Last night, for<\/span> an evening hosted by StrictlyVC, this editor sat down with Trae Stephens, a former government intelligence analyst turned early Palantir employee turned investor at Founders Fund, where Stephens has cofounded two companies of his own. One of these is Anduril<\/a>, the buzzy defense tech company that is now valued at $8.4 billion by its investors. The other is Sol<\/a>, which makes a single-purpose, $350 headset <\/a>that weighs about the same as a pair of sunglasses and that is focused squarely on reading, a bit like a wearable Kindle. (Having put on the pair that Stephens brought to the event, I immediately wanted one of my own, though there\u2019s a 15,000-person waitlist right now, says Stephens.)<\/p>\n We spent the first half of our chat talking primarily about Founders Fund, kicking off the conversation by talking about how Founders Fund differentiates itself from other firms (board seats are rare, it doesn\u2019t reserve money for follow-on investments, consensus is largely a no-no).<\/p>\n We also talked about a former colleague who manages to get a lot of press (Stephens rightly ribbed me for talking about him during our own conversation), whether Founders Fund has concerns that Elon Musk is stretching himself too thin (it has stakes in numerous Musk companies), and what happens to another portfolio company, OpenAI, if it loses too much talent, now that it has let its employees sell some percentage of their shares at an $86 billion<\/a> valuation.<\/p>\n The second half of our conversation centered on Anduril, and here\u2019s where Stephens really lit up. It\u2019s not surprising. Stephens lives in Costa Mesa, Ca., and spends much of each day overseeing large swaths of the outfit\u2019s operations. Anduril is also very much on the rise right now for obvious reasons<\/a>.<\/p>\n If you\u2019d rather watch the talk, you can catch it below. For those of you who prefer reading, what follows is much of that conversation, edited lightly for length.<\/p>\n Keith Rabois, who recently re-joined Khosla Ventures, was reported to have been \u201cpushed out<\/a>\u201d of Founders Fund after a falling out with colleagues. Can you talk a bit about what happened?<\/strong><\/p>\n At Founders Fund, everyone has their own style. And one of the benefits that really comes down from Peter from the beginning, when we were first founded around 20 years ago, is that everyone should run their own strategy. I do strategy in a different way than [colleague] Brian [Singerman] does venture. It\u2019s different than the way that Napoleon [Ta] \u2014 who runs our growth fund \u2014 does venture, and that\u2019s good, because we get different looks that we wouldn\u2019t otherwise get by having people executing these different strategies. Keith had a very different strategy. He had a very specific strategy that was very hands-on, very engaged, and I think Khosla is a very good fit for that. . .and I\u2019m really happy that he found a place where he feels like he has a team that can back him up in that execution.<\/p>\n Image Credits:<\/strong> TechCrunch<\/p>\n<\/div>\n You\u2019ve talked in the past about Founders Fund not wanting to back founders who need a lot of hand holding . . .<\/strong><\/p>\n The ideal case for a VC is you have a founder who is going to really good at running their own business, and there\u2019s some unique edge that you can provide to help them. The reality is that that\u2019s usually not the case. Usually the investors who think they\u2019re the most value added are the most annoying and difficult to deal with. The more a VC says \u2018I\u2019m going to add value,\u2019 the more you should hear them say, \u2018I\u2019m going to annoy the ever-living crap out of you for the rest of the time that I\u2019m on the cap table.\u2019 If we believe that we \u2014 Founders Fund \u2014 are necessary to make the business work \u2014 we should be investing in ourselves, not the founders.<\/p>\n I find it interesting that so much ink was spilled when Keith moved to Miami, and again when he moved back to the Bay Area in a part-time capacity. People thought Founders Fund had moved to Florida, but you\u2019ve told me the bulk of the firm remains in the Bay Area.<\/strong><\/p>\n The vast majority of the team is still in San Francisco. . . Even when I joined Founders Fund 10 years ago, it was really a Bay Area game. Silicon Valley was still the dominant force. I think if you look at fund five, which is the one I entered at Founders Fund, something like 60% to 70% of our investments were Bay Area companies. If you look at fund seven, which is the last vintage, the majority of the companies were not in the Bay Area. So whatever people thought about Founders Fund relocating to Miami, that was never the case. The idea was that if things are geographically distributed, we should have people who are closer to the other things that are interesting.<\/p>\n Keith said something earlier today at the [nearby] Upfront Summit about founders in the Bay Area being comparatively lazy and not willing to work nine to nine on weekdays or on Saturdays. What do you think about that and also, do you think founders should be working those hours?<\/strong><\/p>\n I used to work for the government, where, when you speak publicly, the goal is to say as many words as possible without saying anything . . .it\u2019s just like the teacher from Charlie Brown, rah, rah, rah, rah, rah. Keith is really good at saying things that journalists ask about later. That\u2019s actually good for Keith. He made us talk about him here on stage. He wins. I think the reality is that there aren\u2019t enough people in the world that say things that people remember that are worth talking about later. My goal for the rest of this talk is to find something to say that someone will ask about later today or tomorrow, \u2018Can you believe Trae said that?\u2019<\/p>\n I have a solution to that, but that comes later! OpenAI is a portfolio company; you bought secondary shares. It just oversaw another secondary sale. Its employees have made a lot of money (presumably) from these sales. Does that concern you? Do you have a stance on when is too soon for employees to start selling shares to investors?<\/strong><\/p>\n \u00a0<\/p>\n Image Credits:<\/strong><\/p>\n<\/div>\n \u00a0<\/p>\n In tech, the competition for talent is really fierce, and companies want their employees to believe that their equity has real monetary value. Obviously it would be bad if you said, \u2018You can sell 100% of your vested equity,\u2019 but at a fairly early stage, I think it\u2019s fine to say, \u2018You\u2019ve got 100,000 shares vested; maybe you can sell 5% to 10% of that in a company-facilitated tender, so that when you\u2019re being compensated with equity, that\u2019s real and that\u2019s part of your total comp package.\u2019<\/p>\n But the scale is so different. This is a company with an $86 billion valuation [per these secondary buyers], so 5% to 10% is a lot.<\/strong><\/p>\n I think if you start seeing a performance degradation related to people checking out because they have too much liquidity, then yeah, that becomes a pretty serious problem. I haven\u2019t seen that happen at OpenAI. I feel like they are super mission-motivated to get to [artificial general intelligence], and that\u2019s a really meaty mission.<\/p>\n You\u2019re also an investor in SpaceX. You\u2019re an investor in Neuralink. Are you also an investor in Boring Company?<\/strong><\/p>\n We\u2019re an investor in Boring Company.<\/p>\n Are you an investor in X?<\/strong><\/p>\n No. No, no, no, no. [Laughs.]<\/p>\n But you\u2019re in the business of Elon Musk, as I guess anyone who\u2019s an investor would want to be. Are you worried about him? Are you worried about a breaking point?<\/strong><\/p>\n I\u2019m not personally concerned. Elon is one of the most unique and generational talents that I think I\u2019ll see for the rest of my life. There are always trade-offs. You go above a certain IQ point and the trade-offs become quite severe, and Elon has a set of trade-offs. He\u2019s incredibly intense. He will outwork anyone. He\u2019s brilliant. He\u2019s able to organize a lot of stuff in his brain. And there are going to be other parts of life that suffer.<\/p>\n You are very involved in the day-to-day of Anduril, more than I realized. You\u2019ve built these autonomous vessels and aircraft. You recently introduced the RoadRunner, a VTOL that can handle varying payloads. Can you give us a curtain raiser about what else you\u2019re working on?<\/strong><\/p>\n The nature of Anduril and what we\u2019re doing there is that the threat that we\u2019re facing globally is very different than it was in 2000 through 2020, when we were talking about non-state actors: terrorist organizations, insurgent groups, rogue states, things like that. It looks now more like a Cold War conflict against near-peer adversaries. And the way we engaged with great power conflict during the Cold War was by building these really expensive, exquisite systems: nuclear deterrents, aircraft carriers, multi-hundred-million-dollar aircraft missile systems. [But] we find ourselves in these conflicts where our adversaries are showing up with these low-cost attritable systems: things like a $100,000 Iranian Shahed kamikaze drone or a $750,000 Turkish TB2 Bayraktar or simple rockets and DJI drones with grenades attached to them with little gripper claws.<\/p>\n Our response to that has been historically to shoot a $2.25 million Patriot missile at it, because that\u2019s what we have, that\u2019s what\u2019s in our inventory. But this isn\u2019t a scalable solution for the future. So since we were founded, Anduril has looked at: how can we reduce the cost of engagement, while also removing the human operator, removing them from the threat of loss of life . . .And these capabilities are not hardware capabilities largely; this is about autonomy, which is a software problem . . .so we wanted to build a company that\u2019s software-defined and hardware-enabled, so we\u2019re bringing these systems that are low cost and supplementing the existing capabilities to create a continued deterrent impact so that we avoid global conflict . . .You want to do things in attritable ways that reduce the cost of life and the capital costs of deploying these systems, [yet] that still allow you to demonstrate total technological superiority on the battlefield to the extent that you prevent conflict from ever happening.<\/p>\n I\u2019d read a story recently where someone from one of the defense \u2018primes<\/a>,\u2019 as they\u2019re called, rolled their eyes and said defense tech upstarts don\u2019t know enough yet about mass production. Is that a concern for you?\u00a0<\/strong><\/p>\n Startups don\u2019t<\/em> know how to do mass production. But primes also don\u2019t know how to do mass production. You can look at the Boeing 737 problem if you want some evidence of that. We have no supply of Stingers, Javelins HIMARS, GMLRS, Patriot missiles \u2014 they can\u2019t make them fast enough. And the reason is they built these supply chains and manufacturing facilities that are more like the manufacturing facilities of the Cold War.<\/p>\n To look at an analogy to this, when Tesla went out to build at massive scale, they said, \u2018We need to build an autonomous factory from the ground up to actually hit the demand requirements for producing at a low cost and at the scale that we need to grow.\u2019 And GM looked at that and they said, \u2018That\u2019s ridiculous. This company will never scale.\u2019 And then five years later, it was evident that they were just getting absolutely smoked. So I think the primes are saying this because it\u2019s the defensive reaction that they would have. to say these upstarts will never get it.<\/p>\n Anduril is trying to build a Tesla. We\u2019re going to build a modular, autonomous factory that\u2019s going to be able to keep up with the demand that the customer is throwing at us. It\u2019s a big bet, but we hired the guy that did it at Tesla. His name is Keith Flynn<\/a>. He\u2019s now our Head of Production.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n![\"\"](\"https:\/\/techcrunch.com\/wp-content\/uploads\/2024\/03\/53562059220_ee929656c9_k.jpg\")
<\/p>\n![\"\"](\"https:\/\/techcrunch.com\/wp-content\/uploads\/2024\/03\/53561612661_a79ee762dd_k.jpg\")
<\/p>\n