Anduril Industries is aiming to be a giant slayer among U.S. defense contractors, yet its 31-year-old founder Palmer Luckey remains realistic about the company’s impact to date in the protracted war in Ukraine.
When asked whether Anduril’s drones would lead the Eastern European country to victory over Russia, Luckey said: “We’re a small part of it. If they win, it will be because of probably 100 other factors that are bigger than Anduril. But we’ll be some small part.”
Still, the Costa Mesa company’s goals already seem limitless, with precision attack weapons in the sea, on the land and in the air.
It is one of the most closely watched defense companies in the U.S. Last week, it raised $1.5 billion and now has a $14 billion valuation.
One of the key reasons for its high valuation is its reliance on software that helps the company produce products with a gross margin of 40% to 45%, which significantly exceeds typical defense contractors that have margins around 8% to 10%, according to the private investor website Sacra, which analyzes startups.
“Anduril Industries flipped the traditional business model of defense contracting,” Sacra wrote in a report. “Instead of waiting for Requests for Proposals (RFPs) from governmental agencies, Anduril has gone after a strategy where they take on the R&D burden upfront, allowing them to offer pre-developed, cutting-edge solutions to the Department of Defense and other allied military forces worldwide.”
Luckey’s Aim
Luckey, with his Hawaiian shirts, flip flops and shorts, defies the traditional view of Pentagon-chummy military contractors in crisp shirts and ties.
Unlike the military veterans who fill the ranks of defense contractors, Luckey, now a billionaire several times over, has never served in the armed forces.
His aim is high tech. The development he is gambling will overturn decades of Defense Department love of huge aircraft carriers, manned fighter planes and rattling helicopters.
Anduril got its start with a backing from Peter Thiel, the iconoclastic and often controversial Silicon Valley tech guru who inspired Luckey’s view of cutting edge warfare.
Oculus VR
Anduril offers an ever-expanding array of weapons, ranging from AI-guided underwater drones to an unmanned fighter drone and reusable drone that can hit a target and return to base. Other products include highly sophisticated border-protection systems.
“The company, which has raised more than $2 billion overall since its founding seven years ago, told investors it roughly doubled revenue to about $500 million last year,” tech-focused website the Information reported in May.
The company has its sights on competing against defense giants such as Lockheed Martin and RTX Corp. (Raytheon), but Anduril plans to use fast-moving weapons, not the lumbering giant tools of the past.
The company took a big leap forward in April when the U.S. Air Force awarded Anduril a contract for the Collaborative Combat Aircraft program, which will eventually consist of more than 1,000 advanced drones supporting American fight jets.
It plans to open a factory next year in Rhode Island to produce 200 underwater drones annually. It already has an $18.6 million contract with the U.S. Navy.
In May, the company introduced the new Pulsar series of electronic warfare tools. Pulsar uses artificial intelligence “to rapidly identify and defeat current and future threats across the electromagnetic spectrum, including small and medium-size drones.”
Dominance of the electromagnetic spectrum is critical to operations on a modern battlefield of rapidly-evolving drone, counter-drone and jamming technologies, Anduril said.
“As the war in Ukraine has shown, EW (electronic warfare) tactics are evolving faster than ever — a cat and mouse game of sensing and dodging, disruption and adaptation, in the spectrum — with updates to EW and threat systems now happening over shorter timelines of weeks, days or even hours,” the company’s statement said.
Product Lines
Anduril isn’t profitable and may not be so for some time, a fact that doesn’t bother Luckey. The Los Angeles Times in July quoted him as saying Anduril should not be profitable in the near term.
“We should be taking all of the money that we’re making and putting it back into growing the company, launching new product lines, trying to become the next major defense prime,” the newspaper quoted him as saying.
The Business Journal last month estimated Luckey’s wealth at $5 billion, which could prove to be on the low side.
A change in Luckey’s personal life may account for why he seems to have been taking a bit of a low public profile recently.
“Palmer is on paternity leave. If you send any questions via email, I can try to get them answered, but no promises given he isn’t online,” a spokesperson told the Business Journal on July 31.
