Defense Darling Anduril Grapples with Military Tech Glitches

Eight-year-old Anduril Industries is one of the most buzzed-about startups in defense tech, one of the world’s most valuable private companies, and one of the few, if only, firms whose founder considers Hawaiian shirts to be formal wear.

While Anduril has won Pentagon contracts and the line of investors looking to buy into its last fundraising was too long to accommodate, two reports late last week suggested its breakthrough technology has had some setbacks, though the company dismissed them as selective negative press from competitors.

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Anduril was founded in 2017 by Palmer Luckey, whose Oculus was acquired by Meta in 2014 as the foundation of its headset-making augmented reality (AR) and virtual reality (VR) unit. The new venture is focused on altering a different reality, the one in the defense sector, where major contractors like Lockheed Martin and Northrop Grumman have a stranglehold on business. Anduril makes autonomous and AI-backed military systems including reconnaissance and combat drones, sensors and interceptors. It also develops the “command and control” AI software Lattice, which can coordinate and direct multiple unmanned assets at once.

Last year, Anduril doubled revenue to $1 billion. Earlier this year, it linked up with Luckey’s former employer Meta to take over the contract for a $22 billion US Army program to develop AR/VR headsets for soldiers. Multiple Pentagon contracts for its drones and interceptors have rolled in as well, as have partnerships with traditional defense contractors. All this activity has drawn in the venture capital A-list, with Andreessen Horowitz, General Catalyst, BlackRock and Peter Thiel’s Founders Fund on board. (Anduril is named after the sword used by protagonist Aragorn in Tolkien’s Lord of the Rings, while Thiel cofounded Palantir, which is also named for an object from Rings lore. Why aren’t there any Charlotte Brontë-inspired AI defense contractors?)

Anduril was last valued at $30 billion in June, when its $2.5 billion fundraising round was oversubscribed eight times, but it may still be ironing out a kink or two: 

• Reuters reported Friday that Anduril’s Altius drones crashed twice during Air Force tests this month. The news agency also said Ukrainian military personnel were frustrated with its reconnaissance Ghost drone, which they found struggled against Russian jamming of satellite navigation systems.
• On Thursday, the Wall Street Journal reported an incident in May in which over a dozen unmanned drone boats using Lattice were automatically idled because they didn’t follow their instructions. The paper also reported that, in August, the engine of an Anduril-developed unmanned fighter jet was damaged before a planned Air Force test flight in California due to a mechanical issue. In the same month, an interceptor drone crashed and caused a 22-acre fire in Oregon.

Failure is an Option: “We do fail … a lot,” Anduril wrote in a blog post responding to the reporting. The company added, however, that the reported failures represent only a “tiny fraction” of thousands of tests. Anduril suggested the stories “present a few narrow snapshots, stripped of all context” and that they were “clearly sourced” from its competitors.