New monopoly? Inside VC tech’s overthrow of the primes

Venture capital (VC)-backed defense tech companies like Anduril, Palantir, and Scale AI have quickly risen to prominence in the weapons industry, increasingly beating out “Big Five” defense contractors like Lockheed Martin, Boeing, and RTX (formerly Raytheon) for military contracts.

And now directly challenging traditional weapons contractors’ grip over the industry, Anduril and Palantir are forming a consortium with fellow defense tech upstarts including SpaceX, OpenAI, Saronic, and Scale AI to jointly bid for military contracts, according to reporting from the Financial Times.

In a press release announcing the consortium, Anduril and Palantir depicted the effort as a way to deliver key “technological infrastructure” to the government and other partners that would “transform America’s world-leading AI advancements into next-generation military and national security capabilities,” which they present as critical to maintaining America’s military dominance amid increasingly tenuous geopolitical conditions.

But forming a consortium to jointly bid for contracts signals an intention to collude, rather than compete, with one another for funding. When considered in tandem with defense upstarts’ recent spate of blossoming partnerships, the consortium appears poised to further concentrate both lucrative government contracts and political influence in the hands of an emerging class of weapons tech start-ups — and the powerful billionaires behind them.

Defense tech partnerships and power plays abound

The companies reportedly involved in the consortium share key characteristics — they are VC-backed start ups either rooted in defense or, as in OpenAI’s case, increasingly building a profile in the industry.

Indeed, after dropping language barring military applications of its tech on its website early last year, OpenAI brought on a retired former National Security Agency (NSA) director and retired U.S. Army General Paul M. Nakasone to its board of directors. Billionaire entrepreneur Elon Musk’s SpaceX has also garnered a multitude of military and intelligence contracts worth billions.

On CNBC late last month, former Palantir employee and Empros Capital founder Alex Fishman elucidated upon the Consortium’s propensity to boost Palantir’s role in the weapons industry as a kind of coordinator, while giving other prospective participants a critical edge in their respective endeavors. “I think [the consortium is] an absolutely enormous opportunity…for Palantir, that means being the glue, that means tying it all together, that means coordinating all of these things. Of course, for SpaceX, that means projecting dominance through space, and for Anduril, dominance in the drone arena. And for Open AI, it means bringing the best AI models to bear.”

Initial consortium partnerships may be announced as soon as this month. Meanwhile, Anduril and Palantir are making other critical bids to consolidate forces, including integrating Palantir’s “AI Platform,” or AIP, with Anduril’s “Lattice” autonomous software platform to bolster AI capabilities in the national security realm, according to the same press statement announcing the consortium. Anduril has also launched a “Lattice Partner Program” to integrate its Lattice autonomous operating system into other companies’ operations, including many defense and deep tech startups, including Forterra, Impulse Space, Numerica, Oracle, Saronic, Scale AI, Textron Systems and Valinor — some of which have notably been contacted to join the consortium.

The announcements emphasize that such software integrations foster interoperability critical to sharing information between partners within military contexts, where access to rapidly developing battlefield information can be key to making timely warfighter decisions. What goes unmentioned is how integrating Anduril’s (or any given weapons tech company’s) software into myriad defense tech companies’ systems’ operations may further secure its position as a defense industry staple, thus positioning it for both contracts and industry-wide influence to boot.

Crucially, news of the consortium materializes as the companies it’s to involve are economically rivaling, if not outright surpassing, the very traditional defense contractors the consortium aims to challenge. With a valuation of $350 billion, SpaceX is now the world’s most valuable private company, with Open AI gaining ground with a recent $157 billion valuation. And Palantir’s stock price more than quadrupled last year, further, making it more valuable than both RTX and Lockheed Martin.

The Thiel Connection

Critically, Anduril, Palantir, and other reportedly consortium-involved tech startups, including Scale AI, OpenAI, and SpaceX, are funded by billionaire venture capitalist Peter Thiel, especially through his VC firm Founders Fund. The controversial Silicon Valley kingmaker has simultaneously worked to influence policymaking processes via the funding of a number of successful congressional campaigns over the years, including the previous U.S. Senate campaign of now incoming Vice President J.D. Vance.

Now, it seems, the consortium is positioned to procure Thiel further influence within an administration where he’s already made significant inroads. Indeed, the incoming Trump administration has tapped other Thiel affiliates, including former chief of staff to Thiel Michael Kratsios and Palantir senior adviser Jacob Helberg, for the administration positions of White House Office of Science and Technology Policy director and undersecretary of state for economic growth, energy and the environment respectively.

Along similar lines, SpaceX founder Musk, both a long-term Thiel associate and ever-closer affiliate of Trump upon funding his 2024 campaign, is himself now co-head of the newly formed Department of Government Efficiency (DOGE).

The consortium announcement coinciding with an incoming Trump administration, meanwhile, is timely given defense tech players’ affinities towards Trump, whose interests, they posit, align with defense tech efforts to allegedly make the industry more cost effective, in contrast with Big Five business models that often ask for hefty contracts up front, complete work slowly, and frequently price-gouge.

“I think Trump is a change candidate…he wants to get more for less,” Anduril head and long-term Trump supporter Palmer Luckey excitedly told CNBC after Trump’s re-election. “I think you can do [defense spending] with less if you do it right…if you select the right companies, you can succeed and spend less.”

But Lockheed Martin Chief Financial Officer Jay Malave posits that the efficiency Luckey supposedly cherishes could actually bolster the DoD budget, thus securing more funds for weapons contractors of all stripes. “With government efficiency, you could see elements of addition by subtraction, so ultimately, you could see a higher budget request than what we've seen from the prior administration.”

Meanwhile, a Defense Department official told Defense One that altogether, he could see growing defense tech partnerships as “a play to shape the next administration’s approach” to procuring and buying defense tech.

Ultimately, circumstances at hand suggest that a Palantir- and Anduril-led defense tech consortium will be bidding for contracts — at the hands of a friendly Trump administration.