The investment thesis behind Anduril

Here’s Katherine Boyle from General Catalyst talking on the Venture Stories podcast about her rationale being funding Anduril in the early days:

Anduril’s a company that’s doing extraordinary work transforming the Department of Defense. I think when you look at a company that says, I have a customer that doesn’t know how to buy commercial products off the shelf, there hasn’t been a defense contractor built in the last 70 years of the size we want to become, and we’re a group of people who really have this vision not only about how the customer can change but how products are built in a sector, that’s a bold vision.

 

We certainly looked at the story and the story was plausible. We were working with a group of experts who worked at Palantir, worked at Oculus, really understood what needed to be done, the deeper we drilled down, the more it made sense, it was just a really hard vision to achieve. With that framework, we said: if this team, which is extraordinary, can change the way the Department of Defense thinks about the future of defense, the types of products they need and how they buy products, this will be an extraordinarily massive company.

 

And that was sort of the investment thesis. And every round it has become much more true. Every round there’s more products they’ve built, more customers they can reference. Their thesis of changing the way products are built and sold to the Department of Defense is actually becoming a reality. That’s why I go back to the founders themselves being extraordinary, because the most important visions are also the hardest to achieve.

Katherine discusses how she makes decisions based on understanding the founder and their narrative:

… The most extraordinary founders are also historians. They know everything about their industry. They know everything about their competitors. They read obsessively or talk to people obsessively or get information obsessively because they are so paranoid that there is something they missed. That is something that can’t be faked.

 

The difference in Western civilization being the difference between Athens and Jerusalem. Athens being where we derived Western logic, Greek philosophy, all of our institutions from American democracy are borrowed from that; and Jerusalem being the cornerstone of revelation of many world religions… I believe life is this balance of reason and revelation, as manifested by logic and these secrets that are given to us that we don’t know where they’re from. When you listen to much more experienced investors talk about their frameworks, they talk about secrets a lot… I think a lot of the founding experience is using this combination of logic and order to achieve great things, but there are these nuggets of wisdom… that most people can’t fathom, they cannot understand and they’re not going to see them.

I think of those nuggets of wisdom as being the same as Michael Polanyi’s “anticipations” of new scientific theories. This is what propels the human enterprise forward, while competition filters out the non-serious ideas or companies.

The way DoD makes program decisions, however, neglects the revelation and focuses solely on the reason. Yet reason is inward looking. It focuses on deductive exploration of the trade space within the bounds of what is known.

In practice, revelation is brought in whenever resources are allocated to people and organizations rather than specified projects. This is clearly how commercial investors think. Outcomes matter, but when you find a very serious team and understand that team, you also come to understand their outcomes. This is opposite of DoD, which has transient officials deciding on outcomes, and handing that over to program offices and contractors to go “execute.”