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Drone startup Anduril: Meeting the threats of today — and tomorrow

Over the weekend, a US destroyer and three commercial ships operating in the Red Sea reportedly came under drone and missile attacks. Iran-backed Houthi forces in Yemen claimed responsibility.

Since early October, Islamic State and Iran-backed militias have launched more than 50 drone attacks against American forces stationed in Iraq and Syria, according to DroneSec, a tech company specializing in analyzing drone threat intelligence. Palmer Luckey, whose startup has developed a new weapon to counter these threats, says he can help.

His company, Anduril Industries, built a small, AI-powered combat drone called Roadrunner, which can fly at hundreds of miles per hour. The California-based Anduril was founded in 2017.

Luckey, 31, was born and raised in Long Beach, Calif. He started college at age 15, but dropped out at 19. He focused his time and effort on his passion for gaming, building virtual reality company Oculus and selling it to what was then Facebook in 2014 for more than $2 billion.

Luckey says Facebook then fired him because of his support for Donald Trump in the 2016 presidential election. (Parent company Meta's CEO Mark Zuckerberg publicly countered that a “personnel matter” led to his dismissal.) At that point, Luckey could have pursued any number of new ventures, but he chose to concentrate on national security.

“It was the most impactful thing that I could work on,” he said.

In a first for this kind of weapon, Roadrunner can take off, return to ground, and be reused if it does not engage a target. (Anduril said the price of Roadrunner is in the "low hundreds of thousands of dollars.")

A single operator can launch and supervise multiple Roadrunner squadrons. "I didn't believe the United States had the tools we needed to address these ever-more deadly-drones that our adversaries are throwing against us," Luckey told Yahoo Finance Live in an interview this week. (See video above.)

Government procurement records detail that US Special Operations Command paid $12.5 million to Anduril in December 2022 for “Roadrunner CUxS [Counter Unmanned Aerial System] Hardware,” 404 Media reported.

Billions on defense

A number of investors are betting on Luckey.

Joe Lonsdale of Texas-based venture firm 8VC invested in Anduril because of what he described as the "integrity and ability" of the company's founders, and the need for its technology given increasing geopolitical tensions between Washington and Beijing.

LISBON, PORTUGAL - NOVEMBER 08: Palmer Luckey, Founder, Oculus and Anduril, delivers remarks on
Small and nimble: Palmer Luckey, founder of Anduril. (Horacio Villalobos - Corbis/Corbis via Getty Images) (Horacio Villalobos via Getty Images)

In addition to Anduril, Lonsdale co-founded and invested in Epirus, which developed so-called directed-energy weapons that destroy drones using high-power microwaves. The firm also invested in Saronic Technologies, a Texas-based startup building autonomous surface vessels for the US Navy.

Lonsdale argues that smaller, nimbler defense tech startups are well positioned to compete and win against larger, publicly traded defense contractors. "The culture of the big primes is to wait and lobby and get paid to do something and they tend to be more incremental and careful, and if somebody is too talented and fast and opinionated their legacy government-like cultures usually reject those personalities," Lonsdale said.

8VC is not alone, with many venture investors committing capital to this sector. As of Nov. 30, $29 billion has been invested across 470 VC-backed US defense tech companies this year, according to PitchBook.

To date, Anduril has raised $2.7 billion and is valued at nearly $10 billion. Luckey did not specify a timeline, but said Anduril intends to go public.

'We need autonomy'

"The future of war is going to be defined by massive numbers of autonomous systems cranked out by the nations that have the industrial firepower to do so," Luckey said.

Anduril is building a portfolio of products including counter-drone aircraft, autonomous submarines, loitering munitions, and an autonomous security tower deployed on US military bases around the world and on the US-Mexico border by US Customs and Border Protection. The company has said it has secured contracts with the US Department of Defense, the US Department of Homeland Security, and the UK Royal Marines. Anduril deployed software, hardware, and personnel to Ukraine as well.

Anduril, though, has a lot of competition, such as Boeing (BA), General Dynamics (GD), Lockheed Martin (LMT), Northrop Grumman (NOC), and RTX (RTX).

Luckey contends his company has advantages over its big, entrenched rivals.

"Because we are a defense product company, more than a defense contractor, we don’t make money by dragging contracts out," he said, adding, "We make money when we move fast. We make money when we are efficient."

Josh Lipton is an Anchor at Yahoo Finance.

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