📶 defense tech drama

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Good morning 👋

We have drama in defense tech.

Anduril (Palmer Luckey’s defense tech company) is suing a startup founded by ex-Anduril employees over theft of trade secrets and IP.

Regardless of how the case plays out, there are things that investors need to know, and we break those down in this week’s piece.

If you think we’re right, wrong, or way wrong, let us know in the comments.

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NEWS
Anduril and some defense tech legal drama 👨‍⚖️

Anduril, the defense tech giant founded by Palmer Luckey, has sued a startup called Salient Notion, alleging theft of trade secrets and contract breaches. The company was founded by ex-Anduril employees, and the lawsuit reveals some other challenges both within defense and tech as a whole.

Here are the larger takeaways from this event.

Why it matters:

• Employee mobility laws and NDAs: All startup employees are knowledge workers, and that internal knowledge compounds as the company success does. Anduril is a defense tech winner, and Anduril employees have an inside look at what it takes to build a billion dollar defense tech company. The laws around switching companies are messy (ask your lawyer, not me), and there’s a reason that most tech companies force employees to sign NDAs that make it illegal to take their knowledge learned and go to a competitor.

• Defense tech has gone mainstream: For years, defense tech used to be a ‘hard no’ from VCs. Those days are behind us, and more and more investors are getting involved in the sector. Success stories like Anduril have added to this narrative change, along with more and more geopolitical issues abroad. Capital follows attention, and litigation follows capital. This is the latest reminder of that.

• Old school defense tech companies and investors fight back: The influx of new capital has not gone unnoticed, and there naturally will be some resentment from existing players towards newer players in the industry. Peter Thiel (an early Anduril backer) famously said that competition is for losers. You can either fight competition the old way and compete on basis points for government contracts, or you can end your competition by drowning them in lawsuits.

What happens next:

We’re too far away from this story to speculate on the outcome, but we’re tracking what happens because of the legal precedence.

The outcome could make it easier or harder for employees to leave established companies and start their own company in the same space. Depending on the final verdict, this could either stifle new innovation or make it easier for new company formation.

We’ll stay tuned and update you either way.

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