, this is going to change dramatically, where the ability to have these very smart systems that can actually interact with the physical world, learn and adapt, that’s going to be transformative.”
Reed’s view
If the biggest knock on Anduril is that its products sometimes fail in testing, it’s doing very well. Eventually, the questions will center on regular business matters, like its gross margins. That will ultimately make it one of the most interesting companies in robotics and manufacturing.
We’re in an awkward phase where the supply chains don’t really exist to build a lot of things entirely within the US. And human labor still costs a lot less than setting up robots, as Schimpf pointed out.
Eventually, the national supply chain efforts and advances in robotics will converge, and the first companies to really take advantage of it might be ones like Anduril, driven by a requirement to build within the US, the need for high-quality manufacturing, a customer with pretty deep pockets, and the ability to recruit talent.
I’ve put my interview with Schimpf up on YouTube, where he discusses a wide range of topics, from the future of autonomous warfare to how he gets the most out of his workforce.
Room for Disagreement
Reuters raised questions about Anduril’s technology, citing “a gap between the U.S. company’s claims of battlefield readiness and the performance of some of its drones in testing and combat, according to interviews with more than a dozen people, including former Anduril staff, military officials, and people working with drones on the Ukrainian battlefield.”
Reuters said Anduril’s drones have had “limited impact” in Ukraine.
Notable
Semafor’s Ben Smith reported that earlier this year, Deputy Secretary of Defense Stephen Feinberg “wondered aloud whether the leading next-generation defense firm, Anduril, ‘is a real company’ or whether it only makes ‘toys,’ according to a person who heard the observation from him directly.”