Minus One · 3 min · Nov 5, 2026

Defense startups must expand beyond a single product category

Trae Stephens · Co-founder, Anduril Industries

Trae Stephens argues that companies aiming to become defense primes must cross domains because major contractors build across many categories.

In this episode

23:45 High valuations can make even successful startups poor investments6 min
30:28 Anduril grew out of a search for software-led hardware4 min
34:20 Anduril started with a deployable product, not its ultimate ambitions5 min
39:18Defense startups must expand beyond a single product category3 min
12:01 Palantir took a decade to reach $1 billion in revenue4 min
17:24 Twelve companies generated over 95% of Founders Fund's returns6 min
2:50 Palantir's culture won him over by turning ideas into action6 min

“There is no free space left in defense.”

Trae Stephensat 41:20 · Minus One

Takeaways

A single product category limits a defense company's potential scale
Major defense primes span many products and domains
Anduril is working with General Dynamics on submarine modules

About this segment

Trae Stephens argues that companies aiming to become defense primes must cross domains because major contractors build across many categories. Anduril's work with General Dynamics on submarine modules shows how that expansion can happen.

Trae Stephens is cofounder of Anduril Industries and Partner at Founders Fund.

Co-founded Anduril, building autonomous defense systems on a shared software platform, and invests in government-focused startups.

Aditya Agarwal, Host · Partner, South Park Commons
One of Facebook's first engineers, he helped build its first search engine; later CTO of Dropbox.

From “What Nobody Tells You About Building Defense Tech Companies | Trae Stephens”, Nov 5, 2026. Watch the full episode

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

39:23
In the spectrum of things that you could build, how do you do in some ways product selection or prioritization? And then similarly, you know, you've kind of talked about building the modern defense prime. I think there are five other, you know, kind of recognized primes, right? Five or six. Do you think there's room for a bunch more? Like, can people go out and start kind of like new defense companies that can get to scale?
39:43
Yeah. So, you know, the five big defense primes are all household names. It's like Boeing, which actually does a lot of commercial as well. So their market cap is not entirely tied to defense. But Boeing, Lockheed Martin, Northrop Grumman, General Dynamics, and RTX, which used to be called Raytheon. These are huge companies. and they don't build a single thing. They build a bunch of things. In fact, they build general aviation aircraft.
40:07
Like they're building private jets. Private jets, yeah. They're building elevators in the case of RTX. I mean, these are thousands of SKUs at every company. And so when we talk about building a modern defense prime, it's actually very different than how startups have been talking about this in the defense tech community. Because if you come in with like an idea where you're like, I'm going to build, you know, a unmanned surface vessel, or I'm going to build like a electronic warfare platform or something like that. That is a product or it's a category of products. You don't get to a hundred plus billion dollar market cap with the Department of Defense building in a single category. And that was something that we have a lot of conviction around early on at Anderrill is that we knew we need to be multi-domain, just like Lockheed is,
40:54
just like Northrop is. And so the, I think the reality for a lot of defense tech companies that they haven't quite figured out yet is that all paths converge at Andrel. Even if the thing that you're building at first is not competitive with Andrel, you are going to end up competing with Andrel if you want your company to be worth a lot of money. And I'm not saying that I'm not okay with that. I'm totally fine with having competition. I'm just saying like, if you believe that you're operating in free space. It's just not true. There is no free space left in defense. Every major contract that we go after, we compete with Lockheed, we compete with Northrop, we compete with RTX, we compete with General Dynamics. We have to work with them in some cases. We just announced a few weeks ago that we're building a massive submarine shipyard to build supermodules
41:44
for Virginia-class submarines. We have to work with General Dynamics Electric Boat to make that happen. When we started the company, did we think we're going to build nuclear submarines? No. But in order to play in this ecosystem, you're going to have to do all of this stuff over time. And so there's no such thing as like a niche domain defense tech company, if your plan is to be a next generation prime. And I think you just have to like really think about the implications of that. That's a pretty good answer. I will call it here. Trey, thank you for showing up with