00:37:04 · Ethan Thornton
[00:37:04] S1: I think... So look. There are things I'm quite bad at, and I'm I'm happy to get into those and discuss those. I think I... I've been obsessed with thinking about this for a while. So I have... I talk about this a lot. Have two family members who... Whose job this was largely in the air force, this is, like, dinner table conversation my entire life growing up. I'm pretty obsessed about it. And one, like, this is principally one of my things to own is, like, what does this future look like in the limit? I think it's easier to extrapolate than people expect. Like, I'll give you an example on balloons. And I shouldn't touch too deeply on the specific reasons, but, like, in high school, at the farm with my uncle, my uncle and I were talking and we're, like... We started thinking about balloons for some reason. We're, like, wait, balloons are actually very, very likely gonna be super, super important for unmanned warfare. This would have been circa like 2018. And we we go on this long long discussion. I get to thinking about it. I get like massively obsessed with balloons. And I... This is long before Mach, everyone's like, dude, why are you so obsessed with balloons? Like, I'm in high school, I was like... I wasn't a nerdy person, but I had, this very specific obsession that was strange. I went and patented, like, a balloon navigation design, like, was obsessed obsessed with it. Well, probably three years later, China flies a balloon above The US, and we have to spend like a million dollars shooting it down. And then suddenly, this is in the middle of a fundraising process where everyone was actually critiquing me for being too obsessed with balloons. Suddenly, even though that's way out of left field and you wouldn't have considered that, physics is physics. Like, if I put something up for, like, a couple thousand bucks at 80,000 feet and you have to go scramble a fighter jet to go shoot it down or launch a big surface to air missile, the unit economics there just don't work. And I can go and put millions of balloons up. And so this is like an example of, like, a really, really weird out of left field asymmetry that I think myself and my uncle have been passionate about for a while. Ukrainians are waking up to balloons, which is which is quite exciting. I think I think they'll be able to deliver massive asymmetry through that.
00:39:00 · Ethan Thornton
But now I've got to figure out a way to shoot balloons down, which I'm working quite hard on. And so the other nice thing is once you have these bets and these bets are generally proven true, two things start to happen. One, you're already thinking about the future and you're anchoring that in conversations with the Pentagon every day, with your engineers every day, with the Ukrainians quite often. And so you you understand what the future looks like, and as these things are proven true, you start to war game against what you know to be true. So, like, I've been building this for for for several years now thinking balloons are important. It's being proven true. Well, I I have an advantage of already sort of positioning to... Okay. China will have balloons. Russia will have balloons. How do we go and treat these things down at scale? The second thing that happens is the government starts to trust you on these things. And when they see a hard problem, you get called into the room to talk to them about how to solve it. And frankly, as a patriot, there's like no cooler thing than to be asked like, hey, this is the this is the existential problem. Can you help us solve it? And when you develop that trust, you get to see a level deeper and and think a level deeper about all these things.
00:40:04 · Ty Morse, Ethan Thornton
[00:40:04] S0: I think a lot of companies stay in this like design phase and testing phase for way longer than maybe they should, and you are very focused on actually like getting it end users hands and like at least showing them what the capabilities are. Yeah. How do you decide when the right time is to go do that and then make sure that it works? Because that's like the highest stakes. It's like you send the rocket up and if it blows up, you're just lighting a bunch of money on fire and also a bunch of trust. [00:40:28] S1: So it's two things. I think you test like crazy internally. I mean, we're... We run mini flight tests every single week. And then two, you're honest with your customers. I think so many people are like, the customers have seen development programs. Like... And their development programs usually take, like, a decade plus. And so saying, do you wanna see this thing? It's more... It's, like, 40% gonna work, but you... You'll at least get to see that I'm, like, running a testing campaign, testing every day. Would you like to come out to this? You just, like, set a trust level with the customer. Just be, like, fully transparently honest. They know it's a hard thing. They've seen people struggle with it for decades. And see, you also just like let the customer in and give them as much info as you can.
00:40:28 · Ethan Thornton, Ty Morse
[00:40:28] S1: So it's two things. I think you test like crazy internally. I mean, we're... We run mini flight tests every single week. And then two, you're honest with your customers. I think so many people are like, the customers have seen development programs. Like... And their development programs usually take, like, a decade plus. And so saying, do you wanna see this thing? It's more... It's, like, 40% gonna work, but you... You'll at least get to see that I'm, like, running a testing campaign, testing every day. Would you like to come out to this? You just, like, set a trust level with the customer. Just be, like, fully transparently honest. They know it's a hard thing. They've seen people struggle with it for decades. And see, you also just like let the customer in and give them as much info as you can. [00:41:07] S0: I know that, like, for the past probably couple years, you're basically in this, like, rapid design phase and you're working on a bunch of different programs all at how do you go from that sort of business to, like, scaling up maybe multiple factories in the next twelve months and, like, having that transition be successful?
00:41:22 · Ethan Thornton
[00:41:22] S1: So I think there are three discrete stages to this process. And so you've kinda got your one to 10 stage. This is where you actually just kinda wanna be off on an island somewhere. You wanna know, like, generally what the mission set is, but, like, kinda leave me alone. Let me go and do this. I'm gonna blow a lot of stuff up in the process safely, very, very safely. But, like, as we described, I'm gonna take a lot of risk and get something that works. And that's, like, one to 10, we're there pretty much on all the products you see behind. You then enter 10 to 90 mode. That's where you wanna be as close with the customer as you possibly can. Like, okay, how literally do you want to fuel this thing? Do you want this type of connector? Do you want this type of connector? Right? Do you want this launch box? Do want this launch box? And you wanna be super deeply coupled there. That's when, generally, you start doing revenue because they're buying airframes for testing. And we're at that stage across a good number of our platforms now. There's what's always been called the valley of death for companies between that, like, 90 to to a 100 face. And this is this is where it is so easy to lose your soul as a company. Because you wanna be really good at 10 to 90, but if you stay in 10 to 90 for so long, for too long, you just get, like, requirements build up and engineering build up and bloat as a company. And so there's this gut call that most companies get to make themselves. Unfortunately, we don't. That is, okay, when do you want to enter production? Most companies get to make that decision. For us, it's the government that makes that decision. And if the government doesn't make that decision to go into production, you keep going after engineering contracts on the product that's at, 88. And to get those engineering contracts, you have to be adding specs to the thing. You have to be doing something, but you need revenue to survive. And you can do a ton of revenue. Like, there are companies that do billions of dollars of revenue mostly in this stage. It's really on the government. Now my job is to convince the government, but the government has to step up and say, yes. I want 5 thousand of that thing. Right? And that is one of the things that makes defense so hard is that is out of your hands.
00:43:14 · Ethan Thornton
Now that will be happening here across, hopefully, a few product lines, but certainly certainly one or two within the next, like, six to nine months. So you you you don't wanna end up... You don't want the government to pull you too fast, and that's where you have to be honest. Like, they want production real bad right now. Like, give me some time because I don't wanna I don't wanna screw this up for you. But it also needs to happen because products die when they stay in that stage too long, and companies die. Your overhead just builds and builds and builds, and you wake up and your unit economics just fundamentally don't make sense. And who cares on the company level? But when your unit economics don't make sense, you're certainly not delivering asymmetry to the warfighter. And so, yeah, it's a BDF or... Is the the the way to put it. It's a trust building ex... Experiment with the government. It's getting your unit economics or your your CapEx economics and capital stack right to pre build production so the customer really, really trusts you're ready to go. This is where we kind of have an a... Unfair advantage on components because I can go and scale for companies and then bring ex Pentagon official by a factory that is actually making thousands of things, which very few people in defense do. But, yeah, I mean, that's the stage we're at today. We're, like, right in the meat of, like, 10 to 90 work right now. Across several of our product lines, we'll be wrapping that up by end of year. So that'll be likely Pike, Glide, Stratus, and then Dart. We're rearchitecting Viper, I think, to add a lot more range. We initially architected Viper around off the shelf engines. I think the Viper architected off Mach Jet will be a lot better. And so Dart Viper will be sort of mid next year is when we'll leave the 90 work. And then as soon as the government custom contracts, and ideally before, because you can sell internationally and you can sell b to b. So before on some, not before on others, we'll be entering rate. And that's where we're setting up factories. So big, big, big factory down in Texas, another big factory right next door here. That one's more development. Texas is, full automotive style production. Like, this factory is still... It's meant for flexibility. So it's it's more of a development facility. That will be full true rate.