00:07:13 · Adam Bry
[00:07:13] S1: So the single biggest, I think it's different for different companies in different situations. The single biggest challenge that we face is in our supply chain. So, you know, we started talking about competition with DJI. There's a huge geopolitical backdrop to this industry. When we started the company, we started manufacturing our drones in house from day one, which was very counter trend at the time. Like conventional wisdom in Silicon Valley at the time was like, one, don't touch hardware, and two, if you're gonna touch hardware at all, make sure you outsource all of it to China and do as little yourself. And that's just not the path that we chose, you know, we felt like having manufacturing close to R and D was how we were gonna get the best products the fastest, maybe not the most cost effectively, but definitely the best and the fastest, which is what we were focused on. So we've always manufactured our drones in house, but like everybody else, we were getting components from China in '20... You know, with our first generation of drones in the twenty ten's. As we expanded to serve government customers and as geopolitical tensions with China rose, it became clear that that was not a sustainable future for us, and so we made a lot of investments to get our supply chain out of China, but two years ago we were sanctioned by the Chinese government. I was sanctioned personally, the company was sanctioned. The day that they announced the sanctions, they showed up at our battery factory in China and shut it down and seized, it was a supplier that we were working with, they seized all their equipment, said they couldn't keep doing business with us, so it was a very aggressive targeted action to try to kill the company basically. So over the last two years, we've had to basically rebuild huge swaths of the supply chain to get down to zero China dependence, which is still a kind of fragile endeavor, because for a lot of what we do, the historical component supply has all been in China, and we're in the position now of being a big enough company that we can be a great anchor customer for a new battery vendor, or a motor vendor, or a camera vendor to help them get started serving this industry, which we are happy to do.
00:09:08 · Adam Bry, Ty Morse
We're actually gonna spend about $1,000,000,000 with US suppliers over the next five years, specifically aimed at building up the supply base here, but it's still fragile. And so, you talk about doubling production, the biggest risk and the biggest challenge for us is upstream with our suppliers and putting ourselves and them in a position to do that and deliver that, and so we're getting more and more deeply integrated with all the companies that we partner with to help them get to the scale that we need. [00:09:34] S0: I've noticed a number of my friends are getting sanctioned, like earlier and earlier and blacklisted. [00:09:39] S1: You must have some interesting friends. [00:09:41] S0: Yeah. Well, if they haven't even gone to China to set up their supply chains, it's a little bit easier. Yeah. But if you're like twelve years into the company and suddenly your entire supply chain gets fucked, what does that feel like just in that moment?
00:09:41 · Ty Morse, Adam Bry
[00:09:41] S0: Yeah. Well, if they haven't even gone to China to set up their supply chains, it's a little bit easier. Yeah. But if you're like twelve years into the company and suddenly your entire supply chain gets fucked, what does that feel like just in that moment? [00:09:53] S1: You know, I kinda like the fight, and there's different, there's different ways companies can react to this, there's certainly different perspectives within Skydio. You know, there's one school of thought of like, let's see if we can work with the US government to get some relief here and maybe broker some kind of deal. My perspective is the other side of it. I think this is the right direction. Think... So it's like game on. Know, like let's... This is this is a forcing function for us to do what we knew to be right anyways and so let's accelerate it. You know, there's nothing like burning the boats to motivate you to like to solve some hard important problems. And and that's basically like the approach that we've taken. And I think it's worked out well for us. Mean it has not been pain free, like at that moment we basically had to go into a mode where we were rationing batteries. We had fortunately a healthy chunk on the shelf, but we had to cut down to shipping one battery per drone, which was painful for us, super painful for our customers. You know, we're lucky that they came along with us on that journey and our internal teams did an incredible job of standing up new cells and new pack manufacturing in just a truly insane timeframe
00:09:53 · Adam Bry, Ty Morse
[00:09:53] S1: You know, I kinda like the fight, and there's different, there's different ways companies can react to this, there's certainly different perspectives within Skydio. You know, there's one school of thought of like, let's see if we can work with the US government to get some relief here and maybe broker some kind of deal. My perspective is the other side of it. I think this is the right direction. Think... So it's like game on. Know, like let's... This is this is a forcing function for us to do what we knew to be right anyways and so let's accelerate it. You know, there's nothing like burning the boats to motivate you to like to solve some hard important problems. And and that's basically like the approach that we've taken. And I think it's worked out well for us. Mean it has not been pain free, like at that moment we basically had to go into a mode where we were rationing batteries. We had fortunately a healthy chunk on the shelf, but we had to cut down to shipping one battery per drone, which was painful for us, super painful for our customers. You know, we're lucky that they came along with us on that journey and our internal teams did an incredible job of standing up new cells and new pack manufacturing in just a truly insane timeframe [00:11:02] S0: to close the gap. Were you flying around and meeting with a bunch of suppliers?
00:11:02 · Ty Morse, Adam Bry
[00:11:02] S0: to close the gap. Were you flying around and meeting with a bunch of suppliers? [00:11:06] S1: Yeah, I mean, were scouring the earth, yeah, well, scouring the free world, you know, The US and our allies around the world to find all the ingredients that it takes to build a battery that performs at the level that we need for these systems, and look, we came out of it the other side with better performance, which was surprising even to me, like we picked up a couple minutes in flight time going with a different cell and a different pack. [00:11:33] S0: There's this interesting idea of like trade offs, and one of the things that we talked about yesterday was there's a number of companies, I think DJI included, that are trying to do battery swapping docks, and so a drone will just land, have its battery swapped out, and immediately start flying again. But you basically said if you surveyed your customers or their use cases, it's very, very small, Or you'd increase flight time or something by 5% with a battery swapping doc. So how do you think about making product trade offs just informed by actual customer experience versus what sounds like a good idea, but may not in fact be actually useful?
00:12:08 · Adam Bry
[00:12:08] S1: So, we're increasingly in a position now of having really deep insight into how our products are being used, what adds the most value for our customers, and so product development is always a blend of a lot of different inputs. Like, you never want to only look at the data of what people are doing today because you're gonna miss the possibilities of what might exist, but you know when we're developing drones today, we're steeped in the data of existing usage and you know flight patterns, flight speeds, different mission profiles that people are flying, time between flights, all these things, and that informs the investments that we're going to make. So, something like battery swapping, you know, if it's free and it's perfectly reliable, add some value, but it's not free and because it's a more complex mechanism, it's also gonna cost you something in reliability and so it's a question of like what are the trade offs against other things that you could put your time and resources into and what's best for the customer. You know, one example of, you know, incredible series of inventions that's resulting in an incredible product that wouldn't fall directly out of the data is F10, which is a fixed wing drone that's robotically launched and caught, so basically lives in a drone vending machine, there's a robot arm that picks it up, releases it into the air, that thing has two hours of endurance, it's got a 100 miles an hour top speed, which is just a total paradigm shift in what you can do with autonomous dock drones in terms of the area that you can cover. So, this is like first response for sheriff's office that cover thousands of square miles, like somebody calls 911 in a rural area, it might literally take sheriffs an hour to get there on the ground, and this thing can be there in ten minutes providing real time situational awareness, you know, be like a lost hiker, potential fire starting, things like that. So that's a product that came out of a lot of conversations with customers and also our conviction in some core technology blocks that we could apply to bring these things together.