Private Markets, Angel and Secondary Investing, Sacra

Sacra

Private Markets, Angel and Secondary Investing

Bringing transparency to private markets so investors, founders, and employees can build on conviction. Sacra delivers deeply researched insights on the private companies shaping tomorrow's markets. By surfacing the data, context, and operator perspective that are missing from private markets today, we help secondary buyers and sellers price equity accurately and unlock liquidity for the people building these businesses.

Private Capital Markets

<ul><li>With a $1B manufacturing facility announced in January in Columbus, Ohio and a new $250M counter-drone contract with DoD, the once-scrappy border surveillance startup Anduril is getting closer to competing head-on with the traditional prime contractors in defense.</li><li>Sacra estimates Anduril's revenue reached $1B in 2024, up 138% YoY, now valued at $14B for a 14x revenue multiple.</li><li>Few companies stand to benefit as much as Anduril from the new Trump administration—which is eyeing Anduril co-founder Trae Stephens for a top DoD post—with the potential to grow their 0.2% share of defense spending ($1.2B in US contracts) and challenge the ~80% of major contracts historically won by Lockheed and Raytheon.</li></ul>

With a $1B manufacturing facility announced in January in Columbus, Ohio and a new $250M counter-drone contract with DoD, the once-scrappy border surveillance startup Anduril is getting closer to competing head-on with the traditional prime contractors in defense.Sacra estimates Anduril's revenue reached $1B in 2024, up 138% YoY, now valued at $14B for a 14x revenue multiple.Few companies stand to benefit as much as Anduril from the new Trump administration—which is eyeing Anduril co-founder Trae Stephens for a top DoD post—with the potential to grow their 0.2% share of defense spending ($1.2B in US contracts) and challenge the ~80% of major contracts historically won by Lockheed and Raytheon.

<ul><li>Now, with the success of Anduril ($625M revenue in 2023), SpaceX ($6B revenue in 2023), and Palantir ($2.23B revenue in 2023), the narrative has completely flipped.</li><li>The biggest mistake founders make is considering the $800B DoD budget a single market and approaching it with a land-and-expand mentality, rather than what Scott calls a “conglomeration of micro markets”.</li><li>Between the multi-year sales cycles, hardware-based business models and non-recurring revenue, VCs circa 2017 widely considered defense tech to be uninvestable.</li></ul>

Now, with the success of Anduril ($625M revenue in 2023), SpaceX ($6B revenue in 2023), and Palantir ($2.23B revenue in 2023), the narrative has completely flipped.The biggest mistake founders make is considering the $800B DoD budget a single market and approaching it with a land-and-expand mentality, rather than what Scott calls a “conglomeration of micro markets”.Between the multi-year sales cycles, hardware-based business models and non-recurring revenue, VCs circa 2017 widely considered defense tech to be uninvestable.

The Biggest Mistake Defense Startups Make

<ul><li>There&#39;s a confluence of things that are happening. One is Anduril&#39;s success, and that relates to whether there&#39;s actual economic success, polymers, carnival barker-like skills in talking about the success, and Palantir being a public version of that as well.</li><li>The two things that do happen, and this is the things that are very, very, very difficult, and they&#39;re very real. One is that the needs are so often written in a bespoke way that it&#39;s very, very, very difficult for someone that isn&#39;t doing custom development of hardware and software, to sell a product.</li><li>The second weight in the business is the budgeting cycles are really two years long. So, every enterprise piece of software is either trying to get some predictability, like ‘we land and expand, it&#39;s 50K, but eventually they&#39;ll pay us a million bucks.</li></ul>

There&#39;s a confluence of things that are happening. One is Anduril&#39;s success, and that relates to whether there&#39;s actual economic success, polymers, carnival barker-like skills in talking about the success, and Palantir being a public version of that as well.The two things that do happen, and this is the things that are very, very, very difficult, and they&#39;re very real. One is that the needs are so often written in a bespoke way that it&#39;s very, very, very difficult for someone that isn&#39;t doing custom development of hardware and software, to sell a product.The second weight in the business is the budgeting cycles are really two years long. So, every enterprise piece of software is either trying to get some predictability, like ‘we land and expand, it&#39;s 50K, but eventually they&#39;ll pay us a million bucks.

Ross Fubini, Managing Partner At XYZ Capital, On The Defense Tech Opportunity

<ul><li>In World War 2, as conventional armies faced off in large-scale ground battles, the government enlisted hundreds of American private sector contractors to build the tanks, planes, and boats—see Lockheed’s (NYSE: LMT) P-38 Lightning fighter and Electric Boat’s (NYSE: GD) USS Gato and Balao-class submarines—that were key to the Allied victory.</li><li>The Cold War wound down in the 90’s and Department of Defense (DoD) spending fell by 55%, triggering a massive wave of consolidations that created modern defense giants like Lockheed Martin and Northrop Grumman, decreasing competition, and increasing the use of cost-plus contracts.</li><li>Anduril ($600M+ revenue in 2023) similarly self-fund their own R&D—spending 100%+ of revenue on R&D vs. ~2% for Lockheed—using miniaturized GPUs developed for the gaming industry to build border sensors and autonomy systems fast and at a fraction of the cost of prime defense contractors, allowing them to win on a lower fixed price.</li></ul>

In World War 2, as conventional armies faced off in large-scale ground battles, the government enlisted hundreds of American private sector contractors to build the tanks, planes, and boats—see Lockheed’s (NYSE: LMT) P-38 Lightning fighter and Electric Boat’s (NYSE: GD) USS Gato and Balao-class submarines—that were key to the Allied victory.The Cold War wound down in the 90’s and Department of Defense (DoD) spending fell by 55%, triggering a massive wave of consolidations that created modern defense giants like Lockheed Martin and Northrop Grumman, decreasing competition, and increasing the use of cost-plus contracts.Anduril ($600M+ revenue in 2023) similarly self-fund their own R&D—spending 100%+ of revenue on R&D vs. ~2% for Lockheed—using miniaturized GPUs developed for the gaming industry to build border sensors and autonomy systems fast and at a fraction of the cost of prime defense contractors, allowing them to win on a lower fixed price.

Anduril, SpaceX, And The American Dynamism GTM Playbook

<ul><li>Forterra raised $75 million in a Series B round in September 2024, led by Moore Strategic Ventures, XYZ Venture Capital, and Hedosophia.</li><li>Forterra operates a B2B dual-use business model that leverages a single autonomous driving platform across both defense and commercial markets.</li><li>Forterra's core AutoDrive platform enables expansion into adjacent autonomous vehicle markets beyond its current focus on logistics and tactical vehicles.</li></ul>

Forterra raised $75 million in a Series B round in September 2024, led by Moore Strategic Ventures, XYZ Venture Capital, and Hedosophia.Forterra operates a B2B dual-use business model that leverages a single autonomous driving platform across both defense and commercial markets.Forterra's core AutoDrive platform enables expansion into adjacent autonomous vehicle markets beyond its current focus on logistics and tactical vehicles.

United States

Hardware-software defense systems for autonomous drones, surveillance towers, and counter-drone warfare

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Anduril (ANDURIL US)

Anduril At $1B/yr

TL;DR: With a $1B manufacturing facility announced in January in Columbus, Ohio and a new $250M counter-drone contract with DoD, the once-scrappy...

Sacra

The Biggest Mistake Defense Startups Make

Anduril circa 2017 was a highly unsexy company, both for Silicon Valley software engineers put off by its work on the southern border wall and for...

Sacra

Ross Fubini, Managing Partner At XYZ Capital, On The Defense Tech Opportunity

Sacra interview with Ross Fubini, Managing Partner at XYZ Capital.

Sacra

Anduril, SpaceX, And The American Dynamism GTM Playbook

TL;DR: Product-centric defense tech companies are flipping the traditional military procurement model based on cost-plus contracts, self-funding...

Sacra

Primer: Forterra - 14 Dec 2023

Autonomy stack for defense and commercial vehicles with integrated hardware and software

Sacra

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