How to Buy Anduril

Episode Overview

• A discussion on the challenges and methods of investing in private companies, using the defense tech startup Anduril as a case study.
• An overview of Anduril, its founder Palmer Luckey, and its mission to disrupt the traditional military technology industry.
• An explanation of how private company shares are traded on secondary markets, often through Special Purpose Vehicles (SPVs).
• A look at the valuation of Anduril and the difficulty for smaller investors to gain access at a reasonable price.
• A brief debate on the ethical considerations of investing in the defense and military technology sector.

Key Concepts

• Private Company Investing: The process of buying shares in companies that are not publicly traded on a stock exchange. This is more complex and less transparent than public market investing.
• Anduril Industries: A defense technology startup founded by Palmer Luckey (creator of Oculus VR) that develops software and hardware for military applications, aiming to bring a more agile, Silicon Valley approach to the defense sector.
• Cost-Plus Contracting: A common model in the traditional defense industry where contractors are paid for their costs plus a percentage for profit, which can disincentivize efficiency and cost-cutting.
• Secondary Markets: Platforms where shares of private companies can be bought and sold by early investors, employees, and funds, allowing for some liquidity before an IPO.
• Special Purpose Vehicles (SPVs): Investment structures that allow multiple investors to pool their money to buy a stake in a private company, often used on secondary market platforms.
• Ethical Investing: The personal and moral decisions investors face when considering industries like defense, balancing potential profits with the societal impact of the company's products.

Quotes

• At 00:06 - "Anduril is a company that I'm trying to buy and they are a defense tech startup." - The speaker introduces his "safari stock" and the focus of the segment, highlighting the difficulty of acquiring shares in a private company.
• At 01:06 - "You think about the prime contractors... they're selling stuff on cost plus... that doesn't motivate companies like those guys to be efficient and optimize and cut costs." - Explaining the inefficient business model of legacy defense contractors that Anduril aims to disrupt.
• At 04:33 - "How do you buy shares of, let's say, Anduril specifically? So they're not public, which means you can't go and download like a quarterly or an annual report." - Highlighting the core challenge of investing in private companies due to the lack of publicly available financial information.

Takeaways

• Investing in high-growth private companies like Anduril is possible for individual investors, but requires navigating specialized secondary market platforms.
• The defense technology sector is undergoing disruption by startups that are more innovative and cost-effective than traditional "cost-plus" contractors.
• Due to limited transparency and liquidity, investing in private markets carries unique risks and requires a higher degree of trust in the company's long-term vision.
• Valuations in private markets can increase dramatically between funding rounds, making it expensive to get in later. For example, Anduril's valuation more than doubled from $14 billion to a trading value closer to $30 billion in a short time.
• Investing in sectors like defense involves ethical considerations that each investor must weigh for themselves, balancing profit potential with personal values.