Nov 11, 2024 · 1h 45m · news
Matt Grimm, Co-Founder @Anduril: How a Trump Administration Changes the Defence Industry | E1224 · 20VC with Harry Stebbings
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In this comprehensive interview on 20VC, Anduril Co-Founder Matt Grimm discusses the urgent need to reform Western defense procurement, the strategic threat of China, and the software-driven future of warfare, while sharing deeply personal insights into leadership, corporate culture, and personal motivation.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 16.3% of the talking time here. How this is scored →
Harry as informed peer 3.3 Guest teaching 4.7 Guest disagreement 3.0 Harry pushing back 3.6
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 19:44 Guest Forcefully Rejects Premise on Buyer Intelligence
When host quotes a founder stating VCs overestimate government buyers' intelligence, guest directly rejects the insult, noting that insulting customers is a foolish sales strategy.
Hardest push from Harry ▶ 1:34:00 Host Insists Government Must Arbitrate SpeechHost refuses guest's free speech stance, pushing back hard that state police and legal authorities must act as arbiters against speech that incites violence.
Biggest teaching moment ▶ 1:26:05 Reframing Robo-Dogs to Attrition EconomicsGuest dismisses host's sci-fi question about weaponized robo-dogs to school him on asymmetric warfare economics, contrasting $50k Iranian drones against $4M US Patriot interceptor missiles.
Harry holds his own ▶ 58:55 Host Cites Revolut Cap Table StrategyHost demonstrates deep domain knowledge of high-growth tech firms by bringing up Revolut's strict cap table enforcement to challenge guest's claim that companies cannot control secondary SPV chaos.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Post-Election Reactions and Personal Political Alignment | 2 | 3 | 2 | 2 | Host opens with post-election sentiment and asks if Anduril will perform better under a Trump administration. Guest clarifies his personal alignment as a lifelong Democrat while emphasizing Anduril's strict internal apolitical stance. | |
| The Threat of China and the Defense of Taiwan | 2 | 3 | 1 | 1 | Host asks about potential shifts regarding China and Taiwan under Trump. Guest shares a lighthearted story about discovering he was personally sanctioned by China while on a Peloton. | |
| Semiconductor Onshoring and the Supply Chain Threat | 1 | 7 | 1 | 1 | Host openly admits naive understanding of supply chain tiers. Guest educates host on tier 1 through tier 4 supply chains down to raw earth minerals and manufacturing processing. | |
| Triggers of a Hot War and Deterrence | 3 | 3 | 2 | 4 | Host probes potential hot war triggers and asks whether Israel's response in Gaza was wrong or if war is good for business. Guest outlines deterrence strategy and defends Israel's military stance. | |
| How Software and Autonomy Transform Defense | 4 | 4 | 3 | 6 | Host challenges reliance on five-year government procurement vision docs, noting changing political leadership makes governments seem like difficult customers. Guest explains how long-term civil servants maintain continuity. | |
| Understanding the Incentives of Government Procurement | 3 | 7 | 6 | 4 | Host quotes another defense founder claiming VCs overestimate DoD buyer intelligence. Guest forcefully rejects the framing, explaining procurement officials operate under fundamentally different risk-reward incentives. | |
| Reforming the Defense Sector: Cost-Plus vs. Firm Fixed-Price | 3 | 8 | 2 | 3 | Guest details the perverse incentives of cost-plus defense contracting versus firm fixed-price contracts. He presents stats on defense prime stock outperformance and stock buybacks versus R&D investment. | |
| Accelerating Defense Development Cycles | 4 | 6 | 3 | 5 | Host questions whether defense markets contradict the VC 'winner-take-all' model. Guest explains why defense isn't winner-take-all while highlighting the massive scale of international defense budgets. | |
| International Defense Spending and Sovereignty | 3 | 4 | 2 | 3 | Host asks if the US spends too much or the UK spends too little on defense. Guest argues European and UK spending are far too low and inefficiently allocated. | |
| Lessons Learned from Defense Industry Incumbents | 4 | 4 | 3 | 5 | Host asks what Anduril learned from legacy defense incumbents. When guest praises incumbent hiring, host pushes back on whether top tech talent actually wants to work at Lockheed. | |
| Reflecting on Corporate Mistakes: Remote Work and G&A Scaling | 3 | 3 | 1 | 2 | Guest candidly reflects on corporate mistakes, including not taking a stricter anti-remote work stance earlier and attempting to under-fund G&A and business systems. | |
| The Psychology of Regret and High-Performing Teams | 4 | 4 | 4 | 5 | Host asks if relentless perfectionism harms company culture. Guest defends high standards, asserting that perfectionist pressure is great for high-performing teams but bad for weak teams. | |
| Anduril's $5 Billion Fundraising History and Capital Strategy | 3 | 3 | 2 | 3 | Host inquires about Anduril's capital strategy across $5 billion raised. Guest breaks down who orchestrates fundraising rounds internally. | |
| The Pros and Cons of Secondaries and the 'Scummy' Broker Market | 5 | 5 | 4 | 6 | Guest criticizes secondary SPV brokers as 'scummy'. Host pushes back on company responsibility, citing Revolut's strict cap table management as proof founders can control secondary chaos. | |
| Unlocking Latent Patriotism: The Secret to Anduril's Success | 4 | 4 | 5 | 5 | Host asks about gender diversity percentages in defense startups. Guest firmly rejects hiring for demographic numbers or quotas, focusing purely on talent and mission alignment. | |
| Venture Capital Dynamics in the Modern Defense Sector | 4 | 4 | 2 | 3 | Host asks how Anduril evaluates acquisitions. Guest describes acquiring non-VC-backed, bootstrapped technical teams and plugging them into Anduril's sales and compliance engine. | |
| The Routine and Sacrifices of an Execution Machine | 3 | 4 | 3 | 3 | Host asks about personal routine and sacrifices. Guest rejects the standard marital advice 'never go to bed angry', arguing that stepping back prevents emotionally fueled arguments. | |
| Why Silicon Valley Still Matters and the Evolution of Venture Capital | 4 | 5 | 4 | 4 | Host shares regret over not moving to Silicon Valley 10 years ago. Guest forcefully urges host that top venture capital investors must be located in California near talent density. | |
| Quick-Fire Questions: Contrarianism, Peter Thiel, and Anduril's $100B Path | 3 | 4 | 2 | 3 | In quick-fire questions, guest explains Peter Thiel's core lesson that consensus yields no investment alpha, and outlines Anduril's path to a $100B valuation. | |
| The Future of Robotic Warfare and the Western Munitions Deficit | 3 | 8 | 4 | 2 | Host asks a 'Joe Rogan-esque' question about weaponized robo-dogs. Guest dismisses sci-fi tropes and educates host on asymmetric attrition economics ($50k Iranian drone vs $4M Patriot interceptor). | |
| Geopolitical Adversaries: Iran vs. China's Strategic Might | 3 | 6 | 5 | 3 | Host quotes previous guest Sean Maguire claiming Iran is the greatest evil. Guest directly disagrees, asserting China is a far more complex and dangerous strategic threat. | |
| The Case for Banning TikTok in the United States | 6 | 6 | 6 | 7 | Host debates free speech limits and argues state authorities must arbitrate harmful content. Guest pushes back sharply, warning that state speech censorship is extremely dangerous. | |
| Analyzing Europe's Ambition Deficit and Global Position | 3 | 4 | 2 | 3 | Host asks about Europe's economic trajectory. Guest shares personal childhood reflections on growing up with family financial instability and how it shaped his drive. | |
| The Illusion of Wealth and True Contentment | 3 | 4 | 2 | 3 | Guest reflects on buying his dream BMW M3 early in his career and realizing material wealth does not bring personal contentment or happiness. |
Statements from this episode (61)
Grimm: China is the primary geopolitical threat to Western values
“China, hands down. The mindset of the PRC, I think their approach to basic human rights, I think their conducting of an ongoing genocide with their Uyghur population, I think their approach to free speech, to political assembly, to religious freedom, are funda…”
Grimm: TikTok should have been banned in the US years ago
“Hundred percent absolutely yesterday, if not years ago.”
Grimm: I am a lifelong Democrat and donated to Kamala Harris
“For me personally, I'm a Democrat. I've been a lifelong Democrat. I've supported Democrats my entire life. I donated to Kamala. I donated to Hillary Clinton, donated to a number of House Democratic races, Senate Democratic races, recently hosted a fundraiser f…”
Anduril operates internally as an apolitical company following Coinbase's philosophy
“Internal to Anderrill, like we're an apolitical company. Like we don't talk about personal politics inside the company. We kind of subscribe to the Brian Armstrong Coinbase kind of philosophy of like, we're here for a mission.”
Grimm: Anduril will succeed regardless of whether Trump or Harris wins
“I think I think we were going to succeed under either, like we've succeeded under President Biden, we succeeded under President Trump before that, so I don't think I don't think there's a massive difference to Andrew.”
Grimm: True capitalism has been missing from defense sector for decades
“Kind of the return of capitalism to the defense sector, which has been sorely missing for decades, ah, a rebuilding the American industrial base relying on cost plus contracts less and turning to more firm fixed contracts.”
Matt Grimm: China will not invade Taiwan if Western deterrence holds
“I, Think that if America does its job and the West and our allies do their jobs, I think no.”
Grimm: China personally sanctioned me for selling missiles to Taiwan
“I mean, I was personally sanctioned by China for selling missiles to Taiwan as was my co-founder, Brian Schimpf, and a couple other executives in the company itself.”
Grimm: TSMC's Arizona plant yields are slightly outperforming its Taiwan factories
“We're already seeing the early results at the TSMC plant in Arizona that has some pretty good yields that are Slightly outperforming the yields of their Taiwan factories.”
Grimm: The West is in a Cold War escalating toward hot war
“Which to me, I think it's pretty obvious that we're in escalating into a hot war.”
Grimm: Completely removing Chinese influence from hardware supply chains is nearly impossible
“I think it's very, very, very hard in practice to actually completely divorce yourself from any Chinese influence on the supply chain whatsoever.”
Grimm predicts Russia-Ukraine negotiated settlement within the next year
“My guess is that and it's a complete conjecture here. I have no insider information whatsoever, but my guess is that we see some sort of detente or some sort of negotiated settlement take place probably over the next year would be my guess. And if I had to bet…”
Grimm predicts Israel will achieve near and total conquering of Gaza
“I think what we end up seeing is we end up seeing the, ah, ultimately kind of the near and total sort of conquering of Gaza,”
Anduril and Co-Founder Matt Grimm Officially Stand With Israel
“I don't at all, no. Absolutely not. Personally stand with them, and we as a company do too.”
Grimm: Anduril's Lattice OS fuses sensor data for real-time battlefield view
“That's really what we're doing with our lattice operating system that's at the core of all of our products, is trying to bring together and fuse all of this different data that's coming from individual soldiers, from individual planes, from satellites, from su…”
Grimm: Pentagon and UK MOD vision documents remain consistent across administrations
“There's like a slight misunderstanding that like, oh, the entirety of the Pentagon turns over every four years. It's just fundamentally not true. Same here in, in, in MOD Manon Whitehall. It doesn't turn over with every administration end to end. So I think th…”
Grimm: Venture funding allows defense startups to build hardware before selling
“The other angle we can take is we can just do it. And I think that this is part of our strength where we've raised Pretty good amount of venture capital money. We have incredible broad freedom on what we can do with that money. So like if we have an idea of a …”
Grimm: Northrop Grumman stock returned over 20% annually for 15 years
“Northrop Grumman over the last 15 years has had a total compounded annual shareholder return of just over 20%. Lockheed and Boeing are just behind them at about 15%. The S&P 500 over the exact same time period has an 11.6% total compounded annual return.”
Grimm: Lockheed Martin spent 4x more on buybacks than R&D in 2023
“Like last year alone, Lockheed Martin, the twenty-twenty-three numbers, Lockheed Martin spent six billion dollars on stock buybacks. They only spent 1.5 billion dollars on IRAD, which is called internal R&D. Their own at risk funding of research and developmen…”
Defense procurement takes 15 to 20 years from requirements to full deployment
“So it can be upwards of 15, 20 years to go from first requirements document to full fielding of a system.”
Software-first modular design enables 2-3 year defense hardware cycles
“I think a two, three year cycle is extremely believable, especially if you architect your products to be pretty modular. If you architect your products to be upgrade friendly, if you upgrade your you design your products around a software kind of mentality whe…”
Grimm: Defense will never be a venture-style winner-take-all market
“I don't think there will ever be a kind of venture style dynamic of a winner take all. I don't think this is a situation of like Google versus Yahoo where, where one is the obvious dominant winner by 10 X and then there's the other rands. I don't think that's …”
Grimm: Western allies will spend nearly $1.3T on defense in 2024
“In 2024 alone, US is spending about eight hundred and eighty billion on defense. The UK spending about seventy three billion more. The EU member countries are spending almost three hundred billion on top of that. Australia spending forty five billion on top of…”
Grimm: Anduril will become the sixth defense prime alongside incumbents
“I don't see it as like Lockheed, Boeing, Northrop, Raytheon, et cetera. We're going to take all of them down. I don't see that at all. I think it's going to be like, we're going to become the sixth prime alongside them and that there's still plenty, plenty, pl…”
Matt Grimm: UK defense spending is drastically too low
“U.K. Spending too little by a wide order of magnitude. Should be closer to the two and a half, three percent of GDP that everyone's committed that they should be spending on NATO. So it should be, my guess is like, 50% higher than that”
Grimm: Defense primes are abandoning firm-fixed-price contracts
“And in fact, a few of them have come out in their recent annual reports and quarterly calls and whatnot and said that they're walking away from cost plus, or from firm fixed contracts. They won't do firm fixed contracts anymore. It's too risky for them.”
Matt Grimm: Anduril allocates 60% to 70% of budget to R&D
“Oh no, no, no, no. It's like 60, 70%. It's a huge number.”
Grimm: Anduril reinvests all revenue and remains EBITDA negative
“Like, Andrew, we're gonna do, we're doing very well financially this year revenue's off, off the charts. And then we reinvest every single nickel of that right back into future growth, future programs, all of that. So, like, we're still, you know, ebbed and ne…”
Grimm: Defense incumbents currently outperform Anduril at hardware logistics and fielding
“There's like a real kind of logistics and fielding piece there that to be honest as of today, they're better at than we are since we have a lot to learn there.”
Matt Grimm: Fully remote hardware companies are a contradiction in terms
“It's hard, basically impossible to run a hardware company in a fully remote capacity. It comes down to it. Somebody has to turn the wrench and build the thing. So like a full remote kind of hardware company is kind of a contradiction in terms.”
Matt Grimm: Relentless self-criticism benefits top teams but breaks weak teams
“It's good for high-performing teams. It's not great for shit teams.”
Matt Grimm: I will listen to this interview four times to critique myself
“I guarantee at the end of this, I'm going to listen to this interview no less than four times making notes of different tacks I could have taken or different points I should have made or different arguments I could have gone down.”
Grimm: Anduril has raised $4B in equity and $5B total including debt
“Short of debt, it would be about four billion. With debt, it'd be about five billion.”
Grimm: Anduril could not have built the business on half the capital
“I don't think I would say, oh, we could have done this on half as much money. No, not at all. I mean, if anything, I think we should raise more and go faster.”
Anduril employee tender offer participation sits at roughly 30%
“Every time we've done one of these structured tenders we've had a relatively low participation rate in them. Somewhere in the like, 30% range of the percent of shares that could have been sold that were eligible to be sold.”
Anduril never provides financial or strategic disclosures to SPV brokers
“Andoril has never once ever approached an SPV broker and said, hey, here are detailed financials. Here's our detailed strategy. Let me avail our management team for different interviews or different kind of sessions.”
Grimm: SPV brokers exploit unsophisticated investors with high fees and bad numbers
“What is fundamentally happening is you get a representation of bad numbers. To kind of like relatively unsophisticated investors on the other end who are paying usually pretty steep premiums to the kind of what we would describe as the fair market price with u…”
Grimm: Anduril will absolutely not hire to meet demographic quotas
“No, absolutely not. And anybody who tells you that they are, I think, like, I think is misguided.”
Grimm: Women Account for 18% to 20% of Anduril's Workforce
“We're about, I think, like, 18%, 20%, something like that.”
Grimm predicts many newly funded defense tech startups will implode
“Ultimately, I'm a little nervous about a lot of these companies kind of getting over their skis and then getting one or two fundraisers under them and then realizing it's a lot harder than it looks on paper and ultimately struggling and probably, probably impl…”
Grimm: Startups pitching as the 'Anduril of X' will lose to Anduril
“Well, you should know that the andrel of X is going to be andrel and that you're Your best bet is probably buying as many andrel shares as you can.”
Matt Grimm: Defense technology should not be a standalone VC asset class
“I agree. Absolutely. As a component of a diversified defense sort of investment within a broader diversified portfolio.”
Matt Grimm: Anduril has explored potential collaboration with Helsing
“Oh, we love them. Like, good relationship with them. I hope they succeed. We've talked about, talked with them a couple times about potential collaborations.”
Grimm: Almost All of Anduril's Acquisitions Were Bootstrapped
“Most of our acquisitions almost all of them have not been venture backed. They've been sort of bootstrapped and ground up started.”
Matt Grimm: Anyone claiming you can have everything without sacrifice is lying
“Oh, absolutely. Absolutely. Anybody who puts that together and tries to convince you that you can have everything you possibly want in life with no sacrifices is lying to you. Of course there are sacrifices.”
Grimm: California holds highest concentration of next-gen tech talent
“The highest concentration of talent working on what I think is going to be the next generation of problems That the world faces and the next generation of kind of generational segment defining companies. A lot of them are in California, man.”
Grimm: Venture capital lost its way by chasing quick fads
“I do think venture lost its way. And in pursuit of that kind of that, that early, that, that early fad, that next kind of quick trend, that next kind of, you know, quick pop.”
Grimm: Any VC ranking that excludes Founders Fund from top is laughable
“Any list of, you know, top tier VCs, et cetera, you know, people that publish the list that doesn't include founders fund at the top is a laughable list.”
Grimm: Early-stage defense tech valuations are too high for VC returns
“I think I would not be investing in defense at some of the valuations that these early stage companies are pulling down, because I think there's a sort of a view of a venture return in some of these companies that I think is going to be pretty hard to achieve.”
Grimm: Anduril is underpriced at its $14 billion valuation
“I don't think so. I think Andrel's underpriced today.”
Grimm: Reaching $100B requires massive production of autonomous systems
“I think really what it takes and this is gonna sound kinda, kinda silly, kinda pithy is, is full scale production. Massive scale production of robot planes, robot subs, more drones, more missiles, more everything.”
Matt Grimm: Robot-on-Robot Warfare Is Likely in Future Conflicts
“Robot on robot warfare, I think is pretty likely.”
Grimm: Iranian Shahed attack drones cost approximately $50,000 to manufacture
“This Iranian Shahid missile it's one of the missiles they mostly use goes pretty slow. It's just a drone. They can make it for in the neighborhood of fifty-ish thousand dollars.”
Grimm: The West lacks munitions capacity for a prolonged nation-state war
“The US right now does not have the production capacity, nor does the UK, nor does Australia, kind of the West at large, to make enough munitions to fully equip a prolonged nation on nation conflict.”
Matt Grimm: Foreign control of social media algorithms risks long-term US national security
“What we are willingly doing is we are willingly letting a strategic adversary control the knobs on what gets mainlined into the psyche of our youth. And if you don't think that that has long-term strategic implications for the motivation, for the ambition, for…”
Matt Grimm: Bias in traditional media is understated, not overstated
“I don't think, to answer your question concretely, I don't think it's overstated, if anything, I think it's understated.”
Matt Grimm: Preemptive state censorship of political speech is dangerous
“Having a sort of preemptive control over what opinions, what political positions, what proposals are allowed to be said is an incredibly dangerous path to go down”
Grimm: Europe has complacently lost its drive and ambition to build the future
“I think there's a lot of interesting and very challenging structural issues facing Europe. And I think fundamentally, again, it's coming from a very, very American perspective. There's an ambition. There is a, you know, seeking and working towards a better, br…”
Matt Grimm: Would start a semiconductor fabrication company if failure were impossible
“If failure was completely impossible, completely off, I'd repatriate all semiconductor fabrication. I'd start a company doing that.”
Matt Grimm: Anduril will go public and likely be his final company
“I think probably. I mean, we're all in this for the long haul. I think probably. We're gonna ring the bell one day, and then we're, you know, gonna build a massively successful publicly traded company, and like, yeah, it's probably my last.”