In an age when every ambitious entrepreneur claims to be a disruptor, Anduril Industries leaders Palmer Luckey and Brian Schimpf fit the definition perfectly.
Their Costa Mesa-based defense company is dedicated to shaking up the Pentagon’s procurement process for defense contractors. They aim to bring high-tech, AI-guided systems into service for wartime and military defense.
“I strongly believe in contractors being accountable for what they do,” company founder Luckey told CNBC. “It is ludicrous to have a business model that allows companies to fail at what they do and make money.”
Luckey heads what may be the hottest, fastest-growing U.S. defense startup in a field still dominated by big brand legacy companies. Privately held Anduril scored a $14 billion valuation as of August – up from $8.5 billion in 2022. The company has grown to 4,000 employees and almost weekly, it’s announcing new contract wins.
It has converted what was once the well-known Los Angeles Times printing plant in Costa Mesa into its headquarters.
Anduril, which has announced plans for a 5-million-square foot-factory, makes airborne drones, underwater drones and solid rocket motors. It’s shunning giant projects like aircraft carriers and manned fighter jets.
Anduril emphasizes combining artificial intelligence with off the shelf components to challenge the dominance of such giants as Northrop Grumman (NYSE: NOC) and Lockheed Martin (NYSE: LMT), while emphasizing it plans to stick with high-tech systems.
For all these reasons, Palmer and Chief Executive Schimpf are the Business Journal’s Businesspersons of the Year in the tech sector.
“Since 2017, more companies have embraced Anduril’s vision, and we now serve as a model for innovators breaking into the defense sector,” Schimpf told the Business Journal. “While investors and commercial tech once hesitated to engage, defense investment has become more mainstream in response to evolving global conflicts. As a result, the industry is seeing an influx of companies seeking the same success Anduril has achieved. We’re proud to lead a new class of defense companies revitalizing the defense industrial base.”
Oculus VR, $2.3B
Most parts of the 32-year-old entrepreneur’s story are well-known: At age 19, Luckey founded Oculus VR, which was acquired in 2014 by Facebook in deal valued at $2.3 billion, according to Anduril’s website. After a rocky time at Facebook, Luckey went on to co-found Anduril with Schimpf and three others in 2017.
Luckey has a fortune estimated at $5 billion, making him the 14th richest Orange County resident, according to the Business Journal.
Luckey’s appearance – Hawaiian shirts, cargo shorts and sandals – contrasts completely with the usual view of buttoned-down corporate leaders, and with the medal-bedecked Pentagon generals themselves.
While founder Luckey is a fervent booster of President-elect Donald Trump, having hosted fundraisers for him in Newport Beach, Schimpf donated $510,000 to Democrat Kamala Harris’ presidential campaign.
“The idea that we need to be the strongest military in the world is really non-partisan,” Luckey told CNBC shortly after Trump’s win in November.
Luckey said Russia’s invasion of Ukraine nearly three years ago was a turning point, leading many companies into defense work after shunning it for years. Anduril drones have been used by Ukrainian forces in the bitter fighting.
The warfighter tools are designed to convince enemies of the U.S. and its allies that starting wars is “just not going to work.”
“So don’t try it,” Schimpf told Yahoo in a November interview.
He added: “We use our balance sheet to invest in the technologies we think need to exist.”
‘Wildly Surprising,’ $1.5B
“It is wildly surprising how fast this has gone,” Schimpf said of the company’s growth.
The company’s valuation rocketed up to $14 billion in the summer after it raised another $1.5 billion in Series F financing, led by Peter Thiel’s Founders Fund and Sands Capital.
Other investors have included such top-flight firms as Valor Equity Partners, Andreessen Horowitz, General Catalyst, and billionaire Thomas Tull’s US Innovative Technology Fund.
To date, it’s raised an estimated $3.5 billion in financing; revenue roughly doubled to about $500 million in 2023, according to reports.
“Anduril has proven that our model — recruiting talented engineers, building quickly and efficiently using venture dollars, and selling next-generation technology off the shelf to the government — works,” Schimpf wrote in a blog post, according to a 2022 article on the Crunchbase news website. “And that with the right technology and incentives the government can be a nimble customer.”
The warfighting trend is definitely leaning toward more technology in the 21st century, possibly throwing traditional giant projects such as the F-35 fighter jet into question.
Data analytics software company Palantir Technologies (Nasdaq: PLTR), co-founded by Thiel, is in talks with Anduril to form a defense industry consortium to bid on government work, the Financial Times of London reported last month.
The relationship between the two companies goes back several years.
“In 2017, we backed Anduril Industries, as it was founded by Palmer Luckey and three former colleagues from Palantir. It has since raised billions and become the most important defense prime since Palantir and SpaceX,” Palantir co-founder Joe Lonsdale said in a 2023 blog posting.
Some Detractors, Hurdles Ahead
Bringing Anduril’s speedy process to fruition will prove more difficult in the face of the Pentagon’s glacially slow bureaucracy hemmed in by federal law.
“It’s not like the defense secretary can say, ‘Eliminate all bureaucracy and issue a contract in 30 days,’ and everyone says ‘Absolutely, we’ll get everything done in 30 days,’” Scott Sacknoff, president of aerospace and defense investment firm Spade Indexes LLC, told Business Insider in November.
The industry website Breaking Defense quoted General Atomics spokesman C. Mark Brinkley as calling Anduril “the Theranos of defense,” referring to the fraud-laden blood testing firm that sent its founder to prison.
Brinkley reportedly questioned how Anduril’s fighter-like drone Fury unmanned fighter jet could carry weapons and host a landing gear given its design.
“Sometimes you find these companies, and they say they’re going to use one drop of blood and they’re going to revolutionize the whole world, and then they grow up to be Theranos,” Brinkley told Breaking Defense. “Quite frankly, when you look at the Fury — to me, it looks like trying to use a drop of blood to change the world. And I don’t see it.”
Luckey dipped into the treasure trove of Shakespearean English phrases for his response.
“The sponsored article written by General Atomics PR people doth protest too much, methinks,” Luckey posted on the X platform.
Luckey & Schimpf: Dropout and Ivy Grad
Amid the public debate over the value and costs of college, Anduril leaders Palmer Luckey and Brian Schimpf show both sides of the spectrum.
Luckey began attending Golden West College and Long Beach City College at the age of 14 and studied at California State University, Long Beach before dropping out to build Oculus VR.
Schimpf, on the other hand, graduated from the Ivy League’s Cornell University with a Bachelor of Science in Operations Research and Industrial Engineering. Previously, Schimpf was the Founder and Lead of Cornell University’s autonomous vehicle research program.
Prior to Anduril, Schimpf was an early hire at Palantir Technologies.
— Kevin Costelloe
