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