Anduril Series E

My cousin Derek got really into tactical gear in 2019—bought night vision goggles he'd wear to check his mail, started calling his Subaru "the rig." Last Thanksgiving he admitted he just liked feeling important, which is exactly the vibe I get watching Founders Fund and a16z pump $1.5B into Anduril at a $12.5B valuation. The numbers superficially work if you squint: they've got actual DoD contracts, growing revenue, and Palmer Luckey's whole "tech-bro-saves-America-from-bureaucracy" narrative that plays well in certain rooms. But mediocre deals hide in plain sight by pointing at PowerPoint slides of autonomous systems while everyone nods seriously. The valuation assumes they'll become the next defense prime, except Lockheed Martin trades at like 1.5x revenue and these guys are probably getting priced at 15x. Cool surveillance towers though, Derek would definitely buy one.

December 2023 timing is whatever—rates were high, the venture market had theoretically sobered up, but defense tech remained the one sector where you could still pretend 2021 never ended. Everyone's performing this kayfabe where "hard tech" and "American dynamism" mean you get to ignore normal valuation discipline because, I don't know, China or whatever. The lead investors here aren't dumb; Founders Fund backed Palantir through years of mockery until they weren't wrong anymore. But there's genuine delusion in thinking every defense software company gets that redemption arc. Anduril's building actual hardware—drones, submarines, sensor towers—which means real COGS, supply chain hell, and margin compression that makes enterprise SaaS look elegant. The company's fundamental bet is that the Pentagon will radically change how it buys things. If you believe that, I have a healthcare reform bill to sell you.

The competitive dynamics are messier than the pitch deck suggests. Yeah, traditional defense primes are slow and bureaucratic, but they're also the only ones who know how to actually deliver at scale without killing anyone important. Anduril's whole value prop is "we move fast," which sounds great until you're building weapons systems and "move fast and break things" becomes a literal war crime. Shield AI, Rebellion Defense, a dozen other VC-backed startups are chasing the same contracts with similar origin stories. The TAM is theoretically massive—global defense spending tops $2 trillion—but the accessible market for an upstart is like fighting over 2% of that while Raytheon watches and waits to acquire you for parts. I'll admit their Lattice OS creates some moat, and the autonomous systems angle is genuinely differentiated. But $12.5B implies they're capturing market share that requires geopolitical chaos staying exactly at current levels: bad enough to justify spending, not so bad that everything breaks.

Exit potential is where this gets darkly funny. IPO market for defense companies exists but demands actual profitability, which—checks notes—they probably don't have yet. Strategic acquisition by a prime makes sense except antitrust scrutiny on defense consolidation is real, and culturally Anduril positions itself as the anti-establishment alternative, so getting acquired by the establishment feels like admitting defeat. Maybe they pull off the Palantir trajectory: stubbornly refuse to care about public market expectations, eventually IPO into skepticism, then slowly prove themselves over years while true believers get rich and everyone else moves on. That's the best case. Worst case is the Pentagon's next administration decides AI-powered kill-bots aren't politically palatable, VC funding dries up before they reach cash-flow positive, and this becomes a $12.5B tax write-off. The risk-reward at this valuation isn't terrible, it's just... aggressively medium. Like Derek's tactical gear: impressive until you need it to actually work.