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