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

1. 0:00 – 0:54

   Intro

   1. HSHarry Stebbings0:00

      Sean Maguire said on the show that Iran is the greatest evil. Do you agree?

   2. MGMatt Grimm0:04

      Yes and no.

   3. HSHarry Stebbings0:06

      Who is?

   4. MGMatt Grimm0:06

      China. Hands down.

   5. HSHarry Stebbings0:08

      Why?

   6. MGMatt Grimm0:08

      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.

   7. HSHarry Stebbings0:28

      Should TikTok be banned in the US?

   8. MGMatt Grimm0:30

      100%, absolutely, yesterday, b- uh, if not years ago.

   9. HSHarry Stebbings0:34

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

   10. MGMatt Grimm0:49

       We get to do it in person.

   11. HSHarry Stebbings0:49

       ... this is so much more special. Thank you for joining me.

   12. MGMatt Grimm0:52

       Yeah. Thank you for having me. Excited to be here.

2. 0:54 – 3:37

   Post-Election Reflections

   1. MGMatt Grimm0:54

   2. HSHarry Stebbings0:54

      Now we, uh, we're at an interesting time.

   3. MGMatt Grimm0:56

      Yep.

   4. HSHarry Stebbings0:56

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

   5. MGMatt Grimm1:03

      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.

   6. HSHarry Stebbings2:41

      Do you think Anduril will thrive better in a Trump administration though versus a Kamala administration?

   7. MGMatt Grimm2:46

      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

3. 3:37 – 10:32

   China-Taiwan Relations

   1. MGMatt Grimm3:37

      and, and put into practice.

   2. HSHarry Stebbings3:38

      Speaking of the American industrial-

   3. MGMatt Grimm3:39

      Yeah.

   4. HSHarry Stebbings3:39

      ... 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?

   5. MGMatt Grimm3:48

      In a new Trump administration you mean?

   6. HSHarry Stebbings3:49

      Yeah.

   7. MGMatt Grimm3:50

      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.

   8. HSHarry Stebbings4:43

      Do you think China will invade Taiwan?

   9. MGMatt Grimm4:45

      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.

   10. HSHarry Stebbings5:30

       Must be quite a funny conversation with your wife, like-

   11. MGMatt Grimm5:32

       (laughs)

   12. HSHarry Stebbings5:32

       ... "How was your day?" "Oh, I got, just got sanctioned by, by China." Oh.

   13. MGMatt Grimm5:35

       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-

   14. HSHarry Stebbings5:50

       You're like, "I wonder what Palmer's done now." (laughs)

   15. MGMatt Grimm5:53

       (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?"

   16. HSHarry Stebbings6:00

       (laughs)

   17. MGMatt Grimm6:00

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

   18. HSHarry Stebbings6:05

       "Darling, we're not going to Beijing this summer." (laughs)

   19. MGMatt Grimm6:08

       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.

   20. HSHarry Stebbings6:50

       Do you think US attempts to bring back semiconductor kind of manufacturing industry-

   21. MGMatt Grimm6:55

       Yeah.

   22. HSHarry Stebbings6:55

       ... back to US soil will be successful?

   23. MGMatt Grimm6:57

       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.

   24. HSHarry Stebbings7:12

       So do you think the threat by China moving forwards will decrease or increase?

   25. MGMatt Grimm7:16

       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-

   26. HSHarry Stebbings7:31

       Wh- what is that? I'm so sorry, I'm really naive.

   27. MGMatt Grimm7:33

       Yeah. (laughs)

   28. HSHarry Stebbings7:33

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

   29. MGMatt Grimm7:36

       Yeah, okay.

   30. HSHarry Stebbings7:37

       ... what is that?
4. 10:32 – 11:34

   How Will the Russia-Ukraine Conflict Evolve?

   1. HSHarry Stebbings10:32

      Ukraine.

   2. MGMatt Grimm10:32

      Yep.

   3. HSHarry Stebbings10:32

      It is, uh, uh... You know, we're obviously in Europe, it's a very pressing-

   4. MGMatt Grimm10:35

      Yes.

   5. HSHarry Stebbings10:35

      ... and important topic. Uh, how do you foresee that playing out over the next few years?

   6. MGMatt Grimm10:40

      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.

   7. HSHarry Stebbings11:14

      Do you think Trump will be able to bring the two parties together-

   8. MGMatt Grimm11:16

      (sighs)

   9. HSHarry Stebbings11:16

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

   10. MGMatt Grimm11:22

       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

5. 11:34 – 13:35

   Israeli–Palestinian conflict

   1. MGMatt Grimm11:34

      it's actually pretty hard.

   2. HSHarry Stebbings11:35

      Final one and then I wanna get to the business itself-

   3. MGMatt Grimm11:37

      Let's move on.

   4. HSHarry Stebbings11:38

      Israel-Gaza.

   5. MGMatt Grimm11:38

      Yeah.

   6. HSHarry Stebbings11:38

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

   7. MGMatt Grimm11:47

      You should move to a better neighborhood. (laughs)

   8. HSHarry Stebbings11:50

      (laughs) Marylebone is not terrible.

   9. MGMatt Grimm11:51

      Yeah. (laughs)

   10. HSHarry Stebbings11:52

       Like... But it, uh, it's very, very kind of pressing in London. What happens there?

   11. MGMatt Grimm11:57

       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-

   12. HSHarry Stebbings12:37

       Do you think Israel is wrong in their response?

   13. MGMatt Grimm12:39

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

   14. HSHarry Stebbings12:44

       Strong.

   15. MGMatt Grimm12:46

       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.

   16. HSHarry Stebbings13:15

       As crass and as awful as this sounds, is war not good for business?

   17. MGMatt Grimm13:18

       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.

   18. HSHarry Stebbings13:30

       You are the biggest insurance premium to governments.

   19. MGMatt Grimm13:33

       (laughs)

   20. HSHarry Stebbings13:33

       I, it's, it's, uh, I totally understand

6. 13:35 – 23:14

   How Are Software & Autonomy Transforming Defense?

   1. HSHarry Stebbings13:35

      that. You mentioned, "Hey, we wanna bring the latest technology-"

   2. MGMatt Grimm13:38

      Yeah.

   3. HSHarry Stebbings13:38

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

   4. MGMatt Grimm13:43

      Yeah.

   5. HSHarry Stebbings13:43

      "... and that they can leverage it if needed." How is software and autonomy transforming defense?

   6. MGMatt Grimm13:48

      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.

   7. HSHarry Stebbings15:39

      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.

   8. MGMatt Grimm15:54

      Yeah.

   9. HSHarry Stebbings15:54

      Uh, they're mostly run by people who've never actually had a job. Um.

   10. MGMatt Grimm15:59

       (laughs)

   11. HSHarry Stebbings15:59

       (laughs) I mean, they sound like the shittest customers ever.

   12. MGMatt Grimm16:02

       Yeah.

   13. HSHarry Stebbings16:03

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

   14. MGMatt Grimm16:09

       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.

   15. HSHarry Stebbings16:32

       We, we had a prime minister that didn't last longer than a cabbage.

   16. MGMatt Grimm16:35

       Yeah, for pretty famously, uh... (laughs)

   17. HSHarry Stebbings16:37

       (laughs)

   18. MGMatt Grimm16:37

       ... 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-

   19. HSHarry Stebbings16:44

       So does she. (laughs)

   20. MGMatt Grimm16:45

       (laughs) Yeah, exactly.

   21. HSHarry Stebbings16:46

       (laughs)

   22. MGMatt Grimm16:47

       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-

   23. HSHarry Stebbings18:44

       And then you show them.

   24. MGMatt Grimm18:45

       ... and then show them.

   25. HSHarry Stebbings18:45

       Yeah.

   26. MGMatt Grimm18:46

       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."

   27. HSHarry Stebbings19:25

       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."

   28. MGMatt Grimm19:33

       Yeah.

   29. HSHarry Stebbings19:34

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

   30. MGMatt Grimm19:39

       Yeah.
7. 23:14 – 32:05

   How Would Matt Design a Structure of Incentives to Encourage Risk-Taking?

   1. MGMatt Grimm23:14

      (laughs)

   2. HSHarry Stebbings23:14

      So you- I- I'm putting you now in charge of the MOD, the DOD-

   3. MGMatt Grimm23:17

      Sure.

   4. HSHarry Stebbings23:17

      ... you name your Department of Defense-

   5. MGMatt Grimm23:19

      Sure.

   6. HSHarry Stebbings23:19

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

   7. MGMatt Grimm23:28

      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-

   8. HSHarry Stebbings25:10

      Just for those that don't understand, what is cost plus contracting?

   9. MGMatt Grimm25:12

      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-

   10. HSHarry Stebbings25:57

       Takes time.

   11. MGMatt Grimm25:58

       ... 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.

   12. HSHarry Stebbings26:50

       W- w- what are they?

   13. MGMatt Grimm26:50

       Uh-

   14. HSHarry Stebbings26:51

       I don't know these.

   15. MGMatt Grimm26:51

       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.

   16. HSHarry Stebbings27:07

       But, I'm sorry, I'm-

   17. MGMatt Grimm27:07

       So thinking about this, it's like-

   18. HSHarry Stebbings27:09

       ... 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.

   19. MGMatt Grimm27:18

       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.

   20. HSHarry Stebbings28:56

       But I don't, I- I don't understand that. Like, w-

   21. MGMatt Grimm28:58

       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.

   22. HSHarry Stebbings29:48

       So if, if it... Uh, uh, how long is it from, like, first dag-

   23. MGMatt Grimm29:51

       (laughs) .

   24. HSHarry Stebbings29:51

       ... to deployment there, and how long is it with you?

   25. MGMatt Grimm29:54

       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.

   26. HSHarry Stebbings30:10

       But it's like conflicts which-

   27. MGMatt Grimm30:10

       I'm really enjoying-

   28. HSHarry Stebbings30:11

       Conflicts would-

   29. MGMatt Grimm30:11

       ... your face right now.

   30. HSHarry Stebbings30:12

       B- b- this-
8. 32:05 – 37:27

   Does the Defense Market Challenge the Winner-Take-All Model?

   1. HSHarry Stebbings32:05

   2. MGMatt Grimm32:05

      Yeah.

   3. HSHarry Stebbings32:05

      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."

   4. MGMatt Grimm32:27

      Yep.

   5. HSHarry Stebbings32:27

      They will always be-

   6. MGMatt Grimm32:28

      No, of course.

   7. HSHarry Stebbings32:29

      ... pretty scattered.

   8. MGMatt Grimm32:29

      No, and we wouldn't propose that.

   9. HSHarry Stebbings32:30

      And they'll always be pretty scattered.

   10. MGMatt Grimm32:31

       Mm-hmm.

   11. HSHarry Stebbings32:32

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

   12. MGMatt Grimm32:39

       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.

   13. HSHarry Stebbings35:03

       How much did the US spend?

   14. MGMatt Grimm35:04

       880.

   15. HSHarry Stebbings35:06

       880?

   16. MGMatt Grimm35:06

       Yeah.

   17. HSHarry Stebbings35:06

       Wow. How much did the UK spend?

   18. MGMatt Grimm35:08

       Uh, 73.

   19. HSHarry Stebbings35:10

       73. Wow.

   20. MGMatt Grimm35:10

       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.

   21. HSHarry Stebbings35:16

       Okay. So-

   22. MGMatt Grimm35:17

       (laughs)

   23. HSHarry Stebbings35:17

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

   24. MGMatt Grimm35:22

       And then EU is 295 on top of that.

   25. HSHarry Stebbings35:24

       Okay, but l- let's look at that. 880 versus-

   26. MGMatt Grimm35:27

       Yep.

   27. HSHarry Stebbings35:27

       ... 73. That is 8% or 8.5%. Is the US spending too much or is the UK spending too little?

   28. MGMatt Grimm35:33

       UK is spending too little by a wide order of magnitude.

   29. HSHarry Stebbings35:36

       What should it be?

   30. MGMatt Grimm35:38

       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.
9. 37:27 – 47:30

   Will Nations Favor Domestic Defense Providers?

   1. HSHarry Stebbings37:27

      have Anduril in the US. We have Helsink in Europe.

   2. MGMatt Grimm37:30

      Mm-hmm.

   3. HSHarry Stebbings37:31

      Will we have favored purchasing by those nations?

   4. MGMatt Grimm37:35

      Oh, we already do.

   5. HSHarry Stebbings37:37

      We already do?

   6. MGMatt Grimm37:37

      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.

   7. HSHarry Stebbings38:59

      What percent of your budget is R&D?

   8. MGMatt Grimm39:02

      Our budget?

   9. HSHarry Stebbings39:03

      Yeah.

   10. MGMatt Grimm39:03

       Oof.

   11. HSHarry Stebbings39:04

       I'm just wondering comparatively to the 1.5% of one of your primes.

   12. MGMatt Grimm39:08

       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-

   13. HSHarry Stebbings39:15

       Range-wise, is it like 10 to 15%?

   14. MGMatt Grimm39:17

       ... 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-

   15. HSHarry Stebbings39:45

       I think it's super easy to bash-

   16. MGMatt Grimm39:47

       ... R&D.

   17. HSHarry Stebbings39:47

       ... incumbents. Uh, of course, and like-

   18. MGMatt Grimm39:50

       Of course it is.

   19. HSHarry Stebbings39:50

       Everyone does it.

   20. MGMatt Grimm39:51

       Yeah.

   21. HSHarry Stebbings39:51

       What did you learn-

   22. MGMatt Grimm39:52

       This is the venture capital community. (laughs)

   23. HSHarry Stebbings39:53

       Yeah.

   24. MGMatt Grimm39:53

       Of course we, of course we do. Everyone who, everyone who has come before is of course-

   25. HSHarry Stebbings39:57

       Oh, shit.

   26. MGMatt Grimm39:57

       Uh, yep.

   27. HSHarry Stebbings39:57

       What, what did you learn from them that they've done well-

   28. MGMatt Grimm40:00

       Yeah.

   29. HSHarry Stebbings40:01

       ... that you actually wanna take with you?

   30. MGMatt Grimm40:03

       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.
10. 47:30 – 51:22

    Relationship to Regret

    1. MGMatt Grimm47:30

    2. HSHarry Stebbings47:30

       How do you think about your relationship to regret?

    3. MGMatt Grimm47:32

       Oh, man, um-

    4. HSHarry Stebbings47:34

       Do you regret things, or are you very forward-thinking, like doesn't matter, fuck it?

    5. MGMatt Grimm47:37

       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-

    6. HSHarry Stebbings48:12

       Do you wonder about the impact that has on culture? I'm the same.

    7. MGMatt Grimm48:14

       Oh, 100%.

    8. HSHarry Stebbings48:15

       Because nothing's ever good enough.

    9. MGMatt Grimm48:17

       No.

    10. HSHarry Stebbings48:17

        And nothing's ever fast enough and nothing's ever right.

    11. MGMatt Grimm48:19

        No.

    12. HSHarry Stebbings48:19

        And even when it is, it's like, "Well, that's what I said it should've been."

    13. MGMatt Grimm48:21

        Yeah. No.

    14. HSHarry Stebbings48:22

        But that's not great for teams.

    15. MGMatt Grimm48:24

        It's good for high-performing teams. It's not great-

    16. HSHarry Stebbings48:27

        S-

    17. MGMatt Grimm48:27

        ... for shit teams.

    18. HSHarry Stebbings48:27

        Sure, but high-performing teams still need Matt. That's awesome.

    19. MGMatt Grimm48:30

        Yeah.

    20. HSHarry Stebbings48:30

        Well done.

    21. MGMatt Grimm48:31

        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.

    22. HSHarry Stebbings50:13

        Is, is a good decision today always better than a perfect decision tomorrow?

    23. MGMatt Grimm50:16

        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.

    24. HSHarry Stebbings51:05

        How much money have you raised to this point?

    25. MGMatt Grimm51:07

        Hoo.

    26. HSHarry Stebbings51:08

        Give or take?

    27. MGMatt Grimm51:08

        (laughs) Give or take. (laughs) Uh, do you include debt in that?

    28. HSHarry Stebbings51:12

        Pre and post?

    29. MGMatt Grimm51:13

        Uh, short of debt, it would be about 4 billion with debt it'd be about 5 billion.

    30. HSHarry Stebbings51:20

        Okay. So four to 5 billion,

11. 51:22 – 53:23

    Fundraise Process

    1. HSHarry Stebbings51:22

       who runs the fundraise process?

    2. MGMatt Grimm51:23

       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-

    3. HSHarry Stebbings52:28

       Do you think-

    4. MGMatt Grimm52:29

       ... entirely done driven by Bobak.

    5. HSHarry Stebbings52:30

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

    6. MGMatt Grimm52:38

       Depends on your philosophy, I suppose.

    7. HSHarry Stebbings52:40

       If you had the time again, could you have done the same one too?

    8. MGMatt Grimm52:43

       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."

    9. HSHarry Stebbings52:54

       What was the biggest R&D fail?

    10. MGMatt Grimm52:57

        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

12. 53:23 – 59:46

    Managing the Impact of Secondaries

    1. MGMatt Grimm53:23

       raise more and go faster.

    2. HSHarry Stebbings53:24

       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."

    3. MGMatt Grimm53:29

       Mm-hmm.

    4. HSHarry Stebbings53:29

       Those that take secondaries and those that haven't.

    5. MGMatt Grimm53:31

       Mm-hmm.

    6. HSHarry Stebbings53:31

       And kind of the OGs who have been there and deservedly have.

    7. MGMatt Grimm53:35

       Yep.

    8. HSHarry Stebbings53:35

       How did you think about the secondary decision?

    9. MGMatt Grimm53:38

       Which secondary decision?

    10. HSHarry Stebbings53:39

        Well, in terms of the ability to let people take secondaries.

    11. MGMatt Grimm53:42

        Mm-hmm.

    12. HSHarry Stebbings53:42

        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.

    13. MGMatt Grimm53:51

        We do.

    14. HSHarry Stebbings53:51

        And fuck it's, like the amount of Andrew investors I've met is, is a lot.

    15. MGMatt Grimm53:56

        Yeah. How many of them are lying? (laughs)

    16. HSHarry Stebbings53:59

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

    17. MGMatt Grimm54:03

        Yeah.

    18. HSHarry Stebbings54:03

        And got 25 investors for it.

    19. MGMatt Grimm54:06

        Yep.

    20. HSHarry Stebbings54:06

        And that then leads to 25 people say, "I'm an investor."

    21. MGMatt Grimm54:09

        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.

    22. HSHarry Stebbings54:16

        There's a lot of noise.

    23. MGMatt Grimm54:16

        Yeah, yeah.

    24. HSHarry Stebbings54:17

        How do you feel-

    25. MGMatt Grimm54:18

        I mean, space, SpaceX had a similar thing. They still do have a similar thing, right? Um-

    26. HSHarry Stebbings54:21

        For sure. How do you feel about that? How do you think about that internally? Is this something you wanna lock down?

    27. MGMatt Grimm54:26

        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-

    28. HSHarry Stebbings56:23

        What is this scummy behavior?

    29. MGMatt Grimm56:25

        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.

    30. HSHarry Stebbings58:03

        Is that not a financial crime? You are like misrepresenting-
13. 59:46 – 1:04:49

    Key Factors Made Anduril a Breakout Success

    1. MGMatt Grimm59:46

    2. HSHarry Stebbings59:46

       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.

    3. MGMatt Grimm59:56

       Yeah, yeah, you can't tell me ahead of time. That would-

    4. HSHarry Stebbings59:58

       Yeah.

    5. MGMatt Grimm59:58

       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.

    6. HSHarry Stebbings1:02:40

       A company is a collection of people. You mentioned kind of bringing that together with the patriotism elements.

    7. MGMatt Grimm1:02:44

       Yeah, do you wanna like embroider that on a pillow or something, you know?

    8. HSHarry Stebbings1:02:47

       No-

    9. MGMatt Grimm1:02:47

       Could make, could make, could make a nice like, uh, little poster, motivational poster.

    10. HSHarry Stebbings1:02:50

        My, my, the hard question I have for you is, the patriotism-

    11. MGMatt Grimm1:02:53

        Mm-hmm.

    12. HSHarry Stebbings1:02:53

        ... there is this image of kind of machoism-

    13. MGMatt Grimm1:02:56

        Mm.

    14. HSHarry Stebbings1:02:56

        ... aligned with defense, war, conflicts.

    15. MGMatt Grimm1:02:59

        Sure.

    16. HSHarry Stebbings1:03:00

        Um, what percent of Anduril is women? Respectfully, does it matter?

    17. MGMatt Grimm1:03:05

        Yep.

    18. HSHarry Stebbings1:03:06

        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.

    19. MGMatt Grimm1:03:12

        (laughs)

    20. HSHarry Stebbings1:03:12

        And actually we're here to build amazing companies.

    21. MGMatt Grimm1:03:14

        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-

    22. HSHarry Stebbings1:03:58

        So you're not gonna hire for a number?

    23. MGMatt Grimm1:03:59

        No, absolutely not. And anybody who tells you that they are, I think like, like I, I think is misguided.

    24. HSHarry Stebbings1:04:05

        How- what percent is women then?

    25. MGMatt Grimm1:04:06

        Yeah, not enough, man. Not enough. Um, we're about, I think like 18%, 20%, something like that.

    26. HSHarry Stebbings1:04:12

        18 to 20% women?

    27. MGMatt Grimm1:04:13

        Something in that range, yeah.

    28. HSHarry Stebbings1:04:14

        Pretty good.

    29. MGMatt Grimm1:04:15

        (laughs) That's funny.

    30. HSHarry Stebbings1:04:17

        (laughs)
14. 1:04:49 – 1:07:36

    The Outlook for Venture Investments in Defense Companies

    1. MGMatt Grimm1:04:49

       Harry, that's what it is.

    2. HSHarry Stebbings1:04:49

       Thank you. So Trey-

    3. MGMatt Grimm1:04:50

       Yeah.

    4. HSHarry Stebbings1:04:50

       ... actually said the reason why you've been successful is the composition of leaders that you have in the firm.

    5. MGMatt Grimm1:04:54

       Mm-hmm.

    6. HSHarry Stebbings1:04:55

       Which is able to be incredible execution in you-

    7. MGMatt Grimm1:04:58

       Yeah.

    8. HSHarry Stebbings1:04:58

       ... incredible product mind in, um, Palmer-

    9. MGMatt Grimm1:05:01

       Mm-hmm.

    10. HSHarry Stebbings1:05:01

        ... fundraising ability in Trey-

    11. MGMatt Grimm1:05:03

        Yep.

    12. HSHarry Stebbings1:05:03

        ... uh, ability to sell into government as well in, you know, Brian and Trey.

    13. MGMatt Grimm1:05:07

        Yeah.

    14. HSHarry Stebbings1:05:08

        Very different skillsets.

    15. MGMatt Grimm1:05:09

        Yep.

    16. HSHarry Stebbings1:05:10

        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.

    17. MGMatt Grimm1:05:16

        Agreed.

    18. HSHarry Stebbings1:05:17

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

    19. MGMatt Grimm1:05:22

        Yeah.

    20. HSHarry Stebbings1:05:23

        What happens to all these venture investments in defense companies?

    21. MGMatt Grimm1:05:27

        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.

    22. HSHarry Stebbings1:05:48

        As a venture investor contemplating investing in the market-

    23. MGMatt Grimm1:05:51

        Yeah.

    24. HSHarry Stebbings1:05:51

        ... what, what should I know that I don't know?

    25. MGMatt Grimm1:05:53

        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.

    26. HSHarry Stebbings1:07:06

        'Cause we're seeing, like, defense funds being created.

    27. MGMatt Grimm1:07:08

        Yeah.

    28. HSHarry Stebbings1:07:08

        And I'm like, this is not an asset class in itself to just-

    29. MGMatt Grimm1:07:12

        Shouldn't be, no.

    30. HSHarry Stebbings1:07:13

        No.
15. 1:07:36 – 1:10:43

    Acquisition Strategy

    1. MGMatt Grimm1:07:36

       we'll see where they end up.

    2. HSHarry Stebbings1:07:36

       We mentioned the m- immense number of startups getting funded.

    3. MGMatt Grimm1:07:39

       Yep.

    4. HSHarry Stebbings1:07:40

       Acquisitions? How do you think about-

    5. MGMatt Grimm1:07:42

       Yeah.

    6. HSHarry Stebbings1:07:42

       ... acquisitions right now?

    7. MGMatt Grimm1:07:43

       Yeah, we've been pretty successful with, with acquisitions.

    8. HSHarry Stebbings1:07:45

       You were in Australia.

    9. MGMatt Grimm1:07:46

       I was.

    10. HSHarry Stebbings1:07:47

        That was when we first met.

    11. MGMatt Grimm1:07:48

        Yes. (laughs)

    12. HSHarry Stebbings1:07:48

        Yeah, you were like... I don't know.

    13. MGMatt Grimm1:07:49

        Yeah.

    14. HSHarry Stebbings1:07:49

        I was like, "You were in Aus? This is incredibly late for you."

    15. MGMatt Grimm1:07:51

        Yep.

    16. HSHarry Stebbings1:07:51

        And you were like, "No, I'm in Sydney."

    17. MGMatt Grimm1:07:52

        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."

    18. HSHarry Stebbings1:10:24

        (laughs)

    19. MGMatt Grimm1:10:24

        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

16. 1:10:43 – 1:13:18

    Non-Obvious Habits Make Matt an “Execution Machine”

    1. MGMatt Grimm1:10:43

       mentality.

    2. HSHarry Stebbings1:10:44

       You mentioned taking your family and moving-

    3. MGMatt Grimm1:10:45

       Oh.

    4. HSHarry Stebbings1:10:46

       ... to Australia.

    5. MGMatt Grimm1:10:46

       Yeah.

    6. HSHarry Stebbings1:10:47

       I spoke to Brian, I spoke to Trey.

    7. MGMatt Grimm1:10:48

       Yep.

    8. HSHarry Stebbings1:10:48

       I spoke to so many, and they said you're an execution machine.

    9. MGMatt Grimm1:10:51

       Yeah.

    10. HSHarry Stebbings1:10:52

        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.

    11. MGMatt Grimm1:10:59

        Mm-hmm. (laughs)

    12. HSHarry Stebbings1:10:59

        Like, your physique is, like, the embodiment of execution.

    13. MGMatt Grimm1:11:02

        Yeah. Uh, I mean, I-

    14. HSHarry Stebbings1:11:03

        Mine is the embodiment of Europe. (laughs)

    15. MGMatt Grimm1:11:06

        (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-

    16. HSHarry Stebbings1:12:15

        What time do you get up in the morning?

    17. MGMatt Grimm1:12:16

        Uh, about 5:30.

    18. HSHarry Stebbings1:12:17

        When's your gym?

    19. MGMatt Grimm1:12:19

        Right then.

    20. HSHarry Stebbings1:12:19

        Right then?

    21. MGMatt Grimm1:12:20

        Yeah.

    22. HSHarry Stebbings1:12:20

        Kids get up at 7:00?

    23. MGMatt Grimm1:12:22

        Yeah, thereabouts.

    24. HSHarry Stebbings1:12:23

        Okay, so then you-

    25. MGMatt Grimm1:12:23

        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.

    26. HSHarry Stebbings1:12:35

        Do you think it's bullshit to think that you can have it all? Like...

    27. MGMatt Grimm1:12:38

        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.

    28. HSHarry Stebbings1:12:47

        What have you missed-

    29. MGMatt Grimm1:12:48

        Of course there are sacrifices.

    30. HSHarry Stebbings1:12:49

        What have you missed or sacrificed that you think about most?
17. 1:13:18 – 1:17:08

    The Secret to a Happy Marriage

    1. MGMatt Grimm1:13:18

       of joy in life.

    2. HSHarry Stebbings1:13:18

       What's the secret to a happy marriage and being incredibly busy?

    3. MGMatt Grimm1:13:22

       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.

    4. HSHarry Stebbings1:14:31

       Do you agree, never go to sleep angry?

    5. MGMatt Grimm1:14:33

       (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 emotional reaction, to things that may, may not deserve such an emotional reaction. With the benefit of time, a benef- little bit of benefit of, uh, self-reflection, um, I think it puts you in a position to have a more thoughtful, clearer communication that isn't so fueled by emotion. And I think having an, an, an argument at dinner that turns into a argument after bedtime, that turns into a, "Let's stay up all night and argue about it," I actually think is, like, not, not actually that healthy. Just getting to a place where you say, like, "Look, we're both frustrated. Let's talk through this tomorrow," which I think is totally fine.

Episode duration: 1:45:59