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.
00:45:08 · Ethan Thornton
Victorville Energetics will be full true rate. Along the way, though, I think this is where a lot of companies die. You can't forget how to do the one to 10 work when you're in 10 to 90. And in the act of doing the 90 to a 100 work, so many companies sell their soul by adding so much overhead of, like, process onto the company. And so one of the things that's controversial that I I am doing and will continue to do is to have products at every stage of that. Because excellent engineers like working on something important. And so the second... And and there's overlap here, but generally, you've got engineers that are good at, like, zero to 30. You've got engineers that are good at, like, 20 to 60. Another advantage of running a functional org is you can kinda pull those engineers throughout the process of the program at the right time. But, dude, if you're not doing a one to 10 program, why... Especially if you're not doing that for, like, a year, Your one to 10 engineers are gonna leave. And so there are so many reasons that you need to have a lot of products to build a great company in this space. I wanna be clear. I would not have this many products in any other industry. But in this space is one of the reasons that I think it's actually insanely, insanely important to do so.
00:46:11 · Ty Morse
[00:46:11] S0: When you think of like spinning up an entire new product from scratch, you may not necessarily have all the talent that's required to go from the complete from scratch, like just on the whiteboard to a finished product. So how do you basically rapidly... You know, you have some idea and then go rapidly find all the right talent to fit that mold, like the guy to spearhead it and everyone beneath him?
00:46:34 · Ethan Thornton
[00:46:34] S1: It's another good argument for a function based org. There was a really painful period of the company where we didn't have all of those talent sets. I didn't have someone who could, like, characterize the RF dynamics of the vehicle, who could go and do, like, loads and dynamics, who could go and do, like, reliability engineering. Like, I I guess we somewhat still have that guy. That's one that's being stood up right now. Thermals. The thing about building a products in any space, but I think especially in this space, is you've got, like, 40 different disciplines. And if you miss out on one discipline, the program just fails. Like, if if we improperly design the thermals on Viper, I have to restart Viper. Now, fortunately, my blocks only take three months, but that's a three month slip on, like, a six to twelve month program. And so the reason it's taken us so long to stand up an excellent engineering function is it just takes a long time to build all of those functions. We're at that point now. The nice thing is we're not verticalized. We're we're based on function. So I don't need a thermal engineer for every single one of my programs. I need a thermal engineer, and he or she will probably have one or two. They'll be the lead, and we'll have one or two people that work for them. And thermal spikes at certain portions, just to highlight thermal. This happens across the board, but thermal spikes at certain portions of the development process. It's really, really big at the beginning. There's not that much new data and, like, the prototyping phase. It's super autoflight testing, fix those issues, and then it's really, really hard as you design an envir... Environmentals for rate. And so each of these functions is, like, spiky along the process of development. Now the nice thing is they tend to spike in the same phases in each development. And so what you wanna do is you never wanna have two products in the same phase of design. It's, like, very, very painful because then those spikes overlap. But if you wanna run, one, an economically efficient org, much more importantly, an org where folks are just doing excellent work all the time and you build an excellent culture, you need to basically impedance match having a vehicle in each phase of that development so that those spikes are levelized as much as possible.