Matt Grimm, Co-Founder @Anduril: How a Trump Administration Changes the Defence Industry | E1224

Harry Stebbings 0:00 Sean Maguire said on the show that Iran is the greatest evil. Do you agree?

Matt Grimm 0:04 Yes and no.

Harry Stebbings 0:06 Who is?

Matt Grimm 0:06 China. Hands down.

Harry Stebbings 0:08 Why?

Matt Grimm 0:08 The mindset of the PRC, I think their approach to basic human rights, I think their conducting of an ongoing genocide with their Uyghur population, I think their approach to free speech, to political assembly, to religious freedom are fundamentally antithetical to how the West values human life and how we think about human rights.

Harry Stebbings 0:28 Should TikTok be banned in the US?

Matt Grimm 0:30 100%, absolutely, yesterday, b- uh, if not years ago.

Harry Stebbings 0:34 Ready to go? (instrumental music plays) Matt, I am so excited for this. Dude, we get to do it in person-

Matt Grimm 0:49 We get to do it in person.

Harry Stebbings 0:49 ... this is so much more special. Thank you for joining me.

Matt Grimm 0:52 Yeah. Thank you for having me. Excited to be here.

Harry Stebbings 0:54 Now we, uh, we're at an interesting time.

Matt Grimm 0:56 Yep.

Harry Stebbings 0:56 We've obviously just had the election. I just wanna start, how do you feel post-election? Are you happy about it and why?

Matt Grimm 1:03 Yeah. I think there's, uh, obviously the election just ended, we're getting results in from some of the kind of Congressional races and Senate races. Uh, obviously President Trump was reelected to a second term. I think there's a couple interesting things here. Uh, for me personally, I'm a Democrat, I've been a lifelong Democrat, I've supported, uh, Democrats my entire life. I donated to Kamala, I donated to Hillary Clinton, donated to a number of, uh, House Democratic races, Senate Democratic races. Recently hosted a fundraiser for now Congressman, uh, sorry, now, uh, Senator-elect Adam Schiff of California. So I've supported a lot of sort of left of center or national security Dems through my career, so of course on a personal level, like, yeah, I wish the election had gone differently. Uh, that said, I think, like, there's a lot of interesting potential for both Anduril and the defense sector at large in a new administration, and I think, uh, having a new approach, a new mindset, a new approach to, uh, innovation, a new approach to funding different defense programs, um, could be pretty interesting. So we'll, we'll see how things evolve, we'll see what control of the House and the Senate looks like, and, um, and I think for, for Anduril going forward, like, you know, I think there's a lot of, I think there's a bright future. Um, the other thing I would add here is that internal to Anduril, like, we're, we're an apolitical company. Like, we don't talk about personal politics inside the company. We kind of subscribe to the Brian Armstrong Coinbase kind of philosophy of, like, we're here for a mission and our mission at Anduril is to bring the best technology to the defense sector, period, regardless of who's in the White House, regardless of what party is in control of Congress. So for us internally it doesn't really matter to the day-to-day life, uh, but, but, but externally, of course, perceptions are, are what they are so y- yeah, we have to play the, play the political game and influence where we can.

Harry Stebbings 2:41 Do you think Anduril will thrive better in a Trump administration though versus a Kamala administration?

Matt Grimm 2:46 Uh, better I think is doing a lot of work in that, in that line. I think, uh, I think we were going to, going to succeed under either, like we've succeeded under President Biden, we succeeded under President Trump before that, so yeah, I don't think, uh, I, I don't think there's a massive difference to Anduril. Mostly what we're e- excited about in a new administration are new appointees who bring different mindsets to defense procurement, like a different kind of approach, a recognition that the status quo is not acceptable, a new approach to, uh, funding, a new approach to contracting, seeing more urgency, more ambition, kind of the return of capitalism to the defense sector which has been sorely missing for decades. Uh, a, rebuilding the American industrial base, uh, relying on cost plus contracts less and turning to more firm-fixed contracts, like, there's a whole number of different policy approaches that we're pretty optimistic that the new administration's gonna, gonna at least take some of that

Matt Grimm 3:37 and, and put into practice.

Harry Stebbings 3:38 Speaking of the American industrial-

Matt Grimm 3:39 Yeah.

Harry Stebbings 3:39 ... base there, uh, we are gonna get to kind of supply chains, but I do just wanna ask what changes specifically with regards to China and Taiwan? There's a lot of talk about it. What changes?

Matt Grimm 3:48 In a new Trump administration you mean?

Harry Stebbings 3:49 Yeah.

Matt Grimm 3:50 Um, it's a little too early to predict what exact foreign policy pieces are gonna change. I think what we would like to see happen is a recognition of and an acknowledgement of what we see as an em- pretty obvious and emerging conflict around f- freedom, around democracy, around the rights of citizens to have free speech, free assembly, and to have their voices heard in their own government. Uh, a philosophy that I would say does not apply to mainland China or to, uh, to Russia for that matter as well. So I think a new approach to seeing the emerging threat that's there and then, uh, reflecting on kind of the capitalistic and, and industrial base that relies on China right now and, and taking an approach that brings a lot of those jobs, a lot of that industry, a lot of that kind of tier two, tier three lower down in the supply chain types of, types of work back to America and our allies, 'cause I think depending on China in the long run's, uh, gonna, kind of a dicey position to be.

Harry Stebbings 4:43 Do you think China will invade Taiwan?

Matt Grimm 4:45 Uh, I think that if America does its job and the West and our allies do their jobs, I think no. I think the ambition is there, I think the vision is there. I mean, I was personally sanctioned by China for selling missiles to Taiwan, uh, as, as was my co-founder Brian Schimpf and couple other executives in the company itself. So, like, it is pretty clear to me that, uh, if China's taking the position that arming Taiwan for their self-defense is an affront to the One China policy and then issuing, uh, direct international sanctions as a result of that, pretty clear to me where their ambition lies. Whether that results in an actual straight up invasion I think depends largely on the West and our position, uh, in, in, in posturing to defend Taiwan.

Harry Stebbings 5:30 Must be quite a funny conversation with your wife, like-

Matt Grimm 5:32 (laughs)

Harry Stebbings 5:32 ... "How was your day?" "Oh, I got, just got sanctioned by, by China." Oh.

Matt Grimm 5:35 Uh, I was on, I was on the Peloton in the morning just, uh, just riding and got a, a news alert from a Bloomberg story that said, uh, "Anduril and key executives sanctioned by China" and thought, "Ah, hmm." And the a- and the story listed-

Harry Stebbings 5:50 You're like, "I wonder what Palmer's done now." (laughs)

Matt Grimm 5:53 (laughs) I literally thought, uh, "Oh, wow, that's new. That's gonna play weird." And it said, uh, "Anduril and three key executives" and I was like, "Ah, which ones?"

Harry Stebbings 6:00 (laughs)

Matt Grimm 6:00 Uh, and then opened the story, was like, "Ah." (laughs) Literally found out from a Bloomberg story. Pretty wild.

Harry Stebbings 6:05 "Darling, we're not going to Beijing this summer." (laughs)

Matt Grimm 6:08 Yeah. (laughs) Exactly. Exactly. And the sanctions notice, it was, it was a kind of a hilarious thing, the sanctions notice said, uh, "We're seizing your assets in China and preventing any, uh, entry into mainland China, Macau, or, or Hong Kong." To which the obvious question's like-What assets? I've never been there. I'm not gonna go there. I don't own any property there. Like, what the hell are we talking about? It's just this, uh, this very kind of like posturing kind of PR political message. Uh, but then for us, for, like, seriously for Anduril, like, we interpret that both as a sign that, like, we're doing something right. Like, if China is taking that kind of aggressive action towards us, like, we see that as like, "Oh, well, we were, you know... We're kind of on the right path here." Uh, and then, and then second, I think is a pretty clear indication of at least their ambitions vis-a-vis Taiwan.

Harry Stebbings 6:50 Do you think US attempts to bring back semiconductor kind of manufacturing industry-

Matt Grimm 6:55 Yeah.

Harry Stebbings 6:55 ... back to US soil will be successful?

Matt Grimm 6:57 I think it has to be. I think it will be. Uh, we're already seeing the early results out at, uh, the TSMC plant in Arizona that has some pretty good yields that, um, are slightly outperforming the yields of their Taiwan factories. Of course, we'll see how that plays out in the longer run, but yeah, I think it, I think it has to work and I think it will work.

Harry Stebbings 7:12 So do you think the threat by China moving forwards will decrease or increase?

Matt Grimm 7:16 I think there's like a... It's a complex question. Um, I think that there's still a lot of supply chain, especially way down in the, like, tier two, tier three, tier four levels of supply chain that still fundamentally rely on Chinese processing, Chinese refining, and Chinese manufacturing. And-

Harry Stebbings 7:31 Wh- what is that? I'm so sorry, I'm really naive.

Matt Grimm 7:33 Yeah. (laughs)

Harry Stebbings 7:33 I'm a venture investor, so it's my, it's my job. But, like, tier two, tier three, tier four-

Matt Grimm 7:36 Yeah, okay.

Harry Stebbings 7:37 ... what is that?

Matt Grimm 7:37 So, like, uh, if when, when, when you buy a phone, inside the phone is a circuit board or... and then in, on that circuit board are some chips, and then inside those chips are individual minerals, individual materials that go into making those chips, right? So, like, as you go further down in the supply chain, you get this kind of broader out pyramid. And then in the business, you refer to that as your tier one suppliers, your tier two suppliers, your tier three suppliers, kind of go- going down into, like, how far down into the, like, actual raw metal coming out of the ground do you wanna trace back your supply chain? And too much of that down in the pyramid of the supply chain depends on Chinese processing and Chinese mining, especially around rare earth minerals and rare earth, uh, elements like magnets, which means motors, a lot of the underlying components that go into silicon chips. A lot of that is still going through, uh, China. So if you think about a kind of a cold war, which to me I think it was pretty obvious that we're in, uh, escalating into a hot war, and then you think about like, okay, well, every drone needs electric motors. Every, uh, missile needs semiconductors to help kind of control the, the, the flight dynamics and the, the aiming and the, uh, avionics and all of that. Uh, far enough down that supply chain, you start looking at like, oh man, those individual resistors, those come from China. That individual, uh, fastener, that raw metal comes from China. So I think it's very, very, very hard in practice to actually completely divorce yourself from any Chinese influence on the supply chain whatsoever. Nonetheless, I think if the, if a cold war escalates to a hot war, like, we as the West at large need to be in a position where we, where we either have stockpiled enough to make it through a conflict or we have developed, uh, ideally our own supply chains for those individual components.

Harry Stebbings 9:17 What, what would lead to a cold war becoming a hot war?

Matt Grimm 9:19 A few things that could happen. I think you could see, um, North Korea get spicier. I think you could see a, uh, invasion of Taiwan that would get very spicy. I think you could see, uh, Russian expansionism vis-a-vis Ukraine kind of keep pushing into Eastern Europe, and I think it's a pretty hot topic in Europe these days. That would get pretty spicy and escalate. Uh, and then I also think, um, freedom of movement of ships and commercial traffic through the South China Sea, like, a massive amount of our li- livelihood depends on ships moving in and out of the Chinese, uh, South China Sea. So I think if you started to see, like, freedom of navigation get compromised, that could pretty quickly escalate into a, into a hot war. But, like, vis-a-vis Anduril, like, what, what we see is we see that deterrents of long-term hot war conflict ultimately comes through strength, and that there is a, a, a weakness begets hot wars. So from our perspective, we view it as we want to equip our military, the militaries of the UK, the West, our allies, Australia, et cetera, uh, with the best possible technology to make the cost of escalating into a hot war, uh, for our enemies, for our opponents, uh, prohibitively expensive. Uh, that's kind of the idea, that's kind of the vision, that's what we started the company to do, and it's what we're, what we're building towards.

Harry Stebbings 10:31 You mentioned Russia,

Harry Stebbings 10:32 Ukraine.

Matt Grimm 10:32 Yep.

Harry Stebbings 10:32 It is, uh, uh... You know, we're obviously in Europe, it's a very pressing-

Matt Grimm 10:35 Yes.

Harry Stebbings 10:35 ... and important topic. Uh, how do you foresee that playing out over the next few years?

Matt Grimm 10:40 Yeah, we'll se- uh, we'll, we'll see. My guess is that, uh... And it, it's a com- complete conjecture here, I have no insider information whatsoever, but, uh, my, my guess is that we see some sort of detente or some sort of, uh, negotiated settlement take place probably over the next year would be my guess. Uh, and if I had to bet, it looks something like, uh, Russia annexing a, a chunk of Eastern Ukraine more or less along the line of conflict where the line has, you know, for better or worse, kind of held for the last year or so. Uh, and that, and that then the war kind of deescalates and everybody goes back to rebuilding. But again, pure conjecture. I don't really know.

Harry Stebbings 11:14 Do you think Trump will be able to bring the two parties together-

Matt Grimm 11:16 (sighs)

Harry Stebbings 11:16 ... and form a resolution? As he said very clearly, "If it was me, I would have ended it in days," you know?

Matt Grimm 11:22 Yeah, political procl- proclamations like that are, are, are easy to make, uh, on a, on a campaign stage and hard in practice. Um, we'll see. We'll see. I mean, I'm, I'm optimistic that he'll be able to find a resolution. I just, uh... I think in practice

Matt Grimm 11:34 it's actually pretty hard.

Harry Stebbings 11:35 Final one and then I wanna get to the business itself-

Matt Grimm 11:37 Let's move on.

Harry Stebbings 11:38 Israel-Gaza.

Matt Grimm 11:38 Yeah.

Harry Stebbings 11:38 Again, another incredibly prescient one. I have, you know, riots outside my apartment every weekend, uh, protesting against it. Uh-

Matt Grimm 11:47 You should move to a better neighborhood. (laughs)

Harry Stebbings 11:50 (laughs) Marylebone is not terrible.

Matt Grimm 11:51 Yeah. (laughs)

Harry Stebbings 11:52 Like... But it, uh, it's very, very kind of pressing in London. What happens there?

Matt Grimm 11:57 I mean, from our perspective, uh... I guess from my perspective personally, um, the whole thing is pretty tragic, and I think, uh, if, if I were on the Palestinian side, I probably would rethink invading your neighbor and, uh, and, and abducting and torturing and ultimately murdering, uh, civilian pro- uh, civilian hostages. I think what we end up seeing is we end up seeing the, uh, ultimately kind of the, the, the near and, and, and total sort of conquering of Gaza, uh, and we end up seeing the kind of-... Palestinian people, like, hopefully, uh, appreciating that, that terror and violence isn't the way forward for their society. And, uh-

Harry Stebbings 12:37 Do you think Israel is wrong in their response?

Matt Grimm 12:39 I don't at all, no. Absolutely not. Personally stand with them, and we as a company do too.

Harry Stebbings 12:44 Strong.

Matt Grimm 12:46 I think it's pretty clear. I mean, I think it's, uh, I think, I think it's a pretty clear position to take, 'cause it's like, um, you know, you cannot expect a country to, uh, sit idly by while your neighbors lob missiles over the border into your, into your cities, hitting apartment buildings, hitting shops, hitting homes. Uh, to say nothing of staging an actual hostile invasion over the border and massacring civilians, and you can't expect them to stand by and watch that happen and do nothing. War is tragic. The outcomes are, are, are terrible, and you see the pictures that come out of it, you see the videos that come out of it. Yeah, it's, it's objectively terrible.

Harry Stebbings 13:15 As crass and as awful as this sounds, is war not good for business?

Matt Grimm 13:18 Uh, war is not good for business. War's not good for hu- for humanity. Like, what, what we want to do is deter war. What you want to do is to have a very big stockpile that you never have to fire. That's ideal.

Harry Stebbings 13:30 You are the biggest insurance premium to governments.

Matt Grimm 13:33 (laughs)

Harry Stebbings 13:33 I, it's, it's, uh, I totally understand

Harry Stebbings 13:35 that. You mentioned, "Hey, we wanna bring the latest technology-"

Matt Grimm 13:38 Yeah.

Harry Stebbings 13:38 "... and we wanna equip the, you know, Western governments to feel that they have this power-"

Matt Grimm 13:43 Yeah.

Harry Stebbings 13:43 "... and that they can leverage it if needed." How is software and autonomy transforming defense?

Matt Grimm 13:48 Oh, man. Uh, we could talk for this, uh, talk about this for hours here. The, uh, I think it's a totally transformative. I mean, I know you spend a lot of time on your podcast talking about AI as it applies to enterprise companies, as it applies to SaaS companies, as it applies to, uh, you know, customer service, like all these different verticals, all these different areas, and defense is no different. I think the future around AI is incredibly bright. Uh, I think there's a lot of opportunity to optimize everything from production to, uh, field support, to, to maintenance, to, uh, understanding the landscape of what the battlefield looks like. That's really what we're doing with our, uh, uh, Lattice operating system that's at the core of all of our products, is trying to bring together and fuse all of this different data that's coming from individual soldiers, from individual planes, from satellites, from submarines, from missiles, from every kind of sensor that you might have out there in, uh, in, in a battle space, fuse that into one picture so that the, uh, the, the soldiers and the commanders who are ultimately, uh, you know, uh, controlling, controlling the battle space have a live, real-time view of what's happening out there. And I think there is a tremendous amount of, of impact that this is gonna have. So when we think about new products, we look at, like, what is, uh, currently existing, what the, uh, five-year kind of program needs are. And like these documents are public. You can go find these documents, these kind of fi- five-year vision documents that each of the services put together, and you could say like, "Okay, well, what's currently there? What, uh, do we see as the missing gap? What do we think we can have that's kind of unique to the market here? Uh, and then let's go, let's go invent, let's go create." So I think there's a whole world of innovation that's gonna come from really bringing these kind of software-first, AI-driven kind of principles, uh, into the, into the defense sector that's traditionally lagged, especially on software.

Harry Stebbings 15:39 How do you think about them building a faster horse? And what I mean by that is, if you're following five-year vision docs, you're just kind of, "Oh, they want that, and so we'll align our product roadmap to that," versus governments are largely inefficient. They change every four years, so I don't know how they have a five-year vision doc.

Matt Grimm 15:54 Yeah.

Harry Stebbings 15:54 Uh, they're mostly run by people who've never actually had a job. Um.

Matt Grimm 15:59 (laughs)

Harry Stebbings 15:59 (laughs) I mean, they sound like the shittest customers ever.

Matt Grimm 16:02 Yeah.

Harry Stebbings 16:03 How do you think about, like, actually leading the way, showing what technology can do, and prioritizing what to build first?

Matt Grimm 16:09 Yeah. So I think a couple of things. I think, first of all, uh, it's a slight misnomer and a slight misunderstanding that the whole personnel changes over every four years. That's just fundamentally untrue. Uh, the, the political leaders at the top and some of the political appointees at the top, uh, yes, those do tend to change with administrations, and sometimes they change more often. I mean, there's like an average tenure of something like two and a half years for a lot of these positions, so.

Harry Stebbings 16:32 We, we had a prime minister that didn't last longer than a cabbage.

Matt Grimm 16:35 Yeah, for pretty famously, uh... (laughs)

Harry Stebbings 16:37 (laughs)

Matt Grimm 16:37 ... on a, on a, on a Twitter feed, right? Um, yeah, uh, it, see, if you use these lights with the cabbage, it ages faster, right? So, um-

Harry Stebbings 16:44 So does she. (laughs)

Matt Grimm 16:45 (laughs) Yeah, exactly.

Harry Stebbings 16:46 (laughs)

Matt Grimm 16:47 Ar, good joke. Um, yeah, so I think there's like a slight misunderstanding that, like, oh, the entirety of the Pentagon turns over every four years. It's just fundamentally not true. And same here in, in, in MOD main in Whitehall. It, it doesn't turn over with every administration end-to-end. So I think that these longer-term vision documents written by military officers and civil servants within these organizations, like, largely do hold for where they wanna see the capabilities of the Navy or the Air Force go in the next five years, the next 10 years, the next decade. But to your point, like, yeah, we consistently, even in the technology sector, we consistently underestimate the pace of innovation, and we consistently underestimate, uh, the pace at which software especially is going to continue to, to, to rapidly kind of develop and, and accelerate. And like nobody would have predicted, uh, the, the, the wave of AI and then, uh, AI applications hitting, hitting the market even as recent as, what, like three years ago. Like no one would have seen this kind of massive, uh, massive wave coming. So I think that there's a, a, a middle ground, because if we invent and, and have a, have an idea for some sort of crazy, out-of-the-box, left field sort of, uh, kind of construct, and then we come to the Pentagon and say, "Hey, we think you should do X," and if X completely and totally doesn't align even at all with where they want to take the capability, it can be kind of a hard sell. Uh, there are parts of the organization that are meant for doing sort of these like futuristic, kind of expansive types of things. Uh, so that's one angle, is that we can just kind of go, uh, you know, pitch something, convince them, and, and, and go that way. The other angle we can take is we can just do it, and I think that this is part of our strength, uh, where we've, where we've raised a pretty good amount of venture capital money. Uh, we have incredible broad freedom on what we can do with that money. So like if we have an idea of a new...... capability, a new type of missile, a new type of drone, a new type of submarine, like, we can just go do that. And then-

Harry Stebbings 18:44 And then you show them.

Matt Grimm 18:45 ... and then show them.

Harry Stebbings 18:45 Yeah.

Matt Grimm 18:46 And then say, beyond just like, "Oh, hey, here's a PowerPoint slide," which is what they've been pitched for the last 40 years, of how this new potential thing... If, if you fund me, if you give me that money on a cost plus basis, surely I can hire enough engineers and I can, I can design this for you. Here's my PowerPoint slide of what it would look like. We can shortcut all of that and just say like, "Hey, so we've built a couple and I can, you know, come out to my test range. I'll be glad to show you how they work. Here's how they talk to the other systems you have. Here are they... here's how they talk to the planes you already have. Here's how they talk to the drones you already have." Like, "We think this is pretty compelling," uh, it's what's called a con op in our business. Uh, "Here's a pretty kind of compelling con op how you'd use this tech- use this technology. Like, let's give it a go."

Harry Stebbings 19:25 I was speaking to a defense entrepreneur the other day, and he said, "The thing you will consistently overestimate is the intelligence and the intellect of government buying organizations."

Matt Grimm 19:33 Yeah.

Harry Stebbings 19:34 They largely don't know what AI is, Harry. And so it is a uphill battle selling into them.

Matt Grimm 19:39 Yeah.

Harry Stebbings 19:39 Is that a fair picture of government buying knowledge?

Matt Grimm 19:44 Uh, I mean, in- in- insulting your customer and expecting them to buy from you is usually a- kind of a dicey proposition. So, like, uh, no, I don't think it's totally fair. I think there's a worldview piece here that we as Silicon Valley kind of entrepreneurs tend to underestimate, where, like, it is our jobs, literally, it is your job, literally, to go meet the most brilliant, adventurous, entrepreneurial, creative, uh, folks on the planet. That's your job. And then pick which ones of them you want to invest in, which ones of them you think have the best opportunity to go make their vision a reality, of course. That is not the job of a DOD bureaucrat and a procurement officer. That's fundamentally not the job. And you also have to think about a- kind of a risk-reward kind of incentive system that they're operating under. Uh, and to be clear, I'm not, like, defending the system. I'm thinking there's a, there's a- a perception and an understanding problem that has to happen here. So from the perspective of a procurement officer, if they take a flyer, they take a bet, like you do, on a prospective new company, and then that company totally implodes, for, for you as a venture capitalist, you think like, "Oh, yeah, well, that's like 80% of my companies that are, you know, ultimately probably gonna fail, and I'm hoping for the other 10% to return my money, and I'm hoping for 10% of them to be, uh, you know, big, big home runs and return the fund." Like, that's your business of a power law business. That's not the business of a procurement official. It's fundamentally not. Like, they have to put technology, and tools, and weapons, and bullets, and bottled water, and, uh, you know, cots, and medical kit, and, you know, fuel. They have to put that in the hands of soldiers in harm's way every day. So when someone comes along and is like, "I have a genius idea about AI," for them, like, they're thinking, "Yeah, okay, maybe that sounds pretty crazy, but like, I've kinda gotta just put bullets in the- in the hands of my soldiers." Uh, so-

Harry Stebbings 21:40 So do we need to change the incentive mechanism ... of government buying?

Matt Grimm 21:42 ... 100% we do. We absolutely do. So there's just like-

Harry Stebbings 21:46 How do you do that?

Matt Grimm 21:46 ... I- I- I think it's like- it's kind of- it's kind of pithy to be like, "Ah, yeah, those in the Pentag- th- they're- they're all just- they're all just idiots." It's like, no, they're not. They're not. They're just operating under a different incentive structure, a different reward scheme, a different kind of, uh, kind of careerist kind of mentality that for those of us in Silicon Valley, entrepreneurs and- and VCs and investors alike, it's just a fundamentally different kind of worldview. So I think what you have to do is understand where they're coming from and then translate to them, "Okay, here I have this core technology. Here's how it could actually impact the lives and the- the- the- the capabilities of your soldiers in conflict. Here's how we'd field it. Let me show that to you. Let me, uh, you know, go do the- do the work that's al- you know, often pretty painful." And you talk to a lot of enterprise entrepreneurs and enterprise investors, it's like there- there are- there's a headline that makes sense, like, "Oh, bringing X innovation to the enterprise." And then when you actually get into the weeds of enterprise implementation, it's really hard.

Harry Stebbings 22:43 Really hard.

Matt Grimm 22:43 It's really, really, really hard, but then it's also very-

Harry Stebbings 22:44 But this is what every AI entrepreneur says though, which is like, you know, there is a very large chasm between purchase and implementation.

Matt Grimm 22:49 Oh, my goodness, yes.

Harry Stebbings 22:51 And that has not been anywhere near closed.

Matt Grimm 22:54 No, no, and even closed, understood.

Harry Stebbings 22:57 But okay, so-

Matt Grimm 22:57 Understood... I mean, you talk to plenty of, uh, entrepreneurs who come in here and say like, "Oh, AI is totally gonna transform X corporate infrastructure. Totally gonna transform accounting. We won't need accountants anymore." Like, I've he- heard that pitch a couple of times, and you're like, "H- eee, really?"

Matt Grimm 23:14 (laughs)

Harry Stebbings 23:14 So you- I- I'm putting you now in charge of the MOD, the DOD-

Matt Grimm 23:17 Sure.

Harry Stebbings 23:17 ... you name your Department of Defense-

Matt Grimm 23:19 Sure.

Harry Stebbings 23:19 ... style. Uh, what would you do to create a structure of incentives that creates risk-taking mindsets for the people buying?

Matt Grimm 23:28 Yeah, a few things, man. Um, first of all, uh, would appreciate the urgency of the problem. And I think that over the last, call it decade, I think, uh, the- the- the governments of the West have largely gotten complacent to what we view as the kind of- the major geopolitical strategic problems facing, uh, facing the West, especially vis-a-vis China and to a slightly lesser extent, Russia. So appreciating the urgency, I think, is point- point number one. Point number two, I would say, is bringing capitalism back to the defense sector. Uh, my- my former boss and now friend and mentor, Sham, who you've had, uh, Sham Sankar at Palantir, who you've had on the show, uh, he's been on a tear lately talking about this. And he had this, uh, this tweet that I think perfectly encapsulates it, where he said that, uh, everyone, including Russia and China, uh, have given up on communism, except Cuba and the DOD. And it's like, that's kind of the mentality, right? It's like a mentality of a- of a cost plus style contracting. I'll get to that in a second. Where, uh, like, ultimately, a competitive...... win. A better technology, a better approach doesn't always necessarily win out. And like, oftentime, there are different incentives at play, uh, that, that, that lead to a little bit more of a kind of communistic or socialistic approach to, to the defense sector that I think is fundamentally bad, and is ultimately squeezing out kind of the crazy entrepreneurs and the crazy inventors from, from working in the sector. So the third point that I would change would be, uh, would be way less cost plus contracting. Way, way, way less cost plus contracting. Moving many more things to firm-fixed price and then being comfortable with-

Harry Stebbings 25:10 Just for those that don't understand, what is cost plus contracting?

Matt Grimm 25:12 Oh, man. Uh, so if you've spent any time around lawyers or accountants or, uh, your folks of that type that bill by the hour... So what happens on these large defense procurements is that one of these prime contractors will come in and they will pitch a PowerPoint slide about how they would do something, and then they hire engineers to build to that vision. Then they bill those engineers to the government at an hourly rate, uh, with a, with a fixed margin. So that's a cost plus. So it's, uh, "It costs us this." There's a fixed margin on top of that, and then they charge that back to the government up to, uh, the, the, the limit of the, the particular program budget. So what ends up happening... And it's like, you, you know, I, I started with lawyers and accountants for a reason. Is like, when you incentivize someone to work by the hour-

Harry Stebbings 25:57 Takes time.

Matt Grimm 25:58 ... it will take more time. And when you incentivize somebody to work, uh, by a firm-fixed price, it'll go a whole lot shorter. So it's like if you take those fundamental incentives and then you extrapolate that to the entirety of the industry, there's actually not a lot of incentive for the existing prime contractors to make the plane cheaper or faster. It's just fundamentally not the incentive. What they're incentivized to do, given that their profit margins are ultimately driven by how high they can drive the cost up, because they get a firm-fixed margin on top of that cost, then you get the behavior that you incentivize. And I think, like if you look at some of the statistics and some of the performance of these companies, honestly it's kind of hard to blame them. It genuinely is. Like, the stock performance of the top five defense primes in the US is, wildly outperforms the S&P 500. I have the statistics right here. I wrote them down.

Harry Stebbings 26:50 W- w- what are they?

Matt Grimm 26:50 Uh-

Harry Stebbings 26:51 I don't know these.

Matt Grimm 26:51 Yeah, so Northrup Grumman over the last 15 years has had a, uh, total compounded annual shareholder return of just over 20%. Lockheed and Boeing are just behind them at about 15%. The S&P 500 over the exact same time period has an 11.6% total compounded annual return.

Harry Stebbings 27:07 But, I'm sorry, I'm-

Matt Grimm 27:07 So thinking about this, it's like-

Harry Stebbings 27:09 ... I'm, I'm really naive. Why, why is that when they have a shitty structure of cost plus that doesn't really incentivize them to be that innovative? I- I'm struggling to understand those premiums.

Matt Grimm 27:18 Yeah (laughs) . I'm, I'm, I'm enjoying the, the light bulb going off. So what's, what's happening is that the incentive structure within the Pentagon, within the procurement office has said like, "Well, this is how we prefer to do business, because we don't want to have our companies make too much money." So this, this firm-fixed margin is something like 8%, 9%, 10%, thereabouts, uh, depending on the particular contract. Uh, so that's how they've structured many of their large procurements, including the F-35, including large submarine programs, have all been designed under this kind of cost plus type structure. So what the defense primes have gotten very good at is they've gotten very good at figuring out ways to take their, uh, overhead kind of corporate costs, including their buildings, including their HR departments, their finance departments, their legal departments, kind of all of these, their IT infrastructure, all of that, bundling that into that cost number on the beginning part of the equation, then taking that firm-fixed kind of price margin markup on top of that, such that that free cash flow that comes off of that con- that contract, it's like actually pretty, pretty free. So then the companies perform financially very well, uh, including some wild stats about stock buybacks and dividends. Like, last year alone, Lockheed Martin, the 2023 numbers, Lockheed Martin spent $6 billion on stock buybacks. They only spent $1.5 billion on IRAD, uh, which is called internal R&D, their own at-risk funding of research and development. They spent four times the amount of money on stock buybacks than they did on at-risk research and development. That's wild. That's wild. That's completely upside down from how any technology company, how any software company, how any Silicon Valley-type company operates.

Harry Stebbings 28:56 But I don't, I- I don't understand that. Like, w-

Matt Grimm 28:58 The, the, the... And the reason that they're doing that is 'cause that's the incentive structure that exists within government procurement, and it's rewarding that kind of behavior. So what I'm trying to propose in a, in a new administration, kind of a new world view, a new approach to these contracts is like stop funding that. It's not working. Like, you're not getting the best technology in the hands of soldiers. But fundamentally what you are getting is you are getting technology that is two or three generations behind, 'cause by the time you go from a requirements document to a PowerPoint proposal document to hiring the engineers to developing the thing on a cost plus basis, which takes exactly as long as you think it would, very long time, and then into a fielding and then ultimately into a support mechanism for that whole procurement. By definition you're operating on requirements that are a decade, 15 years old. They're two or three cycles behind where the current state of the art is.

Harry Stebbings 29:48 So if, if it... Uh, uh, how long is it from, like, first dag-

Matt Grimm 29:51 (laughs) .

Harry Stebbings 29:51 ... to deployment there, and how long is it with you?

Matt Grimm 29:54 Yeah, so it can be upwards of 15, 20 years to go from first requirements document to full fielding of a system, which is way longer than most Silicon Valley companies have been, have been alive. So it's just a, a, a wild amount of time.

Harry Stebbings 30:10 But it's like conflicts which-

Matt Grimm 30:10 I'm really enjoying-

Harry Stebbings 30:11 Conflicts would-

Matt Grimm 30:11 ... your face right now.

Harry Stebbings 30:12 B- b- this-

Matt Grimm 30:12 This is, this is, this is, this is great.

Harry Stebbings 30:13 But I'm just like confused because like, you know, if you think about-

Matt Grimm 30:15 Mm-hmm.

Harry Stebbings 30:15 ... conflicts in Afghanistan-

Matt Grimm 30:16 Yep.

Harry Stebbings 30:16 ... the terrain and the geography of a climate will drastically change the type of equipment that you need.

Matt Grimm 30:22 No, I mean if you remember in the early days of the Iraq War, uh, we, we sent American soldiers and British soldiers i- into conflict in Iraq in soft-sided Humvees where they were just like bullets coming, coming through the, the canvas on the side, 'cause it was just a, uh, just a different-... kind of war. We were, we were equipped for a different kind of conflict. And then over the course of the 20 years that we were at both, in both of those conflicts, we in- innovated and developed, uh, these MRAPs, these kind of mine-resistant vehicles. We put armor on all of the Humvees. We totally transformed... We had a lot of, like, IED defeat e-

Harry Stebbings 30:56 Is it possible to have six- to 12-month cycles or am I totally dreaming in that world?

Matt Grimm 31:01 Six to 12 months would be very hard. I think that underestimates the kind of logistics fielding supply chain kind of piece of it, that's like getting technology into the hands of these soldiers forward and then training all of them, uh, supporting them with maintenance. Like, you know, trucks break, planes break, you need to replace things. You know, hard, hard landings, you need to replace landing gear. Whatever it is, uh, there's a whole kind of tale of like that that's pretty hard. So 6-12 months is very hard. I think a two, three-year cycle's extremely believable, especially if you architect your products to be pretty modular, if you architect your products to be upgrade-friendly, if you upgrade your, uh, you design your products around a software kind of, kind of mentality where you can... You know, thinking similarly to how Tesla approaches their, their fleet of cars with their over-the-air updates pushing pretty frequently. Like, if you take a software-first approach to a lot of the products, yeah, I think you can get a lot shorter than a 5, 10, 15, 20-year, uh, kind of life cycle but-

Harry Stebbings 31:57 I, I, I-

Matt Grimm 31:57 ... six, 12 months I think would be pretty hard.

Harry Stebbings 31:58 I just have to go back. Classic VC wanting now...

Matt Grimm 32:01 (laughs)

Harry Stebbings 32:01 Uh, I, I live in, like, 10-year IPO cycles-

Matt Grimm 32:04 Yeah.

Harry Stebbings 32:04 ... so my six to 12 months be great.

Matt Grimm 32:05 Yeah.

Harry Stebbings 32:05 Um, you just mentioned the, the market there and the kind of the, the primes being kind of structured the way they are. Is this not a bad market, forgive me, in the way that y- I was trained on the winner-take-all... Winner will accrue 95% of the value and the second will take 5% of the value. The very structure of this market kind of denotes that actually no government is gonna say, "A 100% buys with Anduril."

Matt Grimm 32:27 Yep.

Harry Stebbings 32:27 They will always be-

Matt Grimm 32:28 No, of course.

Harry Stebbings 32:29 ... pretty scattered.

Matt Grimm 32:29 No, and we wouldn't propose that.

Harry Stebbings 32:30 And they'll always be pretty scattered.

Matt Grimm 32:31 Mm-hmm.

Harry Stebbings 32:32 And so does that go against the idea of winner-take-all and is this market good as a result?

Matt Grimm 32:39 So yeah, a couple questions, uh, kind of baked into one there. Um, first, uh, I don't think there will ever be a kind of venture-style dynamic of a winner-take-all. I don't think this is a situation of, like, Google versus Yahoo where, where one is the obvious dominant winner by 10X and then there's the other rands. I don't think that's gonna be anywhere close to the case in, uh, overall defense spending. So it kind of goes against that thesis, sure. The, the inverse of that is that it is a gigantic market and it is a long enduring market. And for me personally, an incredibly impactful and incredibly, uh, like, important market to bring innovation to. Uh, to, to wit, I have a couple of stats here to throw at you. Uh, in 2024 alone, US is spending about 880 billion on defense. Uh, the UK is spending about 73 billion more. Uh, the EU member countries are spending almost 300 billion on top of that. Uh, Australia is spending 45 billion on top of that. And that's before we start talking about other partner nations like Japan or, like, Taiwan or Middle Eastern allies or any of that. That's purely just looking at, like, this year's spending. It's, like, over a trillion, almost a trillion five in, in spending. It's a big number. So clearly I'm not saying like, "Oh man, the total addressable market for Anduril is a trillion five years." It's not. Like, a lot of that goes into salaries, a lot of that go- goes into healthcare, goes into, like, you know, food and feeding, like... An- of course there's a lot of complexity to that. Uh, my point is just that this isn't a kind of new emerging sort of like, "Oh, I wonder what the, I wonder what that growth sector's gonna look like." It's not that at all. It's a, like, big enduring, very reliable, uh, sector. The other thing I would say, kind of bringing it back around to the kind of political positioning where we started the conversation, is that defense spending has, like, largely remained fairly flat and kind of grown pretty predictably, uh, almost linearly over Republican administrations, Democratic administrations. Same in the UK for what it's worth. So from a perspective of like, do we think our customers will be there buying important technology in five years? Of course they will be. So yeah, I think there's a couple of pieces. One is, like, I don't see it as a true winner-take-all. I don't see it as like Lockheed, Boeing, Northrup, Raytheon, et cetera. "We're gonna take all of them down." I don't see that at all. I think it's gonna be like, we're gonna become the sixth prime alongside them and that there's still plenty, plenty, plenty of food to eat.

Harry Stebbings 35:03 How much did the US spend?

Matt Grimm 35:04 880.

Harry Stebbings 35:06 880?

Matt Grimm 35:06 Yeah.

Harry Stebbings 35:06 Wow. How much did the UK spend?

Matt Grimm 35:08 Uh, 73.

Harry Stebbings 35:10 73. Wow.

Matt Grimm 35:10 Graham outside is sweating right now 'cause he, uh, he's the one who pulled these statistics so, you know, we, we're gonna hope they're right.

Harry Stebbings 35:16 Okay. So-

Matt Grimm 35:17 (laughs)

Harry Stebbings 35:17 (laughs) Don't worry. It's a venture podcast. We're very, very rarely right. Uh, it's a prediction market after all.

Matt Grimm 35:22 And then EU is 295 on top of that.

Harry Stebbings 35:24 Okay, but l- let's look at that. 880 versus-

Matt Grimm 35:27 Yep.

Harry Stebbings 35:27 ... 73. That is 8% or 8.5%. Is the US spending too much or is the UK spending too little?

Matt Grimm 35:33 UK is spending too little by a wide order of magnitude.

Harry Stebbings 35:36 What should it be?

Matt Grimm 35:38 Should be, uh, closer to the 2.5, 3% of GDP that everyone's committed that they should be spending on NATO. Uh, so it, it, it should be... My guess is, like, 50% higher than that.

Harry Stebbings 35:47 So tr-

Matt Grimm 35:47 And then more, more importantly than a particular dollar amount, they should be spending it more efficiently. Uh, and, and the UK, like the US, is not.

Harry Stebbings 35:56 Well, I think about 2% of UK GDP now is about $10, so-

Matt Grimm 35:59 (laughs)

Harry Stebbings 36:00 (laughs) ... I would- it wouldn't be too hopeful on that one.

Matt Grimm 36:01 Your, your comment, not mine.

Harry Stebbings 36:02 Um, but m- my question to you is, was Trump right then in suggesting that the EU should be spending a lot more-

Matt Grimm 36:07 Yes.

Harry Stebbings 36:07 ... and the US should be spending less on EU defense?

Matt Grimm 36:10 Yes, absolutely.

Harry Stebbings 36:11 Hmm. What happens then with your five primes that... Respectfully, if they're doing buybacks and not investing in R&D, I mean this in the nicest way, do they consider Anduril a threat do you think?

Matt Grimm 36:26 I think they would consider our approach to technology development to be a threat to their style of...... of technology development and their style of production, yes. I don't think they view us as Anduril, uh, it's ourselves. I don't think they're, they're thinking of us every morning. Um, I do think they view the cost plus versus firm fixed mindset as being particularly impactful to them. And in fact, a few of them have come out in their recent, uh, annual reports and quarterly calls and whatnot, uh, and said that they're walking away from cost plus con- or, uh, from firm fixed contracts. They won't do firm fixed contracts anymore. It's too risky for them.

Harry Stebbings 37:11 Oh.

Matt Grimm 37:11 Uh, yeah.

Harry Stebbings 37:13 Wow.

Matt Grimm 37:13 It's an interesting gambit, isn't it?

Harry Stebbings 37:14 Yeah, why?

Matt Grimm 37:16 I don't know. Can't speak for them. Uh-

Harry Stebbings 37:18 Fascinating.

Matt Grimm 37:19 Mm-hmm.

Harry Stebbings 37:20 Fuckers.

Matt Grimm 37:20 (laughs)

Harry Stebbings 37:22 Uh, will we see the nationalization of different providers?

Matt Grimm 37:25 Yeah.

Harry Stebbings 37:25 And what I mean by that is, like, we

Harry Stebbings 37:27 have Anduril in the US. We have Helsink in Europe.

Matt Grimm 37:30 Mm-hmm.

Harry Stebbings 37:31 Will we have favored purchasing by those nations?

Matt Grimm 37:35 Oh, we already do.

Harry Stebbings 37:37 We already do?

Matt Grimm 37:37 We already do, yeah, for sure. Um, and there's an, an, an agenda within each of these countries, within Australia, within UK. This isn't anything particularly new. Like, the, the British government, like the US government, or like the Australian government, wouldn't be comfortable taking British taxpayer dollars and funneling them straight to Anduril US in California to buy new kit, or new technology, or new drones, or new missiles. So one of the kind of strategic moves we have made is to invest in teams and engineers and production capacities in each of these countries, including the UK, so that U- UK taxpayer dollars get spent within the UK to manufacture UK variants of a particular product that we make. We will see this in, in, in, in every country. So the thesis is basically taking core IP and then localizing it to work with, you know, your radio standards, your existing platforms, like helicopters or planes or, or, or drones or warships or whatever, that requires, like, a little bit of customization, that that's just a slightly different platform, slightly different technology. So we adapt it into the UK standard and then manufacture it here, deploy it here, support it here, field it here with British citizens based here in England. Uh, kind of a, kind of a, like, sovereignty agenda is what they would call it.

Harry Stebbings 38:59 What percent of your budget is R&D?

Matt Grimm 39:02 Our budget?

Harry Stebbings 39:03 Yeah.

Matt Grimm 39:03 Oof.

Harry Stebbings 39:04 I'm just wondering comparatively to the 1.5% of one of your primes.

Matt Grimm 39:08 Yeah, we spend... I'd have to get you the firm number. The number I'm gonna, I'm gonna throw out is gonna be-

Harry Stebbings 39:15 Range-wise, is it like 10 to 15%?

Matt Grimm 39:17 ... totally wrong. Oh, no. No, no, no. It's like 60, 70%. It's a huge number. It's a huge number. Like Anduril, we're gonna do, we're, we're doing very well financially. Uh, this year revenue's off, off the charts. Um, and then we reinvest every single nickel of that right back, right back into, uh, into future growth, future programs, all of that. So, like, we're still, you know, EBITDA negative, as you'd expect for a growth stage startup like us. Uh, but we, we spend a, a massive percent of our, of our revenue on-

Harry Stebbings 39:45 I think it's super easy to bash-

Matt Grimm 39:47 ... R&D.

Harry Stebbings 39:47 ... incumbents. Uh, of course, and like-

Matt Grimm 39:50 Of course it is.

Harry Stebbings 39:50 Everyone does it.

Matt Grimm 39:51 Yeah.

Harry Stebbings 39:51 What did you learn-

Matt Grimm 39:52 This is the venture capital community. (laughs)

Harry Stebbings 39:53 Yeah.

Matt Grimm 39:53 Of course we, of course we do. Everyone who, everyone who has come before is of course-

Harry Stebbings 39:57 Oh, shit.

Matt Grimm 39:57 Uh, yep.

Harry Stebbings 39:57 What, what did you learn from them that they've done well-

Matt Grimm 40:00 Yeah.

Harry Stebbings 40:01 ... that you actually wanna take with you?

Matt Grimm 40:03 Yeah, I think a few things. Um, I think there's a, uh, there's a political piece of this that I think we have a lot of lessons to learn on, uh, impacting the appropriations process, impacting the legislative process, uh, having our voice heard in, you know, different kind of policy approaches coming out of Congress and coming out of the Pentagon. Um, I think there's a lot of lessons to be learned there. Uh, I think there are good lessons to be learned, especially on what in our business was, um, kinda referred to as MROs, essentially the, uh, the long logistics tail that comes with, with, with deploying one of these products. Uh, unlike a Silicon Valley software company where you, you know, you, you hit upgrade on the cloud servers and then, then whoa, all your customers have a new version. Just fundamentally not how our business works, where, you know, we have, you know, soldiers using our products deployed all over the world, and you can't just click a button and magically upgrade everything. You can upgrade some here, upgrade some here, upgrade some here. There's like a, a, a real kind of logistics and fielding piece there that, to be honest, uh, as of today, they're, they're better at than we are. So I think we have a lot to learn there. Um, and then the last piece that I think is kind of an, kind of an interesting one, and, um, might get us to some other interesting conversation topics is, uh, I think they've done a really good job at, uh, at appealing to a patriotic sort of, uh, you know, kind of current and influencing folks who want to come work and have, you know, defend their country and be patriotic and kind of influence, uh, influence the national defense sector and kind of encouraging them to come work on these problems. I think, uh, they've done a really good job at... Like, they hire a lot of people. They have a lot of employees. They have a lot of offices. They have a lot of production factories. They have a lot of kind of folks who work there who believe in a mission and a vision, and I think there's something to be taken from that.

Harry Stebbings 41:52 If we're being blunt, do the most ambitious technology-oriented people want to go and work at Lockheed?

Matt Grimm 41:58 No. No.

Harry Stebbings 41:59 So have they done a good job with that?

Matt Grimm 42:01 I think they have done a... I think you kinda have to bifurcate a little bit, right? Because there's a, like an ambitious AI software engineer type of mentality, and then there's a production assembly line fielding training type of mentality. They're different people. So I think, like, yeah, they have in a certain category, and I think that's where we have some, some learnings to take.

Harry Stebbings 42:26 What have you not done that you wish you had done?

Matt Grimm 42:29 My joke comment is that if I, if I o- only make two mistakes before lunch, it's a good day. So it's like, (laughs) there's a lot of, there's a lot of things I would, I would say. Uh, I think, I think a couple of things. I think, um...... taking a stronger corporate position on remote work. It's a frequent topic within your-

Harry Stebbings 42:49 Mm.

Matt Grimm 42:49 ... your podcast and your, and your world.

Harry Stebbings 42:51 You wish you'd said no to it?

Matt Grimm 42:53 Wish we'd taken a more definitive negative stance, yes.

Harry Stebbings 42:55 Mm.

Matt Grimm 42:56 Yes.

Harry Stebbings 42:56 What did you do? You just took it laissez-faire?

Matt Grimm 42:58 We have a, uh, I wouldn't say laissez-faire. No. We have a, a, a default in-office first kind of approach. Um, it's hard, basically impossible to run a hardware company in a, in a fully remote capacity. It comes down to somebody has to turn the wrench and build the thing, so like, a full remote kind of hardware company's kind of a, a contradiction in terms. But we, especially through COVID and then through kind of the spreading of people with COVID and then, uh, trying to get people back, uh, it has been harder for us to get that kind of core group back together. So-

Harry Stebbings 43:35 So you wish you'd-

Matt Grimm 43:35 ... I wish we-

Harry Stebbings 43:35 ... been more definitive then?

Matt Grimm 43:36 We should've been more definitive, yeah, uh, in the, in the earlier days of that kind of evolution. In our defense, like, I don't think any of us saw the, the COVID pandemic lasting as long as it did. I don't think any of us foresaw the, kind of the, the distribution of, of, of folks around the country in the way that it, the way that it played out. But I wish we'd taken a more definitive stance.

Harry Stebbings 43:55 What did you do that you wish you hadn't done?

Matt Grimm 43:57 (laughs) Oh, man. Um, there's a few things I would say here. Um, first thing is, uh, we made a, I made a conscious decision, um, about a little over a year ago, a year and a half ago, uh, to attempt to nonlinearly scale our GNA support functions, so things like our business systems team that does our internal tooling, our, uh, HR team, our people business partners who kind of, you know, support their, the managers in their organization, uh, our IT operations team, our facilities team. Um, and what we were trying to achieve is we were trying to achieve a, uh, a nonlinear kind of return on those types of, types of heads. Like, can we build an automation? Can we utilize AI? Can we take a different kind of approach than a traditional type of company, uh, that ultimately will get to a, like, a stronger kind of cost margin profile if we can con- kind of condense that GNA segment of the spend? Um, and, and that was just, that was just a shit decision. (laughs)

Harry Stebbings 45:04 Why? I mean, it seems highly logical, seems rational.

Matt Grimm 45:07 It seemed, it seemed-

Harry Stebbings 45:07 Tooling seems the right time.

Matt Grimm 45:07 It seems logical and it sounds on paper, uh, it sounds like the kind of thing that a, um-

Harry Stebbings 45:14 Why, why was it-

Matt Grimm 45:14 ... you know, a McKinsey consultant would tell you, uh, on, on paper to, to condense spend. Um, I think in particular on, uh, on, on, on two areas, it really kind of hampered our growth and, and, and was a long-term strategic mistake, which we've, which we're correcting, to be clear. But, uh, looking back, I, I, I wish we hadn't done this. Um, first is on the business systems side, uh, and this is, kinda gets to one of my favorite quotes. I literally have this, like, printed on my wall in my office, is the Elon quote about production, um, and I wanna get the quote right, I have it written, is the, uh, "Extreme difficulty of scaling production of new technologies not well understood. It's 1,000% to 10,000% harder than making a few prototypes." And the machine that makes the machine is really the genius and is really the hard part of getting full, full systems into production. Uh, and he tweeted this. I can send you the tweet after if you're curious. Uh, but what that means is there's a lot of guts to running a company, a big hardware company like us, that are completely unappreciated by the average certainly venture capitalist or investor, let alone the public. Uh, that goes into, like, supply chain management, kind of the, uh, procurement management, the sales and operations planning, which gets into, like, literally the guts of, like, how many fasteners should I buy? How many brackets should I buy? How many sensors should I buy? Uh, into the kind of pipeline planning. This is sort of the whole CRM side of things. Into the backend financial engine that kind of makes all of that work that ultimately your auditors have to interact with to, you know, stamp an audit at the end of the year. Um, like, all-

Harry Stebbings 46:57 Was it obvious that this was a mistake?

Matt Grimm 46:58 No, it's obvious now. (laughs) It wasn't obvi-

Harry Stebbings 47:00 Not at the time.

Matt Grimm 47:01 Not at the time it wasn't, no. Um, so, like, what we need, what we should have done at the time is, uh, uh, is, is take a big swing and say, like, "We're going to make massive investments in ultimately headcount and then platform spend," kind of the tools that those folks build, uh, "to build a, a unified kind of operating system here." We're doing that now. We announced this publicly. It's called ArsenalOS. Uh, like, we've hired a whole bunch of heads, but in retrospect, like, I shoulda done that two years ago, um, and we'd be in a, be in a much stronger position now.

Harry Stebbings 47:30 How do you think about your relationship to regret?

Matt Grimm 47:32 Oh, man, um-

Harry Stebbings 47:34 Do you regret things, or are you very forward-thinking, like doesn't matter, fuck it?

Matt Grimm 47:37 I think that anybody who tells you they have no regrets is lying, um, and they're trying to put on a face. They're trying to pretend. I think, like, there's a difference between sorrowful regret and, uh, introspective, reflective regret. And I think for me, uh, I'm incredibly introspective. I'm incredibly self-critical. I like to joke around Andrew that I'm our, I'm our harshest critic. Uh, and I actually view it as part of my job to be continually pushing to, to do better, to do, go faster, to be more perfectionist, and-

Harry Stebbings 48:12 Do you wonder about the impact that has on culture? I'm the same.

Matt Grimm 48:14 Oh, 100%.

Harry Stebbings 48:15 Because nothing's ever good enough.

Matt Grimm 48:17 No.

Harry Stebbings 48:17 And nothing's ever fast enough and nothing's ever right.

Matt Grimm 48:19 No.

Harry Stebbings 48:19 And even when it is, it's like, "Well, that's what I said it should've been."

Matt Grimm 48:21 Yeah. No.

Harry Stebbings 48:22 But that's not great for teams.

Matt Grimm 48:24 It's good for high-performing teams. It's not great-

Harry Stebbings 48:27 S-

Matt Grimm 48:27 ... for shit teams.

Harry Stebbings 48:27 Sure, but high-performing teams still need Matt. That's awesome.

Matt Grimm 48:30 Yeah.

Harry Stebbings 48:30 Well done.

Matt Grimm 48:31 Yeah. Sure. You can do both, though, is my, is, is kind of my meta point, right? So it's like, uh, it is very possible to have a customer demo...... go very well and have the customer walk away and be like, "Man, that was great. I'm really excited." Like, "Look forward to meeting next week, talking about pricing and next steps. Oh, this is really great. Thanks for taking the time." And they walk out and they close the door, get in the car and drive away. And to turn around and be like, "Hoo, all right, great job team. Let's talk about the three things we can do better next time." Like, that's absolutely totally doable. You can both celebrate your achievements and your successes and aim higher and better next time. Those things aren't mutually exclusive. And I think if anything, uh, and this tends to happen a lot in, in, in the Valley and certainly amongst VC world, is like a, a naval gazing at like how amazing you are and a self puffery of like, "Oh, we're the best." Like, first of all, like hubris kills everybody in the long run. So you, you can't have that. Uh, and, and second of all is just objectively false. Like, in, in any individual circumstance, you're always misplaying things to wit, like I guarantee at the end of this, I'm going to listen to this interview no less than four times, making notes of different tacks I could have take or different points I should have made or different arguments I could have gone down and less 'cause I'm neurotic more because the next time I want to do better. And I think that like you can take that mindset, you can take that approach and bring that to everything from our facilities, to our IT stack, to our recruiting process, to our technology development, to our manufacturing process, to our demos, to our customer trainings, to our fieldings, to our field support. Like literally everything as a company, we should be in a position where we say like, "Okay, great. We achieved that milestone. What can we do better next time? What's the learning? What should we change?" And, uh, it's good.

Harry Stebbings 50:13 Is, is a good decision today always better than a perfect decision tomorrow?

Matt Grimm 50:16 I know this gets thrown around the Valley a lot, um, in the general case, yes. However, I think that point is, is kind of hyperbolic. If the decision is truly genuinely tomorrow and there's new information that is coming today. Yeah. Waiting for tomorrow is better. That's, uh, in practice it's not actually the point that the question's trying to get at, the point that's trying to get, uh, that the question to get at is like overanalyzing over data collecting, driving to consensus amongst large committees, uh, over many, many, many, many months getting to a group think decision at the end, yeah. Is always net worse than making a quick decision, seeing the impact of it, learning from it, and then maybe changing course, maybe changing tact completely. Uh, yeah, almost always delaying is worse.

Harry Stebbings 51:05 How much money have you raised to this point?

Matt Grimm 51:07 Hoo.

Harry Stebbings 51:08 Give or take?

Matt Grimm 51:08 (laughs) Give or take. (laughs) Uh, do you include debt in that?

Harry Stebbings 51:12 Pre and post?

Matt Grimm 51:13 Uh, short of debt, it would be about 4 billion with debt it'd be about 5 billion.

Harry Stebbings 51:20 Okay. So four to 5 billion,

Harry Stebbings 51:22 who runs the fundraise process?

Matt Grimm 51:23 Uh, it's changed over the years. Uh, so in the early days, uh, and, and this is because our investor profile has changed over the years too. And surely you have the, the notes of who's led each round and who's participated in each round. Um, in the early days it was, uh, exclusively Trey who would run our fundraising processes and he would put, uh, Palmer or me or Brian or, uh, some of our key engineers in front of investors at the right time to, um, kind of, you know, get to whatever questions they had or whatever their concerns were. But really it was like orchestrated by, by, by Trey. Um, I was always running, managing kind of the back, back office process of it, kind of the collecting of signatures, getting the legal docs done, getting kind of all of the like, kind of mechanics of it, but really the, the framing of it, the pricing, the structure was all, all, all Trey driven. Um, in the later years, that's, um, the more recent years that's shifted to, uh, our CFO Bobak, uh, who's incredible. Um, and he's, he's just coming out of his public shell a little bit. He did a, a round table at Ramp that was really good. But in the latest, um, latest couple of rounds, including our debt round, that was, uh-

Harry Stebbings 52:28 Do you think-

Matt Grimm 52:29 ... entirely done driven by Bobak.

Harry Stebbings 52:30 ... you've raised enough, you've been lean, you could have done more, you've had wasted, you know, rounds in certain respects?

Matt Grimm 52:38 Depends on your philosophy, I suppose.

Harry Stebbings 52:40 If you had the time again, could you have done the same one too?

Matt Grimm 52:43 Absolutely not. I mean, I think there are certainly, uh, individual R&D efforts that haven't gone the way we wanted that in, with the benefit of hindsight, you'd say, "Ah, I would've, I would've cut bait there earlier. I wouldn't have done that one."

Harry Stebbings 52:54 What was the biggest R&D fail?

Matt Grimm 52:57 Uh, I'm not gonna talk about 'em publicly. Um, there, there, there are, there are a few internally that we've had that we put some, put some meat behind and, uh, and, and ultimately didn't pan out. And you cut bait and you move on and take some lessons and maybe you have an engine that's interesting or you have a control technique that's interesting. You can apply a new product, but, um, we've had a couple, I don't think I would say, "Oh, we could have done this on half as much money." No, not at all. I mean, if, if anything, I think we should, we should

Matt Grimm 53:23 raise more and go faster.

Harry Stebbings 53:24 I spoke to a founder the other day who said, "The hardest thing that I face today is two classes of citizens within my companies."

Matt Grimm 53:29 Mm-hmm.

Harry Stebbings 53:29 Those that take secondaries and those that haven't.

Matt Grimm 53:31 Mm-hmm.

Harry Stebbings 53:31 And kind of the OGs who have been there and deservedly have.

Matt Grimm 53:35 Yep.

Harry Stebbings 53:35 How did you think about the secondary decision?

Matt Grimm 53:38 Which secondary decision?

Harry Stebbings 53:39 Well, in terms of the ability to let people take secondaries.

Matt Grimm 53:42 Mm-hmm.

Harry Stebbings 53:42 How much, how to provision that? I don't know how to say this nicely. Um, Andrew has a lot of investors through different SPVs and family offices.

Matt Grimm 53:51 We do.

Harry Stebbings 53:51 And fuck it's, like the amount of Andrew investors I've met is, is a lot.

Matt Grimm 53:56 Yeah. How many of them are lying? (laughs)

Harry Stebbings 53:59 I, I, I, do you know what I think a lot of it is, "Hey, one person did an SPV."

Matt Grimm 54:03 Yeah.

Harry Stebbings 54:03 And got 25 investors for it.

Matt Grimm 54:06 Yep.

Harry Stebbings 54:06 And that then leads to 25 people say, "I'm an investor."

Matt Grimm 54:09 Yep. Yep. And, and there's a, a fair amount of kind of noise on the secondaries about an, an SPV of an SPV of an SPV.

Harry Stebbings 54:16 There's a lot of noise.

Matt Grimm 54:16 Yeah, yeah.

Harry Stebbings 54:17 How do you feel-

Matt Grimm 54:18 I mean, space, SpaceX had a similar thing. They still do have a similar thing, right? Um-

Harry Stebbings 54:21 For sure. How do you feel about that? How do you think about that internally? Is this something you wanna lock down?

Matt Grimm 54:26 I think there's two sides of it that kind of, they're, they're kind of conflicting. One side of it is that I am a very big believer in providing employees with the opportunity and the freedom...... to make a choice about whether being full pot committed, 100% in, or take a little bit off the table, uh, is best for them and their family. Um, you know, I'm a, I'm a father of three kids, and like, we live in Southern California and life is expensive, and Anduril shares don't pay the daycare bills. So like, I totally 100% appreciate someone who's in a position where they're saying like, "Hey, if I sell 20% of my position off, or I sell 10% of my position off, it'll fundamentally change kind of my quality of life and it'll lead to, you know, a marked improvement in my home life, which, you know, ultimately will, will, will make me more kind of committed and, and happy here, and it'll be less tempting to go leave for a higher cash kind of compensation somewhere else." Like, totally get that, and I believe in the rights and the kind of ability of individuals to make that decision. So, on the one side, I'm like, yeah, secondaries are a good thing. Like, you want these folks to be able to have that, have that freedom. And, um, it's worth noting that every time we've done one of these structured tenders, uh, we've had, uh, a relatively low participation rate in them. Um, somewhere in the like 30% range of the percent of shares that could have been sold that were eligible to be sold, uh, that folks actually did sell. So like a fairly, fairly low blended average of, uh, of folks who were selling their shares off, which I take as a great sign that employees are, are very excited and very long. The inverse of that is the chaos of the secondary market, and, um, I think my reputation for hating the chaos of the secondary market's pretty, pretty, pretty well deserved. Uh, I think there's a lot of what I would describe as pretty scummy behavior that happens in the secondary markets, where-

Harry Stebbings 56:23 What is this scummy behavior?

Matt Grimm 56:25 So these SPV brokers who are... I, I, I get why they exist. Uh, they are operating with very low information. Like, Anduril has never once ever approached an SPV broker and said, "Hey, here are our detailed financials. Here's our detailed strategy. Let me avail our management team for different interviews or different kind of, kind of sessions." Uh, they are operating off of a very limited set of basically headlines, which are almost always wrong, and then turning around to investors who are, uh, either desperate, uh, or just sort of kinda carefree, and saying like, "I got an opportunity to invest in Anduril, or SpaceX, or OpenAI," or whatever other kind of hot company, uh, that, that they've been able to, to wiggle some access into. "Here are a couple of headline numbers." A lot of those investors don't understand the fee structures that they're getting into. A lot of those investors don't understand even the structure of carried interest and what that looks like. Uh, and so what is fundamentally happening is you get a representation of bad numbers to kind of like relatively unsophisticated investors on the other end, uh, who are paying usually pretty steep premiums to the kind of what we would describe as the fair market price, uh, with usually pretty ugly layered fees on that, with, in some cases, pretty material misrepresentations. And we've seen some SPVs going around of folks who are fundamentally lying about what shares they have access to, what vehicles they're investing in.

Harry Stebbings 58:03 Is that not a financial crime? You are like misrepresenting-

Matt Grimm 58:07 100% it is.

Harry Stebbings 58:08 ... 200 Gs purchase.

Matt Grimm 58:08 100% it is.

Harry Stebbings 58:08 Yeah.

Matt Grimm 58:08 100% it is. And when we've, when we've seen it, we've, we've called folks out and said, "Hey, that's just not true." Uh, the, the, the most classic of which is where someone says, "Oh, we have direct access to Anduril primary shares of their last round." There was something going around recently of somebody who was like, "We have access to the second close of Anduril Series F raise." And it's like, what the hell are you talking about? There is no second close. The round has been closed for four months. Like, this is done. So if what you're saying is like you're buying shares from somebody who did invest, okay, then say that. But that's not what they're saying. What they're making it sound like is just a totally fundamentally different position.

Harry Stebbings 58:45 To what extent is the onus not on you for that? So if I take, for example, Nikolai at Revolut.

Matt Grimm 58:50 Yeah.

Harry Stebbings 58:50 He has fucking controlled that cap table.

Matt Grimm 58:53 Yep.

Harry Stebbings 58:53 I mean, just watertight.

Matt Grimm 58:56 We've tried.

Harry Stebbings 58:57 You've tried.

Matt Grimm 58:57 We've tried. We've tried. And to a certain extent, um, you can't totally control... You certainly can't control fraud.

Harry Stebbings 59:05 Mm-hmm.

Matt Grimm 59:06 Like, fraud's, fraud's gonna exist. And I can guarantee that someone out there believes that they invested in their former roommate's boyfriend's SPV and owns SpaceX shares or Anduril or OpenAI or whatever else, and actually what they're doing is they're funding that guy's coke habit in B- the Bahamas or something. Like guarantee that stuff's happening, and it's like, I, I can't control that. Uh, what we can control is who has direct access to the cap table, who has direct access to Anduril strategy, who has direct access to Anduril financials. Uh, and beyond that, it's like, I, I, we kinda can't control some of it, to be honest.

Harry Stebbings 59:46 What specifically has Anduril done to be the breakout success that it is? I asked, um, Trey the same question, and he gave me a great answer, which I'll reveal to you after.

Matt Grimm 59:56 Yeah, yeah, you can't tell me ahead of time. That would-

Harry Stebbings 59:58 Yeah.

Matt Grimm 59:58 That would, that would rui- ruin, ruin the, the surprise. Um, my answer would be twofold. Uh, I think first we have... Uh, and they're very related. I think first we have unlocked what was a kind of a latent patriotism within the technology and defense sector. I say latent because if you look at the momentum through the kind of the early 2000s into the, into the 2010s, the momentum in the tech sector, uh, amongst kind of the zeitgeist, amongst the employee kind of mindset, was not one of patriotism. And to your question, you know, a half hour ago, whatever, like are the best and brightest going to work at Lockheed, et cetera? Like, the, like, no, no, there was not an interest in working in the defense sector. And I think like Anduril has unlocked...... that kinda latent talent to wake up and come work on problems that we view as the most important problems in, in, in facing the world right now. Uh, so we, we've unlocked that, and then the f- other half of that kind of, kind of card there is also by unlocking a incredible amount of, of funding and investment into this sector that had also been historically, uh, kind of, kind of lacking for this kind of segment. Uh, and to your point about, like, "Well, isn't this a bad customer?" Like, "I'm used to winner take all," like yeah, that's a lot of, that's a lot of investors. I mean, that's a lot of kind of traditional VC style investing where you're thinking about the next ad tech company or the next social media platform or something, and like, cool, I get it, fine, power to you. Uh, that's not this sector, and thus through the, the, the 2000s and into the 2010s, uh, investors weren't investing in this area. And I think that, like, we were able to both unlock that investor enthusiasm and then pivot that into unlocking this latent kind of patriotism in the dec- the tech talent base, uh, and being able to align the two of those on this mission set, and ultimately, like, at its absolute core, I know this is gonna sound cheesy, but like at its absolute core, like a company is made up of their people, and, uh, if we can get the most motivated, the brightest, uh, the hardest working talent to work on these problems, then like, we will, we will, you'll get good results. So I think, like if it's the one thing I had to point to that's like what made Anduril successful, it's, it's, it's that. We've attracted incredibly smart, hardworking geniuses to work on, uh, on, on, on this problem set.

Harry Stebbings 1:02:40 A company is a collection of people. You mentioned kind of bringing that together with the patriotism elements.

Matt Grimm 1:02:44 Yeah, do you wanna like embroider that on a pillow or something, you know?

Harry Stebbings 1:02:47 No-

Matt Grimm 1:02:47 Could make, could make, could make a nice like, uh, little poster, motivational poster.

Harry Stebbings 1:02:50 My, my, the hard question I have for you is, the patriotism-

Matt Grimm 1:02:53 Mm-hmm.

Harry Stebbings 1:02:53 ... there is this image of kind of machoism-

Matt Grimm 1:02:56 Mm.

Harry Stebbings 1:02:56 ... aligned with defense, war, conflicts.

Matt Grimm 1:02:59 Sure.

Harry Stebbings 1:03:00 Um, what percent of Anduril is women? Respectfully, does it matter?

Matt Grimm 1:03:05 Yep.

Harry Stebbings 1:03:06 And I- I'm kind of just tying everything together here and like, you know, Sean Maguire said the, a woke mind virus is the worst thing in society.

Matt Grimm 1:03:12 (laughs)

Harry Stebbings 1:03:12 And actually we're here to build amazing companies.

Matt Grimm 1:03:14 Uh, so what I think matters, I genuinely fundamentally do not believe the statistics matter. I think what matters is that I want and I work very hard every day to make this so I want every Andurilian to wake up in the morning, whether they're male, female, white, black, Latino, Asian, whatever, I want them to work, wake up every morning and feel excited to come to work. I want them to feel accepted. I want them to feel motivated. I want them to feel like this is a good career decision for them. I want them to feel financially rewarded, and I want them to ultimately believe in the long-term vision of what we're building here, and, uh, regardless of what they identify as, what boxes they check on a form, fundamentally in my core, I don't give a shit. And I think that like a, a focus on-

Harry Stebbings 1:03:58 So you're not gonna hire for a number?

Matt Grimm 1:03:59 No, absolutely not. And anybody who tells you that they are, I think like, like I, I think is misguided.

Harry Stebbings 1:04:05 How- what percent is women then?

Matt Grimm 1:04:06 Yeah, not enough, man. Not enough. Um, we're about, I think like 18%, 20%, something like that.

Harry Stebbings 1:04:12 18 to 20% women?

Matt Grimm 1:04:13 Something in that range, yeah.

Harry Stebbings 1:04:14 Pretty good.

Matt Grimm 1:04:15 (laughs) That's funny.

Harry Stebbings 1:04:17 (laughs)

Matt Grimm 1:04:17 Um, yeah. It's more than you might think.

Harry Stebbings 1:04:19 I think if you look at the average venture portfolio, honestly it's probably 5%.

Matt Grimm 1:04:23 You think so?

Harry Stebbings 1:04:24 Where it, where-

Matt Grimm 1:04:24 Of total employees?

Harry Stebbings 1:04:26 No, no, I'm saying where a CEO is the woman.

Matt Grimm 1:04:28 Oh, where a CEO is the woman. Yeah, you're talking about five-

Harry Stebbings 1:04:29 Where the CEO.

Matt Grimm 1:04:30 Yeah.

Harry Stebbings 1:04:30 Co-founder is the bullshit one-

Matt Grimm 1:04:32 Yeah, yeah.

Harry Stebbings 1:04:32 ... we can all get away with.

Matt Grimm 1:04:33 Yeah.

Harry Stebbings 1:04:34 CEO woman, less than 5%.

Matt Grimm 1:04:35 Yeah, I think that's probably right.

Harry Stebbings 1:04:36 This audience, 85% man.

Matt Grimm 1:04:38 Oh, interesting.

Harry Stebbings 1:04:39 Yeah. Crushing it.

Matt Grimm 1:04:40 Interesting. (laughs)

Harry Stebbings 1:04:40 Yeah, well done. Yes.

Matt Grimm 1:04:42 Uh, it, it's 'cause of the, it's 'cause of the, the, the workout shorts you've got there, that's what it is.

Harry Stebbings 1:04:46 That, that, that's it, absolutely.

Matt Grimm 1:04:47 Yeah. It's, and it's your, your macho vibe,

Matt Grimm 1:04:49 Harry, that's what it is.

Harry Stebbings 1:04:49 Thank you. So Trey-

Matt Grimm 1:04:50 Yeah.

Harry Stebbings 1:04:50 ... actually said the reason why you've been successful is the composition of leaders that you have in the firm.

Matt Grimm 1:04:54 Mm-hmm.

Harry Stebbings 1:04:55 Which is able to be incredible execution in you-

Matt Grimm 1:04:58 Yeah.

Harry Stebbings 1:04:58 ... incredible product mind in, um, Palmer-

Matt Grimm 1:05:01 Mm-hmm.

Harry Stebbings 1:05:01 ... fundraising ability in Trey-

Matt Grimm 1:05:03 Yep.

Harry Stebbings 1:05:03 ... uh, ability to sell into government as well in, you know, Brian and Trey.

Matt Grimm 1:05:07 Yeah.

Harry Stebbings 1:05:08 Very different skillsets.

Matt Grimm 1:05:09 Yep.

Harry Stebbings 1:05:10 And there are a lot of defense companies where you have one of them and not any of the others, and that is not enough.

Matt Grimm 1:05:16 Agreed.

Harry Stebbings 1:05:17 Which leads me to my other question, which is we're seeing a fuck ton of spending in defense in terms of venture investments.

Matt Grimm 1:05:22 Yeah.

Harry Stebbings 1:05:23 What happens to all these venture investments in defense companies?

Matt Grimm 1:05:27 Uh, (sighs) I mean, I think it's kind of a complicated question. I think, um, ultimately I'm a little nervous about a lot of these companies kinda getting over their skis and then getting one or two fundraisers under them and then realizing it's a lot harder than it looks on paper, uh, and, and ultimately struggling and probably, probably imploding.

Harry Stebbings 1:05:48 As a venture investor contemplating investing in the market-

Matt Grimm 1:05:51 Yeah.

Harry Stebbings 1:05:51 ... what, what should I know that I don't know?

Matt Grimm 1:05:53 Uh, you should, you should know that the Anduril of X is going to be Anduril, uh, and that your, your best bet's probably buying as many Anduril shares as you can. Beyond that, uh, I think what you should know is that execution and delivery and actually winning these contracts, winning these long-term programs of record is incredibly complicated and fraught with incredibly complex regulations, uh, compliance, kind of, uh, accreditation. Like there's this whole world of, of, of very messy kind of back office stuff that is admittedly not sexy, it admittedly doesn't make great headlines, but, uh, saying like, "We've got a new missile and it's gonna be great," like, cool does not a successful missile program make. And there's a, a huge gap there. So as a, uh, as, as a new investor to the segment, first of all, I would say, uh, you know, p-... you're unlikely to drive venture-style returns by being kind of consensus, but, like, beyond that, uh, I would say truly spend the time to appreciate the complexities of the appropriations process, the budget process, the, the, the awarding and winning and supporting and delivering of these, of these.

Harry Stebbings 1:07:06 'Cause we're seeing, like, defense funds being created.

Matt Grimm 1:07:08 Yeah.

Harry Stebbings 1:07:08 And I'm like, this is not an asset class in itself to just-

Matt Grimm 1:07:12 Shouldn't be, no.

Harry Stebbings 1:07:13 No.

Matt Grimm 1:07:13 Yeah.

Harry Stebbings 1:07:13 You agree with me?

Matt Grimm 1:07:14 I agree. Absolutely. As a component of a diversified defense sort of investment within a broader diversified portfolio, yeah, sure.

Harry Stebbings 1:07:20 Totally makes sense there.

Matt Grimm 1:07:21 Yeah.

Harry Stebbings 1:07:21 Absolutely.

Matt Grimm 1:07:22 Yeah.

Harry Stebbings 1:07:22 What do you think of Helsing?

Matt Grimm 1:07:24 Oh, we love 'em. Like, good relationship with them. Uh, I hope they succeed. Um, we've talked through about the, talked with them a couple times about potential collaborations. Um, I, you know,

Matt Grimm 1:07:36 we'll see where they end up.

Harry Stebbings 1:07:36 We mentioned the m- immense number of startups getting funded.

Matt Grimm 1:07:39 Yep.

Harry Stebbings 1:07:40 Acquisitions? How do you think about-

Matt Grimm 1:07:42 Yeah.

Harry Stebbings 1:07:42 ... acquisitions right now?

Matt Grimm 1:07:43 Yeah, we've been pretty successful with, with acquisitions.

Harry Stebbings 1:07:45 You were in Australia.

Matt Grimm 1:07:46 I was.

Harry Stebbings 1:07:47 That was when we first met.

Matt Grimm 1:07:48 Yes. (laughs)

Harry Stebbings 1:07:48 Yeah, you were like... I don't know.

Matt Grimm 1:07:49 Yeah.

Harry Stebbings 1:07:49 I was like, "You were in Aus? This is incredibly late for you."

Matt Grimm 1:07:51 Yep.

Harry Stebbings 1:07:51 And you were like, "No, I'm in Sydney."

Matt Grimm 1:07:52 Yeah. Yeah, I was in Australia, um, related to an acquisition actually. Um, yeah, so we've had pretty good success with acquisitions. Um, so kind of a little atypical for a company at, at, at our age. Uh, the thesis behind our acquisitions is basically that there exists a category of, you know, to your point about, I guess it was Trey's point really, about the kind of g- skill sets of the founding team and what we're really good at and kind of what, what we can drive at. Uh, there exists a category of these companies where they have a brilliant product mind, they have some interesting technology, they have some interesting, uh, set of core, kind of core platform, and either they haven't quite figured out the government relations sales go-to-market engine, like they haven't quite gotten there, uh, or they haven't quite solved the kind of like back office proposals and the contracting and to compliance and to security clearances and to kind of supply chain management and, like, all of that kind of, like, complex, admittedly not that fun kind of back office pieces, uh, both of which we as a company happen to be, like, really fucking good at. So, uh, we find these companies, and like the, the why I was in Australia was related to this company we acquired based out of Boston called, uh, Dive Technologies. They make a robotic submarine, an autonomous submarine. Uh, we sold a variant of that submarine to the Royal Australian Navy, uh, on this development program, and we had to hire an entirely new team, start up a whole new office in, in, in Sydney. Uh, so I took my family over for about 18 months to kind of launch that. We've got about 125, 130 employees in Sydney now, something, something thereabouts. So we've taken that kind of approach to that Dive kind of mentality, where they had a very interesting submarine design. It was still pretty early. Uh, they didn't have a ton of revenue, they didn't have a ton of customers, but, like, the technology itself is incredibly, incredibly cool, incredibly compelling. Uh, we mix that with our kind of customer knowledge, our intimate kind of customer engagement, and we know that the Navy, both the US Navy, the UK Navy, and the Australian Navy want to have more autonomous kind of seafaring capability. You can kinda marry the two of those together and say, "There's something here." Uh, but the Dive team at the time didn't, just didn't have that kind of whole go-to-market kind of support engine there. So we say, "Hey, let's take that platform. Let's bolt it, uh, to, uh, alongside both our Lattice platform for kind of a command and control kind of communication side of, of running a robot with the go-to-market engine that we've already built, uh, and, and magic can happen."

Harry Stebbings 1:10:24 (laughs)

Matt Grimm 1:10:24 And magic has happened. We've taken that, we've applied it to a few other acquisitions, and that's kinda generally the approach that we've seen work. It's also worth noting most of our acquisitions, um, almost all of them, uh, have not been venture backed. Uh, they've been sort of bootstrapped and, uh, and, and ground up started. So, um, it's kind of a different, little bit of a different

Matt Grimm 1:10:43 mentality.

Harry Stebbings 1:10:44 You mentioned taking your family and moving-

Matt Grimm 1:10:45 Oh.

Harry Stebbings 1:10:46 ... to Australia.

Matt Grimm 1:10:46 Yeah.

Harry Stebbings 1:10:47 I spoke to Brian, I spoke to Trey.

Matt Grimm 1:10:48 Yep.

Harry Stebbings 1:10:48 I spoke to so many, and they said you're an execution machine.

Matt Grimm 1:10:51 Yeah.

Harry Stebbings 1:10:52 What do you do that's non-obvious that allows you to be so efficient at what you do? Like, I see, I mean this in the nice way, but I see it in, like, your physique.

Matt Grimm 1:10:59 Mm-hmm. (laughs)

Harry Stebbings 1:10:59 Like, your physique is, like, the embodiment of execution.

Matt Grimm 1:11:02 Yeah. Uh, I mean, I-

Harry Stebbings 1:11:03 Mine is the embodiment of Europe. (laughs)

Matt Grimm 1:11:06 (laughs) That's funny. Um, I... It's kind of an interesting question. Uh, I think I'm kind of always moving, um, I'm always, always, always glued to my phones, uh, to much to the frustration of my wife at times. Um, I'll often be working on two or sometimes three things at the same time, and I'm just consistently trying to both, uh, make quick decisions, communicate those decisions, uh, and then empower people to execute on them is, like, part one. Um, part two is constantly learning. So I'm, like, constantly consuming, whether that's podcasts, whether that's audio books, whether that's new technical books. Like, I'm constantly trying to just expand my knowledge of, uh, of, of the world and of the kind of broader tech and defense ecosystem. And then the third piece, I would say, is that I, I think I have a pretty good eye for talent, and I have a pretty good eye for, uh, the types of folks who kind of have that perfectionist mindset that I do. Um-

Harry Stebbings 1:12:15 What time do you get up in the morning?

Matt Grimm 1:12:16 Uh, about 5:30.

Harry Stebbings 1:12:17 When's your gym?

Matt Grimm 1:12:19 Right then.

Harry Stebbings 1:12:19 Right then?

Matt Grimm 1:12:20 Yeah.

Harry Stebbings 1:12:20 Kids get up at 7:00?

Matt Grimm 1:12:22 Yeah, thereabouts.

Harry Stebbings 1:12:23 Okay, so then you-

Matt Grimm 1:12:23 Yeah, I do- I don't see my kids in the morning usually. Um, so usually I'm, I'm at the office. Uh, we have a gym at the office. So usually I go there, uh, work out at the office, uh, work all day, and then get home and do, um, story time and bedtime with my kids at night.

Harry Stebbings 1:12:35 Do you think it's bullshit to think that you can have it all? Like...

Matt Grimm 1:12:38 Oh, absolutely. Absolutely. Anybody who puts that together and, and, and tries to convince you that you can have everything you possibly want in life with no sacrifices is lying to you.

Harry Stebbings 1:12:47 What have you missed-

Matt Grimm 1:12:48 Of course there are sacrifices.

Harry Stebbings 1:12:49 What have you missed or sacrificed that you think about most?

Matt Grimm 1:12:52 I...There's not much, man. There's not much, to be honest. I, I, I, I, I, I think if I had more time, I would spend more time with my kids. Like, you don't get them at this age very often. Uh, or sorry, for very long. Very often's a bad phrase. Uh, you don't get them at this age for very long. Um, and they're really fun. They're really, really good kids.

Harry Stebbings 1:13:17 What-

Matt Grimm 1:13:17 They bring me a lot

Matt Grimm 1:13:18 of joy in life.

Harry Stebbings 1:13:18 What's the secret to a happy marriage and being incredibly busy?

Matt Grimm 1:13:22 Is two things. First is, uh, I mean, both of them are gonna sound, sound pretty cheesy. Um, first is choosing your life partner very, very, very, very carefully. And I think having a, um, which goes to point two, very clear communication about expectations, about responsibilities, about, uh, timelines, about goals. And if, uh, you know, fundamentally, relationships fall apart when some of those things don't happen. So, if I'm consistently making promises to my wife, and she's amazing and great, uh, if I'm consistently making promises about where I'll be, or, "I'll take the kids here," or, "I'll get this thing done," or, "I'll handle this problem," and then I'm consistently not, then she will understandably get frustrated. And the ver- verse is also true, and I find that, uh, this applies to business as well, without clear communication about, "Yes, I will, I will take care of that," but actually doing it and doing it to a, a, a high level, uh, frustration just builds over time. And over time, that can turn in from minor frustration into major frustration into, "This isn't working for me," kind of, uh, kind of breaks.

Harry Stebbings 1:14:31 Do you agree, never go to sleep angry?

Matt Grimm 1:14:33 (laughs) Um, no, actually. I actually don't. I actually don't. Um, I think also applies to business, but especially for me, and you talk to enough of my friends, you'll, y- this has surely been (laughs) , surely been said, like, I can have a very, uh, I can take things personally that aren't necessarily intended personally, and I can have an emotional reaction, an overly