How Altimeter Is Investing $100M+ Checks | Anduril, SpaceX, K2 Space

0:00How are you guys thinking about the exit environment and navigating this very volatile year? Extreme volatility and uncertainty. Max tech uncertainty, max political uncertainty, max economic uncertainty. And so it's not the most appealing environment to go public in. You still can do it. There's always going to be appetite from investors to invest in great businesses. Eric Crispin, welcome to Sorcery. Happy to be here. I'm so pumped. You are kind of a legend. You are a legend. You fly a little bit under the radar, but you have a wonderful track record already. You've been at Altimeter almost three years now.

0:36They have over 10 billion AUM. And you've invested into some of the most consequential founders in this generation. Companies like SpaceX, Anderol, K2 Space, and some more. I'd love to just start with what's your biggest bet right now? Thank you so much. Happy to be here. Far from a legend. And I try to fly a bit under the radar and just be a great partner to the entrepreneurs I'm working with. Biggest bet right now in terms of position size is Andrel. Wow. Okay, so we need to get to how we got here. So you've been in human capital most of your career. You worked at Index. You worked at Kostla.

1:16How did you flip over to the capital capital side? Yeah, so I've been in venture capital over 10 years, started at Kostla Ventures, got recruited there, worked really closely with Keith and Vinod, and Dillian was there at the time. and I was kind of co-leading human capital or talent. And so I was working with companies like FAIR and Max Rhodes over there right after we led the seed round, companies like GitLab. And, you know, I remember I was talking with Vinod. I was like, Vinod, how are you going to measure if I'm good at my job, if I'm being successful, if this is valuable? And he was like, oh, Eric, easy.

1:51Like, I'm just going to ask the entrepreneurs that we've asked you to spend time with, like, hey, what do you think, Eric? And if they tell me, hey, he's great, thank you so much. Like, I know you're doing your job. I trust that what you're doing is is, you know, beneficial and making an impact to the companies. And so, you know, I was doing that at Kostla. I got recruited to index to kind of like lead all of human capital and really had a blank slate to do it there. And that was like a playground for me. Right. To kind of design something from scratch. And, you know, how we thought about it there was you've got, you know, entrepreneurs, you've got current founders, future founders, sort of, you know, LPs, talent in the ecosystem.

2:33And what's the relationship we want to have with all these people? And they're like different relationship journeys, almost like you think of a customer journey. Right. And so a series A company wants to have, you know, the CMO of a public company as an angel investor and an advisor before they can they can hire them. Or, you know, if you're a late stage company before you go public, you're thinking about bringing on an audit chair or a CFO to take you public or a new president. And, you know, those same people want to angel invest and advise early stage companies. And so we started seeing all this like cross pollination opportunity within our portfolio.

3:09And we just thought about who, like, how do we earn the right to have the relationships with these people? What do they want? What's important to them? What do they care about at this stage of their life and career? And how can we be the conduit to that thing for them? And that allowed us to just build, like, really deep, intimate relationships with these people. And then, you know, in parallel to that, we're, you know, working with our largest positions in our portfolio, spending time with Alex Wang or Dylan Field or Asaf while I was at Index of Wiz and Figma and Scale AI and really just sitting down with them and understanding, okay, what's the number one thing any investor could do for you this year that would be transformational for your business?

3:53Like, I'm not an employee, but what's the one thing that I can do for you that would fundamentally move the needle for your company? It's usually like one or two or maybe three things over the course of an entire year. almost all of them come back to like something people related. It's a key hire or a key introduction or a strategic introduction, something like that. And so spending time with them to identify that thing and then you just deliver. You just do the thing. And then you build trust with the founders. You kind of like deepen your relationships with the people that you're kind of like working with to accomplish that.

4:24And you earn the right to kind of like be that consigliere or, you know, trusted partner to the founder. And we found out that through doing that, you know, I'm working with Alex Wang at ScaleAI on the CTO search. We ended up hiring Brad Porter, who's since left and started, you know, collaborative robotics. And so we started seeing that like, OK, these talent activities are leading us to these other exceptional people who are starting companies. You know, we initially got to know Zach Abrams and Sean from Bridge when they were like starting to think about what's next before they'd even decided they were going to start a company and then quickly realized, oh, they want to start a company.

5:03And so, you know, that led us to kind of like source and co-lead the seed for Bridge, which eventually got acquired by Stripe after I had since left. And, you know, so there was all these kind of like flywheels in the function. And ultimately how this led me to Altimeter is Index and Altimeter had a bunch of co-investments, companies like Confluent and ClickHouse to name a few. And, you know, at least what I heard is the Altimeter team started to hear about me in these board meetings that I wasn't in. Yeah. And, you know, the founders were saying, oh, Eric from Index was super helpful on this specific thing.

5:42And the Altimeter, who is this guy that's like not here that's getting called on the board meetings? Who's Eric? And so I knew Jim and a little bit socially. And so, you know, I got to know them. And it was kind of more so started off with they were thinking about, oh, do we want this function and this capability at Altimeter? And I was helping them think through that. And then there was this moment where, you know, they were kind of like, hey, have you ever thought about being an investor? Like you've kind of done the hard part of shown that you can build trust with and be valuable to like exceptional entrepreneurs.

6:14And you have a really interesting network. Like, would you have a desire to be an investor? We think you have great potential. If you wanted that for yourself, perhaps you could be great at that here. And, you know, Index was a fantastic place. I was happy to be there, grateful to be there. But it was just a no-brainer opportunity to kind of go from human capital to being an investment partner, having a seat at the table, working with Brad and the entire team at Altimeter. And so, you know, I jumped at that, and that was a little over two and a half years ago. And, man, it's been, you know, incredible kind of making the jump.

6:46Congratulations. That is huge. That's awesome. Yeah. And so you have developed a superpower throughout all this. Like of the details that you mentioned, authenticity, trust between all these relationships, what do you think are the key components of developing relationships with different people and talent? I think you have like curiosity, right? Like you have to take an interest in other people and actually care to get to know them. What's important to them? What do they care about? I don't know. Maybe it goes like I'm an only child. And so I growing up, like had to make friends. You got to take an interest in other people.

7:23And so I think it starts with that. And then there's just like a simple thing of it's not what everybody can do for you. It's about what can you do for everybody else to earn the right to have a relationship or a friendship with these people, to be a part of like their career journey or their life journey. And like I say that from a position of privilege of like, hey, if you're working at a COSAR, an index or an altimeter, like you're in the ecosystem. You're going to benefit from being a good actor in the ecosystem. And whether that's a short term, you earn the right to invest in this company or it comes back around because, you know, you did the right thing for somebody else.

8:00You know, careers are long. Venture cycles are long. And so it was a couple of those things of just being curious, genuinely wanting to get to know people, being useful to them, being helpful. and then, I don't know, like, in venture, in this ecosystem, like, these are incredible people doing inspiring things, important missions. So if you don't love it, maybe it's hard to do, but, like, if you have that love of the game, if you're interested and curious about these people, then it's kind of like heaven, and it's kind of, I don't know, at least somewhat easy. Sorcery is brought to you by Brex, the financial stack trusted by more than 30 ,000 companies, including one in three venture-backed startups in the U.S.

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9:29Start today at brex.com slash sorcery. That's B-R-E-X dot com slash sorcery. So you're particularly focused on real world technologies like aerospace and defense. Yeah. How did you get interested in that after being exposed to all of the categories? Yeah. You know, I think there's like one, it's just cool. Like, yeah, it's just it's just cool. And then two, you know, as I think about companies, it all comes back to people and talent. Right. And so I believe, like, if you can create a fundamental, like, talent advantage at, like, you know, the human level within your company and get a high density of talented people, like, you have better odds of success and the magnitude of success can be a lot larger.

10:24And so, like, talent is the leading indicator of success of any organization, right? And this was, like, ingrained to me at Index, or excuse me, at Kostla, the team you build is the company you build. And so I just think that companies in, call it deep tech, aerospace, defense, energy, autonomy, mining, robotics, all these categories, you're seeing these, this sort of like new class of entrepreneur go after these opportunities that were, you know, trained or had success at Palantir and Tesla and SpaceX and et cetera. And not only are these like massive market opportunities, like truly just huge slices of the economy that haven't been kind of attacked by entrepreneurs with venture capital in a while.

11:07And so it's too daunting for most. Most won't even try. Even fewer are capable of pulling it off. But these couple of teams paired with venture dollars, you kind of can attract exceptional talent into your company at an early stage because there's kind of like nobody else doing this thing. And so if someone is passionate or wants to come work on something that's meaningful, that's difficult, that's challenging, but if successful is, like, really going to leave a mark or really have an impact, there's not 50 companies doing the thing. There's one or a couple. And so, again, you can consolidate and get this, like, dense pool of really talented people into your business, and that just gives you the strategic advantage.

11:51And so I like companies where you can stack the deck in your favor. And so I just think companies in this space have a fundamental advantage on talent. You're writing over$100 million checks now. You go from human capital straight to$100 million checks. That's truly incredible. And you're doing it for Altimeter, who is traditionally very well known as a software investor. How did you convince Altimeter, Brad, the team to get into this space? You know, it's helpful when the entrepreneurs that you are building conviction in and you put in front of the team are, you know, great. And so the team is good at recognizing greatness.

12:31But it stems with, you know, a lot of data and a lot of market work pointing to, like, what is changing in the world? Like, what is the super cycle or why is now the right time to kind of go after some of these opportunities? You know, obviously our investment, you know, in SpaceX helped inform our investment in K2. And with Andrel, like it was pretty clear how exceptional the team was, what they were doing, why they had a fundamentally like better like cost structure and business model and how they were being innovative to, you know, capture, you know, a very large sort of like market opportunity within defense.

13:11And so, you know, convincing the team is doing a bunch of work and, you know, explaining the size of the opportunity, why this team is uniquely well suited to go after this opportunity. What's their insight? What's it's informed by? Why have they earned the rights? Why have they earned the right to go after it? And then, you know, stemming back to my human capital days, it's like, yeah, you can identify the like difficult or hairy things that aren't perfect yet. But you also can see like, okay, well, I know how to help on that thing. Or I know that that is the worst it's ever going to be. And that's going to improve over time.

13:43And so you can build fundamentally better businesses, which we can talk a bit about, like some of the trends lines within space or defense. But our team is smart. And so when you present the data, when you meet the teams, when the teams come and present and talk about, hey, here's what we're doing. Here's why it's different. Here's the size of the prize. Here's why we're going to win. You know, it makes it easier to kind of, you know, convince the team or at least communicate my conviction based on all the work that I've done. I want to dig into a couple of your companies. Let's start with Anderle.

14:24Okay, so let's break this down from a deals perspective. Yeah, so after I joined Altimeter, one of the first things, I wanted to do was invest in Andrel. I just had a deep belief for actually, you know, like years, I hadn't had the opportunity to invest in the company. But I was like, God, this is just obvious to me. Like the team is so good. How they're going about attacking the market is just, I just thought it was an obvious, like great venture bet. And I thought it was destined to be a wild success. And so I joined, I was like, okay, you know, we need to invest in this company. And, you know, there was, there were, there were some preexisting relationships with, with Brad and some of the team, but ultimately it was our mutual friend, Christian, who'd kind of like reconnected us to Trey.

15:09And we spent a bunch of time with Trey and Brian and the team over there and pretty quickly realized that they were right on the cusp of, you know, some some pretty special things. In fall of 2023, we made our first investment. And, you know, I think for us it was, hey, we understand your business. We understand your market. We are highly concentrated investors. We think diversification is the enemy of outlier returns. And so, you know, we want to earn the right to partner with you now and we want to concentrate and build a really large position in your business and help you, you know, go from, you know, the private to public markets and build, you know, an enduring standalone, you know, outlier epic business.

15:56And I think, you know, candidly, it's like, we flew down there, we spent the time, we had a point of view. And I think that's why, you know, that coupled with, with the brand and some of the relationships, and I think they could, they could sense our genuine sort of like, you know, passion and care for what they were doing and then how we could be a good partner to them as they also scaled the business. So that's... A clear power law winner. A clear power law winner. Yeah. Yeah, absolutely. And so what was the evolution... I guess to reframe that, they're a clear power law winner. Yeah. They've almost made a whole vibe reset within the defense industry.

16:38It's cool. It does feel that way. It is cool. They've got merch. there you have a really good design good luck getting their merch yeah well yeah yeah but they do yeah jan and the design team have exceptional taste um and almost like you know a consumer sort of like brand or affinity for their brand and what's incredible yeah what they're doing with like the anime i think they should make a video game maybe an anime series um but i think they're they're humanizing it and they're also like highlighting the the importance of it and the importance of the mission and they're doing it with so much authenticity right and i think that just resonates with investors with their customers um with obviously you know talent that they're recruiting and retaining um people realize like hey this is a really important american company it's it's crazy to me because they have created this whole movement and this new kind of positivity in an industry that was never viewed well in venture coming from a traditional venture background defense wasn't something that you would look at um i don't think it was like you're used to looking at software companies and so when they came around um you know they had a tougher time starting and everything but now they have critical mass everybody wants to get behind them.

18:01They have ridiculous leadership. I'm curious, what have you learned from working with Palmer and Brian? You know, I think what stands out from them is that one, like mission matters and authenticity is, is important, right? Like even though they got a bunch of flack early on and faced like extreme sort of backlash in some cases or negativity, which is interesting. Like there's almost like unwavering support for the men and women who serve in the armed forces, yet there's like so much hate and negativity, you know, for the companies that provide, you know, the men and women of the armed services with the capabilities and products and tools that they use to, you know, be effective in their jobs to, you know, defend and deter and be safer.

18:53And so that's like kind of interesting. But I think in spite of all that, like they were driven by a mission and they weren't going to be derailed by anybody else. And clearly that resonated with, you know, people from, you know, ultimately Palantir, where they came from in other great places that wanted to come work on something that mattered. Right. That wanted to make a dent in the universe that, yeah, this is really hairy. This is really difficult. Your family might not understand it. your friends or whoever might like, you know, look down on you or whatever it might be. But like, you're going to be building stuff that matters.

19:29It's really hard challenges. It's going to be super fulfilling, probably fun. And oh, by the way, like the wealth generation upside for you personally is like massive. And so I think they've just done an incredible job with that. And people have come around to realize that like, yeah, this is important. I do want to work on something like this. And so hats off to them, right? They did it early on before it was cool. Obviously, I always thought it was cool, but I don't think it's any surprise where they are today. I guess to break down Anderil further, I'd like to assume everybody knows what Anderil is because I know what Anderil is.

20:09You know what Anderil is. It's everywhere. But could you just give a high-level overview of Anderil and maybe their evolution over the years? Yeah, so Anderil's building a modern defense prime. you know kind of leveraging software, AI, mass manufacturing, design for mass manufacturing and you know it started out with I think initially it was like a border security company and I believe their first product was like a century tower so kind of like a surveillance tower you know they now have you know many product lines across air, land, sea and space and so you know They made a recent acquisition that got announced as company Klaus, which is a ruggedized edge compute and networking sort of product and platform.

20:54They've got a whole suite of products underwater with dive and copperhead and sensor networks. They've got all types of like counter UAS. They've got drones. They've got Fury, which is their group five autonomous drone for the CCA program. So they've got Runner. Yeah, they've got Roadrunner. They've got stuff in space. They've got Barracuda. And so, you know, they've got multiple business units, a whole bunch of products. And oh, by the way, it's all stitched together with Lattice, which is a modern software platform that, you know, makes everything sort of just work better together. And so ultimately, like the government is just getting a lot more value per dollar of spend by buying from Andrel.

21:40And, you know, so they've done a great job with organic sort of like R &D and innovation internally. And they've also done an incredible job with inorganic growth and making acquisitions that are very strategic in identifying, you know, requirements and programs that the government has clearly said, like, we need this. And they've identified the technology. And that technology probably never would have found its way into the hands of, you know, the government or the warfighter without Andrel. And so they've made some incredible acquisitions, which have led to Dive, which have led to Fury and really sort of, you know, transform the trajectory of that business.

22:18And they'll continue to do that. And at this point, you know, like the growth is pretty incredible. You know, obviously the brand is incredible. And I think the reputation of kind of, you know, what they're doing and how they're doing it. And so that's yeah, that that's a high level overview. They're intense. Yeah, you know, they are. But they're also like, they're intense, and obviously they're also driven by the mission, but they're also just like fun, down-to-earth people to hang out with. They've mastered, obviously, how to, you know, resonate and build trust with the customer in D.C. and sell to the government and capture those programs, which, again, I think comes back to trust and really understanding.

23:05And then, you know, you've you've got Palmer and Brian in the team that is just exceptional on both hardware and software product development and how to actually like get more innovative products into the hands of their customers to just get more bang for your buck, which is ultimately like you are you're saving the taxpayer dollars like taxpayer dollar or the government is going to spend this amount of money. They're just going to get a lot more for what they're spending. I listened to Brian at the Hill and Valley Forum, and one of my biggest takeaways from one of the clips was they're not bottlenecked by manufacturing.

23:45They're bottlenecked by regulation. Have you noticed that? I think there are definitely, you know, getting things certified, like, you know, testing at certain ranges. There are, and in some cases for good reason, but there are certainly hoops to jump through in certain cases for these companies. And so, you know, they're more intimately, I think, feeling the pain day to day as the operators of the company than I am as an investor. Like, you know, I think they're doing incredibly well, but I'm sure they could be moving even faster in certain areas. So another one of your portfolio companies that I want to break down is K2 Space.

24:26Could you share more about the company and how you got introduced to them? Yeah, absolutely. So Karan and Neil, the founders of K2 Brothers, you know, Neil spent a bunch of years at SpaceX. And the team is just an incredible, you know, group of sort of engineers that were long tenured at SpaceX. Kind of some of the core people from Dragon and Falcon 9, even Starship, Starlink, Starshield. and they're building very large satellites. And so the insight that they had working at SpaceX was that SpaceX is going to own launch and absolutely own proliferated LEO, which is low Earth orbit. And so that's where their Starlink constellation orbits.

25:12Now there's, you know, MEO and GEO, there are other orbits and there are benefits and interesting use cases in those orbits, both for the government and for commercial use cases. But in those orbits, you need to design a specific sort of like satellite for those. And SpaceX had no desire or interest to do that. And so K2 had identified a really interesting market opportunity of, hey, we can build very large satellite buses where we can stack 10 of them in a Falcon 9. and we can deliver like just unprecedented sort of capability and performance into these other upper orbits at a price that is just drastically lower than anything that had ever been done.

25:54So for example, Viasat 3. Viasat's like a legacy satellite operator. Viasat 3, one of the most high-powered sort of like satellites ever launched into orbit. I think it was like 26 kilowatts of power cost 500 plus million dollars to make you can launch one of them at a time um k2's satellites are 20 kilowatts a piece you can launch 10 at a time and you know call it a 10x reduction and sort of price so you can have 200 kilowatts of capacity launched into space 10x like more more capability at at like 10x cheaper cost um and part of that is you know this team came from spacex they know how to vertically integrate and build all of the subsystems and components from scratch to where if you're just an integrator and you're buying from the supply chain well you're going to buy a reaction wheel from honeywell that's going to cost two million dollars a piece well they can build theirs for again like you know a 10 or 100x reduction in price and you do that across the entire bus.

27:00Fundamental insight was that cost to launch a kilogram of mass to orbit was super expensive historically. And so everyone spent a ton of time and money to shrink the size of things. But there were massive trade-offs. The smaller something is, the less capable it is. But it was so expensive to launch anything into space, you wanted to make it as small as possible to make it as sort of cheap as possible. Now, SpaceX kind of bent the cost curve down so far on launching a cost of kilogram to mass to orbit. It was just inevitable that things are going to get bigger again. And bigger is better in space.

27:49You can have more power, more aperture, more mass. All of that leads to being more effective. The more power you have, it's directly tied to, for instance, if it's communications use case, it's directly tied to bandwidth or throughput capacity. And so bigger, more power equals more dollar signs. And the team had the skill set and the capability to vertically integrate and design for mass manufacturing large satellites that could be highly performant in really tough orbits like MEO or GEO at a tenth of the price of kind of existing solutions. And this is critically important for both the DOD and kind of all of GPS and position navigation and timing is in MEO.