Anduril Leads the Charge in Defense-Tech Startup Industry

[00:00:00] [SPEAKER_02]: What is dedication?

[00:00:01] [SPEAKER_02]: People ask, how your children learn how to ride a bike and you didn't.

[00:00:05] [SPEAKER_02]: I just created an environment where they taught themselves and all I had to do was be there.

[00:00:08] [SPEAKER_03]: That's dedication.

[00:00:10] [SPEAKER_03]: Visit fatherhood.gov to hear more.

[00:00:11] [SPEAKER_03]: Brought to you by the U.S. Department of Health and Human Services and the Ad Council.

[00:00:18] [SPEAKER_00]: Welcome to Tech News Briefing.

[00:00:20] [SPEAKER_00]: It's Monday, August 19th.

[00:00:22] [SPEAKER_00]: I'm Julie Chang for The Wall Street Journal, filling in for Zoe Thomas.

[00:00:26] [SPEAKER_00]: One of the biggest shifts to occur in the defense sector since World War II is taking place now.

[00:00:33] [SPEAKER_00]: A huge flow of venture capital funding is going into defense technology startups,

[00:00:38] [SPEAKER_00]: aiming to challenge the industry's traditional players.

[00:00:42] [SPEAKER_00]: We'll look at how the startup Anduril has become tech investors' biggest bet.

[00:00:46] [SPEAKER_00]: Our national security editor will join us to discuss.

[00:00:49] [SPEAKER_00]: And then, if cyber breaches and other privacy concerns have you rethinking how many websites need your real personal information,

[00:00:58] [SPEAKER_00]: you're not alone.

[00:00:59] [SPEAKER_00]: But lying when you sign up for a website can cause its own problems.

[00:01:04] [SPEAKER_00]: We'll explain.

[00:01:09] [SPEAKER_00]: First up today, Paul Marlucky is the 31-year-old founder of defense tech startup Anduril Industries,

[00:01:16] [SPEAKER_00]: named after a magical sword in J.R.R. Tolkien's Lord of the Rings novels.

[00:01:20] [SPEAKER_00]: Lucky is part of a new breed of defense company executives, aiming to take on weapons makers like Lockheed Martin and Northrop Grumman.

[00:01:29] [SPEAKER_00]: Venture capitalists are investing billions of dollars into startups like Anduril that are focused on developing futuristic weapons for a potential conflict with China.

[00:01:39] [SPEAKER_00]: WSJ national security editor Sharon Weinberger spoke with TNB host Zoe Thomas about this.

[00:01:45] [SPEAKER_00]: Here is their conversation.

[00:01:47] [SPEAKER_04]: So, Sharon, tell us a little bit more about who Paul Marlucky is.

[00:01:52] [SPEAKER_05]: Sure.

[00:01:52] [SPEAKER_05]: So, Paul Marlucky is probably familiar to most people or at least people interested in video games for founding the company Oculus VR,

[00:02:02] [SPEAKER_05]: which was developing virtual reality goggles for use in video games.

[00:02:07] [SPEAKER_05]: This is a technology that had been around for a while.

[00:02:09] [SPEAKER_05]: He made it a lot better.

[00:02:11] [SPEAKER_05]: And then Facebook, now known as Meta, stepped in and bought his company that he had started out of a camper trailer in his parents' driveway.

[00:02:21] [SPEAKER_05]: They bought it and basically made him a billionaire.

[00:02:24] [SPEAKER_04]: And how does his company, Anduril, fit in with this new breed of defense tech startups?

[00:02:30] [SPEAKER_04]: And how does he fit in as a new defense exec?

[00:02:33] [SPEAKER_05]: So what's been happening in Silicon Valley is there's a lot of interest in the defense business.

[00:02:38] [SPEAKER_05]: In other words, the idea that you can bring AI, that you can bring software and integrate it with hardware and compete with these big defense companies.

[00:02:48] [SPEAKER_05]: But doing it on new technologies that would be designed for a fight in Asia, designed for a fight against China.

[00:02:55] [SPEAKER_05]: So what are these weapons?

[00:02:56] [SPEAKER_05]: These weapons would be uncrewed fighters, drones, small uncrewed submarines, weapons that are autonomous, operated by AI.

[00:03:07] [SPEAKER_05]: And so into this whole pivot comes Palmer Luckey.

[00:03:11] [SPEAKER_05]: He was leaving Facebook.

[00:03:12] [SPEAKER_05]: He wanted to start a weapons company.

[00:03:14] [SPEAKER_05]: And so that's exactly what he did with the original idea of focusing more on software and then pivoting into hardware.

[00:03:22] [SPEAKER_05]: Hardware, I mean weapons.

[00:03:23] [SPEAKER_05]: And they're now offering a variety of autonomous weapons that they want to sell to the Pentagon.

[00:03:29] [SPEAKER_05]: And their argument is we can do this faster.

[00:03:32] [SPEAKER_05]: We can do it cheaper.

[00:03:34] [SPEAKER_05]: And we can build weapons that are more relevant to the fight in the Pacific.

[00:03:39] [SPEAKER_04]: So Luckey's company has been around since 2017.

[00:03:41] [SPEAKER_04]: What kinds of contracts has it secured so far?

[00:03:44] [SPEAKER_05]: One of their first big contracts was with Homeland Security for basically technology that could help protect the border.

[00:03:52] [SPEAKER_05]: They developed these towers with sensors that would be autonomously queued.

[00:03:57] [SPEAKER_05]: It would automatically detect incursions across the border.

[00:04:01] [SPEAKER_05]: So as opposed to perhaps the idea of a wall made famous under President Trump where you build physical barriers to stop people,

[00:04:10] [SPEAKER_05]: the idea is that these towers would be strategically located across the border where there are crossings.

[00:04:16] [SPEAKER_05]: And they would automatically detect when a human being crosses the border.

[00:04:20] [SPEAKER_05]: And then that would go to border guards, people who could intercept people crossing the border.

[00:04:24] [SPEAKER_05]: That was one of their first big contracts.

[00:04:27] [SPEAKER_05]: Perhaps a more significant one was they got a contract worth up to a billion dollars with Special Operations Command.

[00:04:34] [SPEAKER_05]: So they gave Anduril this very large contract to develop anti-drone technology.

[00:04:41] [SPEAKER_05]: And then a more recent contract that they have, and perhaps what would be their most significant one if it keeps going into the future,

[00:04:49] [SPEAKER_05]: is they're one of two companies that was selected by the Air Force to build something called CCA.

[00:04:55] [SPEAKER_05]: It's basically an uncrewed fighter jet.

[00:04:58] [SPEAKER_05]: These would be drones essentially for the Air Force that would eventually take the place of things that manned fighter jets now do.

[00:05:07] [SPEAKER_05]: If that goes forward, that could be really one of their most significant entrees, proving that they can compete with the large prime contractors.

[00:05:16] [SPEAKER_04]: What's Anduril's current valuation?

[00:05:18] [SPEAKER_05]: Anduril's current valuation, meaning in their latest round of fundraising, is $14 billion,

[00:05:24] [SPEAKER_05]: which is about 28 times the approximate $500 million in revenue that they had last year, we were told by sources,

[00:05:33] [SPEAKER_05]: because they don't publicly release their revenue data.

[00:05:36] [SPEAKER_05]: So that's pretty significant to be worth 28 times your revenue.

[00:05:40] [SPEAKER_05]: A traditional defense company like Lockheed Martin or others are worth anywhere usually between maybe one and a half to three times their revenue.

[00:05:51] [SPEAKER_05]: So it's a huge difference and is going to create a huge challenge for the company going forward.

[00:05:57] [SPEAKER_04]: You mentioned that Anduril and other defense tech startups are focusing on the idea of a conflict with China.

[00:06:04] [SPEAKER_04]: How is it doing that?

[00:06:06] [SPEAKER_05]: China is different than other adversaries or enemies the US might face because they are very, very advanced.

[00:06:14] [SPEAKER_05]: They have a really large defense industrial production base.

[00:06:18] [SPEAKER_05]: They can produce things at mass, at quantity as the United States can do, although we've also had problems in recent years.

[00:06:25] [SPEAKER_05]: So the idea is if you want to compete with a country that's a near peer or an adversary that has as good or perhaps in some cases better technology than you,

[00:06:35] [SPEAKER_05]: you need different types of technology.

[00:06:38] [SPEAKER_05]: Just as the war in Ukraine has been heavy on artillery and ammunition,

[00:06:43] [SPEAKER_05]: the thinking goes that a war with China is going to require AI powered weapons that can react very fast.

[00:06:50] [SPEAKER_05]: And that is where a company and other defense startups like Anduril come in.

[00:06:55] [SPEAKER_05]: They say, look, we come from a tech startup environment.

[00:06:59] [SPEAKER_05]: We're used to developing things at very high speeds.

[00:07:02] [SPEAKER_05]: And their argument is we can develop the weapons you need, particularly things that rely on software, rely on AI, and we can do it very, very quickly.

[00:07:12] [SPEAKER_04]: We've discussed this on a recent show, the fact that Silicon Valley defense startups actually win few government contracts despite the surge of VC funding for these startups.

[00:07:22] [SPEAKER_04]: Why does Anduril's success matter in this space?

[00:07:25] [SPEAKER_05]: The success or failure of Anduril is so important.

[00:07:29] [SPEAKER_05]: In part, it will succeed or fail based on what it's able to do.

[00:07:32] [SPEAKER_05]: It's winning contracts.

[00:07:34] [SPEAKER_05]: It has to now prove to the Pentagon that it can manufacture and that it can manufacture at scale.

[00:07:40] [SPEAKER_05]: But one of the things that makes Anduril's success so critical is everyone sort of looks to them as the best funded, the furthest along in many ways.

[00:07:51] [SPEAKER_05]: And so if Anduril can't make it, if they can't break into this sort of prime market and get significant Pentagon contracts, people say, well, then what chances do the little companies have?

[00:08:04] [SPEAKER_05]: And there's really a lot of little companies out there.

[00:08:07] [SPEAKER_05]: Anduril has now won some big contracts, and that is a significant hurdle they've cleared.

[00:08:12] [SPEAKER_05]: The second significant hurdle that they need to show is that they are manufacturing weapons and they're manufacturing them at the price that they're saying we can do things better, cheaper, faster.

[00:08:26] [SPEAKER_05]: And then the third hurdle, which will also be hard and a little bit further down the road, is they have to prove to what is often called the end user, meaning the people on the battlefield, that their weapons work.

[00:08:38] [SPEAKER_05]: And that is also going to be a challenge.

[00:08:41] [SPEAKER_00]: That was WSJ national security editor Sharon Weinberger.

[00:08:46] [SPEAKER_00]: Coming up, how many websites really need to know your zip code and mother's maiden name?

[00:08:52] [SPEAKER_00]: We'll tell you about the pros and cons of lying when you set up online accounts after the break.

[00:09:03] [SPEAKER_02]: What is dedication?

[00:09:05] [SPEAKER_02]: People ask, how your children learn how to ride a bike and you didn't.

[00:09:08] [SPEAKER_02]: I just created an environment where they taught themselves and all I had to do was be there.

[00:09:11] [SPEAKER_03]: That's dedication.

[00:09:13] [SPEAKER_03]: Visit fatherhood.gov to hear more brought to you by the US Department of Health and Human Services and the Ad Council.

[00:09:23] [SPEAKER_00]: It seems like every website from social media companies to online stores want your personal information these days.

[00:09:31] [SPEAKER_00]: Name, email, birthday, street address, and sometimes more.

[00:09:35] [SPEAKER_00]: Should you give it to them or should you enter fake details?

[00:09:39] [SPEAKER_00]: Our host, Zoe Thomas, spoke about the pros and cons of fibbing online with Sean Kapton, who wrote about this for The Wall Street Journal.

[00:09:47] [SPEAKER_04]: So what are the benefits to lying about your information on these sites?

[00:09:53] [SPEAKER_01]: Well, as we all know, there's lots of data breaches.

[00:09:56] [SPEAKER_01]: Things like your name obviously identifies you.

[00:09:59] [SPEAKER_01]: Birthdays are used a lot as an identifier.

[00:10:02] [SPEAKER_01]: Things like mother's maiden name.

[00:10:03] [SPEAKER_01]: And these are often items that are used to prove your identity and could also be used by someone else to assume your identity.

[00:10:11] [SPEAKER_04]: Okay, so how easy is it to sign up for websites with bogus information?

[00:10:15] [SPEAKER_01]: It's tremendously easy.

[00:10:16] [SPEAKER_01]: We spoke with a few companies, had a really long conversation with Microsoft and a bit with Yahoo.

[00:10:21] [SPEAKER_01]: And they said that basically they're not looking for this.

[00:10:23] [SPEAKER_01]: They're only looking for fake information if someone's trying to commit fraud.

[00:10:27] [SPEAKER_01]: You know, creating like a thousand accounts in a minute and using them to send spam or phishing emails or things like that.

[00:10:34] [SPEAKER_01]: But I tested out about 12 of the most popular sites in the US.

[00:10:38] [SPEAKER_01]: And I could make up a fake name, a fake birthday, a fake city, zip code.

[00:10:44] [SPEAKER_01]: So I was able to do all of that.

[00:10:46] [SPEAKER_04]: Are there repercussions if you're caught lying on some of these sites?

[00:10:50] [SPEAKER_01]: Well, you probably won't get caught, but you might get yourself in trouble.

[00:10:53] [SPEAKER_01]: A lot of times this information is used if you lose access to your account.

[00:10:57] [SPEAKER_01]: So you may forget your username and password.

[00:11:00] [SPEAKER_01]: You may try to log in too many times with the wrong information, or you might get your account taken over by a fraudster or scammer.

[00:11:07] [SPEAKER_01]: So in that case, you've got to contact Microsoft, Facebook, Google, whomever, and basically prove you are you to get access back to it.

[00:11:16] [SPEAKER_01]: And we had a funny conversation with someone, a senior person at Microsoft who said people call up and they don't know their name.

[00:11:22] [SPEAKER_01]: They don't know their birthday.

[00:11:23] [SPEAKER_01]: They don't know where they live because they didn't give the real information.

[00:11:27] [SPEAKER_04]: All right. That was Sean Kapton, who wrote about this for The Wall Street Journal.

[00:11:30] [SPEAKER_04]: Thanks for joining us.

[00:11:31] [SPEAKER_01]: My pleasure.

[00:11:31] [SPEAKER_04]: If that is your real name.

[00:11:34] [SPEAKER_00]: And that's it for Tech News Briefing.

[00:11:36] [SPEAKER_00]: Today's show was produced by me, Julie Chang, with supervising producer, Catherine Millsop.

[00:11:41] [SPEAKER_00]: We'll be back this afternoon with T&B Tech Minute.

[00:11:45] [SPEAKER_00]: Thanks for listening.