20VC Anduril Founder, Palmer Luckey I Am Here To Build a $50Bn Company, How Palmer Evaluates His Relationship To Money Pre & Post Oculus' $2.3Bn Exit & Why The US DOD Needs To Be More Like China in It's Approach

In this episode of "20 Minutes VC," host Harry Stebbings interviews Palmer Luckey, founder of Anduril Industries, a defense technology company aiming to revolutionize U.S. and allied defense capabilities by integrating AI with advanced hardware. Luckey, who previously founded Oculus VR and sold it to Facebook for $2.3 billion, discusses his vision for Anduril to become a $50 billion company that fundamentally alters national security procurement. He shares insights into the challenges of working with legacy defense technologies, the need for continuous product development, and the importance of convincing both venture capitalists and government entities of the potential for innovative defense solutions. Despite misconceptions about Anduril's political stance and Silicon Valley's relationship with the DoD, Luckey emphasizes the bipartisan support for better military technology and the global desire for U.S. leadership in defense.

• Palmer Luckey is the founder of Anduril Industries, a defense company integrating AI with hardware advancements.
• Anduril aims to transform defense capabilities for the US and its allies.
• The company has raised over $385 million from notable investors.
• Palmer previously founded Oculus VR, which was acquired by Facebook for $2.3 billion.

"I'm thrilled to welcome Palmer Lucky founder, Anjural Industries, founded on the premise of radically transforming the defense capabilities of the United States and its allies by fusing artificial intelligence with the latest hardware advancements."

This quote introduces Palmer Luckey and the mission of his company, Anduril Industries, which is to innovate in the defense sector by combining AI with advanced hardware.

• Palmer started Oculus VR at 19, living in a camper trailer after dropping out of college.
• Oculus VR was one of the fastest multibillion-dollar exits, acquired by Facebook in less than two years.
• The acquisition by Facebook was seen as a way to accelerate Oculus's growth and capabilities.

"When I started Oculus, I was 19 years old, living in a 19 foot camper trailer, had just dropped out of college... and we went from just being a trailer to a multibillion dollar acquisition by Facebook in less than two years."

This quote recounts Palmer's journey from a college dropout to the founder of Oculus VR, leading to a rapid and successful exit.

• Palmer aims to build a $50 billion company that changes national security procurement in the US.
• He believes that to succeed in the defense industry, one must operate independently rather than as a subcontractor.
• Palmer's financial success from Oculus gave him the freedom to pursue ambitious goals in the defense sector.

"I'm not doing this because I want to build a $50 million company. I'm doing this because I want to build a $50 billion company that will fundamentally change the way that national security procurement works in the United States."

This quote emphasizes Palmer's ambition for Anduril Industries to have a significant impact on the defense industry and his desire to create a company of immense scale.

• Palmer acknowledges the freedom and opportunities money provides but maintains that his core interests and lifestyle remained consistent after acquiring wealth.
• He pursued VR as a hobby before Oculus and did not initially focus on the financial aspect.
• Having genuine friends from before his financial success is something he values greatly.

"Taco Bell has never tasted so good as when you know that you could afford to never eat Taco Bell again. Turns out it's still great."

This quote illustrates Palmer's perspective on wealth, suggesting that while money can enhance freedom, it does not necessarily change one's fundamental tastes and preferences.

• Palmer's financial security from the Oculus sale allowed him to explore impactful ventures like Anduril.
• He observed that successful defense startups like Palantir and SpaceX were founded by billionaires, influencing his decision to enter the defense industry.
• Palmer believes that founder secondaries can provide the freedom to pursue larger and riskier projects.

"Money is what gave me the freedom to make that choice. I never would have been able to justify working in defense if I didn't already have enough money to get through the years of startup that it takes to start a successful defense company."

Palmer's quote highlights how financial resources can empower entrepreneurs to take on significant challenges, such as starting a defense company, which may require substantial upfront investment and a long-term vision.

• Palmer acknowledges the stark differences between consumer tech (like VR) and the defense industry.
• He had to develop a new base of expertise for Anduril, focusing on areas where the US military needed advancement, such as autonomous systems and AI.
• The defense industry poses unique challenges, such as integrating with decades-old technology.

"We ended up working primarily on autonomous systems for DoD applications. And artificial intelligence is not a natural outcropping of virtual reality, augmented reality."

This quote highlights the shift in focus from consumer technology to defense applications, which required Palmer to adapt and learn about entirely different technological challenges and opportunities.

• Anduril's core product, Lattice, is an AI-powered sensor fusion network that integrates data from various sensors into a real-time operational picture.
• Building Lattice involved challenges such as integrating with existing, sometimes outdated, technology and hardware.
• Palmer's experience with vertical integration in consumer tech contrasted with the need to work with established defense technologies.

"One of the trickiest things about building something like that is that we can't control all of the sensors... We kind of have to build our software system so that we can integrate with the hardware we make. But also hardware that's been deployed for literally decades."

This quote conveys the complexity of developing defense technology that must be compatible with a wide range of existing hardware, some of which may be significantly outdated.

• Palmer's ultimate goal is for Anduril to create products that enhance the value of its other offerings.
• He envisions a vertically integrated approach where Anduril's products, such as Sentry Towers and Ghost drones, feed into and act upon data from Lattice.
• The ambition is to own the entire product ecosystem in the defense industry, similar to successful tech companies.

"That is the end goal? Like, in the end, I want to build products that make all of my other products more valuable."

This quote outlines Palmer's long-term vision for Anduril Industries, aiming to create a synergistic ecosystem of defense products that reinforce each other's value and effectiveness.

• Anduril Industries deploys sensor systems that feed data into their Lattice platform.
• Anvil, Anduril's counter drone system, uses data from Lattice to intercept drones, enhancing the value of their sentry towers.
• The company's philosophy is to create products that increase the value of previous and future products, a common practice in consumer and enterprise technology but not in the defense industry.
• Defense contractors are often incentivized to start from scratch due to the time and materials payment model, which Anduril is trying to change by applying a modern, vertically integrated approach.

"Some of our unannounced sensor systems that we've deployed are feeding data into lattice. And then we have things like Anvil, which is our counter drone system, which is basically an interceptor that knocks drones out of the sky, and that's acting on data from Latice. But what's really cool is that all of these products make the other products more valuable."

This quote highlights the interconnectedness of Anduril's products and the strategic approach they take to ensure that each new technology enhances the functionality and value of existing systems.

• Anduril operates on a continuous development model, deploying products in the field and iterating based on real-world feedback.
• Unlike the consumer sector with distinct product releases, Anduril updates its products continuously, often as a service, which differs from traditional defense product cycles.
• The right time to release new products is less about timing and more about the ability to continuously improve upon them.

"Generally, the way that we've looked at this is a continuous development process where we are getting things out into the field, deploying them with our customers, solving real problems in war zones, and then getting continuous feedback from them."

The quote explains Anduril's methodology of product development, emphasizing real-world deployment and iterative improvements based on customer feedback.

• Legacy defense contractors are criticized for not investing enough in internal research and development (IRAD).
• Defense contractors typically spend a minimal portion of their revenue on IRAD as most costs are taxpayer-funded, which limits innovation and risk-taking.
• Anduril self-funds their IRAD, allowing them to explore cutting-edge technologies without relying on government belief in their feasibility.

"The biggest mistake they're making is not investing nearly enough in what the industry calls irad. Internal research and development."

This quote criticizes traditional defense contractors for their lack of investment in innovation, which Anduril sees as an opportunity to differentiate and lead in the industry.

• Anduril believes customers understand their problems but may not know the best solutions.
• The company educates potential clients by demonstrating the effectiveness of their technology in real-world applications.
• Convincing government clients differs from consumer sales, as government decisions are made by a few who are willing to deeply understand and quickly adopt proven technologies.

"There's definitely an education process that needs to go on. Like when we were first starting the company, we were talking with one of our now large customers, and at the time, we didn't have any hardware, we didn't have any software."

This quote emphasizes the importance of educating potential defense clients about new technologies and the need to prove their effectiveness through demonstrations and pilot programs.

• Silicon Valley has historical ties to the DoD, although recent trends show tech companies distancing themselves from defense work.
• A misconception exists that Silicon Valley is largely against working with the military, but Anduril's founder believes the majority support the military.
• The narrative is skewed by a vocal minority, leading to a perception that does not match the broader sentiment within the tech industry.

"Silicon Valley is born of DoD. The Department of Defense is. You cannot really remove the two from each other in terms of how they started and how early Silicon Valley was influenced."

The quote reflects on the intrinsic relationship between Silicon Valley and the DoD, suggesting that the recent distancing is not representative of the industry's history or the majority's views.

• Anduril's founder suggests the DoD should prioritize technology that will be decisive in future conflicts rather than focusing on past capabilities.
• The founder admires China's strategic investment in technologies like cyber warfare, signals intelligence, and autonomous systems.
• Anduril aims to influence the DoD's approach to technology through their work, but acknowledges that change must also come from within the DoD.

"I would be a lot more like China. I think that China's done a very good job of focusing their resources on the technology that they believe is going to win the next war, not building up a massive arsenal of technology that will allow us to win the last war we already fought again."

This quote proposes a strategic pivot for the DoD to focus on emerging technologies that are likely to be critical in future conflicts, drawing a parallel to China's focused investment in next-generation warfare capabilities.

• Palmer Luckey emphasizes the importance of demonstrating innovation through action, not just advocacy.
• He believes in investing his own resources to develop better technology and then presenting it to the Department of Defense (DoD) as a viable option.
• The DoD is showing interest in small technology companies for innovative capabilities.
• There is a growing consensus among Americans, politicians, and DoD officials that current defense spending does not yield the necessary capabilities.
• The challenge lies in overcoming institutional inertia and focusing on meaningful change rather than superficial metrics.
• DoD's innovation initiatives are criticized for valuing quantity over quality, with many funded projects not leading to deployed capabilities or viable companies.

"But the most important thing I can do is put my money and my time where my mouth is, prove that things can be better, prove that we can build better technology, and then sell it to the DoD and say, hey, look, DoD, you didn't have to fund all of this work."

This quote highlights Palmer Luckey's commitment to personally investing in the development of superior technology as a more effective strategy than lobbying or public advocacy.

"The Department of Defense more than ever agrees that small technology companies are a path to deploying innovative capabilities."

Palmer Luckey points out that the DoD recognizes the potential of small tech companies to contribute to innovation in defense, indicating a shift in their approach to sourcing technology.

"The biggest problem is just what everyone already knows. It's the institutional inertia."

Palmer Luckey identifies institutional inertia as a significant barrier to implementing change within the DoD, despite a desire for innovation.

• Venture capital tends to avoid defense-focused companies due to a lack of successful investment examples.
• In contrast to other industries, defense has seen only two unicorn companies in 30 years, both founded by billionaires.
• The DoD's structure and processes discourage VC investment, as companies often cannot retain intellectual property or achieve significant financial outcomes.
• Palmer Luckey suggests that the DoD needs to create more success stories to attract venture capital to defense startups.
• Founders Fund's investment in Oculus and Anduril is highlighted as an example of a VC firm willing to make unconventional bets in the defense sector.

"As an American, I wish that venture capital was flowing more towards defense-focused companies."

Palmer Luckey expresses a desire for more VC investment in defense, highlighting a gap between national interests and current investment trends.

"The companies aren't capable. I know venture capitalists who meet with companies and say, I love the founder, he's brilliant, I love the company, their technology is amazing. But I don't believe they can ever achieve a financially significant outcome because the way that the DoD is built does not make that easy or even possible."

This quote reveals the challenge defense startups face in attracting VC investment due to structural issues within the DoD that limit their growth potential.

• Founders Fund is recognized for its willingness to invest in unconventional and high-risk ventures.
• Palmer Luckey values the confidence and support of early investors like Founders Fund, which backed Oculus and later Anduril.
• The diverse investor base for Anduril's Series C round is indicative of the company's success in proving its capabilities.
• A successful defense company requires expertise in legal, procurement, political engagement, and financial management, beyond just a strong product.

"Founders Fund was betting not only that we would be a successful VR company. They were betting that we would be the first successful VR company and that VR as a whole would finally become viable because of us."

Palmer Luckey emphasizes the significant risk Founders Fund took in investing in Oculus, betting on the entire virtual reality industry's success based on one company's potential.

"You have to be really good on the political side. You have to understand how to interface with politicians and convince them that your stuff really is going to make warfighters safer and not just be a huge waste of taxpayer money."

This quote explains the multifaceted nature of a successful defense company, which must navigate political and legal landscapes effectively.

• Palmer Luckey reflects on his evolution as a leader, recognizing the need to delegate tasks and focus on his unique strengths.
• He emphasizes the importance of hiring skilled individuals to handle specific roles within the company.
• Leadership often involves representing the company in high-stakes situations, even if it means stepping out of one's comfort zone.
• Palmer Luckey acknowledges the value of mentorship and the impact of his experiences working with renowned experts in various fields.

"You didn't actually sign up to work on technology. You signed up to run a tech company. And those are two very different things."

Palmer Luckey distinguishes between the passion for technology and the responsibilities of leading a tech company, highlighting the need for leaders to prioritize the company's broader needs over personal interests.

"I have been around people that most people my age don't get the chance to work with. So whether you're talking about world class programmers like John Carmack... or working with people who hold senior government positions... I've had the benefit to work with a lot of people that most people my age do not get to work with."

This quote underscores the unique opportunities Palmer Luckey has had to learn from leading figures across different industries, which has shaped his leadership skills and perspective.

• Palmer's childhood favorite book was "Journey to the Center of the Earth," which resonated with him due to its portrayal of a small group achieving something extraordinary for their own reasons.
• As an adult, Palmer recognizes the unrealistic nature of such a feat being accomplished by a few individuals, understanding the importance of teamwork.
• Palmer currently enjoys "The Three-Body Problem" for its hard science fiction and the cultural insights it offers, contrasting Chinese and American perspectives on individualism and collectivism.

"My favorite book was Journey to the center of the earth, because it was a story about how a few people pulled off something extraordinary, not because they were trying to do it for everybody else, but basically they were doing it for different reasons, but they were doing it for themselves, their own reasons."

The quote highlights the appeal of individual achievement and personal motivation in Palmer's younger years, as well as the influence of literature on his formative experiences.

"It's very interesting to read well written hard Sci-Fi that, you know, was kind of written from a perspective that you would not necessarily agree with."

This quote emphasizes Palmer's appreciation for literature that offers differing cultural perspectives, particularly in the realm of science fiction, and the value he sees in understanding alternative viewpoints.

• Palmer believes his strength lies in convincing people that what he's working on is of utmost importance, maintaining high-quality work and products.
• This ability to inspire others has been consistent throughout his life, from running internet forums to playing sports as a child.
• Palmer's self-acknowledged weakness is getting easily distracted by solvable problems, leading to difficulty in prioritization and potential regret over missed opportunities.

"I think one of my biggest strengths is being able to convince people that what I'm working on is the most important thing in the world and the most important thing that they could be working on."

The quote reflects Palmer's persuasive skills and his focus on instilling a sense of purpose and importance in his team's work.

"The problem is when there's hundreds of problems you could solve, you can't solve all of them."

This quote underscores the challenge of selective focus and the difficulty Palmer faces in managing his desire to solve numerous problems versus the practical need to prioritize.

• Palmer emphasizes the importance of owning up to mistakes and analyzing them critically without playing the victim.
• He believes that while mistakes offer learning opportunities, dwelling on them unproductively is something he tries to avoid.

"You have to look at it critically and say, how did I fail? How did we fail?"

The quote stresses the necessity of self-reflection and accountability in learning from mistakes, rather than deflecting blame.

• Palmer addresses the misconception that Anduril is politically biased, clarifying that the company's work on border security is a bipartisan issue.
• He also dispels the belief that Silicon Valley is against working with the Department of Defense, explaining that the majority support the military and a few dissenting voices are the minority.

"One of the biggest misconceptions is probably the idea that what we're doing is politically biased in one way or the other."

This quote points out the false perception of Anduril's political stance and Palmer's effort to correct it.

• The primary scaling challenge for Anduril is growing the company at a rate that maintains its culture and structure.
• Palmer reflects on his experience with rapid growth at Oculus and his desire to avoid repeating what he perceives as past mistakes in scaling too quickly.

"The big scaling challenge is bringing people on as fast as you can while still retaining the culture and structure that made you successful in the first place."

The quote highlights the balance Palmer seeks between rapid growth and preserving the foundational elements of the company's success.

• Palmer envisions Anduril as a transformative defense product company that significantly impacts defense procurement and supports Western values.
• He stresses that the mission, rather than profit, is the primary motivation, though financial success is necessary to achieve the company's goals.

"I want to build a defense product company that changes the way defense products are bought, that saves taxpayers hundreds of billions of dollars while making us tens of billions of dollars, and makes sure that western values are preserved here in the United States and abroad with our allies."

The quote encapsulates Palmer's ambitious long-term goals for Anduril, highlighting his desire to influence defense technology and policy while ensuring profitability and ideological impact.