In this episode of the Mission Matters podcast, we sit down with Chris Benson, the CTO of Istari Digital and an Air Force acquisition pioneer who was one of the architects behind the modernization of the Small Business Innovation Research (SBIR) program during his time at AFWERX.

We discuss:

• How SBIR evolved from a slow, lab-driven R&D program into a real commercialization pathway

• Why Open Topic and TACFI/STRATFI changed the game for venture-backed defense startups

• What the new Strategic Breakthrough Awards mean for scaling to production

• Why founders need to think about Phase III and production contracts from day one

• How proposal caps, foreign due diligence, and other new rules could reshape the program going forward

As always, please let us know what you think. And please reach out if you or anyone you know is building at the intersection of technology and national security.

You can listen to the podcast on Spotify, Apple, the Shield Capital website, or right here on Substack.

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Transcript

Maggie 00:19

On this episode of the Techquisition Edition of the Mission Matters podcast, we’re breaking down something that really sits at the center of the defense innovation ecosystem — that is the reauthorization of the Small Business Innovation Research and Small Business Technology Transfer Program, better known as the SBIR/STTR program. Although, for the purposes of this podcast, we’re just going to truncate it down to SBIR, which is how it’s commonly referred to. Additionally, while SBIR is a government-wide program administered by the Small Business Administration and executed at every government agency, we are primarily going to focus on the Department of Defense, which we will just refer to as DoD. And to help us do that, we are joined by someone who has a front row seat to the evolution of the program — Chris Benson, the CTO of Istari Digital. Before joining Istari, Chris served as an Air Force acquisition pioneer and was one of the architects behind the modernization of SBIR during his time at AFWERX, including initiatives like creating the concept of open topic and the extremely popular TACFI/STRATFI program that many startups and investors today see as the best on-ramp into defense.

David 01:51

All right, Maggie, but before we bring Chris on, I think we should level set for our founders listening, because SBIR is one of those programs everyone in defense Tech has heard of but very few people fully understand exactly.

Maggie 02:05

You know, depending on who you talk to, SBIR is either the single most important funding source for early stage defense technology, or it’s this useless bureaucratic maze like program buried somewhere deep inside the federal government. You know, I even heard somebody refer to it once as welfare for PhD students.

David 02:24

Well, that’s some pretty good ramen. But I guess historically, you could say that both of those things have been true. But at its core, SBIR is the federal government’s venture capital program for small businesses. Since its creation in 1982 it has invested more than 77 billion in research and development funding across over 33,000 startups or small businesses supporting everything from defense technologies to medical breakthroughs and importantly for founders, this isn’t just grant money floating around Washington. SBIR is one of the primary mechanisms that the government actually uses to discover, test and transition emerging technologies into real programs of record.

David 03:06

But as you’ll find out later in the podcast, the program has gone through some pretty dramatic changes over the past decade. For a long time, the SBIR program was mostly run out of government labs, places like Air Force Research Lab, Office of Naval Research, Army Research Lab, and until recently, not super conducive to venture backed startups, and candidly, has had a pretty poor track record in transitioning into meaningful war fighter capability. For years, most small businesses that received SBIR funding never meaningfully productized or deployed the technology that the SBIR program funded.

Maggie 03:43

But then things started to change,

David 03:45

So around the late 2000 10s, let’s say 2016 2017 a group of acquisition leaders inside the Air Force, who I am proud to call my friends, including our guests today, began experimenting with new ways to use SBIR to attract these venture backed companies and start to transition the technology. They started with a simple idea like open topic, and upon success, opened up the aperture of funding and established the TACFI/STRATFI program,

Maggie 04:13

if you’re a founder or investor in defense tech. Today, those programs probably sound pretty familiar.

David 04:20

So like those initiatives, essentially turned SBIR from a science project funding mechanism into something much closer to a commercialization pipeline, and now we’re seeing Congress codify a lot of that evolution.

Maggie 04:33

So that brings us to the big news of today, after more than a year of debate and uncertainty, including a multi month lapse in the program when authorization lapsed back in September, Congress has finally passed the Small Business Innovation and Economic Security Act, which reauthorizes SBIR and STTR for five years through 2031

David 04:54

and in addition to extending the program, the bill also introduces several structural changes. Founders. Should understand, and we’ll get into that a little bit later.

Maggie 05:04

All right, let’s bring on our guest for today.

David 05:08

Well, it gives me great pleasure and pride to bring Chris Benson on, who is one of the key figures in modernizing the SBIR program during his time at AFWERX, which is the innovation arm of the Department of the Air Force, and he’s helped shape reshape how the program engages startups

Maggie 05:24

today, he’s on the other side of the table as CTO of Istari Digital, a fast growing dual use defense technology company that’s also leveraged SBIR as part of its growth.

David 05:36

Chris, welcome to the Mission Matters Techquisition Edition podcast. We’re so fortunate to have you on here. It’s definitely great to have a friend and a colleague, and I guess, an Air Force veteran, maybe a quitter as well, join us here. Now that you’re on the private sector side, I guess to start off when you were working inside AFWERX, helping evolve the SBIR program. What problem were you trying to solve then? And what wasn’t working about SBIR at that time? Yeah.

Chris 06:09

Well, first off, thank you so much for having me, and I will second my excitement about the bill that was just passed by the Senate on Tuesday, and then we were just talking about what the House is about to do with that. So I think there’s a lot of really interesting things that are getting pushed forward. And I guess I’m very, very encouraged by Congress continuing to try to improve on the SBIR program. After, I guess, 40 plus years, there’s been a lot of improvements on it since we started working on it back in the 2016, ‘17, and ‘18 timeframe. So going back to your original question — what were we actually trying to do there? If you remember, during that timeframe, that was in the early days of, I would say, a wellspring or Cambrian explosion of many types of innovation organizations, right? So DIU, the original, which you were at, David, as well as a number of other folks. And then we had AFWERX, and then we had NavalX, and there were a few other organizations that were around there as well. And so at AFWERX, when we were working on this, we got brought in and were originally tasked with the idea of trying to encourage innovation within the Air Force. And so we tried to do a number of different things by focusing on individuals and empowering the airmen and the folks inside the organization. But then they also brought us some folks who were working on acquisition — who were acquisition officers — that would include myself and some others, to try to think about, well, what are some of the acquisition tools we have in our tool chest to be able to figure it out? And we — one of the first ones we looked at was the SBIR program. So at the time, that was several hundred million dollars a year of funding that was taken from a large number of different accounts and was spent through kind of a central process, through Air Force Research Lab. And the thing that we noticed with that, that was interesting, was the fact that the number of dollars that we had in that SBIR bucket every year was increasing, which is good, right? Okay, so this is more money for innovation, trying new things within the department. The thing that was concerning was that at the same time, with the dollars increasing, the number of unique companies that were being awarded was actually decreasing. And then so we dug a little bit deeper, and we realized that, oh, actually, not only was the number of companies being awarded decreasing, but the number of unique companies even applying for these ever-increasing number of dollars was decreasing. And so we saw this as a demand problem, or kind of a problem with the solution that we were offering to attract the best companies to work with us. The number one thing we were trying to solve is: if we are getting more dollars, how can we also get that to be given out to more unique types of companies and have more competition for those dollars? And so we went after a couple different things, and we saw really kind of two of the biggest challenges that we heard when we were talking with companies about why they were not coming and working with the SBIR program. The first one being that the process for how they were applying was rather opaque, and so they weren’t exactly sure what they were supposed to be doing with this. It wasn’t clear — there was a whole bunch of “you have to apply for a DUNS number, and you had to go get a SAM account” and all these different kinds of things. And so we tried to spend a lot of time making that process as transparent and as straightforward as possible. The other thing that I think is actually probably the most important one was it was just slow, right? So you would submit an application, you would wait. You would wait maybe three months, and then you would hear something back. Sometimes you would be selected; other times, we would wait six months, and then you might be hearing, “Hey, you’re selected” or “not selected.” And then you might wait another three months to start. And now it’s been nine months, and you’re starting a $150,000 phase one contract, and for a lot of these companies, the timeframe just didn’t work. The two big underlying problems we were trying to solve behind that were the clarity about how companies could engage with the government, and also the speed at which they could engage with the government through that process.

David 10:36

Yeah, that’s great. And I think time to execution is often overlooked and maybe taken somewhat for granted with some of the more recent language and then sort of just the vigor with which AFWERX started to actually work with these companies, which has probably then increased the volume of participants. But you know, to me, I think when the SBIR program really came onto the scene was with this unique concept that you all came up with. And I think you highlighted, you know, the fact that the industry base was shrinking, right? We had less performers, despite the fact that there are more entrepreneurs in the United States than ever before, and yet somehow less are choosing not to participate in the national security environment. Of course, that was a big part of the reason why Defense Innovation Unit was stood up. But you guys kind of took it a step further, and you created this idea called open topic. Seemed pretty radical when it launched, yeah, and I can imagine that there was some pushback. So maybe you can talk a little bit about how you came up with the idea of the open topic. What were some of the reservations behind it? And then how have you seen that maybe proliferate across other parts of government?

Chris 11:52

It’s interesting that you mentioned that the open topic was novel, right? So actually, both the original things we were trying to do — moving fast and trying to have clarified instructions — we leveraged a lot of lessons learned from you all out of DIU to do that for the kind of overarching SBIR reform. And the open topic we actually leveraged from the British. So there was this organization called DASA — which I wish I could remember the full acronym for — in the UK, and they did these open calls for innovation. And so the original open call solicitation for AFWERX was modeled almost exactly off of the open call from the British. Now, you’re right. There was some pushback from folks saying, “Hey, you know, we’ve tried this before.” In the past, there actually had been a topic within AFWERX called a blue sky topic, and it had actually received zero applications in the past because people didn’t know what to apply to it. And that was, I think, in the early-to-mid 2000s or something like that. And so people were saying, “You know what? Fine, go ahead and try it. Last time we did this, we got zero applications.” And so it was actually interesting to see how they let us do it. But the real reason why we did the open topic was really, once again, trying to solve a particular need for the warfighter at the time, right? So we were seeing a bunch of companies — they were starting to apply, it was faster. There were a bunch of companies saying, “Okay, I have this capability. It doesn’t fit in any of the buckets that you guys have, any of the topics that are currently out there.” And I was like, “Okay, well, you’ve got to get to talk to somebody who’s writing these topics — a warfighter, if you will.” And they’d go, “Yeah, no, I have a warfighter. He really wants it.” And they would find an actual operator, right? Who really wanted the solution. But then we realized there was actually a timeline problem, not just post submission of the application, but beforehand. So there was this process where, in order to get into a specific topic we had at the time, you would submit an idea for what an SBIR topic would be, and you could wait — I don’t know, I think between when you submitted the idea, it would go through several gates and checks, which made some sense. But between when I submitted it as a warfighter, or usually as an acquisition person, and when it actually hit the streets for companies to see it, that was between six and 12 months, right? So now add it up. I’ve got an idea as a warfighter, a need as a warfighter or an acquisition person. Now I’ve got to wait, let’s say, 12 months until it actually hits the street. It’s going to be open for one to three months. So now we’re at 15 months. And now between when somebody submits their proposal and they’re actually starting a contract, that’s another nine months. So now we’re at 24 months from when the warfighter has a need. And that is completely outside of the realm of what we were being asked to do by our leadership — which was to move fast. And so we said, “Well, look. If you’ve got somebody who really wants it, then how about you just have them write a letter saying, ‘Hey, I could actually really use this.’ And what if we made a topic that said, ‘All right, if you’ve got somebody who really wants to use something, you’ve got a really interesting idea — then let’s just have an open topic for things that really need to move fast and have a really serious defense need, have some good technical backing, and have a real pathway to commercialization.’”

Maggie 15:23

So Chris, another initiative I know that you worked on at AFWERX was the TACFI/STRATFI programs, and now we see in this new reauthorization bill the Strategic Breakthrough Awards, which award up to $30 million for phase twos. They look very similar to STRATFI in that they have the idea of matching government funding with private capital. So I’m curious, can you talk a little bit about what you were trying to accomplish with TACFI/STRATFI at AFWERX, and now that we see the Strategicbreakthrough award, do you see this as Congress basically institutionalizing that model that you initially pioneered?

Chris 16:01

But, yeah, I think the Strategic Breakthrough Awards are definitely, I think, the spiritual successor of what we started in the beginning with TACFI and STRATFI. And I’ll go back to why we did that originally. It was because we had warfighters, we had acquisition folks who had a demand, right? They came in and said, “All right, well, look, I can write you a letter, and we can get on a phase one or a phase two. But really, in order to make something that’s truly useful at scale — that can cross that valley of death — $2 million is actually not going to cut it.” I mean, some of these programs that go into production — $2 million is a rounding error on some of these very large things. And so we had some folks from the acquisition community who would come and say, “Hey, look, I’ve got a warfighter. I’ve got some money, but $2 million is not enough.” And so we said, “Well, unfortunately, we can’t write that big of contracts.” And then, fortunately, in that case, I was wrong. We went back and looked at it, and it turns out you actually could write larger SBIR contracts if you were able to work with the Small Business Administration to prove to them that, “Hey, this is actually a good use of the SBIR funds, and you’re not concentrating it for no reason.” And so part of our discussion with the folks and a lot of different stakeholders working with the SBIR program and the STTR program at the time was saying, “Hey, look, we are okay with you guys trialing out writing larger awards for things that you think can make strategic impacts for the warfighter or for a particular acquisition. But we don’t feel like it’s right, and we don’t think it’s necessarily the right answer to have the SBIR program take on all of that risk. If there really is going to be a transition, then what you don’t want to do is say, ‘Okay, fine, SBIR program, you build the entire bridge across the valley of death, and we’ll just meet you on the other side — on acquisition land over here.’” Rather, what we said is, “Well, look, how about this? The SBIR program could build a little bridge from one side, and the acquisition folks can build a little bridge from the other side — we can kind of meet in the middle. That way, there’s some skin in the game as you go across.” And that kind of narrative, I think, made a lot of sense to all the stakeholders at the time. And they said yes. And then one thing that actually kind of ended up fitting in the middle is: what if there’s just not enough money? It’s a really hard thing. But actually, private capital can come in, and it ended up working quite well. I mean, I don’t know the transition rate for a lot of the STRATFIs, but I know personally, I think of the first 20 or so, we’re easily in the mid double digits in terms of percentages that are actually transitioning over to programs of record, and that’s what you want, right? You want to be able to place these big bets, to have actual significant changes to how we’re approaching the valley of death and bringing new capabilities to the warfighter.

David 18:55

Yeah, that’s great. So I guess real quick on that — was the leveraging of third-party capital or VC funding not necessarily part of the original recipe when thinking about building larger STRATFI awards?

Chris 19:11

So it was both. When we were talking with folks from the SBIR and STTR offices, they were very focused on commercialization, right? It’s a core commercialization program. They were saying, “Hey, look, we want — if we’re going to put X number of SBIR dollars in there, we want to see you commercialize.” Now, commercialization can happen either through selling to somebody else in the Department of Defense, or selling to somebody like a large defense prime or even a commercial company. And so the — it’s not a perfect measure, but a useful heuristic — is basically non-SBIR dollars to SBIR dollars. And so we found the addition of private capital from, you know, places like venture capital firms or other types of investment firms to be a very useful indicator of the probability of transition to commercialization, whether it’s within the DoD or elsewhere. And it also has the added benefit of saying, “Hey, if I can put in $1 of SBIR, I can actually get two or three or $4 worth of capability.” And what we found actually — if you go back and look at the numbers — I remember we had this chart where it’s like, we would put some money in for all the STRATFI companies, and then very quickly after that, the amount of money they would get from all other sources combined would dwarf the amount of SBIR dollars. And so it was really trying to crowd in that funding — for the political scientists out there, it’s like the idea of: you put a little money in there and it acts as a catalyst to crowd in the other funds. That’s what we were looking to do. And we saw — I mean, I was blown away by the first response to the first open call, and it really was a huge, overwhelming response, both from the private investment community and from the warfighters.

David 21:00

Yeah, no, that’s awesome. Well, so Chris, you know you’re now on the other side as CTO of Istari Digital, building a dual-use defense tech company. Have you been a user of the SBIR program, and what’s it like being on the other side of the table leveraging some of these programs that you helped institutionalize?

Chris 21:20

I mean, I think we like to practice what we preach, right? And so we think that starting with some of those early phase one, phase two pitch day-type SBIR awards, and then as soon as you’re getting on those awards, immediately start thinking about that transition — both to where you’re going to get the non-SBIR dollars and getting over into the commercial sector as well. And I mean, I remember our very first — when our first SBIR phase two started, my first conversation with our program manager was like, “Hey, look, this is only meant to get you in the door. We want to be focusing right now on how to cross the valley of death.” And so we went through the exact same pathway. We kind of mapped out where we started with a couple of those doing this STRATFI, and we have now kind of transitioned out of leveraging heavily SBIR dollars, certainly the last couple of years, but it was very helpful in the first couple to get us off the ground. So the focus now — I always tell startups: “Hey, look, there’s kind of two different go-to-market motions when you’re working in the federal areas. The first is getting in and getting your initial foot in the door, and the second one is going and getting your production contracts.” So the initial ones are phase ones and phase twos; the ones further out are going to be production contracts, and hopefully you’re leveraging the SBIR phase three rights. I will say that I don’t think I’ve seen a lot of people talking about all the stuff the Senate passed — and the Strategic Breakthrough Awards are really, really cool. Love all these things. I think that’s certainly one of the things I’m most excited about.But a sneakily important aspect, I think, of the bill that was passed yesterday was the fact that there’s a requirement for agencies to have templates for the phase three contracts. One of the biggest challenges we still see today in 2026 is the fact that a lot of contracting officers are still not comfortable writing contracts or transactions using SBIR phase three authorities. And the more folks can get comfortable with that, I think the more you’ll see folks be able to transition those things across the valley of death. And so that’s a sneaky, kind of under-heralded part of the bill that came through, from my perspective as well.

Maggie 23:41

So Chris for founders listening, how should they think about SBIR today? What advice do you have for founders to best take advantage of this program?

Chris 23:51

Just know that as soon as you start that first go-to-market motion of getting your foot in the door, you need to start immediately building that muscle of moving to production. You need to start having those conversations right away — talking with the warfighter or program managers about this: “How are we transitioning this? Where’s the PEO line where the funding is coming from? Let’s start talking about SBIR phase three, or production follow-ons, or whatever else you may want to be going through.” And just know that’s a different set of skills than getting your foot in the door. But I will still say that, between what they’re doing with the SBIR program and what David was able to create at DIU, I don’t think there’s been a better time for startups in general to get their foot in the door. But once you get your foot in the door, you immediately need to change your mindset and start focusing on that transition to production.

David 24:43

Oh, absolutely. So I think, yes, production and scaling, that is how we all win. That is how the startups sort of showcase their value. It’s how the war fighters get access to compelling technology with economies of scale. And I mean the ultimately, I think, the taxpayer, you know. Gets better leverage on on what they’re paying in for government operations. So Chris, it’s always a treat to reconnect with you. You know, I should also shout out that Chris is part of the inspiration around sweat equity. So if you read my blog on that, you’ll have noticed his name being mentioned there as well. And you know, you are just kind of, you’re not going to beat me in the beep test this year. Fine. We can do the two-mile race then, I don’t know.

David 25:33

We’ll see — perfect, on reserve duty. Well, Chris, thanks again. Appreciate your time here. Appreciate everything that you’ve done for the SBIR program — taking it out of the doldrums of backwater lab work and into the forefront of innovative, cutting-edge technology. We salute you for that, and thanks for coming on this episode of the Techquisition Edition. Thanks, Chris. Awesome.

Maggie 26:01

now that we’ve heard a little bit about the history of the SBIR program from Chris and how the program came to be such an important part of the defense ecosystem today. Now let’s turn to discuss some of the major changes that were made to the program in the recent SBIR reauthorization bill. So first, one of the big changes made in this bill was that Congress created something called strategic Breakthrough Awards, which allow phase two SBIR projects to scale up to as much as $30 million over four years, provided the company can bring matching funds from another government agency or third party capital provider.

David 26:40

And as you learned, it seems that the origin definitely came from the TACFI/STRATFI model that AFWERX pioneered. So this is the government trying to pair funding from other sources and help accelerate transition, whether that’s with private capital or other government funding.

Maggie 27:00

So the idea there basically is, if I can go get another DoD agency to give me $10 million to fund some project, then I can get another 10 million from SBIR. Is that the right way to think about this?

David 27:14

I think so, yeah. It’s all about — and in certain cases, it’s also looking towards the future. So if you are addressing something that has future funding programmed, you can win a STRATFI now — that funding doesn’t come to you until you’ve exercised that milestone and the matching funding has also been released. But yes, it is all about big-time signaling and leveraging other pots of funding.

Maggie 27:42

Another major change that founders will notice is proposal limits. Agencies now have the authority to cap how many SBIR proposals a single company can submit in one year, which reads like an attempt to prevent what people sometimes call SBIR mills, right?

David 27:58

You are right, Maggie. I mean, it’ll be interesting to see how this one plays out. I certainly feel for the government SBIR evaluators, who are deluged with proposals, and you know, advances in AI mean larger volume proposals — a lot of it being AI slop — and that is a pretty big drain on your evaluators trying to separate the best solutions from the rest. My personal hope is that this will help curb the SBIR mill enthusiasm for submitting to every topic under the sun, even when they’re unqualified. But time will tell, and the agencies will exercise their own autonomy around this. I think it’s also worth noting — and Chris alluded to this in the interview — around improvements for phase three transitions, including some standardized procedures and better acquisition workforce training, so that contracting officers can understand how SBIR technologies can be fielded beyond R&D funding. And like anything, you know, education is absolutely key, and it is a great authority that the SBIR program provides to help companies transition from these R&D stages into something that looks more like production.

Maggie 29:11

And then there’s another area that’s recently gotten a lot of attention that is foreign due diligence.

David 29:20

Yeah, this is a big one. Congress has significantly expanded security screening requirements for companies participating in the SBIR program.

Maggie 29:29

So David, help founders understand what that actually means. You know, if I’m a startup applying for SBIR funding today, what kind of scrutiny should I expect?

David 29:39

Yeah, this is probably the biggest structural change for founders that they need to understand. Congress has essentially expanded the national security screening process for SBIR participants. Under the new rules, agencies now have to conduct due diligence on companies applying for SBIR funding to determine whether they pose a security risk. The government will evaluate things like financial, employment, or technological connections with foreign entities, and whether the company or its partners appear on a number of national security watch lists such as the Commerce Department’s Entity List and the Treasury Department’s Chinese military-industrial companies list. So for founders, the takeaway is pretty simple. SBIR is still very much open to venture-backed startups, including those with international investors, but transparency around ownership, capital sources, and foreign relationships is going to matter a lot more. And if there’s a questionable connection to entities in countries of concern, the agency now has the explicit prerogative to deny such awards.

Maggie 30:43

So we’ve covered what changes made it into this SBIR reauthorization bill, but I also want to discuss what didn’t make it in. There’s been a lot of debate over the last year about SBIR reform. I know David last year, you actually testified in front of the Senate Small Business Committee right as Senator Ernst unveiled the Innovate act to institute more substantial reform of the SBIR program. What were some of the key provisions in this bill that were not passed in the final bill, or what were you hoping might make it through that was ultimately left on the sidelines?

David 31:16

Yeah, good point. And you know, it probably doesn’t do any good to dwell in the past, but a couple elements that Senator Ernst included was this unique phase one, a program which was aimed at helping new entrants on ramp faster into the SBIR program. So it was almost like a carve out before a phase one, and it was only available to first time participants that did not make it into this final bill. Additionally innovate act, wanted to apply a lifetime cap for how much funding an individual company could win through the SBIR program that also did not make it in. And then, personally, I had hoped for some language promoting firm fixed price contract types over cost reimbursement, or at least giving a significant preference from Congress that isn’t in there either. Though I do feel good about a lot of different agencies across the DoD who seem keen on trying to promote firm fixed price, which is far more conducive to a venture backed startup, and you know, just more aligned with how the commercial world does buying in general.

Maggie 32:27

Well, regardless, I think we’re all happy that SBIR is officially reauthorized. The wait is over, and that just means there’s going to be more innovative small businesses getting funding to build the future of defense innovation, which I personally am excited about.

David 32:44

absolutely, and I can maybe stop fielding calls from founders and other investors about what’s going on with the latest with the SBIR at least for the next five years, we don’t have to think about that authority going away, though. I’m sure you know, in four years, we’ll start to re engage and and see how we can make this program even more conducive to just the way technology is developed and where the national security apparatus needs it. So I guess the battle is over for now, but modernization never sleeps.

Maggie 33:18

All right, David, as we wrap up, I want to ask you a closing question. What do you think the next Techquisition Edition episode will be about? If you had to guess?

David 33:28

Okay, great. I did think, I think we got this one correct.

Maggie 33:33

We did get this one correct. We correctly guessed SBIR reauthorization was next. So let’s see if we can keep the streak going.

David 33:39

Well, yeah, and the other one that I think I alluded to was around the President’s budget, so we’ll see if that one transpires, but that’s what I believe will be the next Techquisition Edition.

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Vector isn’t just building drones. They describe their business model as “Modern Warfare as a Service.” Instead of waiting years to push hardware through traditional procurement pathways, they deliver integrated capability — technology, tactics, training, and battlefield feedback loops — under service contracts that tap into O&M funding.

We discuss:

• Why the Pentagon’s $1B Drone Dominance initiative is the clearest USG demand signal for attritable systems yet

• How “Drone as a Service” business model unlocks O&M funding (the largest color of money)

• Lessons from Ukraine & Israel (and why it’s not copy-paste for the U.S.)

• Building a China-free supply chain and re-industrializing American drone manufacturing

As always, please let us know what you think. And please reach out if you or anyone you know is building at the intersection of technology and national security.

You can listen to the podcast on Spotify, Apple, YouTube, the Shield Capital website, or right here on Substack.

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Transcript

Maggie 00:38

In this episode of the Mission Matters podcast, we sit down with Andy Yakulis, the CEO and co founder of Vector Defense, a startup building the future of American Drone Dominance.

David 01:22

For an acquisition nerd like me, I get super excited when I get to analyze and dig into a business like Vector. Vector has a pretty unusual business model compared to other startups we’ve had on the podcast. And describes Vector as delivering Modern Warfare as a service, providing war fighters with a full package of modern technology, Battlefield insights, tactics, techniques and procedure development, tactical integrated services and training, rather than solely tapping into research development, training and evaluation or RDT&E funding and procurement dollars, like most companies, Vector also receives operations and maintenance, otherwise known as O&M funding, for their products.

Maggie 02:09

Vector’s first product is Hammer, a long range FPV, that is first person view, drone capable of deep sensing and deep strike. As I’m sure many of our listeners are already aware FPV drones and other attritable software defined systems have proven to be an integral part of modern conflict. FPV drones now cause an estimated 60 to 80% of casualties on the battlefield in Ukraine. However, the US is woefully behind in FPV manufacturing and procurement as China dominates the FPV drone market.

David 02:41

However, late last year, Secretary of War, Pete Hegseth, announced the $1 billion Drone Dominance initiative for the Pentagon to procure hundreds of 1000s of these FPV drones over the next two years. This signals a clear turning point in the Department of War demand signal for FPV drones.

Maggie 03:03

Since it was founded, Vector has raised more than $60 million, and they have an incredible founding team to execute on this vision. Andy, the CEO, spent 18 years as an Army officer, specifically as a helicopter pilot, with time spent at Special Operations Command, Army futures command and the Office of Strategic capital. His co founder, George Matus, began developing novel drone technologies all the way back in high school, and founded Teal Drones, a company he scaled into one of America’s leading drone manufacturers, winning the US Army’s Short Range Reconnaissance program of record, which is one of the first major US military programs related to small drones. Additionally, the founding team includes Matt Long and Larson Jensen, who also spent time in the Special Operations community as Navy SEALs.

David 03:51

This conversation covers everything from the current state of U.S. attritable drone capabilities to the challenges surrounding drone manufacturing and supply chains and how the lessons learned in Ukraine translate to the United States forces.

Maggie 04:06

All right. Well. Andy, thank you so much for joining us today on the Mission Matters podcast. I know one of the big reasons that we decided to do this podcast really trying to spread the word about one of the administration’s new initiatives, which is Drone Dominance, great name. So could you just tell us a little bit about Drone Dominance and the significance of this initiative?

Andy 04:30

Well, Maggie, David, great to be doing this with you. We’re really excited to to go after the Drone Dominance program, or what we call a DDP, the Drone Dominance program is exciting for a variety of different reasons. One, it’s this major demand signal that we’ve been waiting for for many years from the Department of War. You know, I think the relationship with me and David goes back many years. We used to always lament about how we had these unclear demand signals. From the Department. This is the first time where we have a multi year program, multi-year funding, and large budget dollars of congressionally appropriated dollars. And so obviously there’s a lot of risk still in the market, but the Drone Dominance program has taken away a lot of that uncertainty that we usually see in defense.

David 05:18

Yeah, and Andy. I mean, definitely thinking a lot about drones demand signal. What do you think it is like this time and moment today that is allowing the department to announce something like Drone Dominance? And then maybe, where do you think it goes from there?

Andy 05:39

Yeah, it’s a great question. You can’t talk about drones without talking about Ukraine. Obviously, Russia invading Ukraine in February of 2022 set off this revolution in military affairs, where we see drones or unmanned systems used in ways we’ve never seen before, where you can take a drone that used to be used for racing, strap a bomb to it and have this outsized, asymmetric impact on the battlefield. And we as a nation, we as a company, both have been paying very close attention to how unmanned systems, or drones, are used on the battlefield in Ukraine and Israel and all over the world, and the Drone Dominance program is a clear indicator that the Department of War has also been paying attention, and it is now time for America to show its dominance in all areas of technology. For this program, in the drone industry and as the dominant superpower in the world, we need to also have a very resilient supply chain, a very resilient, powerful, competitive drone industrial base, and that’s what this program is incentivizing, is more competition, so more vendors like Vector are competing on that battlefield to build the very best system for our warriors.

Maggie 06:58

I mean, there’s no doubt in my mind, right, the FPV drones have been just a tremendously powerful force in Ukraine. But I know a lot of critics point out the US military and our threat landscape is very different from the Ukrainian military. We have significantly more resources. So how do you see these systems translating to be powerful for US forces in conjunction with our other exquisite systems.

Andy 07:25

Well, there’s a lot to be learned from the war in Ukraine. Maggie, there is a lot to be learned for how the Israelis use unmanned systems on the northern border against Hezbollah and then throughout Gaza and more like an urban setting. What I always tell folks is, there’s not a copy-paste from Ukraine or Israel to the United States military. The United States military has a very specific doctrine, and they are going to use unmanned systems in the way that makes the most sense for them. That doesn’t mean that because the Ukrainians or the Russians use drones in a certain way that there’s not lessons to be learned from them. I think that’s where the innovation of our company and other companies like Vector comes to play is how do we take those lessons learned from the overlap of tactics with technology and apply that to the American military? A lot of what Vector does is not just the production and the manufacturing of an unmanned system, but how that unmanned system is tactically employed. And I think having both sides of the company come together, you know, I think a lot of that is coming ahead in this Drone Dominance program, and having both sides of our company come together is a defining characteristic of this company, but it’s also a defining characteristic of where we see the drone ecosystem going in the United States, where the United States military is playing a little bit of catch-up right now, to be honest, that’s what this program is designed to do, is to rally the drone industrial base. But also, the drone is sort of worthless if we don’t know how to tactically employ it, and so we need to do a lot more work. We, as a military and as an industry, need to make sure that we are leveling up our game on how to tactically employ unmanned systems.

David 09:05

So Andy, I definitely want to build on that. One of the things that you talked about early on with the company, and that really just couldn’t take my mind off of, is the approach you’re taking to the military, right? I think you call it drone as a service, or modern warfare as a service, getting in with the tactics, techniques and procedures, with the special operators and and the standing army as well. What has like tell the audience a little bit about your approach, because I think it is relatively unique to most venture backed startups engaging with the national security system.

Andy 09:47

Yeah, absolutely. David, so when we first met, I was still in the Army. I was at Army Futures Command. You were, and still are, a venture capitalist, but we were always trying to work on this concept of how do we streamline technology through the acquisition system faster? How do we make transitions easier? How do we make sure that we are this dominant technological superpower with our defense technology? And I’ve been working on this problem set for five, six years of how do you push technology through the procurement system faster, so it’s still relevant when soldiers get their hands on it. You know, when I was in the Army, we used to have this saying that we’d get a laugh at conferences. I just don’t think it’s funny anymore, where we give our soldiers yesterday’s technology tomorrow. And that comment has actually turned into a national strategic vulnerability. The technology exists — this is not a technology problem. We’ve got great, innovative companies and amazing entrepreneurs and engineers that can produce great technology. What I kept looking at was, well, this is a contracting problem. This is a procurement problem at times. This is an administrative bureaucracy problem. And I think when you’re fighting sort of a long, sort of bureaucratic process, when you’re fighting the status quo, sometimes it’s a good thing to take a step back and like, why even try to go this way? Is there another way to attack this problem? And that’s when the idea of Vector was sort of born, which is like: what if we didn’t try to sell a drone through the procurement system that could take five, seven, or ten years. What if we attack this problem totally different, and flip the whole concept on its head? And what if we sell a service? What if we sell integration and training? What if we sell the innovation ecosystem that we were developing with those that we are working with? And then, what if we could sell unmanned systems underneath a service contract. And the more that we studied the problem, the more that we studied the Federal Acquisition Regulation, the more we realized this was actually a pretty innovative go to market to achieve a couple of things at once. And if you think about the concept of attritable systems, an attritable system is a consumable piece of technology. When you consume that technology, you have this opportunity to update what was just consumed with a better product. And that sort of fits in this sort of approach of, well, if you’re on subscription contract, or if you’re providing drones as a service, as the drone attrits, why not provide a new, innovative drone than the one that you sold before? And so that’s been our approach ever since we started the company, over 18 months ago, which was actually to attack this as a service contractor, still building products, still selling products, but all underneath service contracts. And I’m proud to say, every drone, every component, every kit that we’ve sold to date has been underneath the service contract.

David 12:38

So you must have just a giant other direct cost contract line item, CLIN, within that contract, is that correct?

Andy 12:46

That’s correct. Yes, that’s That’s correct.

David 12:51

Awesome, because I think I mean, for a venture backed company, you do still have to be mindful of margins. And if you’re doing services, I presume, some somewhat of a time and material type contract, you’re not going to get the types of margins that you’re looking for, but I guess that’s where then the quantity of the types of systems that you’re looking to sell, the constant refresh rate. You could look at your TTP development as a bit of a moat over time.

Andy 13:22

That’s absolutely true, and you’re right on the margins with service contracts. But again, there’s no limit to the amount of systems you can sell underneath a service contract, and so you can sell large quantities of system as long as they’re below a certain price point. This doesn’t work for a tank or a jet fighter, but for attritable systems, the strategy makes a lot of sense, moreover, and I think this is what gets a lot of folks excited about the the business strategy here is, if you get into the different appropriations for what we call different colors of money, you have operations and management dollars, and that’s what we’re talking about right now, service contracts, leverage the O&M budget, which just happens to be bigger than the procurement budget and the R&D budget. But because we’re still building systems, there’s nothing that says I can’t go after procurement contracts as well. There’s nothing that says I can’t go after R&D contracts as well. And most defense technology startups are just in those latter two bins and leave the O&M budget completely alone, but that’s a huge untapped market that most companies aren’t going after, and there’s competition there that for us to go after. But Vector is attacking those three main buckets, those three main colors of money all at the same time, and a lot of times the work that we do on the service side can benefit the work we’re doing, going after different procurement contracts.

Maggie 14:46

Something else that I think makes a lot of sense with this as a service model. You know, when I think about SaaS software as a service, you know, the whole point behind that is that software is constantly changing, so you don’t actually want to buy one static piece of software and then use it forever. You want to pay kind of a recurring fee that allows you to always have the newest, latest, best technology. And I see that applying really well to the drone space. And I think we see on the battlefield in Ukraine, in Israel, people say these drones are changing basically every day. You might actually have to throw out all of your drones every three months, the DOTMLPF is changing all the time, and I’ll just define that for listeners. That’s doctrine, organization, training, materiel, leadership, education, personnel, facilities, and policy. So how are you all keeping up with what is actually happening on the battlefield in the technology space, and how do you bring that back into the tech that you’re building today, into the TTPs and DOTMLPF that you’re discussing with your customers?

Andy 15:51

Yeah, well, let me say first, Maggie, it’s very hard. I mean, it’s very hard to keep up with how fast the Ukrainians are moving, the Israelis are moving. So necessity being the mother of invention, the Ukrainians have gotten so good out of innovating because their survival depends on it. They are constantly trying to find a new way to incorporate advanced technology and the unmanned systems they’re using to keep the Russians at bay, and they’ve done a fantastic job. And the fact that the lines have barely moved over the last four years is is evidence of that. And so we have gone to where the Ukrainians are. We have a team in Ukraine, we have a team in Israel, and we maintain a very consistent leader presence back to those two locations, you know, not to do anything operational, obviously, but to study the tactics, techniques, and procedures, to study the cross section of technology and the tactical implementation of that technology used on the battlefield, we now do a monthly report, which we call the Vector report, which is our learnings from the modern battlefield over that last month, of how unmanned systems or other modern warfare technology was used on the battlefield in different parts of the world, and so it’s been very, very challenging to incorporate all those lessons, to put that into a training course, or put that into the next generation of product development. We use training courses with the United States military to mimic that innovation cycle. And like I was saying before, it’s not a copy paste of what the Ukrainians are doing and what the Israelis are doing with unmanned systems, because the American way of war is different. But we take a lot of inspiration from those battlefields, applying it to your point, David and Maggie, to the DOTMLPF, and the cross section of how the American military will leverage unmanned systems from their doctrine all the way down to the facilities and the policy.

Maggie 17:49

What have been some of the biggest technical challenges that you all have had to work through as you’re trying to build these systems to operate on a realistic battlefield?

Andy 17:59

Yeah, it’s a great question. Maggie, unfortunately now, and I say unfortunately because we need to do better as an industry, but unfortunately now we’re still very much in a one-to-one, one pilot operator to one drone. The next phase of warfare, the next phase of the technological development for unmanned systems, needs to go from one to many. And so it’s kind of interesting, if you if you think back to the global war on terror, where we had multiple individuals piloting, operating, launching drones, predators, reapers and things like that. We are very much in a many to one. Now, for the most part, we’re in a one to one, one operator to one drone. We need to go to the one-to-many concept, and this is a technological challenge to be able to put enough processing power, enough autonomy on a drone, which can be done but a low enough price point. So the unit economics makes sense to realize this vision of what we call a triple mass, again, “triple” being the idea of consumable or throwaway technology, mass being we want to have large quantities of unmanned systems. The economics only work out if you can have just enough autonomy at the right price point on a low-cost system, so you can produce in mass, and the United States military can buy in mass, leveraging the right amount of autonomy and finding that balance, to not put too much R and D into a drone, but still have enough automation and keep the unit economics low enough so the Department of War can buy not tens of thousands, but hundreds of thousands or millions of drones. That’s really the technological challenge, right there.

Maggie 19:35

As we think about this constantly changing technology, as autonomy technology is getting better, electronic warfare, resilient communications is constantly changing and improving. How do you think about the government’s plan to stockpile hundreds of 1000s of these drones? How do we keep them updated and make sure that you know when the war fighter needs these systems, they have the most cutting edge version of them.

Andy 20:01

Yeah, so I think there’s actually two questions in that. One: how do we keep the stockpile current? How do we even have a stockpile? And then, how do we keep it current? To the first part of your question: we learned this lesson the hard way during covid, that our supply chain was not as resilient as we thought, and that’s everything from medicines to toilet paper, to the components that go into drones. And what we have done at Vector, you know, really, over the last 18 months, is to shore up our supply chain, to make sure every component is decoupled from China and, where we can, to lean on the domestic, the US supply chain, which is very, very hard to do when we, as an industry, are trying to create this decoupled, China-free drone supply chain almost overnight. That’s what the Drone Dominance program actually requires, and is designed to do, is to stimulate and energize the drone industrial base, making sure it’s clear and decoupled from China. You know, a lot of money needs to be poured into this ecosystem to make sure the price points can come down so we can realize this concept of economies of scale. Because China is just this manufacturing powerhouse, and they’ve got incredibly cheap labor over there, which is basically very, very challenging to compete on price. And so, you know, I applaud the Department of War for launching the Drone Dominance program, because this program is doing a fantastic job to energize the drone industrial base, to make sure we have the components decoupled from China at a low enough price point so that we can produce drones at scale. So I think that is happening. We need to see even more come from the Department of War and other agencies. But we’re really excited about where this is going on how to keep things current and up to date. I think this goes into our strategy, which is to have a very much more open architecture, a much more modular design. That goes into everything from how we design the drone, how we engineer the drone, how we manufacture the drone — all in a very open-architecture way. We like to say at times, we’re like the Android of drones, where a lot of other companies, for better or worse, are more like the iPhone of drones, very close, very proprietary. Our philosophy is, in order to capitalize on these constant innovations, just as you said, Maggie — the constant evolutions from one piece of software or hardware to the next. The only way to do that is to have a very open, modular architecture, and that’s how we design from the start.

David 22:32

Andy, I think that was really great. I would love to maybe dig in a little bit more on the supply chain and manufacturing and how you all think about that buy versus build conundrum that I think a lot of hardware companies go through right SpaceX, famously completely vertically integrated, and then others, you know, there is a robust supply chain, and you’re picking out different partners for the drone industry specifically, given that a lot of components come from China, I think some of the main ones include the motors and the batteries, and there being kind of a lack of an industry base for those types of sub components, I guess. How do you differentiate your product if you were to go to the same suppliers, that’s, you know, fairly in its infancy. But then too, like, you know, how do you make that decision about this is the thing we’re going to do in house, and this is the thing that we’re going to outsource to a domestic partner.

Andy 23:39

Yeah, another great question, and I think this actually takes us back to, like the evolution of Vector. When we first started Vector, we wanted to be a systems integrator, a tactical systems integrator of unmanned systems. We did not want to build anything, and we started working with a variety of partners and incorporating integrating their drones into different DOTMLPF, going through the DOTMLPF, incorporated them into different war fighting exercises for our customers, we would do mods, we would repackage into different strike kits. But our customers kept asking us to build very bespoke drones for them. They wanted different features that just didn’t exist on the market, so we started manufacturing our own drones in low quantities in probably the middle of 2025 but as we looked into the supply chain to your question, David, we realized that the components that were going into the drones either weren’t getting us the results we needed when we were buying off the shelf, or they weren’t meeting the compliance requirements for the Department of War, especially as they have refined the interpretation of the National Defense Authorization Act, the NDAA compliance scrutiny has definitely grown over the last 18 months, and to that end, we have gotten much more vertically integrated over the last six months, out of necessity, because we had to, because. We could not leave any room for error on compliance. And you know, going back to last year, we thought we understood what was required for NDA compliance, and it wasn’t really until the last six months where we really, really dug in, where we hired some really, really top talent on supply chain. We really did a forensic analysis of our tier two, three and four suppliers, and made sure we understood, we understood exactly down to the resistor, transistor level, where everything was coming from. And so I kind of tell that arc of Vector of getting more and more vertically integrated to say, you know, there’s, there’s certain parts of the drone that we build ourselves, there’s certain parts of the drone that we just have great partners, and we’re really excited to actually announce two of our major partners. Both are domestic suppliers. One is a company, a battery company, actually, that was making batteries for a different purpose, and we brought them into the drone industry. We have actually done this with a variety of our different vendors, where we found vendors that were in adjacent industries, and we brought them into the drone industry, one, because they were decoupled from China, but two, to give us an advantage on supply chain, knowing that there wasn’t a lot of competition for that specific vendor. So we spent a lot of time analyzing the supply chain, a lot of time working with vendors, and a lot of time investing in there. And I think to more directly answer your question, David, is those items that require an increase, increase capital investment, ie, spinning motors that would take a little bit of a capital investment, a lot of time to stand that up. That’s a great that’s a great thing to buy and then assembly into your drone. A lot of the things we do on PCBAs. You know, we’re not printing our own boards here at Vector, but we do a lot of work to design our own boards as well, and that’s also a great thing to contract manufacture out. And so looking at especially the stage we’re at which we’re a post series A company, what makes sense from a capital investment side, what makes sense from an IP side. That’s really how we make our decisions thus far. But we also are taking a hard look at where do we need to have the most control over the components, either for the capability, for the consistency, for the quality and or for the compliance. That’s really what, what drives a lot of our decision making,

David 27:19

And I would imagine also like, what allows you to then scale?

Andy 27:25

Yeah, absolutely. And that’s also a strategic decision based off where the company is, either from a capital raising perspective or a revenue perspective. You know, you can do a lot when you’re on a large contract to further scale. And again, this is what the Drone Dominance program is doing for the industry. It is giving companies like Vector and some of our suppliers a chance to scale, because now they can see the demand coming, really, for the first time in a very long time. So again, we applaud the Defense Department or the Department of War for clearly showing that demand signal.

David 28:02

When you know, talking about this compliance stuff, I think something we hear a lot of from startups, or at least the idea of is who I’ll partner with a defense prime, right? People that have been here done that before you know, if there’s one thing that they’re good at, it is checking all of the boxes around compliance for working with the department. Can the same, is the same true for this particular program, or is there a little bit of a everyone’s at the same starting point, and it’s all about how you execute. So I guess short of the long on this question is, is is Vector partnering with any defense primes, and is that a part of your overall partnership roadmap?

Andy 28:46

It absolutely is. I don’t think you can be in the defense space and not look to the primes for partnership opportunities. And there’s a lot of folks out there that will throw shade on the primes. I’m not one of them. I think the primes are fantastic. They’ve done so much for this nation, and they’ve done so much for a lot of you know, innovative startups like Vector, as they become much more accepting of partnering with companies like like like Vector, because we provide a lot of value to them as well, a lot of the innovation and speed side. So yes, we have partnered with a number of primes. The primes are fantastic for a lot of the compliance, helping us navigate the regulatory environment for, you know, contracting pathways, and so we use them for things like that. And so an invaluable resource. And if there’s any startups out there, or budding entrepreneurs, I would always encourage them to reach out to the primes sometimes that’s a that’s the best way to get started is to is to be a sub for a number of years before you’re even a prime yourself.

Maggie 29:51

Andy, one question that I have is surrounding testing. One of the things that I’ve heard from a couple. Companies building in the national security hardware space is that it can be really hard to actually get access to test ranges where you can realistically test your systems the way that they need to be tested to be resilient in a place like Ukraine, a lot of times, electronic warfare in particular can be difficult to test because of the way that FCC and FAA regulate airspace and regulate the spectrum space. So could you talk a little bit about how you all have approached actually testing your systems to ensure that they’ll be resilient on the modern battlefield?

Andy 30:34

Yeah, it’s a great question. Maggie, I think we’ve been very fortunate in the testing domain. Early in Vector’s history, we jumped into testing as a service of electronic warfare as a service where we had access to very unique ranges here in the United States that did have their FAA and FCC certifications. And so we were able to kind of jumpstart a lot of testing there. One of the things I always asked when I was in the government to companies like a Vector, was, Are your products in Ukraine? Have you tested in Ukraine? And I feel like that’s almost table stakes at this point. Now, here in 2026 where, if you were going to approach the Department of War with a product they’re going to want to know, did you test this in some way in the Ukrainian ecosystem, there’s a lot of great Ukrainian test ranges off the front lines, and they’ve done a fantastic job of setting those up and providing pathways to being able to test your systems there in some very, very realistic scenarios. And so we’ve gone down that path. We’ve used a lot of domestic test ranges, and then, of course, we run a lot of simulation as well. I think the best way to test though, is with your end user. And this is where Vectors business model really comes into play, where a lot of times we get paid to test our products on a service contract with our end user. And that’s sort of part of the contract, and that’s part of what our end users expect is, is they want us to bring them the latest and greatest piece of technology that we think may, you know, give them some sort of exponential value, and they understand that it’s being done in a test environment, and they love that, they love being introduced to something new. And, you know, I think being very honest, and having that relationship with your end user, telling them, like, Hey, this is a prototype. This isn’t ready, but we really want your feedback. Tell us what you think, see if you can break it, see if it flies in this environment. Please give us that feedback. And so we do a lot of that as well.

Maggie 32:38

Something that I think is interesting about Vector. You guys are based in Utah rather than some of the other big defense startup hubs like LA or Seattle or Austin or even San Francisco. Can you just tell us about your decision to build the company there?

Andy 32:53

Yeah, sure. We actually started in North Austin. We still have a satellite facility in North Austin. We probably always will, for a variety of reasons, but we made the decision to move to Utah for a variety of reasons. Nothing against El Segundo or the Bay Area. I actually had a previous startup in the health tech space based out of Silicon Valley. Great experience, but there is this very different startup culture in the bay area or El Segundo than there is here in Utah. In Utah, it’s very collaborative, it’s very founder friendly. The Economics of running the business in Utah is very, very different than in California, and it’s much easier. The taxes are way better. What you pay employees in Utah is very, very different than in El Segundo. You know, it’s hard to make the unit economics work on the drone, on the labor, on the rent and all that overhead that goes into your facility if you’re in California, especially if you’re building attritable systems. And knowing that Vector would probably build hardware at some point, we wanted to be outside of California, just to make the financial aspect that much more scalable for us. The state Government has just been fantastic to us. They’ve been very welcoming Utah for testing. Back to your testing question, Maggie, is pretty fantastic. There’s a lot of BLM land here that we use for long range testing, and there’s a variety of different military bases here that we use as well, where we partner with the military to do a lot of live kinetic testing on our drones as well. And just having easy access to all those ranges has just made this a world class place to build and to test. You know, the summers get to sometimes 105 110 degrees, and the winters get to below zero. So we get to do a lot of environmental testing, high altitude testing around here as well to ensure that the products were put into the to the hands of the war fighter, have been tested in a variety of different conditions, so all of that kind of put together just just made a lot of sense for us, and we’re happy to call Utah Home, and it’s just been fantastic for the team.

David 34:55

Utah is a great place. Do you enjoy skiing there? I’m excited for the innovation. An ecosystem that’s burgeoning. I won’t tell the El Segundo people, you know, how you feel about them when I’m visiting out there later this week, but maybe moving to the international side. You know, you talked about Ukraine, sort of receiving a lot of lessons learned there and doing some testing as well. How do you think about the rest of the international landscape? Right? America still has very strong like foreign military sales, a strong technology culture selling, whether that’s to the Asian Pacific market, out to the Middle East, to other European partners, is it still too early, and right now, we’re just focused on getting this right here at home in the United States, or is Vector also thinking about international expansion.

Andy 35:49

We’re very much focused on the international market as well. Again, we’re excited for some interesting announcements we’ll make here in probably the next 60 to 90 days of some international markets that were opening up for the Vector team. What has been very interesting with the international market, though, that really closely ties into this administration is previously there would be a lot of U.S. aid to our partners and allies. And what this administration has done is sort of flip that script, incentivizing our partners and allies to do more direct contracts with innovative companies like Vector. The other thing that has been an interesting change in the international market is a lot of our foreign partners don’t want to buy all-up systems. They want to do in-country manufacturing, they have seen the same vulnerabilities to supply chain that we learned during covid. And what they’re more interested in is not an all-up system that Vector may build, but more so the components, the raw components, that Vector is designing, and then helping them stand up a world-class unmanned systems factory and drone Center of Excellence. And so everything from support in standing up in-country manufacturing, to teaching and training, their own version of DOTMLPF, their own version of tactics, techniques, and procedures for their military, that is what’s most interesting to our international partners, and that’s how we sort of attack the international market — focusing on those countries that are ready to move dollars toward those types of programs.

Maggie 37:27

Andy, you’ve had a long career, both in the military and national security space and now in the founder startup space. What advice do you have for founders who may not have your years of experience as they’re looking to build startups to support national security customers.

Andy 37:46

That’s a great question. Maggie, so I spent 18 years in the Army. The last five or six years were focused on this market — focused on how you build for defense — not knowing I was going to become an entrepreneur in the space, but I was just fascinated by the defense acquisition process, and so I thought I had a good handle on how to go to market. It’s way more challenging than I ever thought. You know, I look at all the advice I gave entrepreneurs when I was in the military, and I sort of shake my head at myself, because I really had no clue on how hard it really was for the entrepreneur. And so I say that to say, don’t start a company, period. Don’t start a company in the defense space unless you absolutely can’t not do it. And I use the double negative on purpose, like you have to lie awake in bed every night thinking about your idea, thinking about your startup, thinking about the market, thinking about how you want to do all of this, and if you can’t sleep because you’re so captivated by diving in and joining this coalition of entrepreneurs that are trying to build it for defense, then great. But if you have doubts, then it probably isn’t for you, because it’s hard. It’s a slog. Every day I relish in it. I enjoy it very much. I don’t think there’s anything else really worth doing, at least in my professional career, than building for defense. But you have to be ready for the challenge. You have to be ready for the highs and lows. And if you are, then it’s a very, very rewarding sort of industry to be in, but it’s not for the faint of heart.

David 39:19

Yeah, I think that’s well said, it’s definitely a labor of love, not so different than serving in certain ways, right? It’s a grind, and you’ve got to love it for all the right reasons. Beyond the things you’re listening to and reading about in the defense tech space, give the listeners a bold prediction, you know, an Andy special, if you will, on something you see playing out in the next year or five years, but obviously the more relevant to today, even better.

Andy 39:58

Yeah, so, um. I’m not an everyday reader, but I think a book that has changed my perspective and has influenced me a lot is Freedom’s Forge. And I think Freedom’s Forge 2.0 is coming. I think the involvement of the United States government, for better or worse, is going to change the defense ecosystem, especially in the unmanned space, in a way that we could never imagine. I’m seeing a lot of very interesting things come from the United States government, from direct investments into companies, MP Materials, Intel, L3, and a couple others. I think that’s a big signal of how involved the Defense Department wants to be to ensure that we have a Freedom’s Forge 2.0 to ensure that this re-industrialization actually happens, to ensure that we do have the industrial base, to ensure we’re ready for hopefully the next fight that never happens, to ensure that we’re ready for it. So I think what we have seen come out of this administration and the Department of Defense, or the Department of War, is just a signal of much more to come. And I think Freedom’s Forge 2.0 is coming in a big way, and we’re really excited to be a part of it.

David 41:15

Well, that’s awesome. Andy, I’m sure, and I hope that they write a chapter about Vector in Freedom’s Forge 2.0 but just for our listeners out there, that same author, Arthur Herman, he’s coming out with a new book called Founder’s Fire: From 1776 to the Age of Trump, set to release on the 21st of April this year. So I don’t think they’ll write about Vector in that one, but I’m sure, you know, Arthur will be looking you up pretty soon. So with that, Andy, thank you so much for taking the time to come on to Mission Matters. It’s awesome to hear about your story, to see veterans like yourself getting out there, you know, putting their time, their sweat, their energy, right, all their lessons learned, into building a company of consequence. We wish you the best of luck. I can’t wait to hear about how well you do in the Drone Dominance program, right, and that maybe in the very near future, airmen, soldiers, Marines, and sailors, etc, will all be flying your drone. So just awesome. Thank you so much.

Starfish is building “space tugs” that can dock with and move other satellites — extending mission life, disposing of debris, and enabling other national security use cases. Their recent Remora mission autonomously maneuvered one satellite within 1,250 meters of another, validating a core thesis: software can radically lower the cost of operating in orbit.

We discuss:

• Why affordability and scale matter as much as exquisite capability in a contested domain

• The role RPO plays in U.S. military operations

• The current state of our adversaries’ orbital warfare capabilities

• How SBIR → STRATFI can be a springboard to building a scalable business

• Navigating classified work without slowing commercial velocity

• Where LEO, GEO, and cislunar actually fit in over the next five years

• The power of software to conduct complex RPO missions with relatively cheap, simple hardware

As always, please let us know what you think. And please reach out if you or anyone you know is building at the intersection of technology and national security.

You can listen to the podcast on Spotify, YouTube, Apple, the Shield Capital website, or right here on Substack.

Subscribe now

Transcript

Maggie 00:39
In this episode of the Mission Matters podcast, we sit down with Austin Link, the CEO and co-founder of Starfish Space. Starfish is building the future of rendezvous proximity operations, or RPO for short, for satellite servicing, beginning with space tugs for satellite life extension missions. Essentially, Starfish satellites are able to attach to other satellites and pull them into a higher orbit in order to extend their lifetime in space. RPO are the maneuvers and technologies that enable one spacecraft to safely approach, navigate around, inspect, dock with, or service another object in space while maintaining precise control and collision avoidance. I know Austin often describes this as two bullets coming together to very lightly kiss without actually touching each other. The same technology for life extension can also be used to clean up orbital debris, otherwise known as space junk, to ensure crowded orbits can be free of clutter from other satellite operators, as well as a whole host of maintenance and US government mission sets.

David 02:03
Historically, RPO missions, like life extension missions, have been prohibitively expensive for most use cases. Of course, before Starfish, the RPO missions would require large, expensive spacecraft outfitted with several complex sensors to conduct the operations. With Starfish, they’re revolutionizing the industry with their Software Defined Platform, which can conduct RPO missions with just one or two sensors and cameras at a tenth or even a hundredth of the price of your traditional RPO satellites.

Maggie 02:34
Since they were founded in 2019, Starfish has launched two technology demonstrator satellites, the Otter Pup One and Otter Pup Two, successfully deployed their software on an Impulse Space satellite, raised more than $50 million, and closed contracts with government organizations like NASA and Space Force, as well as with commercial companies including SES. The founders, Austin Link and Trevor Bennett, are both aerospace engineers who met while working together at Blue Origin.

David 03:03
In this conversation with Austin, we’ll cover everything from the role RPO plays in US military operations, the current state of our adversaries’ orbital warfare capabilities, and, of course, how to navigate the United States government contracting process as a space hardware startup. Okay, Austin, it’s great to have you with us. Thanks so much for joining us on the Mission Matters podcast.

Austin 03:27
Good to be here. Thank you guys for bringing me on.

David 03:31
Yeah, I’m sure you’re a first-time, long-time with this podcast medium, but Maggie and I are just super excited to have you here, so we want to jump into it. In December, you know, as a little pre-Christmas gift—I don’t know, maybe to your investors, maybe to the space economy—you and Impulse came out with a pretty large announcement about your mission, Remora. Can you tell us a little bit about it? I mean, how did it come together, the partnership with Impulse Space? It’s really cool. And then what are the implications for Starfish as a company? And then, I don’t know, maybe wax poetically about the broader space economy.

Austin 04:11
So we did—we announced in December our Remora mission. And on our Remora mission, at Starfish, we put a camera and some software on an Impulse Space satellite, and they allowed us to take control of their satellite and fly it towards another Impulse satellite. And we’re not just flying it from the ground—we flew it autonomously onboard and used our cameras to take pictures of the other satellite. And we got—we got 1,250 meters away, which is close proximity operations when you’re in space. We got some awesome pictures of them, and we got a chance to validate a bunch of our technology and gather a bunch of data to anchor simulations going forward. And this was a big mission for us for a few reasons. Number one, this mission touches on the core thesis of our company, which is we can use software to make it easier to do rendezvous and proximity operations among satellites. And making it easier to do rendezvous and proximity operations is what ultimately allows us to build our Otter satellite that does the life extension and satellite disposal at a price point that commercially works. And it’s what allows us to show up to Impulse Space less than a year before we’re going to launch and drop some software on them, and drop a little bit of hardware from TRL 9 on them, and get to space and have it work and do a proximity operations mission. And so, A, it’s just awesome to announce doing anything in space. That’s always super fun. B, it really validated a couple of our core theses on, “Hey look, we can do proximity operations easier than it’s ever been done in the past.” And then the last thing I would say—it was an awesome chance for our team to showcase their capabilities, and for the Impulse team to showcase their capabilities. They were really a pleasure to work with, and they’re a super impressive team.

Maggie 06:30
Yeah, so it sounds like with this mission, you guys have really demonstrated that you actually can, you know, get two satellites relatively close to each other and take a look at each other, you know, maybe do some servicing. I want to turn to what this demonstrated technology can actually be used for. And maybe the first topic on that is the US government use case. You know, I think previously, it was relatively taboo for the US government to talk much about their space operations. However, I know that’s changed in the past two years, where concepts like orbital warfare, Golden Dome, space control are now actually being discussed publicly by top military leadership. So how does a capability like what you demonstrated with this most recent mission relate to some of these military mission sets?

Austin 07:22
Yeah, sometimes, in trying to describe our company, I say we build satellites that grab and move other satellites. And that always raises the question, “Who the heck wants that? What’s that useful for?” Sure, it’s cool, but how, as a business, do you provide value and through that get money so that you can continue to exist as a business? And for us, with our Otter, there’s really two core commercial missions that we focus on. One of those is the life extension of geostationary satellites. You run out of propellant, we can grab on, hold the satellite in that slot still. And the other one is satellite disposal in constellation. So this satellite has died, it’s occupying a slot, it’s threatening other assets—just get it out of there so that a replacement can be put in and you can continue to operate your critical space infrastructure. Both of those apply to the government the same way that they apply to commercial satellite operators. There are many organizations inside the US and allied governments that operate satellites, and in many ways, they look just like our commercial customers do too. There is also, as you touched on, a variety of mission sets for the US government that are not ones that folks are as interested in commercially, although sometimes they are interested in them commercially. They range from protecting satellites on orbit from—really, usually Russian or Chinese satellites that are nearby. They range from potentially interfering with an enemy asset that is doing services for bad things. They can range to a little bit more complex servicing missions on orbit. So the US government is sometimes a little at the forefront of refueling, sometimes a little at the forefront of on-orbit repairs or assembly or upgrades in a way that commercial companies don’t necessarily have the risk appetite to go bite off at first pass. All of those are areas that the US government expresses interest to us as we develop rendezvous, proximity operations, and docking technologies—we can operate satellites close up to and touch other satellites. I think there’s two challenges for us as a business as we grow into those opportunities. And one of those is to figure out what is going to be fundamentally useful over the long term, because we’re not building a business to go try to grab whatever the shiny contract at the moment is. We’re trying to build a business that fundamentally provides real value to our customers, and that’s true for the government in the same way it is for the commercial side. And then the other factor that we have to decide as we bite off new opportunities is we have an efficient team, and we need to focus on the things that are going to give us the most bang for our buck right now. And so that means that the Otter is always our core focus at the moment, as we build Otters, as we fly Otters, as we grow that line of business. And the next wave of opportunities to take advantage of our technology, we have to tackle bit by bit as they come, as the right ones come for Starfish, and as we can jump and provide a lot of value to our customers for relatively little effort on our side.

Maggie 10:53
Yes, you mentioned some of our adversaries’ actions in space right now—China, Russia. So I wanted to ask, what is the current state of our adversaries’ capabilities as it relates to RPO, orbital warfare? You know, I know there was just an announcement late last year about China demonstrating an on-orbit refueling mission. So how are you seeing our adversaries’ capabilities, and what role does Starfish and other startups play in maintaining US dominance in the space domain?

Austin 11:25
Yeah, so I think there’s not a lot of broad awareness about what goes on with rendezvous, proximity operations, and docking in space, and what can make space a contested domain. And I understand why there’s not always that awareness, because, on the other hand, there’s a lot of incredible things that happen in space. And not to say that some of what’s going on isn’t incredible, but there’s a lot of excitement, and there’s a unique kind of positivity and optimism that often comes with space missions. And sometimes you don’t want to think about, “Oh, this could be a contested domain of warfare also.” But we go talk with government customers and actually commercial customers also, and they’ll talk about, “Yeah, there is 10 to 20 kilometers away from us some Russian satellite or some Chinese satellite, and it has no reason to be there except to be poking around at us and trying to figure out and potentially interfere with what we’re doing.” And these satellites from both commercial and government folks are providing valuable services, and if they went out at the wrong time, that would be a really critical challenge for humans here on Earth. And so they ask us things like, “Hey, could you guys use your proximity operations to help protect our satellite on orbit?” And, you know, that’s something that our technology can lead to, and it’s a real thing that you have to think about, because Russia and China both have proximity operations capabilities, and they have both demonstrated them on orbit. There are multiple Chinese satellites that have docked in geostationary orbit, and there’s some speculation that there is refueling being done as part of it. There are Russian assets that have docked and have gotten close to US assets, and I believe even fired little projectiles at US assets. And those capabilities mean that if you have a US satellite that is relaying communications back and forth to Taiwan at a critical moment, and somebody’s threatening to disable that, that has a huge impact on the safety and well-being of people here on Earth. And that’s something that our technology can help and support. And it’s not that we are the only ones who are capable of doing proximity operations and docking for the US. The US has those capabilities too, but the US has them in a way that’s really expensive. And if—I think we see this in a variety of frontiers of conflict right now—if the US is bringing really expensive capabilities to the theater and adversaries are bringing really affordable capabilities, then over time, the US is losing the economic battle that comes with conflict. And so I think that is where Starfish Space can make a positive impact, the same way that we can make a positive impact on our purely commercial missions by providing more value from the services that we provide than what it takes for us to provide those services.

David 14:43
Well, I gotta say, this whole conversation has made me exceptionally nervous, because it wasn’t that long ago that what we’re talking about is just totally not taboo—Maggie, like verboten, go to jail, like talking about these elements of orbital warfare. So I’m stretching out some of the highest clearances I ever enjoyed in the Department. But it’s good. I mean, we’re seeing this push for these exquisite missions that don’t need to also cost an arm and a leg, right? And I think taking a different, a fresh approach, maybe some might say a first principles approach to doing these various missions is like, right in the wheelhouse. So, I mean, Austin, maybe just talk a little bit to us about the construct of Starfish, right, how your RPO technology serves a lot of different mission applications. And then more so, how do you articulate that to the variety of stakeholders? Because it’s different organizations in the military and the intelligence community who would be interested in life extension versus those that are in orbital debris. But for you as a company building Otter, it’s like, it’s just Otter, like, you know, you don’t need a special widget, you just use it for different purposes. Yeah.

Austin 16:08
I mean, it’s funny. That’s always a tricky challenge, especially for technical founders, but I think for everybody in pitching everything that they work on, you get so involved in the details that you need to do to make it work that that’s what you end up talking about. And in reality, when we’re out there and we’re selling to customers—and for people’s reference, we have Otters that we’ve announced, that we’ve sold their services to the US Space Force, to NASA, to SES commercial company. We’re building all of those now. They’re all getting set to launch over the next year here. And when you go out to sell the services of an Otter, a lot of times, the people that you’re selling to are a bunch of aerospace engineering nerds like yourself. So they’re excited to go and talk about proximity operations, because they think it’s fun, but they’re also good at their jobs, and so they’re ultimately going to make the decision based off of, do they get value out of signing a contract for our services? And on the commercial side, that actually often turns out to be a really straightforward thing to go and talk to people about, especially if they’re a public company. Then the knowledge is kind of out there, and you can go and say, “Hey, you’ve got this satellite or this constellation, you make X amount of money per month on that satellite. We can add five years to that satellite. We’ll charge you Y amount of money per month. X is bigger than Y, and so it is valuable for you to use our services.” And on a commercial side, that’s a pretty straightforward thing. When you’re talking to a commercial company, and then you go and talk to the US Space Force, and we can say, “Hey, you can extend the life of this satellite. We’ll charge you Y money. We’re curious how much money is it worth to you a month to have this satellite?” And people will look at you like, “What the heck are you talking about? Why do you talk about this in terms of dollars?” And so it can be a little bit of a trickier proposition to understand the language of the US Space Force there, and what is the value that they see from life extension. But we try to talk about it in the same way. We try to talk about, you know, the satellite is gathering critical data. The satellite is a key piece of resolving emergencies. And sometimes you can talk about dollars, where you can say, “Hey, if you were to procure a new satellite for these services, it’s going to be like a $2 billion satellite, so you might as well get five more years for a whole lot less money than that.” NASA may be the trickiest of the entities that we’ve needed to talk to, because the ultimate value that the US Space Force wants to provide is pretty clear, even if it isn’t dollars. Ultimately, they want to protect the US as a nation and our allies and our interests. With NASA, there’s some folks there that are going, “We want to explore the edges of outer space.” There’s some folks that are saying, “We want to do as much science as possible.” There are some folks who are saying, “We want to build a technical base.” There are some folks who are saying, “We just want to create American jobs.” All of those are good and valid end goals, but to navigate your way through NASA, you kind of have to understand each group and what their particular interests are going to be. That’s an experience that you can navigate and you can learn, but you also have to be repeating it throughout. Like, “Hey, this is what we all agreed that our goals were going to be at the beginning, and those are the goals that we’re going to pursue.”

Maggie 19:43
So Austin, it sounds like you guys are working with a swath of customers across, you know, military agencies, civilian agencies, as well as completely commercial non-government agencies. I know a lot of the terrestrial tech companies we talk with discuss, you know, some of the specific standards and compliance certifications that they need to get through to work with US government customers, to work on classified mission sets. So I wanted to see if you could talk through, you know, what were maybe some of the bigger surprises or challenges or differences that you’ve had to work through in order to work with some of these government customers on classified mission sets.

Austin 20:26
Yeah, there are, both for classified reasons and unclassified reasons, a variety of licenses or approvals or certificates that you need to get to work with the US government in different stages. Starfish Space does have a facility clearance that we got recently, and it does allow us to work on classified missions or work with classified data. That does unlock a variety of additional mission sets and a variety of additional customer organizations for us. It’s kind of funny to all go through as an organization and have to figure out how to get that. On the back end, I’ve had clearances in previous lives, both at Blue Origin and Lockheed Martin. Both places, I kind of had no idea how it came together that the company could work with me to get those. You’re just sitting there. Then somebody said, “Hey, you should get a clearance.” You go, “Okay, sounds good. I’ll fill out the paperwork.” It is tricky to get a facility clearance, and you have to work with folks. I think that the US government is putting a lot of effort into figuring out how to work with companies like ours. I think they see the value that companies like Starfish Space or Impulse Space or Varda or K2 Space, or a lot of other great space startups that are out there can provide. I think the trick is actually not just getting the FCL, not just getting the clearances for the individuals, but also being careful about how and when you take on classified work. There is a lot of overhead to doing work in a classified manner. And there will be a lot of folks that are tempted to just say, “Hey, everything’s classified. Let’s just be careful and safe here and make sure that everything’s classified.” And you want to be careful, and you really want to protect the sensitive information that allows our nation to defend itself. But you also have to be careful about how much work you’re trying to do in a classified lab, because if you develop some awesome piece of your GNC algorithms that’s really going to make your satellites do proximity operations a lot better, and you develop it in a classified lab to get all of the code and the simulation results and everything back into the unclassified world and apply it to other missions, it’s a whole lot more complicated than it otherwise would be if you’d started off in the unclassified world. And so there’s both the you have to get the paperwork and the approvals, and there’s also the you have to figure out how to operate with it in a way that is efficient for your business and allows your business to continue to do the things that you want to do. Because at the end of the day, I don’t think classified world, I don’t think working with the government world is really that fundamentally different from any sort of business. You’re out there to try to provide value to your customers. You have to build a product that you can actually build, and then it has to deliver that product, or the services of the product, to your customers in a way that is worthwhile for them. And as painful as it can sometimes be to work with the government, oftentimes, when we’re talking about, at least for us, the kinds of sizes of the contracts that we’re working on, the pain of working with the government is a relatively small pain in comparison to the total effort that it takes us to fulfill the mission. Otherwise, probably the biggest challenge is not figuring out how to do it or not doing the paperwork. I think the biggest challenge is that it’s just going to take a really long time, because the government isn’t used to operating at the speed of startups. They’re trying, man, they’re working harder, they’re getting better at it. But there’s still sometimes where you’re like, “Really, that took us six months to pull that off.” There’s a whole lot that can happen in six months at a startup.

David 24:17
Yeah, so, I mean, from a timing and startups and trying to keep the pace of change, you know, ultimately you need to generate revenue, and it seems like a lot of the revenue programs for the military, at least for an early-stage startup, is around some of these non-dilutive R&D type opportunities. So talking about SBIR and STRATFI, can you maybe just like, walk us through a little bit like that approach that you took? How did you find the right stakeholders, and how did you turn that SBIR into a STRATFI?

Austin 24:56
Yeah, SBIR is Small Business Innovative Research contracts are, I think, a really neat thing that the US government does. And a variety of agencies do this—the Department of War, NASA, Department of Energy, the National Science Foundation, they all give out Small Business Innovative Research contracts, although all in a little bit different ways. And these contracts are often broken up into a Phase One and a Phase Two. And a Phase One is on the order of about $100,000, and a Phase Two is on the order of about a million dollars. And when you are two people working from a public library, the idea of getting $100,000 to work on your ideas is like an incredible and overwhelming amount of money. And so that was from the very earliest stages for Trevor and I—one of the early things we looked at was Small Business Innovative Research contracts. And as we were looking into it, we learned there’s kind of a couple of philosophies on how you can use these contracts. You can use these contracts to try to make money and sustain your business. And you can build a company where you’re winning several SBIRs a year, and you have a dozen folks working on these SBIRs, and you can operate for several years like that. Or you can really try to use SBIRs as a springboard, and you can try to use these as a way to become the business that ultimately you’re trying to achieve. And that is actually what the US government tends to want. That’s what the Air Force or the Space Force wants. That’s what NASA wants. They want to use these innovative research contracts to develop technology and teams and business relationships that eventually allows these companies to go fulfill needs for the US government and for the commercial world at a large scale. And so we went into these SBIRs going, “Okay, let’s go into Phase One, let’s go turn it into a Phase Two, and let’s ultimately use that as a way to sell our Otter satellites.” And that played out almost to a T in multiple avenues for us. So our very first SBIR was a $50,000 contract to study some of our proximity operations. Then we turned that, through Space Force Pitch Day, into a, I think it’s like a one and a half million dollar contract at the time. That was real and substantial money for us. And we turned that eventually into a TACFI, a Tactical Financing contract, which is a couple million dollars. And through another set of SBIRs, eventually won a STRATFI, which in our case is $37.5 million coming from the US government to do an Otter mission for the Space Force. And now we aren’t bidding on SBIRs for the Otter or for our key technologies. That’s not what our business is about now, but it really was the springboard to the future. And then it turned out people were really excited that we were trying to use SBIRs in that format. You would go and talk to whoever in the government you thought might buy proximity operations technology or might buy Otters. And they would say, “You know, this is pretty interesting. I’m not going to go give you a $40 million contract off the bat here, but I’d like to work with you a little bit and see what you’re capable of.” And you go, “Okay, well, you know, that’s awesome. We actually know about this SBIR framework where we could go do a Phase One, or we could go do a Phase Two, if you just write us, you know, a letter of support, and we’ll go through the proposal application process.” And it doesn’t always work. These are competitive proposals, but we kind of lead by talking to the customers, and you take it back, and the SBIR process is just a vehicle that allows you to start working with them more closely.

David 29:07
That’s great. And I think, yes, you are using the SBIR program the best way possible. And I wish other companies took that approach and lead, but we don’t need to get into that topic here, but maybe we can just drill in a little bit more. Did you feel like you were educating the customer about what you could do with the Otter and starting to unlock RPO, or did they already have some sort of a knowledge base around it, and they were like, “Oh my God, thank you. I found you. Like, let’s go.” Like, which way was it? Was it a push or a pull?

Austin 29:48
I actually think it was a little bit more us educating, and maybe and definitely not us educating the Space Force on what they would get value from. They’re the ones that can say, “Oh yeah, life extension would be valuable,” or “Oh yeah, proximity operations to do this mission would be valuable for us.” But what we could educate on was what was possible and what was possible in different ways. We’re not the first ones to go to the US Space Force and say, “Hey, how about we do a little bit of life extension?” Many folks have gone and done that before us, but we were the first ones to show up and say, “You know, we could do life extension for this price point.” And the first time we said that to a general, we got some funny looks like, “What are you talking about? That’s totally out of family with all the price points I’ve been told in the past.”

David 30:41
And so they call you a heretic at all? You know, do they say, “I don’t—” Voodoo. Maggie called—

Austin 30:47
Called a heretic, fortunately. But I think that people probably appropriately look at ambitious technology startups and go, “You guys are crazy, like you’re just out here saying stuff. You’re not going to be able to pull that off.” And so you have to fight your way through what is, I think, an appropriate level of skepticism. And to some degree, you can go do that and present to them like, “No, here’s the breakdown. Here’s why we as a business would actually like make money by providing the services to you at the price point we talked about.”

David 31:20
Last question on, like, sort of this general topic. I mean, I’d love to hear, like, how many conversations did it require from you and your team, and probably a very small team, in those early days, to get that Phase One into a Phase Two, that Phase Two, or series of Phase Twos, into a TACFI, and then eventually a STRATFI? And then did you arm yourself with like other third-party consultants, whether they be supporting you through proposal development or lobbying, even?

Austin 31:53
The one that is maybe the easiest to track is going from the Phase One to the Phase Two. In early stages, we had very clear and dedicated pipelines, because that was before we really knew many folks in the US government. Sometimes now we can short-circuit the process a little bit for something like that. We can go, “All right, here’s the three folks that we know that are most likely to support it. Let’s just go and talk right to them.” But when we’re trying to take our first Phase One to a Phase Two, I think we had 30 to 40 dedicated conversations with different folks that we thought might potentially be able to support the Phase Two in the US government. And we had those conversations through all sorts of forums. It would be in person at conferences. It would be through warm connections over Zoom calls. It would be through accelerator or startup mixers. It would be sometimes people that just randomly showed up to one of our SBIR deliverables that we were putting together because they’d heard about us. But I think it was ultimately like 30 to 40 conversations. And then, if you take a look at like, “Well, hey, what does it take to get from the very earliest stages to a STRATFI?” It’s hundreds and hundreds of conversations between Starfish Space and folks in the US Space Force. You want to be careful. You want to be efficient with those conversations. You’re not just talking with the same person over and over 100 times. Like they have things to do too, but you want to cast a wide net and that allows you to eventually find, like, “Here’s the people that are—they’re most interested and can most benefit from what we’re building.” We did and have and continue to, in various ways, work with some third-party organizations along the way. In the very earliest stages, we had no idea how SBIRs worked. I think we lost our first 11 SBIR proposals, and so we started working with some consultants who were really knowledgeable about the SBIR process, and they show up, and there’s some things that they tell you from day one that are like, “Oh, you’re not actually trying to put the most advanced technology descriptions in there, because it’s not scientists that are reviewing the SBIRs. You need to talk about how your business is viable and how what you’re doing would be useful, and that’s what the Air Force likes to go and evaluate SBIRs on.” And so we got some of the tips. We figured it out. We started learning how to win SBIRs. And eventually you get to a point as a business where you go, “Great. We figured it out, and we don’t even need SBIRs as much anymore.” And so these folks that did a great job for us in a certain stage, that particular skill set isn’t as useful for the next stage. So we go, “Thanks for all your help. We’re going to refer other companies to you, and you know, we’re going to move on to the next stage of our development as a company.” And so that’s all sort of what drives us to go, “Hey, we don’t hire and bring some SBIR expert in-house. We hire and bring in really, really capable people who are great problem solvers, generally, in-house, and we’ll bring in a little bit of third-party support along the way.” And we did that in the SBIR stage, and we did that in the STRATFI stage, and we do that now with some of the government affairs or some of the policy work that we’re doing. All of those are supplemental. At the end of the day, only you and your team can tell the story the way that you and your team can. So you still have to get in there and get your hands dirty. You don’t just hand it off, but as advisors, the third parties, I think, can be useful services at times. David, Maggie, what do you guys see other companies do? What do you recommend when you’re talking to some super early founder that is just getting going and saying, “I think I might want some of these?”

David 35:49
I mean, I think what we’ve seen be successful is the founders, especially in those early days, need to be at the vanguard of those conversations and finding their champion. And what I see from the military folks is they really do like talking to founders, right? The people that are going to like build the thing that’s actually kind of novel to them. But as far as, you know, you talked about, “I don’t understand all the elements of an SBIR”—to me, I would advise the startup founder not to go figure it out for themselves. Like that is a lot of effort, and likely wasted effort, and you can pay for those types of services. The key is, can you find a good, trusted source to help you? And that’s where leaning on your investors, who are deeply experienced in this domain, becomes quite clear. And why, you know, as a startup, wanting to engage in the defense ecosystem, you should, you know, pick your investors and your advisors wisely. So, I mean, the way you guys went about it, I think was absolutely perfect, and I think the rewards speak for themselves.

Maggie 37:01
I mean, Austin, another question I had—unlike a lot of the companies that raise venture money, where they’re able to build an MVP in a month, or maybe even a hackathon over a weekend, you guys are building a really complex piece of technology that has taken years to build and prototype and launch and test. So I’m curious, you know, how do you build a go-to-market sales engine while you are still proving out a piece of technology?

Austin 37:34
I think probably fundamentally, the biggest challenge for our business is that we have ambitious goals, and it’s really challenging to build a bunch of satellites that extend and protect and upgrade and improve infrastructure in space. We can’t just go out and be like, “Look at our revenue. It’s going up 30% month over month, and we sell, you know, $10 at a time subscriptions, and it’s a nice hockey stick graph.” You have to get folks of all sorts to buy in on the risk along the way. And that’s customers need to buy in and take some of the risk with you. It’s investors need to buy in and take some of that risk. It’s employees, it’s suppliers. Everybody that you work with is betting on you a little bit in one way or another. And one of the things that you have to do is construct your development plan as a business in a way that allows people to see the risk reducing, allows people to see progress all along the way, and that allows everybody else to buy in a little bit more. And so you might sit there at the beginning and say, “Okay, this is going to cost us $100 million to design and get to flying the first satellite.” But you can’t go out and just get $100 million from your customers, from your investors, when you’re two guys that are sitting in a library. And even if you did, you’re not going to know what are the right things for you to do. You can’t just be like, “Well, I mean, I got $100 million and turn it into a satellite.” You always have to have the steps and the milestones along the way. And some of that is your key technology development, and some of that is pieces of your system architecture, and some of that is demonstration missions. And those are all on the technology side. And some of those are early contracts and conversations with customers. Phase One SBIRs can fit the bill. Letters of interest, or we did something that we call development partnerships with commercial customers. Those can really fit the bill. Early rounds of investment, pre-seed rounds, seed rounds, Series A rounds, those all help do the risk reduction. Hiring great early employees. Sometimes in the proposal process, you go, like, “Okay, well, we just have to make these, we have to send these couple of people’s resumes in, because that’s going to be a key part of why people want to work with us, as they go, ‘Oh, look at this awesome team that you’re building.’” You have to have the little milestones, and you have to buy, get people to buy in on a little bit of risk, and that’s true in basically everything that we do. And so go-to-market is a part of that. The customers that we work with today are generally customers that we’ve been on the journey with for years at this point, and they were the first ones on the commercial side to sign LOIs for us. They were first ones to just pick up the phone when we said, “Hey, we’re a couple of crazy folks in the library, and we just want to pick your brain and see if this would be valuable at all.” And then they were the first ones to dive in on the development partnerships and the first ones to sign up on contracts. And the same way on the government side, you start off with, like, “Who’s willing to talk with you when you’re going through the Hyperspace Challenge accelerator?” And then who’s maybe willing to sign a letter, and who do you talk with on your very first Phase One SBIRs? And there’s a lot of people that start working with you there. And if you buy the risk off along the way, they’re the ones that eventually—maybe they aren’t signing the big contract or the big contracts, but they’re in the meeting in the hallways with those people saying, “You know, you should really take a look at this company. They’ve been doing impressive work.”

Maggie 41:27
Yeah, Austin, since you guys started the company in 2019, you now have launched what, two satellites. You just completed this Remora mission successfully. Can you tell us about some of the lessons learned from each of those experiments testing your technology actually in space?

Austin 41:46
It’s funny, you set out to test the key pieces of your technology, and you do learn things about the key pieces of your technology. You go do some—you go fly some missions. You’re like, “You know what? We actually have some star tracker outages every once in a while, and so we have to update our filters so they’re not expecting measurements on a regular basis. And this is what our GPS error profile actually looks like, and this is the number of dead pixels we’re seeing, or the spurious bright flashes that we see in the background that we need to filter out in our images.” And so there are some technical things that you really learn about your key technology, but there are a lot of other things that you learn about along the way too. You learn about how to operate a satellite, how to get the data down in ways that people can look at it, how to send your commands up in ways that are efficient, and you can move through your testing operations quickly. You learn how to manage a satellite program, even when you’re working with vendors. And we work heavily with vendors to build the components. Just getting the vendors to deliver on time and to talk to each other in a way that everything interfaces correctly, turns out to be a huge amount of effort, and something that we have to pay a ton of attention to as we build the Otters. You learn a little bit about your team and what it takes to be ready for the moments of stress and challenge you have to resolve and what it takes to be ready to do that awesome.

David 43:17
Well, Austin, you’ve been, I don’t know, super generous with your time, and I know you’d probably rather be in the lab building or closing customers, but before we let you go, I think we just kind of love to hear a little bit of you and how you think about the future of space in the next, I don’t know, five to 10 years. Maybe 10 years is too far along, if we really think about what’s happened in the preceding 10 years, but over the next five years. And I know you’re a visionary, you wouldn’t have, like, come up with the name, you know, Starfish in the first place, and all the fun names that you have for all of the componentry, but maybe one area that I would be really curious on your take within this five-year journey is how the various orbits play into each other.

Austin 44:04
It’s easy in the space industry to dream really big and then to not fulfill and follow through on it. And more often than not, when you ask, “What does the space industry look like in five years?” it kind of looks a lot like today. And so I think the areas where it’s changing are the ones that are most interesting to call out. And areas where it’s changing is not necessarily announcements of, “Oh man, we’re going to land humans on the moon in four years.” We announced the same thing, what, six years ago, and didn’t really make that much progress along. And I don’t think we’re gonna have a bunch of people wandering around on the moon in four years, but the areas where you can already start to see the change—the increasingly rapid launch and the landing of rockets, and obviously SpaceX is absolutely at the forefront there. But Blue Origin also recently landed a rocket that took things to orbit, and Stoke Space is working hard on it, and Rocket Lab is working hard on it, and Starship with SpaceX is working on it. And you can already see that progress happening. I think that as more folks enter the launch market, that’s just better and better for people that want to send things into space and get value out of it. You saw a trend for a long time of satellites getting smaller, and now you see a trend of satellites getting bigger again, because people go, “Oh crap, I want to get a bunch of capability into the satellite. I want to have all the data throughput. I want to have the exquisite camera capabilities or compute capabilities.” And all your satellites went down to 3U CubeSats, and now they’re all going back to 1,000-kilogram satellites, and then perhaps even bigger. Some folks are really on the leading edge of that, taking advantage of it. I think K2 Space is an awesome example. And you can see other folks like us, Astroscale is a great company that are going, “Hey, it’s not just a world of CubeSats and really low Earth orbit. There’s a lot of opportunities in geostationary orbit in particular.” And so maybe to touch on your particular question, David, I feel like there are four real orbits that people talk about, at least from a commercial perspective, as potentially having value. There’s low Earth orbit. There is MEO, mid-Earth orbit. There is GEO, geostationary Earth orbit. And then there’s cislunar orbit, which is around the moon basically. And in low Earth orbit, I mean, the biggest thing that’s going on in the space industry right now is Starlink and internet service providers from low-Earth orbit satellite constellations. And Starlink is absolutely very much at the forefront. And what they’re doing is really incredible. And then you see folks like OneWeb and Amazon Kuiper that are following along. There is just tremendous and huge growth going on in LEO, and that’s going to accelerate, accelerate, accelerate. In mid-Earth orbit, the biggest thing going on there is the GPS constellation, and GPS is really critical for what people do in a variety of different ways. From a commercial side, being in mid-Earth orbit, frankly, comes with a lot of radiation challenges that sometimes force you into traditional production lines in the aerospace industry that are long and expensive and very difficult to work with. And so I don’t know that MEO is going to be a very popular place for folks doing new things. Maybe there’ll be some use cases, but boy, the radiation of Van Allen belts can kind of make it difficult. Then you have geostationary orbit, and as you’re building big, exquisite assets that cost millions or billions of dollars, sometimes putting them in a place where they’re over the same spot on Earth and you can trust for them to be there the entire time, turns out to be really valuable. And that was really valuable 50, 60 years ago when people first started launching GEO satellites. And I think it’s still going to continue to be really valuable going forward. And so there’s a lot of folks that are looking at geostationary orbit with a lot of interest, and it’s a key part of what I think we’re building our business around. And then there’s cislunar orbit, and people like to talk about cislunar orbit, but I don’t think we’re going to see a lot of exciting activity in cislunar orbit over the next five years. I really hope that we do someday, because, oh my gosh, how cool to see people on the moon or operating around the moon. I think that, you know, beyond Earth’s realm of orbit, let’s send things to Mars. Let’s send things to Venus. Let’s send things to the moon, to Saturn and Jupiter. That’s so cool. And that’s ultimately some of the absolute most interesting things going on in the space industry. Maybe unfortunately, if you’re trying to build a business around it, you have to take it with a little dose of realism over the five-year time horizon too. And you got to say, “All right, well, we’re not building our business to focus on servicing cislunar satellites right now. Let’s see some satellites there first.”

Maggie 48:59
Great. Well, Austin, thank you so much for taking the time and for coming on the Mission Matters podcast. We’re super excited to be investors in your business and excited to see where you all take it from here.

Austin 49:12
Hey, thank you guys always for having me. Always good to chat with you, and I’m sure I’ll see you somewhere soon.

David 49:18
Have a good one. Thanks, Austin.

We cover:

• How the Appropriations Bill, NDAA, President’s Budget Request, and the reconciliation (the “one big, beautiful bill”) fit together – and where the real funding signal lives

• How startups should engage Congress to advocate for their technology without burning credibility

• What next-generation technologies (AI, autonomy, space, maritime, digital infrastructure) are actually funded in the bill

• The importance of the Joint Explanatory Statement (JES) to understand appropriators’ intent behind the bill

• How to tell whether a budget line is real, available, and competitive, or already spoken for

• How appropriators think about risk, flexibility, and accountability with taxpayer dollars.

You can listen to the podcast on Spotify, YouTube, Apple, the Shield Capital website, or right here on Substack.

As always, please let us know what you think. And please reach out if you or anyone you know is building at the intersection of technology and national security.

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Transcript

Maggie 00:39
On this episode of the Techquisition Edition of the Mission Matters Podcast, we’re joined by Johnnie Kaberle to break down the fiscal year 26 appropriations bill and what it means for startups.

David 01:09
This podcast was originally recorded on January 26, prior to the brief government shutdown and the subsequent congressional compromise that removed the Department of Homeland Security funding bill from the broader appropriations package.

Maggie 01:22
Johnnie is an expert in the world of defense appropriations. She’s currently a senior vice president at West Exec, a well-established government relations firm. Prior to joining West Exec, she served for a number of years as the staff director for the House Appropriations Committee for Defense, also known as HAC-D.

David 01:41
All right, Maggie, before we bring Johnnie on, I think we should level set for our founders listening. Because anytime we say “appropriations bill,” eyes naturally glaze over immediately.

Maggie 01:54
Yeah, this is definitely one of those bills that everyone hears about in one form or another. Everybody knows it’s important. Everybody knows it can lead to things like government shutdowns. But almost no one is totally sure what it actually does, how it comes into being, and how it relates to all these other important documents like the President’s budget request, the National Defense Authorization Act, the reconciliation bill, et cetera. To be fair, it is a 1,000-plus-page document, so it really does quite a lot.

David 02:26
So at a basic level, the appropriations bill is how Congress actually gives the executive branch permission to spend money. Each department, of which there are 12, will receive its own funding bill. Examples include, in addition to the Department of Defense, the Department of Agriculture, Department of Transportation, Department of Labor, Veterans Affairs, as well as the legislative branch, which also depends on funding bills to operate. All the strategies, modernization priorities, and budget requests in the world don’t matter if the money isn’t appropriated.

Maggie 02:57
That’s right. As you might have learned from Schoolhouse Rock, or back in civics class, this is really Congress exercising its power of the purse. And for founders, this is more than just a policy document. It is one of the strongest demand signals the government puts out about what they are actually planning to buy. It tells you where Congress is comfortable putting real dollars behind a mission.

David 03:21
And context matters a lot this year, because last year we were operating under a full-year continuing resolution. Congress was not able to pass a new budget, which basically meant everything was frozen at the previous fiscal year’s funding levels.

Maggie 03:37
So that means that for the past two years, we’ve been operating with a budget tied to government priorities convened all the way back in 2023, which feels like a really long time ago. It seems like a lot has happened since then, right?

David 03:50
You are, Maggie. I think you might have still been in graduate school. But beyond the funding levels, which were tied to decisions made a long time ago, operating under a continuing resolution, or CR, means no new programs that were previously unanticipated in 2023 can begin without explicit approval. I would say this has wreaked havoc on the innovation ecosystem. So when we look at the fiscal year 26 appropriations bill, we’re not just asking what’s in it, but how it’s evolving and what that evolution tells founders about where the system is actually headed.

Maggie 04:23
We’re going to dig into things founders don’t usually hear explained clearly, like how lobbying actually shows up in bill language and why committees like HAC-D and SAC-D, the House and Senate Appropriations Committees for Defense, matter way more than most startups realize.

David 04:39
And we’ll talk about those big, headline-grabbing legislative packages, like the big, beautiful bill, how they fit into this whole process, and how much of that is real acquisition signal versus political noise.

Maggie 04:52
All right, let’s bring Johnnie in. Johnnie, thank you so much for agreeing to be on the Techquisition Edition of the Mission Matters Podcast. You are officially our first external subject matter expert. There’s probably no one better to help us demystify the appropriations bill and help us and our founders understand its value, as well as how they should be thinking about their own government relations strategy to influence and take advantage of the opportunities presented in these kinds of bills.

David 05:24
But first, please tell us a bit about yourself. We know you’re currently at West Exec, a well-established government relations firm, and we know that you were the staff director, as Maggie highlighted. What else should our listeners understand about your experience dealing with the appropriations bill?

Johnnie 05:40
First, David and Maggie, thank you so much for having me on. I have been really looking forward to this. In the year since I left Capitol Hill, my favorite thing has been explaining how appropriations works to people on the outside, because appropriations is really fun when you understand it. I retired after 30 years and 10 months last January, and I actually had a pretty unique background, even by Capitol Hill standards. I worked in personal offices for a variety of members of Congress. I also worked in the whip office in Republican leadership, and then served as the deputy staff director of the entire Appropriations Committee, covering all 12 bills. But my passion, and where I ended up at the end, was as staff director of the Defense Appropriations Subcommittee.

David 06:28
Well, I must say, you know, Johnnie, as we talked earlier before the recording, that this is kind of your first formal podcast out into the ether, and I’m just putting it out there for other podcast hosts: you should definitely bring Johnnie on to your episode. We’re going to focus on founders and the appropriations bill as it lies today, but man, your stories that we were talking about, just a little bit of them, they were incredible. Yeah.

Maggie 06:55
So, Johnnie, top level, what are some of the major highlights that you noticed in this year’s Defense Appropriations Bill? What are some maybe notable new initiatives and funding lines that weren’t present in past bills that people should be paying attention to? Well, I’ll—

Johnnie 07:11
Talk bigger picture. And I think that, again, my passion, and it comes from my previous boss, Chairman Calvert, is the innovation and the pushing of that. Many people get authorization and appropriations confused. And for the founders, what’s important to understand is authorizing without appropriating is just a policy statement. You could get authorized exactly everything you want, but if you don’t get any money for it, is that a win?

Maggie 07:39
And John, maybe could you talk to what even is authorizing?

Johnnie 07:43
So authorizing is giving the permission, giving permission for end strength, giving permission for, let’s say, F-35s or those type of things. However, and I always ask people I do a lot of speaking to, like graduate classes, if the authorizers authorize 90 F-35s and the appropriators fund 100, how many F-35s do you get? One hundred. If they fund two, how many do you get? Two. And so that’s why it’s really important. A lot of founders will relax when they see the authorization bill come out, where, again, if you’re only looking for permission, fantastic, but if money matters, you’ve got to wait for the appropriation.

David 08:26
Real quick, why then do the authorizers even put in a funding table, and how does that interact with the appropriators? Does it influence it in any form or fashion, or are they sort of operating in separate universes?

Johnnie 08:43
I would say, I’m trying to be politically correct, but I still gotta be me. They put a table in so that people can understand what the authorizers’ priorities are, but that doesn’t correspond with funding. Especially if you look at the timing of the bills, we don’t see their tables before other people see their tables. And by “we,” I’m sorry, I still go back into my defense role. The appropriators don’t see that. Staff will talk about priorities and bosses’ priorities and look at the funding levels, but no, the appropriators are not just taking the authorizers’ funding tables and funding them.

Maggie 09:25
Maybe it’d be helpful to actually talk through how the defense appropriations bill comes into being. How does Congress know what the military wants and needs, and how does the appropriations bill and that process relate to the President’s budget request and the J-books, which are supposed to come out earlier in the year to help the appropriators? And just to clarify for listeners, the President’s budget request is the administration’s annual proposal to Congress outlining the President’s funding priorities and plans for the upcoming fiscal year, but of course it’s just a request. Ultimately, Congress is in charge of actually funding those priorities. The President’s budget request is accompanied by the justification books, or J-books, which provide detailed, program-by-program explanations of how requested funds would be spent. They typically include budget rationale, performance metrics, prior year execution, and future plans, and they’re meant to be the primary documents that Congress and congressional staff use to evaluate, question, and modify DoD funding requests. So given all these documents and all these different stakeholders, what does it take to actually get the appropriations bill written and passed?

Johnnie 10:39
So one thing I want to put into context before I start this is the amount of staff. David had mentioned there are 12 subcommittees of the Appropriations Committee. When I was staff director of defense, I had the largest staff of any subcommittee, and that was only 14. And so the defense appropriations bill covers the Department of War, all the military services, and the entire intelligence community. If you were to compare that to our authorizing brothers and sisters, HASC has about 60 staff and the Intelligence Committee has about 60 staff. So we have 14 to 120, just to put that into context. When the President’s budget comes out, there are a lot of budget briefings. There are J-books, though this year, I don’t know how they did it, but the House appropriators had to write their bill without having any of those justifications, which is just amazing that they were even able to pull that off. They go through line by line. They go through the budget request. They have briefings. I know David was one who used to get to give those briefings to the Hill. They ask for specific data, and numbers matter. Numbers really matter to appropriators, because they don’t want to spend money on things that we’re not going to get. They don’t want to fund “hope so.” If they’re looking at how programs perform, and you got X amount of money last year for something and you underperformed, it’s unlikely you’re going to get that much money, or you might even get some money rescinded from the previous year.

David 12:12
Yeah, so those are all good points. And Johnnie, I’m getting a little bit of PTSD thinking about my time at the Pentagon briefing out my program, which I think you’ll appreciate, was $5 billion over the fiscal year. Defense planning, right, the five-year fight, with zero validated requirements. So you can imagine how well that went. Well, you had a lot of fun. You made a lot of friends. I made a lot of friends. Took a lot of cuts. But yeah, specific to fiscal year 26, what were some things that stood out to you? Was there anything in there of true note, and maybe somewhat related to some of the executive branch directives and memos that have been coming out, and whether or not the appropriators are picking up what the executive branch is putting down?

Johnnie 13:04
Well, I think that probably one of the most important areas to look at in the defense appropriations bill that most people skip over and just do a word search on is what we were talking with Maggie about earlier, which is the joint explanatory statement.

Maggie 13:18
And just to clarify for listeners, the joint explanatory statement, often referred to as the JESS, is a document issued by the House and Senate Appropriations Committees that essentially accompanies the final appropriations bill. You can basically think of it as a user manual for how Congress expects the executive branch, in this case the Department of Defense, to execute the appropriations bill, really explaining in plain English Congress’s intent behind the funding decisions written into the bill.

Johnnie 13:49
As we talked about, appropriators like numbers. We don’t use words unless we have to, and so if it’s written there, it really matters. And in one area, it talks about all of the items that were not funded out of the one big, beautiful bill that the department then came to the appropriators to get funded out of base funding. There are also always things that come up throughout the process, new emergent requirements that have to be funded. And I thought that was a really important section of the joint explanatory statement for people to read if they don’t understand, like, well, why didn’t they put more funding here, or why didn’t they put funding there, to understand the pressures that are there. I also think, you know, I hear, and I had a lot of questions, when the administration and the department came out with acquisition reform, which I was thrilled to see. And it’s not easy. It’s not easy when people have been doing something the same way for so many years. It’s uncomfortable, and you need leadership to say, no, it’s okay, we’re doing things differently. And everyone assumed that the appropriators would hate flexibility. Appropriators don’t hate flexibility. It means you have to have accountability. We want to know what you’re doing with it. You’re not getting walking-around money. And appropriators every morning wake up knowing one thing: this is taxpayer dollars. This is not our money. How do you justify spending this money? We want to be able to justify it in the same way that, you know, we push so hard for budgets, for audits. The department should be auditable. These are tax dollars, period.

David 15:25
Well, you’re, I think you’re asking for a few miracles there on the auditing, but maybe.

Johnnie 15:30
Again, this is, maybe it can be done, but it’s not easy, Johnnie.

David 15:35
One thing I wanted to follow up on was the one big, beautiful bill that was passed in July. To me, that was a bit odd, right? The reconciliation bill and its big emphasis and the amount of money that it provided to the department, and of course it was during a continuing resolution. So how should people understand the one big, beautiful bill and its relation to the FY 26 appropriation, and how might it also show up in the bill so that people can kind of see how those priorities are aligned?

Johnnie 16:19
So with the one big, beautiful bill, it was a one-time infusion, and that’s what’s so important. Appropriators will talk about base funding, and that’s the number every year that you look at as base funding. When I was there, it was $833 billion. This year it’s $839, so it’s up $6 billion. Now, when you throw in the one big, beautiful bill, that doesn’t get added to the base. So people that get the money now, in five years there’s not going to be base money to continue something, so it’s not something you can count on for the long term. And I think that is really important for people to understand, that you’re going to need to have other funding mechanisms, or other people within the department or the services that want to pick up the funding, because that money is a one-time shot. And, you know, again, appropriators, we don’t love that. We like to take things into account, to review, to be able to say this is working, this is not working, more money here, less money there. And also, as an appropriator, we don’t love it when authorizers get to write appropriations bills, which effectively happened with reconciliation. But, I mean, it was a great infusion and a needed infusion. It’s just important that people understand exactly what it is and what it isn’t, that it is not adding to the base, it is not long-term additional funds. And even in this situation, there were things that the authorizers did not include in reconciliation that the administration wanted and, as a result, came to the appropriators to fund out of the FY 26 base funding. And what that means to founders is that you have several billion that would have been available to other programs that now had to go into programs that the administration wanted to be funded out of the reconciliation bill, if that makes sense.

Maggie 18:19
So turning gears a little bit to understanding how founders and startups should be interacting with the Hill, with appropriators, and really understanding this bill, the word lobbying comes to mind. I know lobbying can be seen as a dirty word by many, or at best it is a misunderstood word, but a lot of the startups that we work with, and a lot of large companies, leverage lobbying firms to great effect. So how does lobbying show up in the appropriations bill, if at all, and how should startups be communicating with appropriators?

Johnnie 18:57
So I am not a lobbyist. I am a strategic advisor, so I do not go anywhere on behalf of companies. My job is to advise companies exactly on this. How do you communicate? And I think the number one thing is do not assume. Do not assume members of Congress are who you see them as on television shows or movies. They are not all the same. There are show horses, but there are also statesmen. Know who you are working with, and a lot of times that is where hiring somebody from the outside who has actually been in and knows these people can tell you, yes, this person says yes to everybody and does not do anything, or does not have the ability to get things done, or this is something that this member or senator is passionate about. Congress does not fund things because it is a nice thing to do. Again, it is not their money, it is taxpayer dollars. What problems are you solving for? Be very concise. Once you identify what the problem is, and especially with appropriators, does it make something more lethal? Does it mean you are going to produce faster? What does it do to jobs? Does it mean it is going to save money? Highlight that. I cannot tell you, 90 percent of the one pagers I got were just full of buzzwords. After reading it, I understood less than I did before, and it just frustrated me. Make sure you are able to convey exactly what you are doing and be honest. Most of the staff have done this a long time, and Dave and I were talking about how one of the challenges is that committee staff stay there for many, many years. In the department, people are there for two to three years. So you will have somebody from the department come and talk about a program that the committee staff has been working on for ten, fifteen years longer than that person. They really know their stuff.

David 20:54
So Johnnie, if what you are saying is that a startup should go talk to the staff of the Appropriations Committee, go talk to the members who make up the Appropriations Committee specific to your subcommittee, in this case defense. But if you are going to communicate, tell them what your capability is, why it could be good for a certain constituency. But maybe what I am also pulling out is how is it better than what is currently available? So you as a founder need to understand the state of play today and what the military services are employing from other vendors, and why this is a step function better. Because coming in with just your shiny technology, I guess what you are saying is the first thing they are going to ask is, is that being satisfied by something that is already in the base budget? And why should I actually care about this innovative solution, exactly?

Johnnie 21:58
And also, be honest. I cannot stress that enough. These people are used to people trying to work them, and it takes a while to build up credibility. It takes seconds to lose it. I have had members that I worked for see a technology they were just blown away by. It was not always even in their district. They were thinking big picture, national security. And then every meeting, it did not matter who we were talking to, the head of INDOPACOM, PACOM, CNO, whomever, they brought this up. So if you can get them passionate about what it is you do, that is why it is important to know who you are going to talk to and why you are going to talk to them. I see this with some of my clients who have lobbyists. They will send me a list of who they are going to meet with, and I look at the list thinking this is a waste of time. It is not going to help them. Know why you are going in. Are you asking for something? Are you just creating the relationship? What is the purpose? Make sure you understand that. And above all, be yourself. It always made me laugh when people would say they were nervous to come in and see me, because I thought I was the easiest one to talk to. I think you can even tell on this podcast, I will say whatever I think. Just be yourself. If you do not understand it, do not pretend you understand it. What you understand is the tech, so stick with what you know and let the committee and the other people do what they do.

David 23:32
So Johnnie, I mean this is incredible, and thank you. Very helpful, very validating to some of the things I have always thought but never maybe knew concretely. But I want to take a step back. People will always say, hey, I need to get a funding line inserted into the appropriations bill, I have got to get my mark. Maggie is maybe not old enough, but I remember the days of pork, right? And I am sure pork went into the appropriations bill. But we do not do that today, or do we? It is just a little bit different. So how should founders think about the terminology of getting a line item into the appropriations bill?

Johnnie 24:20
So neither the House nor the Senate Defense Appropriations Subcommittee includes earmarks. For this purpose, the definition of an earmark is directed funding for a specific entity. Actually, in the House rules, the definition that the House uses for earmarks is spelled out there. Everything we put in is supposed to be competitively bid if the department did not request it. So if it comes from the department, it is not an earmark. But if Congress adds something, it will be funding a line for a capability. Now, in many cases, you want to make sure you do not come to Congress and say, we have this great capability, make the department take it. You want to be doing your due diligence with the potential customer. You want them to say, we absolutely need this.

David 25:13
Well, what I am hearing you say is that you can talk to Congress and tell us how great your thing is. But if you do not have a customer representative inside the department who is going to advocate for the need for this type of capability that we are ultimately going to compete, whether by the Federal Acquisition Regulation statutes or other transaction agreements or some other contracting mechanism, it is almost like a wasted effort. If you do not have a demand signal coming from the department for this thing, talking to Congress is not really going to help you get a contract faster.

Johnnie 25:55
No, I absolutely agree with what you are saying. As a staff director, I was not going to say, oh, here is this great technology, Navy, you have to buy it. That is just not going to happen. Now, there are times when you talk to the right staff and they see a capability and think, oh my gosh, this would be fantastic for whatever service I am working with, or whomever, and they want to introduce you so that you can let them know what you have. That is something that can happen. But you really need a potential customer who, if they had the money, would want to spend it on that type of capability.

Maggie 26:37
So I noticed that in the bill that was released a few days ago, the word innovation is stated 34 times in the conference report. Following that word were capabilities, everything from solid rocket motors, which had $500 million attached, to DIU receiving $40 million for Pillar Two AUKUS-related fielding initiatives. What clues should startups be looking for in this bill to really understand the signal inside this appropriations bill with respect to emerging and commercial technology?

Johnnie 27:13
I will go back to what I said earlier, which is that appropriators do not like words. If they include a word, it is because it means something. To get into the joint explanatory statement, all four corners have to agree, meaning the House chair, the House ranking member, the Senate chair, and the Senate ranking member. That is a bipartisan, bicameral message on importance. So the fact that this makes it in is a signal to founders about where the priorities are. I was especially happy to see funding for solid rocket motors and those types of things, areas where many of us know there have been issues. That funding is being prioritized to fix those problems, and not just at the prime level. They specifically call out new entrants.

Maggie 28:02
And once a founder sees a budget line for something relevant to them, let us say I build a small UUV, an unmanned underwater vehicle, and I see there is $50 million for small UUVs, what is the next step a founder should be taking to actually tap into that budget line?

Johnnie 28:19
I think that is the point where a founder needs to talk to somebody who understands the process and has worked the process. In some cases, that money might already be spoken for. A line might have been moved. This is where the process does become more opaque. You need to make sure that the money is truly available, who is going to be managing it, and how they are going to get it. There is language in multiple places that says things need to be competitively awarded, except for certain exceptions. You want to make sure this is not one of the places where an exception is going to be provided, and that it really is available. This is very bespoke, and for each case you need someone who knows who to talk to or has the relationships to ask those questions.

David 29:13
So, Johnnie famously, I think the President put out a Truth Social post or a tweet or on X or one of those social media platforms stating that he would like to nearly double the defense budget to one and a half trillion dollars. You know, this is a little over half of the FY26 appropriation. So should we expect that the President’s budget request, when it gets submitted to Congress, will have a top line of one and a half trillion? And if you wouldn’t mind indulging us, what do you think sort of happens from there?

Johnnie 29:50
So I have been trying to track that down too. I don’t know the answer. I have many guesses. I think that it would be difficult to get a base budget at that level. I think there’s a possibility that that would include, but I do not know, another attempt at reconciliation, which I think would be very difficult in an election year, especially for the House. But one of the reasons that it makes me think of having that as the overall base budget is that several years ago, maybe six or eight years ago, we’d gone back to talking about how there are 12 appropriations bills. Historically, the Labor, Health and Human Services bill is, in general, a Democratic priority, and the defense bill has been the Republican priority. And so, as we’ve gone through and gotten close to shutdowns, they’ve started to travel together now. That’s why, for at least six years, you’ve seen them in packages together, and people will talk about parity. So if defense gets a certain amount of increase, then the Labor, Health and Human Services bill needs that increase. There is no scenario where Congress passes a bill with Labor HHS getting that much of an increase. So I often think in terms of three-dimensional chess, and I’m not sure how that would play out. And honestly, I’m not sure how, or if, it’s been decided exactly how that’s going to show up, because we’ve seen this administration get very creative.

David 31:35
Totally. Well, I mean, gosh, thank you so much for sharing your insights and obviously your well-deserved wisdom on the process. I know I definitely learned a lot, and we hope that our founders did as well. Thank you, Johnnie, for coming on. And for those of you that still want to stick with us, Maggie and I are going to highlight some of the winners and losers as we saw from the appropriations bill, based on whether or not Johnnie’s former colleagues decided to mark up or mark down a respective program. So stick with us. But Johnnie, thank you so much for coming on the Techquisition edition.

Johnnie 32:11
Thank you so much. Any time you have questions, let me know.

Maggie 32:14
Thank you so much, Johnnie. All right. Wow. Well, that was a great conversation with Johnnie, clearly a world-class subject matter expert on the world of appropriations. I don’t think I ever fully understood just how all of these different pieces work together, and I definitely learned a lot from that conversation. But I wanted to dive in a little bit here and get into some of the more specific details that came out in this bill that are going to be relevant for startups. Let’s talk through who some of the winners are and who some of the losers are in this appropriations bill that are going to matter for this ecosystem. So, David, maybe starting with some of the obvious ones, how did groups like the Defense Innovation Unit fare, or some of these other innovation organizations, in this bill?

David 33:06
Well, Maggie, yeah, I can never help myself but to do some control F when these types of documents come out and see how the Defense Innovation Unit does, and it looks like they did all right once again, right? They got a significant amount of money in the big, beautiful bill for fielding technology. They got an even larger plus-up from Congress relative to what the President’s budget request was, which was surprising to me. Once again, I think Congress is stating, especially on the appropriations side, that they like the way the Defense Innovation Unit does business. And I think for founders out there, DIU has been kind of a halcyon of an organization that awards contracts to venture-backed startups. So I would be on the lookout for more solicitations, or specifically, if you want a prototype project and you’re moving into production, it seems like there are a lot of line items that are explicitly focused on fielding these capabilities. They got some pretty large buckets of funding around some specific areas.

But I would now be a little bit remiss not to highlight that two sister organizations that are nested under the Defense Innovation Unit did not fare so well. I’m talking about the National Security Innovation Capital and the National Security Innovation Network, NSIC and NSIN, respectively. It looks like they both did get some money in the big, beautiful bill, but both were zeroed out in the President’s budget, and neither were plussed up by Congress. So in my mind, those organizations, as we know them today, are going away. Though I would be remiss not to state that NSIN appears to be morphing into a new entity known as these on-ramp hubs. I know that recently they just did a ribbon-cutting ceremony in Montana for what’s supposed to be an innovation hub out there, and there was a decent amount of money in the appropriations bill for that activity. But enough about the Defense Innovation Unit. Maggie, you write a blog that’s pretty dialed in on all things artificial intelligence as it relates to the department. What did you notice out of the appropriations bill?

Maggie 35:38
So one piece that caught my eye was the Chief Digital and AI Office. Specifically, their Alpha One programs seem to have been a big winner from this bill. This is essentially an AI infrastructure program that they manage to help spread artificial intelligence throughout the department. Last year, Alpha One had a $53 million budget. This year, that was bumped up to $401 million, plus an additional $140 million from reconciliation. So that’s almost, or maybe more than, a 10x increase there. We’ll definitely be seeing a lot more coming out of CDAO.

I’ll also just mention a few callouts. I saw that generative AI was mentioned three times in the joint explanatory statement. I don’t know if it’s ever been mentioned in past explanatory statements. I looked back a year or two and hadn’t seen it before. They’re looking at using generative AI for counter-UAS, looking at using it for mixed reality and immersive simulations, and then one other for real-time operational awareness. A couple of other smaller line items mentioned AI as well, including AI for night vision, multi-domain kill chain automation, cognitive decision aids, and autonomous battle management. Then there was a little bit of talk about using AI for warfighter health, specifically using it to optimize performance under acute stress. So definitely, we’ll be seeing more about artificial intelligence. This all seems to be feeding into the department’s AI strategy, which came out a month or so ago, so it’ll be interesting to see where we go from there.

David 37:27
I was going to say, it’s so good, because I think we talked a little bit in an earlier podcast about GenAI and its ability to help with a lot of different administrative tasks. But now, trying to apply this technology more broadly, I would imagine they’re taking a lot of lessons learned from both Ukraine and Israel on how this stuff could be implemented into the field. So it’ll be exciting to see how different companies implement these technologies, and then how we see it happening in exercises.

Maggie 38:02
Yeah, anything relevant in the world of space, or any of the services that we should be paying attention to?

David 38:08
Well, I’ll touch on space. You know, they were kind of flatlined, all things considered. And I know there are a lot of large initiatives. I guess I will say, Golden Dome aside, the Golden Dome seems like they need to hit the “I believe” button a little bit harder with Congress, because there were a lot of requests for information and understanding around how this is architecturally going to work. So, yeah, I mean, I was a little bit disappointed that space was not as big of a winner. It seems like other areas, like collaborative combat aircraft on the Air Force side, are doing pretty well. I saw on the Navy side a pretty big increase for their warfighting experiments and demonstrations, going from 82 million to 152 million. So you might think a lot about autonomous surface vehicles and underwater vehicles, right, and how they’re performing, and making sure that we’re building that into our concept of operations. Those were a couple other areas that stood out to me.

But I would recommend that founders, within different tech areas or services, look at some of the good materials out there written by outlets that are more professional than us, specifying exactly how things are playing out. Of course, this wouldn’t be a Techquisition Edition without me quickly highlighting the cyber stuff. As of right now, there was nothing in this appropriations bill for it, and in fact there was a section highlighting that if the cyber program isn’t authorized, then there’s money you don’t need to administer it. So the saga continues, yeah.

Maggie 40:00
Will remain to be seen what comes next. And David, just to close out the way that we’ve been closing out these other ones, what do you think our next Techquisition Edition podcast is going to be on, if you had to guess?

David 40:13
Well, I hope that it’s one of two things. It’s either the Small Business Innovation Research reauthorization, and we can talk about that in gory detail, or the President’s budget request, which traditionally is due to Congress in the February timeframe.

We discuss:

• What it means for DIU and SCO to be designated as “field activities”

• What new major AI projects the DoW is starting

• How DoW is investing in data and compute infrastructure to enable rapid AI adoption

• New initiatives in the services and PAEs designed to bring innovation into the hands of warfighters

• And more!

You can listen to the podcast on Spotify, Apple, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please reach out if you or anyone you know is building at the intersection of commercial technology and national security.

And, we encourage anyone interested to read the AI strategy and innovation ecosystem memos for yourself to get all the details on these policy changes:

• DoW AI Strategy

• Transforming the Defense Innovation Ecosystem to Accelerate Warfighter Advantage Memo

• Transforming Advana to Accelerate Artificial Intelligence and Enhance Auditability Memo

Subscribe now

Transcript

Maggie 00:39
Welcome to the second ever episode of the Techquisition Edition of the Mission Matters podcast. In this episode, we’re going to be discussing some pretty big news that came out just yesterday about the Department of War’s new AI strategy and their new plans for the DoW innovation organizations. Just yesterday, Secretary of War Pete Hegseth announced a series of reforms for the DoW innovation ecosystem during a speech he gave at SpaceX headquarters in Starbase, Texas. He also announced the DoW’s new AI strategy. In conjunction with the speech, the department also released three new memos codifying these initiatives. So David, just to kick it off with the first question, can you cover what were some of the major themes highlighted in this speech and in these memos?

David 02:07
Well, Maggie, it’s a pleasure to be back on with you for this Techquisition Edition emergency podcast. Yes, we’re recording the day after Secretary Hegseth’s speech at SpaceX, which is a pretty cool venue to announce things at. But what did he talk about? He was re-emphasizing the desire for the Pentagon to go fast, find a way to be able to say yes, not be overly reliant on process, grow the industrial base by being creative and leveraging private capital markets. There was also a significant emphasis on leveraging artificial intelligence and on behavioral changes around data sharing, experimentation, and making the department AI-first. Secretary Hegseth also announced new leadership at the Chief Digital and Artificial Intelligence Office, as well as at my alma mater, the Defense Innovation Unit. He created lanes of understanding for how organizations like the aforementioned CDAO and DIU, as well as DARPA, the Mission Engineering and Integration Activity, and the Office of Strategic Capital, among others, are to work in tandem together to support the mission, which, quite candidly, can be confusing at times if you are unwitting to the variety of department organizations.

Maggie 03:32
I know I’ve had to have you explain to me multiple times how all these organizations actually differ from each other.

David 03:38
Yeah, well, you know, it certainly doesn’t help that the acronym soup is always expanding. But to that end, he emphasized some consolidation. We had these innovation organizations that were not tied directly to executing missions or acquiring capability. To that, he called out specifically the Defense Innovation Working Group and the Defense Innovation Steering Group. Gosh, I didn’t know that those were actually different, unique entities, and I’m an interested outsider. I couldn’t tell you what they did. He abolished those in favor of consolidating and then sort of putting the onus back on the services to consolidate as well and figure out how they’re going to engage with this series of memos. Overall, I’d say it’s a similar pattern to what we’ve seen. He is highlighting things that seemingly are working and trying to inculcate them into the system, versus allowing these things to continually operate on the periphery.

Maggie 04:42
So David, speaking of DIU and SCO, or SCO, Strategic Capabilities Office, can you tell us a little bit about what you think of those organizations being named field activities? I mean, what is a field activity? I know that was really one of the major reforms that people have kind of attached onto. Is this new? Is this substantial? Why does it matter?

David 05:04
Yeah, well, and I’m glad you mentioned the Strategic Capabilities Office, because I forgot to mention them as one of the organizations he referenced earlier. Okay, so field activity. Does it matter? Is it new? Field activities, there are lots of them. They are sort of an echelon lower than an agency. You have the departments, the Department of War, the Department of the Air Force, which is where the Space Force and Air Force as branches reside. Under the Department of the Navy, you have the Navy and the Marine Corps as branches, and then the Department of the Army. These are secretary-level organizations, and then you have these things called agencies. DARPA is an agency, DITRA is an agency, and then you’ve got the National Security Agency, which is also an agency and an intelligence community organization, so they are dual-hatted to the Office of the Director of National Intelligence and the Department of War. But what you might call less substantial, though still chartered to do a specific service on behalf of the entire department, are these things called field activities. I’ll actually give a commendation to my good friend Kevin McGinnis, who I worked with at Defense Innovation Unit back in the day. He wrote a paper stating that Defense Innovation Unit should be a field activity all the way back in 2017, and he was quick to remind me of that this morning over a message. We talked about it and asked, what does that mean, and why is it important? I would say for the most part things will stay the same. It does put the onus on Defense Innovation Unit and Strategic Capabilities Office to fulfill the mandate as articulated by Secretary Hegseth, and he’s going to submit that through the appropriate Title authority to Congress to ratify it. But now they are, lock, stock, and barrel, supposed to do exactly what these memos highlighted, and the department, or other organizations within the department, cannot or should not do that work. A good example of a field activity is Washington Headquarters Services. Most people don’t really know who they are or what they do. They support from a back-office perspective, contracting personnel among other things, and they provide that service for all of the Office of the Secretary of War’s needs. Whether you’re in Research and Engineering or Acquisition and Sustainment, and you’re one of those principals tied to doing something, if you need a contracting entity or contracting activity, you must use Washington Headquarters Services. That’s what they’re mandated to do, and that’s what a field activity is getting at. I would also say it will provide those of us interested in the financial machinations much better transparency into what Defense Innovation Unit and SCO are submitting through the President’s Budget. They’ll also now have to defend it. It won’t be locked in with all of the other Office of the Secretary of War activities where you have to figure out after the fact what DIU spent money on. That’s interesting. They’ll have to fight for it through the OSD Comptroller and the Office of Management and Budget, but it will help us understand what they’re spending to execute their mission. Hegseth mentioned that DIU will still have the ability to report to the Secretary, as codified in the Fiscal Year 24 National Defense Authorization Act, which was really important at the time. But their direction is going to come from the Under Secretary for Research and Engineering, Emil Michael, who now also appears to be dual-hatted as the department’s single Chief Technology Officer. For what it’s worth, a lot seems to be getting put on the plate of the freshly minted CTO, and I think we’ll get into that a bit more with the artificial intelligence transformation memo.

Maggie 09:19
Yeah. Yeah. That seems like a major point that Secretary Hegseth made, which was that all of these innovation organizations are now going to be reporting into this single CTO, Emil Michaels, who is really bringing all these organizations and their missions together. So according to Secretary Hegseth’s speech, one of the themes that I really took away is that innovation really can’t just be for innovation organizations like DIU. It needs to be part of warfighters and operators. It needs to become a core part of the way that the services departments and acquisition organizations, like the new program acquisition executives, do business. And there were maybe two major initiatives that he announced as part of that. The first one was this change to PAEs, this innovation insertion increment, or triple I requirement, that he mentioned. So could you tell us a little bit about what that actually means?

David 10:19
Yeah, well, I mean, I’ll say maybe to the first part about where is innovation supposed to happen. You certainly have these organizations where it’s expected to sort of be a front door for commercial entities. But I thought it was really cool that Secretary Hegseth sort of called out that innovation can happen at any echelon. He regaled an anecdote with a captain in the Army who was working on some AI transformation and saying, like, we need to be celebrating these activities and encouraging people who see problem sets in different ways and solutions to go out and do it and be encouraged, and then the command structure ought to support it. But specific to this innovation insertion and increment move, I’ll say off the bat, I think this is going to be really tricky to do, and a lot of that comes down to the budgeting process, known under the whole planning, programming, budgeting, and execution, PPBE. Maybe for the purposes of this conversation we’ll truncate it to how it’s colloquially known in the department, and that’s the POM process, Program Objective Memorandum. The POM process forces program managers to outline with extreme specificity exactly how the funding requested from Congress will be spent two years in advance, to include who the performers are going to be and what contract vehicles they’re going to exercise and leverage well in advance. And so how can the PAEs, across their portfolio, which we assume to be a grouping of related programs, be provided enough flexibility to incorporate innovation? This is going to be a challenge. Today, program offices can use programs like the Small Business Innovation Research, SBIR, or the AFWERX program. They also sometimes leverage the Defense Innovation Unit and some of their funding lines that are a bit more flexible, and then SCO, to do some of these innovative, non-programmed activities. So I think the department will need to negotiate with the appropriators off the bat what sort of a percentage, maybe five or ten percent of a program that is being POMed for, could be available for non-specified experimentation. And so I think it’ll be interesting to see how this plays out and how the services respond. But I do think that there’s an element of funding flexibility that is required in order to get after this mandate.

Maggie 12:55
So just to make sure I’m understanding this right, the way we should think about this triple I initiative is that it’s really trying to force the PAEs to spend a specific percentage of their budget on trying to integrate some innovative new technology into an existing program. So I need to spend some money to put AI on the F-35. But what you’re really getting at is that the way money is spent on a major program today has to be very detailed and submitted to Congress far in advance, and so we’re going to have to see how they’re actually able to get this kind of flexibility. Am I understanding what this initiative is the right way?

David 13:37
I mean, it’s almost as though you could ask me, you know, “David, here’s the NFL schedule. Predict every single team that’s going to win based on paper,” and not be able to take into account injuries or crazy random acts. And if you’re not right, there’s nothing you can do during the season in order to change the plan for how you thought it was going to play out. And I think what Secretary Hegseth is getting after is that the velocity and the pace of technological change are so fast that if we’re not taking advantage of it while the program is still in development, by the time it’s fielded, it’s already going to be outdated. And so if we don’t have these opportunities for innovation to occur, to then insert it and integrate and scale, because we’re not all-knowing, you know, we’re setting ourselves up for failure.

Maggie 14:40
So next, I want to turn to another one of his initiatives that he outlined, both in his speech and in these memos relating to the services. That is, he has mandated that the services need to brief plans for innovation within the next 30 days. So what should we take away from this mandate?

David 14:58
So, just like the Office of the Secretary of War started to consolidate a lot of these organizations or councils or steering groups, he is sort of asking the same of the services. And so I would say that, in some respects, it feels like the services are out in front of this. We’ve seen announcements around the Army FUSE program, and they’ve consolidated a lot of these seemingly related but not connected organizations that are doing innovation, experimentation, and scaling, and that’s now all under one house. The Navy is doing a road show with their new Navy Rapid Capabilities Office, and that seems to be a strong insertion point for innovation to get out to the fleet. They’re doing it in concert with the Office of Naval Research, which has historically been responsible for a lot of early-stage technology readiness level experimentation and working across a variety of national and government labs. And then Space Force, for a couple years now, has had this organization called the Commercial Space Office, COMSO, and they’ve been doing a really good job working with commercial organizations and figuring out how they can apply that to their mission mandates.

And so I guess the one service I didn’t really mention is the Air Force. They have a pretty famous innovation organization called AFWERX, but of late it’s been a little bit unclear exactly how that’s being tied into larger programs like Collaborative Combat Aircraft, which is pretty forward-leaning and leverages innovative companies. How is the Air Force going to be adopting this mandate to be more innovative? I think it’ll be really interesting to see how the services submit their plans. I really hope that, at least in some respect, we can see that at the unclassified level and provide some sort of comment, because one of the things that Secretary Hegseth reiterated is just how confusing and challenging it is for industry to understand all of this. So really what we ought to do is accomplish this transparently and make sure that we’re getting feedback from industry, so that we’re not just recreating the same thing as it was before.

So Maggie, maybe switching gears here, in addition to all these changes across innovation organizations and the need to go faster, Secretary Hegseth announced the Department of War’s new AI strategy. I think you’ve had some time to absorb it, but what were some of the major initiatives and themes from that strategy that stuck out to you and that our founders really need to know about?

Maggie 17:58
Yeah, definitely. I was excited to see a new AI strategy from the department. The last strategy the Department released was back in 2023, and if you can believe it, it did not mention generative AI a single time. Times have definitely changed since then. And I think, as you know, I’ve written about and we’ve talked about in the past that there are a lot of changes the department needed to make to really stay competitive in the AI space, as the pace of innovation has moved so quickly in the commercial sector. Overall, the strategy is focused on how the department can quickly adopt AI at speed to become an AI-first warfighting force. They’re trying to ensure that the entire department has access to leading-edge models on all of its networks, both classified and unclassified. The strategy starts out by detailing what they’re calling seven pace-setting projects, which are essentially, as far as I can tell, pilot initiatives to get the ball rolling on AI adoption within the department. Each of these is going to have a single, accountable leader who has to regularly report progress on aggressive timelines.

David 19:14
What would be a pacing project? Because that does sound pretty exciting.

Maggie 19:19
Yeah, yeah. So they’ve already announced one of these, GenAI.mil. I know, David, you’ve actually had the chance to play around with it, so I don’t know if you want to share anything about what that project is and how it is.

David 19:31
Well, sure. So GenAI.mil, a couple weeks ago when I was doing my reserve duty, all of a sudden one day we had an application on our desktop and we had access to Gemini. When you opened up the application, you could launch Gemini, but it also highlighted that coming soon would be a couple other of the more prominent large language models. And at the event yesterday, AHEG Seth announced that Grok is now available. The other two that I believe I recall seeing were going to be OpenAI ChatGPT and Anthropic. So it seems like the department is getting access to some of these cutting-edge large language models, and it’s really great to see. I will say, during my two weeks of reserve duty, I was using it quite a bit. Because I’m used to using it in my day job, I use OpenAI among others, and I was explaining to my coworkers how they might engage with it and leverage it. So it’s really great to see things that are in the commercial world coming to the department. I mean, I guess three years late, but who’s counting?

Maggie 20:43
I mean, I thought that this was a great initial project for the department to roll out, and they got basically just these basic AI tools in the hands of 3 million folks within the department. They did not overthink it, right? They are just giving people access to the exact same commercial tools that you and I have access to in our day jobs, really allowing people to see for themselves the power of these tools and find for themselves the major applications that are actually going to make a difference in their day-to-day workflows. So that was the first pace-setting project. They have a few more that they have not really released any details on, but they are looking at things like using AI for battle management, decision support, and improving simulation. The next major initiative that they announced is that they are actually going to be investing in more AI compute resources for the department.

David 21:33
I will just interrupt. I mean, that is huge to me, and as somebody who has watched the budgets be developed, it always feels like information technology and infrastructure are always a bill payer. So maybe just a little bit more on how exactly we are going to get to this AI utopia with the resources necessary to make it happen?

Maggie 21:59
Yeah, so I think that really investing in these AI compute resources is going to be one of the major enablers of actually getting this technology into the hands of warfighters, as well as folks in the back office. I have written about this before. One of the major roadblocks to getting AI where it is needed is literally just access to compute, access to GPUs, access to hardware that can run on classified systems or that can run at the edge. You know, some people I have talked to actually talk about bringing GPUs, like an NVIDIA Jetson, just in a suitcase to make sure that they always have it when they need it, because they know that they are not guaranteed to have it. Yep, I have talked to people at our portfolio companies that do this, and I have talked to people in the government that do this. So, you know, what the Secretary has said is that the U.S. military is going to put real capital behind acquiring compute resources. He even went so far as to say that they are going to build data centers on military bases or on federally owned land. We will definitely see what has to come of that. These are going to be secure data centers where maybe we could actually do some AI model training on classified data.

David 23:15
Sounds awesome and definitely needed. I hope that the government is able to strike a deal, because what we are seeing is certain communities resisting data centers, you know, not in my backyard. Well, you know, federal land on military bases, and there are certainly plenty of old, ugly buildings that ought to be knocked down, and we could put some server farms in there. Maybe if the warfighter can get access to it first, that would be wonderful, yeah.

Maggie 23:45
Well, you know, we know there’s a lot of real estate professionals in this administration, so I’m sure they’ll be thinking carefully about where the best spots are to put these centers. The next major piece that I saw in this AI strategy actually harkens back to the 2023 strategy, which was, once again, really focused on data availability for use with AI models. This was the major focus of the 2023 strategy, and the new strategy takes it another step further. One of the major challenges to actually deploying and training AI models in the department is that a lot of data is stored in silos. It’s hard for the Air Force to access Navy data, or even within the Navy it can be difficult for different groups to access data, particularly classified data. And as we all know, our AI systems are only as good as the data they actually have access to. So what the Secretary’s memo does is direct all departments and components within the DoD to release a federated data catalog to the CDAO, the Chief Digital and AI Office, that exposes all their system interfaces, data assets, and other access mechanisms across all classification levels, and it says they need to do that within 30 days. I think it will be interesting to see if this can actually technically be done, just literally whether the technology is there to do this in 30 days. But this is certainly an aggressive mandate to force organizations to get their data into a ready state so it could potentially be used by AI. We also see that the memo directs CDAO to release this data to any user who needs it and who has all the security requirements necessary to access that data. It says that if CDAO wants to deny a request, they have to report it within seven days, and that denial can actually be escalated to the Deputy Secretary of Defense for Research and Engineering, Emil Michael. So it will be difficult for CDAO to deny data requests. This is really about trying to open up these data silos. Related to these data decrees, it also directs the services to accelerate rapid ATO reciprocity, authority to operate reciprocity. I don’t want to get too deep into the details of ATO reciprocity. David, I don’t know if you want to chime in here, but basically this is the idea that if I’ve gone through the full cybersecurity process to deploy my software with the Navy, then I should be able to deploy it with the Army or the Air Force without having to go through that same very rigorous cybersecurity process as a commercial vendor to deploy my software on service networks.

David 26:35
You know, it’s a long time coming. We’ll see if they’re able to exercise this. It seems to have been a thorn in the side, and Secretary Hegseth did mention that there will be no sacred cows, and this would certainly be one I’d be willing to sacrifice. Maggie, maybe just, like, what should this mean for our startups? How should they interpret these announcements around data reciprocity, data access, network reciprocity, network access? I think they maybe mentioned stuff around one of the buzzword bingos of modular open systems architecture, trust and responsible AI. They even, I think the memos talked about Advana. The Secretary didn’t mention Advana in his speech. What does this mean for our startups, or emerging companies that want to do business with the department?

Maggie 27:31
Yeah, well, I think it means that this is the time to really start accelerating your engagements with the department. This is a time when they are actively kicking off new projects to explore how these technologies can be used. I also think this is a time when you can actually help shape the infrastructure that the department is going to need to deploy the applications that startups are building. If you have opinions on what compute resources the department needs, and what data catalogs and data infrastructure they need, or even better yet, if you have a solution to support building out that data infrastructure and that compute infrastructure, this is the time to make your thoughts known. Start engaging with people at CDAO and within R&E. Start engaging with people at each of the services. The service chiefs and combatant commanders are going to start designating AI integration leads; they’ve been directed to do so within 30 days. Find a way to get in front of those people when they’re announced, and then really spend a lot of time with warfighters, with operators, deeply understanding their needs, understanding how your solution can solve a real problem for them, and work your way up from there. Yeah. I mean, David, what do you think? What did I miss?

David 28:47
I think that’s right. I think now is a compelling time. I’d like to maybe go back to talking about the Army FUSE program. They’re doing a series of experimentations with the intent that the things that are working will have on-ramps into programs like Next Generation Command and Control. So I think if you’re a startup, you need to start participating in these activities. I’m not saying that there is a well-worn path to scaling, to becoming like the next Anduril per se, but one thing that I thought was interesting that the Secretary mentioned is that he highlighted two companies that are now a pretty vaunted part of the fabric, Palantir and SpaceX, and said that for them to get a hearing and an opportunity, they had to sue the government, and we need to change that mindset. He also mentioned that the Gen AI application is now available to three million people. While our loyal listeners will definitely be listening to the things that the Secretary said, do not assume that the three million people in the department who now have access to Gen AI will have necessarily heard the Secretary. So I think it is important to take the time to read the memos, and we’re probably going to link them in the show notes, and then make sure you have that with you as you’re engaging with your customers, because they’ll need education about how much this transformation is trying to change the narrative. Again, I would say get active and engage. If you feel like you’re being told no a lot, I would say that people within the Office of the Secretary of War will definitely be hearing their boss loud and clear. If you become the squeaky wheel, it might get that higher headquarters organization to reach down and smack somebody to do the right thing, because these are directives. If there’s one thing that the military is supposed to be good at, it’s taking orders in a very direct, top-down fashion. So I think it’s important to get engaged and to give these new emerging organizations the opportunity to prove you right, that working with the department is the right use of your time and resources, and that you can start solving some of these very vexing national security needs.

Maggie 31:18
So David, what were some of the topics that were not discussed in this memo, in this speech, that you might have expected to be in there?

Top of Form

Bottom of Form

David 31:26
So you certainly covered a lot in a short amount of time. In fact, I was joking with one of my friends that I feel as though Secretary Hegseth sort of recreated all of the greatest hits that a lot of us have been saying for a long time about leveraging private capital, growing the industry base, and being innovative. He talked a little bit about contracting. He talked about authority to operate, okay? But what didn’t he get to? I guess I sort of highlighted a lack of what we’re going to do with funding flexibility, right? That’ll continue to be a thorn in the side of all of these initiatives. So I think we’re going to need to get more creative in the coming year with whoever will listen over at Congress. I was also surprised to hear nothing about personnel clearance, right? How do we get people access so that they can know about things that are happening, so that they can build products that will meet the needs of the warfighter.

Maggie 32:26
It was especially interesting that they didn’t include anything about personnel clearance, because they did make talent such a central part of this strategy. In his speech, the department just announced their new initiative, the Tech Force Initiative, which is really working to get early career technical and AI talent into the federal government in general, but the Department of War in particular, to come help build technology to solve some of their crucial challenges. And the AI strategy also directed organizations to be flexible when it comes to pay and hiring to get talented people in there. And, you know, I think, as many people know, getting through the clearance process is actually one of the biggest barriers to getting technical talent in the door. Totally.

David 33:13
I mean, I’m definitely bullish on Tech Force. I remember when the Defense Digital Service first stood up, and some of the initiatives and the education, honestly, that they provided others in the department around how technology was transforming, or should be transforming, mission sets. I’m very bullish on that. But yes, the personnel clearance and getting people through the pipeline, attracting that talent, is going to be a challenge. Also, the International Traffic in Arms Regulations, ITAR. I know that part of it is with the State Department, but, you know, the Secretary has talked a bit about foreign military sales, and I kind of put those two in a similar bucket of how do we allow our industry base to sell to our partners and allies and make sure that we’re not cutting our nose to spite our face from a market standpoint for the proliferation of some of this technology. So I would have liked to have seen a little bit more there, and then maybe just access to classified spaces. Again, if we’re trying to build trust and communicate, and this touches a little bit on personnel clearance, how are we lowering the barrier to entry to even having these types of conversations in the first place? Again, we need to be growing, and growing the amount of people that are in the tent so that we can solve these vexing problems with people’s imaginative and creative ideas. So that’s what wasn’t stated. But gosh, if there’s one thing we can count on, it’s maybe another emergency pod within the next few months as this administration continues to check through a lot of the things that will help modernize the department.

Maggie 34:51
Yeah, absolutely. There are definitely more changes to come, I have no doubt, over the next few months. I’m curious, David, what do you think our next Tech Position podcast episode is going to be about?

David 35:03
Man, this is kind of like a bit of a sign-off for us, right? Like presuming what’s next. Okay, so gosh, I really hope that we can either talk about an appropriations bill getting funded, and I am going to go out on a limb and say that with that appropriations bill will be a reauthorization for the CIBER program. So we might get two emergency pods within one activity. I’m really hopeful for that. So maybe early February we’ll be back with Tech Position episode three, and maybe four, depending on how we decide to split that baby.

Maggie 35:45
I definitely hope we get both CIBER authorization and a budget passed this year. Well, on that note, David, thank you so much for coming on to record this emergency pod. I know it’s 10:00 p.m. now as we’re finishing this recording, and I really appreciate, as always, learning all of your wisdom on all subjects innovation and acquisition in the Department of War.

David 36:09
I really appreciate it, Maggie. It’s good to do this one in person, so that’s also fun. All right, until next time, until next time.

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• The operational complexity of modern joint warfare and the role of commercial technology

• Why Venezuela has become a key piece of U.S strategy in the Western Hemisphere

• What the operation signals to China, Russia, and other adversaries about U.S. resolve and deterrence.

• And more

You can listen to the podcast on Spotify, Apple, YouTube, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please let us know if you or anyone you know is building at the intersection of national security and commercial technology. Tune in next month for our next episode!

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Lisa 00:36
Thank you for making the time to join this timely discussion of the recent U.S. military action in Venezuela. We’re honored to have with us today SHIELD’s senior advisor and the former National Security Advisor to the President of the United States, U.S. Army General H.R. McMaster. General McMaster has a distinguished four-decade career as a U.S. Army officer, national security expert, and presidential advisor. He served as the 25th U.S. National Security Advisor from 2017 to 2018, where he led the National Security Council and advised President Trump on U.S. national security strategy. During his 34-year Army career, following his commissioning from West Point, he held multiple senior command and leadership roles. General McMaster commanded combat operations, including Combined Joint Interagency Task Force operations in Afghanistan, the Third Armored Cavalry Regiment in Iraq, and the Second Armored Cavalry Regiment during Operation Desert Storm. He is the recipient of numerous service awards. I could go on and on, but they do include the Silver Star, two Bronze Stars, and a Purple Heart. Those are stories that we will get out of him at the next limited partner annual meeting. He holds a PhD in military history from the University of North Carolina at Chapel Hill and a Bachelor of Science from West Point. General McMaster is a prolific author and historian and currently a senior fellow at the Hoover Institution at Stanford. We’re grateful to have his esteemed counsel and support at SHIELD, where the mission matters. And now it’s my pleasure to introduce to you Phillip Bilden, SHIELD founder and managing partner, who will help moderate the discussion today.

Philip 02:14
Thank you very much, Lisa. I also echo your thanks to the SHIELD investors and friends of the firm, our advisors and partners who have helped us build the firm that we have, and certainly our esteemed senior advisor and friend, General H.R. McMaster. H.R., very good to see you. I know that you’re on the Pacific Coast and had to wake up early today. You’ve been very busy since this news broke on Saturday. Amidst your other duties, thank you so much for being here for the SHIELD webinar.

LTG McMaster 02:43
Hey, Phillip and Lisa, what a privilege it is to be part of the SHIELD team and to be with you today as well. It’s a fantastic firm with a mission that I’m so excited about, and the vision you all had years ago to put this together. I think it’s already having a huge impact on our national security. Any time for you guys.

Philip 03:01
Thank you. And you have been there from the very inception of the firm as one of our advisors, helping us think through issues like we are dealing with today, which we are going to be discussing: the relevance of the technologies that SHIELD has been supporting and the companies that bring these capabilities to the warfighters, to our intelligence community, etc. Maybe that is where we should start. H.R., I am actually two miles north of Mar-a-Lago, where a lot of this activity took place over the weekend. You are no stranger to Mar-a-Lago in your duties with the President when you started out in 2017 as his National Security Advisor. But operationally, what was executed in the zero-dark hours Saturday morning? How would you assess this, just on a simple scale, one to ten, in terms of the complexity and ultimately the execution, all the planning that went into that in terms of its operational performance? How would you assess that?

LTG. McMaster 04:07
Hey, Philip, I will tell you, this is a ten in terms of degree of difficulty, if we are going to liken it to Olympic diving or something. And it was a ten score, I think, from all the judges. I mean, you have to look at the broad scale of preparation and then implementation and execution on the objective, on the X, and then the exfiltration. It was done so well, so professionally, and in a very difficult environment. It is Venezuela, which is the beneficiary, the recipient, of all kinds of assistance from the Cuban military and Cuba, Cuban secret police essentially, and intelligence. Russia and China have tried to help them perfect their technologically enabled surveillance and police state, and then you also have Iran active there. So getting into that denied environment, collecting the intelligence necessary to drive the planning, and then conducting that planning with so many different agencies and the joint force, this makes me think of the history of other interventions in the hemisphere, going back to Grenada, which was a successful operation but one that revealed a lot of disjointedness in our joint operations. We are so many orders of magnitude better now than we were then.

Then you look at the professionalism of the forces, from the suppression of enemy air defenses to the cyber activities and electromagnetic activities to blind the enemy as you get into the objective area. Just the number of aircraft conducting these electronic warfare missions and the suppression of air defense assets, and then responding immediately to any enemy fire and immediately suppressing that fire, is extraordinary. To have just one aircraft hit and that aircraft still be able to continue the mission is unbelievable. Just deconflicting the airspace was probably pretty amazing. And then the 1/60th coming in, you know their motto, the Special Operations Aviation Regiment, time on target plus or minus 30 seconds. Well, they did that. The timing was impeccable.

I think what you are seeing also, Phil, from the perspective of SHIELD and SHIELD investors, is that we are going to find out more and more that this operation was enabled by a combination of very highly classified government capabilities and a whole range of newly available commercial capabilities, from satellite imagery to RF collection. I am thinking of Hawkeye 360, for example, and then the big data analytical capabilities, the ability to fuse multiple sources of intelligence, and the cyber tools that allowed us to shut down cameras and shut down communications. So a fantastic operation. Degree of difficulty, ten, and I think the score is a ten.

Philip 07:16
Absolutely. Thank you for that. So this was a multi-jurisdictional, multi-agency combined effort that required an enormous amount of integration. Can you walk us through a little bit of the operational phases? The President did not just wake up after two years and decide that he was going after Maduro. This was in the works for several months. There were CIA human assets on the ground, monitoring through traditional espionage, augmented with technical means, drones, ISR capabilities, in order to get to the point where the President could give the order, which I think was before Christmas, that gave an operational window to our friend General Dan “Razin” Caine to pull the trigger and say, this is the go time. Can you walk us through that sequence a bit, H.R., and maybe focus on some of the elements of these technologies and capabilities that are so important to our emerging national security that we are supporting, how they played into the intelligence collection and then ultimately the extraction?

LTG. McMaster 08:26
Well, I think what you saw our intelligence community and the military give the President were multiple options. Of course, President Trump knew Venezuela was a problem in 2017. He actually said at the time that we were developing military options for Venezuela, when we really were not doing that, but he said it, I think, to try to coerce Maduro during that period. Maduro has become more and more of a threat since then, and I can imagine conversations that occurred very early in the Trump administration, especially with Secretary Rubio coming in, who has tracked hemispheric issues in such detail with his Senate staff. He is the most knowledgeable person on activities and the security and economic situation in the hemisphere. I relied heavily on his staff, actually we did. And Trump won for the Venezuela policy we put into place in 2017, as well as the 180-degree shift in Cuba policy away from the Obama administration and back toward maximum pressure on the Cuban army. So very early in the Trump administration, I am sure the order went out, “Hey, give the President options.” You have to put an infrastructure in place to do that. As you mentioned, you have to get intelligence collection capabilities, human intelligence capabilities, and Title 50 intelligence agency operational capabilities in place. I am sure a lot of that was going on that we will probably never hear about, activities aimed at setting conditions for the raid to extricate Maduro, his wife, and others. Then a range of military capabilities were put together. They did not just come together; they had to organize and put a task force together. I think they probably built a mock-up of the palace somewhere and rehearsed this multiple times across operational distances. That preparation phase probably began soon after President Trump’s inauguration. Then you had the organization and rehearsal phase when Maduro was intransigent. There were some initial efforts, and this is a pattern with President Trump. He wants a deal, he always wants a deal, so he tries the deal first, and when he gets stiff-armed, he considers other options. The rehearsals and organization, I think, began around November and December. These great servicemen and women involved probably did not really have a Christmas. You saw the staging that was happening, some of it in Florida, some in Puerto Rico, and other places. The maritime task force played such an important role in this operation. The preparation phase went through December, and then you are teeing up the option for the President. “Mr. President, here is what we have planned.” President Trump likes to get into the details. Just like he will walk around a construction site for one of his hotels, he wants to talk to people with different perspectives and learn more about it. One thing about President Trump is that he is willing to take a risky decision. I cannot share details, but there were multiple times I brought him an operation involving saving U.S. citizens from a dangerous situation. I would lay out the risks, the potential for failure, and the costs associated with that, and he would ask, “Is it the right thing to do?” I would say yes, and he would say, “Okay, do it, General, do it.” Oftentimes I would call back to the agency and say the President approved it, and they would respond, “Really? That can’t be true. Nobody makes a decision that fast.” I think he probably made this decision based on the advice he was getting, including from his principal military advisor, Dan Caine, a former SHIELD guy for a brief period of time and an amazing officer. Then you had the execution, and now we are in the aftermath.

Philip 12:38
Yeah, absolutely. How did this extraordinary military operation maintain operational security, or OpSec? I mean, you’ve got a flotilla of maritime assets, the Gerald Ford, the Iwo Jima, several DDGs, and other support vessels. It was no surprise that there was a buildup. And then, of course, there was the campaign against the drug boats that have been taken out by aerial means and with kinetic force. So maintaining that operational surprise element is very, very challenging, particularly when you have numerous interagency participants. It’s extraordinary. There’s no leak, no nothing. And as we know, the extraction took place in the wee hours on a Saturday, right after the New Year’s holidays, with Delta Force entering and breaching a highly secure Venezuelan military base where Maduro and his wife happened to be at that time. How do you do that? And across—

LTG. McMaster 13:39
—considerable distances, where I’m sure there was significant aerial refueling going on. Aerial refueling of rotor-wing aircraft, which is not an easy task, and operating off the Iwo Jima, which is the amphib that was committed. I think, Phil, this is a really important question because of the ubiquity of surveillance capabilities, low Earth orbit capabilities, RF collection capabilities. Really, it’s almost as if everything you do is visible everywhere. So what you have to do very early in an operation is desensitize your adversary. Sadly, this would be concerning for us. This is what China is doing right now around Taiwan. How will you know when it’s a real Taiwan invasion, or is it just another one of these live-fire exercises?

So having the maritime task force and the aerial activity that we had in the Caribbean prior, that was part of the desensitization. Then deception plays a big role. Deception can be public statements that you make that might indicate that you’re not really looking at this, that you’re looking at other potential options, and so forth. And you remember the President actually announced the clandestine strike on a port facility before that. But all this, I think, was actually beneficial because it indicated that our approach to what we were going to do militarily was pretty narrowly circumscribed and would really only be in the coastal area or involving these narcotics trafficking boats.

So noise was high, deception, and then you have to go into the blind phase. This is where, I think, we have to really think in terms of future war. We have to be able to blind and deceive our enemies. The reason why the situation in Ukraine is so stagnant is because, with the capabilities that both sides have there, you can’t conduct a sustained offensive operation due to the transparency of the battlefield combined with what each side has in terms of long-range precision strike capabilities, FPV drones, and so forth.

Then you’re into the blind phase, and this is something we’ll probably learn about maybe 30 or 40 years from now in terms of exactly what happened. But I think the implication is that we have pretty considerable offensive cyber capabilities, similar to those that the IDF displayed in the attack against Iran, and we probably assisted with that as well. So the importance of warfare across all domains, the space assets, the electromagnetic assets, the aerospace, the maritime, and of course all the set conditions for what happened on land during that successful raid.

Philip 16:35
Thank you. We’ve talked a lot about unmanned systems and drones. We’ve seen this on display in Europe with Russia and Ukraine and these first-person viewing capabilities, which are pretty extraordinary. It’s like playing a video game, but the consequences are unfortunately very deadly. There was a fair bit of aerial surveillance with drones before the operation and after the operation. But interestingly, what had the impact was 150 fixed-wing and rotary-wing assets, some of which were from our service, the Army, that were in the fight. But they were assisted by the anti-aircraft assets that were supplied, I believe, by the Russians and the Chinese. Those were blinded and those were taken out. How do you think they did that? Because that was similar to what happened in Iran with Operation Midnight Hammer just months ago.

LTG. McMaster 17:38
We had command of the airspace. Yeah, absolutely. There were a range of capabilities that were employed. A lot has been mentioned about electromagnetic effects, and I am sure cyber was employed there as well against UAS capabilities. By the way, it is worth mentioning that there is an Iranian Shahed drone factory in Venezuela. That is part of the problem. Part of the problem with Venezuela that brought us there was how Venezuela had become a platform for our adversaries in the region. Also, with the advanced radar capabilities that we have on our manned aircraft, everything from Army Apache Longbows to F-35s and F-16s, oftentimes it is manned aircraft that are the best counter to these unmanned systems. Your ability to command and control with our aerial command and control platforms, based on the common visibility or picture of the airspace, is critical. I do not think really anybody else can do that but us right now, Philip, in terms of the visibility and the ability to bring multiple platforms to bear. The other time you saw this from a defensive perspective was in the highly successful defense of Israel against the massive ballistic missile and drone assault that Iran launched. It was almost completely defeated. That was tiered and layered air defense, involving, as you are mentioning, manned and unmanned systems, aerial and ground systems. I think that is the answer in the future. In warfare, there is always a countermeasure. So what you need is a range of capabilities. You can play the game of rock paper scissors, but you have to have all three to be able to seize and retain the initiative and to create conditions, like we created across multiple domains, to affect a highly complicated raid like that or any other military operation.

Philip 19:38
Well, this is exactly why SHIELD exists, to stay ahead of those technologies that our adversaries are able to develop on their own, reverse engineer, or steal through cyber means, through espionage, or what have you. This rock paper scissors dynamic, staying ahead of adversary capabilities, really drives so much of what we do from a mission standpoint, quite apart from the fact that it is also going to be a very important economic activity. This is where the future is going. Thank you for that operational breakdown. That is extremely helpful for setting the table for some of the geopolitical issues which you have spent most of your career working on, in and out of uniform, in the Oval Office advising the president, thinking about and trying to create a more stable environment for the United States, trying to avoid unnecessary escalation where that is prudent and feasible, but also creating strategic deterrence. That means trying to get the Chinese, the Russians, the Iranians, and the North Koreans not to do things that we do not want them to do. Let us start in the region, and maybe even go back to when you were national security advisor. What has really changed in Venezuela specifically, and then more broadly in Latin America, from 2017 and 2018 at the beginning of the first Trump administration to now? Where did it get to the point where the president felt compelled to actually go do an extraction of a sitting, if not illegitimate, head of state.

LTG. McMaster 21:16
Well, there’s a lot of continuity. I remember a conversation with President Trump, with a number of other people in the Oval Office, and he said, “General, General, why don’t we just bomb them?” And I was like, “Well, who do you have in mind?” He said, “The labs. The labs in Mexico.” People were shocked. I was with the President multiple times a day, every day, so this is the way he thinks. He thinks out loud, and he’s contrarian and disruptive. That can all be positive at times, but people were kind of freaked out about that. So I huddled with them outside the Oval Office and said, “Hey, you know what he’s saying? What he’s saying is that 100,000 Americans are dying of fentanyl poisoning every year, and what we’re doing now isn’t working. He wants options. He wants options.” The narcotics part of this was always on his mind. What has happened is that with the Cartel de la Solace, Venezuela has gotten deeply involved with the Mexican cartels and deeply involved with the Colombian cartels. He’s a source of strength and support for them in a couple of ways. First of all, it’s good to have a nation-state on your side because you can issue false documents, you can do all sorts of things to provide them with cover, and you can provide your aircraft for them, for example. In Colombia’s case, you can provide the trafficking route to evade our interdiction. He was doing all this, and guess what, he was getting a huge cut for it. That helped him because now he had more cash flow. That circumvents our sanctions and allows him to sustain the criminalized patronage network that keeps him in power, this organized crime network. The other thing that’s changed since 2017 is that he’s provided more and more support for what I would call far-left progressive dictatorships in the region, as well as far-left political parties, with his money. I don’t have the data for this, but I hear this from people in the region. I believe it was a huge source of funding for Petro, for de Silva in Brazil, and for AMLO, and for the far-left party in Mexico as well. He was a big part of this pink wave that also affected Peru and Chile, and it was anti-American. He was providing money to build an anti-American coalition such that the balance of power in the hemisphere had shifted dramatically against us since 2017, 2018, and 2020, because the Biden administration, I mean some of them were actually kind of sympathetic to these guys. I’m not a partisan person, but if you think about the shift in policy between the Obama administration and the Trump administration, President Biden went back to the Obama administration approach. Remember President Obama did the wave with Raul Castro at a baseball game. There was this idea that opening up to them and being more tolerant would work, when in fact these regimes remained very hostile to the United States and were providing platforms for China, Russia, and Iran. There’s also an economic dimension to this. Remember the announcement of the Peruvian port and mineral development, for example, and the deepening ties in Argentina. That could shift back now, because if you’re a country in the Western Hemisphere and you’re thinking, “Oh yeah, I’ll take that Chinese money, I’ll take that Chinese infrastructure,” you might be aware they’re going to use it for coercive purposes and trap you in debt, but now you also have to ask whether you’re going to lose all those investments when the U.S. decides enough is enough. I think the dynamic has shifted favorably in that regard. But to answer your question, there have been big increases in the Cartel de la Solace and their connections to other cartels, the use of Venezuela as a platform for Iran, China, and Russia in the region, and the degree to which Maduro took upstream support from China, Russia, and Iran and distributed downstream support to keep the Cuban army in power in Cuba and to get Daniel Ortega back into power in Nicaragua. Nobody knows this better than Rubio, and I think he saw Venezuela as the linchpin for anti-American influence and activities in the hemisphere. He’s right about that.

Philip 25:58
And he is dual hatted. He had your former hat, or he has your former hat, as NSA advisor, but also Secretary of State, and I think a few other titles have been thrown at him, because he is going to be running Venezuela soon as well. So you have answered a very important question. Why Venezuela? Why Maduro now, as opposed to, say, going after cartels in Mexico, closer to our border, if eliminating narco-terrorism and transnational cartels was the key objective? So let’s talk a little bit about what the key objectives were, and then what the strategic impact is going to be, both in the region but also in Asia and back in Europe.

So the original justification, and this is only a few days old, was that the elimination effort is a judicial effort for an indicted felon under U.S. law to be repatriated to the United States forcibly to face U.S. justice for criminal activity involving transportation and all types of things that narco-terrorists do. Then, as we go into the news cycle of the week, we start hearing the President mention the oil factor and the implications of that. There have been references to the Cuban security presence. There have been references to terrorist ties to Hezbollah. There have been references to the Iranians having activities. There are Russian advisors currently in Venezuela. So there are numerous points that really do not have a direct link to the narco-judicial effort, but certainly are within U.S. strategic interest. You would not want this festering in your hemisphere, on your back door. So can you help us really understand what those objectives were?

LTG. McMaster 27:59
Yeah, well, you know, this is where I think the administration gets, it gets like a grade of improve. How about communicating clearly what the objective is? And I think really what it is, based on all these statements, is kind of all of the above. I would put it under the heading of ensuring that Venezuela is no longer a host or a threat to the United States and our security interests in the hemisphere. That is the overall objective. There are certain components to that, and this is where now you have heard the administration talking about the behavior of the regime. We do not really care what regime is in power, as long as the behavior changes. And the behavior you hear about is everything you already mentioned, which is narcotics trafficking, being a platform for enemies and adversaries in the hemisphere, and the grievance associated with the seizure of infrastructure that was built with U.S. investment and denying profits to U.S. oil companies and so forth. And, of course, the subsidization of other hostile regimes with oil money and the cash flow from oil and narcotics. So those are all sub-objectives.

But I think the fundamentally flawed assumption that President Trump might be operating on is that he can get those outcomes without a change in the regime, and he is not going to get it. The reason is that there are limits to what you can achieve with coercive diplomacy. This is where President Trump has this dissonance between peace through strength, which you just saw with this operation, and an impulse toward retrenchment and really not getting involved in long-term efforts abroad, even in the near abroad here in the hemisphere. He tends to view these options through the lens of the searing experience of the Iraq War. In this way, he has inclinations that are quite similar to those of the Obama-Biden administrations.

The flaw in that thinking is that it is not Iraq. I think there is a misdiagnosis of the complications, the cost, and the length of the wars in Iraq and Afghanistan in terms of what caused them. I think what caused them, in large measure, was our short-term approach to long-term problems. There was a Vietnam-style wrong lesson of saying we just do not want to do that, just get the hell out. What we did not focus on was how to consolidate military gains and get to a sustainable political outcome consistent with what brought us to those wars to begin with.

I think what we are seeing in Venezuela may be a replication, actually on a larger scale, because Venezuela is a much larger country in terms of population, of the Obama mistake in Libya. What the Obama administration did in Libya, in its effort to avoid what it perceived as the mistakes of the George W. Bush administration in Iraq, actually exceeded those mistakes by affecting a change in the regime and then doing nothing to consolidate those gains into a sustainable political outcome. What did you have? You had a continued war in Libya. You had a continued threat of jihadist terrorism. You had a huge migration crisis that funneled through Libya into Europe.

So I think what we are going to see here is a failure of coercive diplomacy, and the President will face a difficult choice of what more do you do. If you look at the leaders in Venezuela and what they are doing right now, they are using essentially brown shirts, I think they are called the colectivos, these brigades of thugs, to go after anybody who might be sympathetic to getting Maduro the hell out of there. They are going through people’s phones. They are increasing the number of political prisoners. They have about 900 political prisoners in Venezuela now.

So we have to be clear about what we are demanding. We have to be clear about how we are creating a sense of urgency among officials in this government, many of whom I know are criminals, indicted criminals. We also have to be clear about what kind of punishment we are willing to mete out to achieve our objectives. For these inducements to work, you have to convince the leadership in Venezuela that you are more committed to that change in behavior than they are to continuing it. They have profited a hell of a lot from it, and Venezuelans are not going to be kind to them if they leave their positions, because they have victimized them. Since Chavez took over in 1999, Venezuelans have been living this hell. Since around 2006, the economy has contracted by about 80 percent. They have driven eight million Venezuelans out of the country, about one-third of the population.

So I think there is overconfidence in the ability to affect meaningful change in the nature of the government and its behavior through just coercive means, or what we might call forceful persuasion.

Philip 33:29
So thank you for that, and for our listeners, I should point out that, H.R., you’re an esteemed historian. While in the Army, you wrote a seminal book on the lessons of Vietnam, which wasn’t career enhancing for a while until it became so. You really do have a wonderful historical perspective. And if it’s not regime change that we’re after, that the President is after, and instead it’s trying to get to better outcomes with the existing political leadership and the existing military leadership, what tools are in the toolbox to do that? I presume economics, oil, political isolation, cutting off ties to some of the adversaries that we want booted out of the region, out of Venezuela.

LTG. McMaster 34:19
Yeah, absolutely. So my colleague, Stephen Coughlin, who’s a hoot, talks like Joe Pesci. I said Joe like he has, he’s from the Bronx. But he says, hey, authoritarian regimes really need five things to stay in power. The first thing you need is cash flow. So what you see is the administration going after that, right, from the narcotics cash flow and the oil cash flow. The second thing you need is security forces. I think this is what our agents on the ground are working on overtime to try to splinter those security forces and to get enough of them, who maybe don’t have the most blood on their hands and aren’t the most corrupt, to break away and then to be part of creating the security space you need for a political transition. Because really, these regimes don’t have to be that strong, they just have to be stronger than any organized opposition. The third thing you need is stories to tell your people. Hey, it’s the Yankees, it’s the gringos, they’re creating all these problems. It’s not us. You need me. You need us to save you, the Chavistas to save you. So you’ve got to counter that. This is where I think we should be a lot more active, in the informational domain and in the battleground of perception. The fourth thing you need is control over life choices. That’s what they’ve done with these criminalized patronage networks. If you have a job in Venezuela, it’s because the state kind of controls it. The cash is flowing down through these pyramid-type structures, and your livelihood is at risk. So you’re incentivized to stick with the regime, because that’s all you really know, even though you’re impoverished. And then the final thing is you need an international system that will sustain that authoritarian regime to some extent. As you alluded to, Philip, that’s exactly what they’re working on from the outside in, isolating Maduro from external sources of strength and support. So how will this play out? We don’t know, but I think it’s going to take a long time. We’re not going to see a quick change here. Sadly, the opposition is fragmented. I wish the President had not made the comment about María Corina Machado, like, hey, she’s not that popular. What we should be doing is helping to bring that opposition together and say, hey, play together like they did in the last election. They did that extremely well. What happened is the opposition got 70 to 80 percent of the vote, and they were able to expose that. So I think what’s missing, and this is why Marco Rubio, I mean, he can’t do everything. You need a National Security Council staff process to coordinate and integrate across the departments and agencies and develop a more coherent strategy and policy at this point. That’s really what’s needed. You see elements of it, everything I’m talking about is out there, but what I don’t see is how these are integrated and how they’ll be evaluated based on measures of effectiveness that would then alert you, hey, maybe this isn’t working, we have to bring other options to the President. I think that lack of clarity is hurting us at this moment.

Philip 37:36
So it sounds like a bleeding-out strategy. It sounds like you’re not anticipating a sustained military operation, the proverbial boots on the ground, or a buildup that’s going to make it very clear that the United States is coming with all of its military might, not just for a decapitation of a leader, but, you know, taking out.

LTG. McMaster 37:56
Expecting the change like in Grenada, you know, where we had about 10,000 troops in Grenada but were going against, you know, 1,500 Cubans. You had, in a very small country, Panama. Panama is a country about one-tenth the size of Venezuela in population, and it’s about one-twelfth the size of Venezuela in landmass, and that was an operation of 30,000 troops to displace Noriega. But importantly, those troops gave you the ability to conduct all those activities necessary to consolidate those gains, right, to reform the police forces, to create a new police force under new leadership, which, by the way, was attacked by the old Noriega crew and had to fight them off at the main police station, with one of my friends, Colonel Jim Steele, in there issuing weapons from the arms room and fighting them off, because he was advising the new police force. We had to revise the judiciary there with them, help them revise it themselves, put an election process in place. There was an election about a year later in Panama.

So what does that political path look like? What does that security path of transition look like? There’s a lot of talk about the economic path to transition, bringing oil companies in, but it all has to come together, because without the security reform, without the political change, you’re not going to get the right conditions for revitalization of the economy, and the oil economy in particular. Going back even further, the Dominican Republic, 1965, Operation Power Pack, another very effective intervention, partnering with significant Dominican forces on the ground. How many troops did we put into the Dominican Republic? Forty-two thousand, you know, in ’65.

So I think the President might choke on the price of that, in terms of a massive U.S. intervention that’s sufficient not only to depose the Maduro regime, but then to begin to set security conditions for security sector reform efforts and getting a path toward reform of the judiciary and reform of the political process, to really restore sovereignty to the Venezuelan people. Now the good news is Venezuela has a tradition of constitutional democracy, so really you’re just restoring the old constitution, but it would take a significant effort to do it. And I think they’ve got to tee up this option for the President, because I think he’s going to try everything short of that before he considers that more direct option.

Philip 40:35
So we just this morning woke up to the news that an oil tanker off the northern coast of the UK, between the UK and Iceland, was seized and taken control of by the United States military. That’s just one of the elements. We’re going to chase down their cash flow. You mentioned the cash flow. So speaking from a business perspective, I can’t imagine too many oil executives, with the possible exception of Chevron, who are still there and operating, wanting to take a 30-year view on the multibillion-dollar investment required to bring that oil infrastructure capability back up so that sometime 10 years from now you’re generating reliable profits and have a stable operating political environment to do that. So that’s going to be one very interesting element.

But now let’s move to China and Russia in particular. The Chinese have had oil-for-cash agreements with the Venezuelans. They had a delegation two days before the operation. Some of them were here in Mar-a-Lago right after, because of sensitivities around that. So what is going to be the calculus for senior leadership of the People’s Republic of China, Xi Jinping specifically, with this action that shows U.S. resolve, U.S. technical ability, and U.S. massive capabilities to execute on a very specific military operation, particularly on the heels of what we just saw with Midnight Hammer in Iran?

LTG. McMaster 42:24
I think what you’re going to see is China, Russia, and Cuba, as the local support there, working together to ensure that the U.S. fails in Venezuela and is unable to get a government in place that is friendly to the United States and welcoming to the vast Venezuelan diaspora to return and rebuild the country. So I think what you’re going to see is a sustained Russian effort to foil U.S. efforts in Venezuela, because this is tied to their broader competition with us. I wouldn’t be over the top on this, but Russia and China are at war with us now already. They really are at war with us right now, and they’re acting against us with hostile intent and trying to get away with as much as they can below the threshold that might elicit a concerted response from us. There’s a reason why the largest Russian embassy in the world is in Mexico City. It’s there because Russia wants to turn Mexico against us and use Mexico as a platform to subvert the United States. The reason China is trying to gain control of critical infrastructure and indebt countries in Latin America is really twofold. One is to displace U.S. influence not only in the Indo-Pacific but globally by creating new spheres of influence internationally. The other is to strengthen its exclusive grip on critical supply chains that it can use for coercive purposes, especially involving minerals, and also to address its major vulnerability from an energy perspective. This is a major geostrategic competition that’s playing out. The worst-case scenario is something we have to be concerned about, which is fragmentation in Venezuela and a sustained civil war in which the Russians, the Chinese, and the Cubans do everything they can to ensure that the U.S. fails to get a change in behavior, as we’re framing it now, meaning a change in the nature of the Venezuelan government such that it ceases its hostility to the United States and nations friendly to us in the hemisphere.

Philip 44:40
We’re going to open up the Q&A to our investors and friends who are participating, and H.R., I’ll share some of those questions with you, but let me get one rolling here. We’ve talked a little bit about Russia. We have an active war and conflict in Ukraine. Vladimir Putin is someone you spent a lot of time thinking about and trying to understand, what drives his motivations, and the advice you were able to give to the president kept the United States out of having to adjudicate a territorial invasion that ultimately happened later under a different administration and after the withdrawal from Afghanistan. So the same question I asked regarding Xi Jinping, how is Vladimir Putin viewing this now?

LTG. McMaster 45:37
You know, I think, I hope it’s given him pause. But really, what has emboldened Russia, I think, with the massive reinvasion of Ukraine in 2022, as you already alluded to, was the perception of weakness associated with the disastrous, what I would describe as a self-defeating, humiliating, and deadly withdrawal from Afghanistan in August of 2021. I think the overall lesson is that it is the perception of weakness that is provocative to this axis of aggressors. And what I think President Trump is facing now, again, which is much different from 2020 when he left office in 2021, is the degree to which this axis of aggressors has coalesced, largely based on their view that the West is weak, divided, and decadent. So I think what this raid shows is that we’re not weak, that we have the resolve to do things. Also, I think this raid, in combination with last year’s operation against the deep, buried nuclear sites in Iran on the back end of the IDF’s successful campaign, confirms that, hey, we’re not weak. But we are divided in their view. And, you know, the President’s comments about Denmark, you know, I mean, guys, I mean, Bill, stop scoring these own goals. The way you frame things, it all matters, because what we want to convey to China and Russia on the back end of this operation is, hey, we’re not weak, divided, and decadent. We’re unified. We’re unified on Ukraine as well. We’re unified on Taiwan and the Indo-Pacific. So anyway, I think there are some tremendous opportunities at this moment, Philip, because of the success of this operation. Again, the long-term prospects are not good. They’re going to be tough in Venezuela, but we could see it through if we want to, if we have the will to do it. But also, to show that we’re not divided, I think, is really important, because this axis of aggressors is actually quite weak at this moment, I believe. Russia’s economy is a disaster. Look at what’s going on in Iran. Their currency has utterly collapsed, the protests that are going on there. I was glad to see the President’s statement, hey, don’t go after the protesters, because they did set a record last year for the number of executions in Iran after the effective campaign against the regime and the nuclear and missile programs. And then, you know, they’re about to run out of water in Tehran. China has created huge vulnerabilities in their economy, in my view, in their race to surpass us. They have some coercive power over our economy, which was really stupid for us to give them. But I think the administration is working now to make those supply chains more resilient. I was really happy to see Secretary Bessent say, hey, we’re going to do this in two years. That’s kind of an American attitude on supply chain resilience. So, hey, we’re in this competition, and we need all hands on deck. So stop kicking Denmark in the ass. Let’s work together.

Philip 48:47
Friends, including some of our friends from that part of the world, on Denmark, in Denmark, Greenland, the Arctic. So what’s behind all of the rhetoric? Is it simply, is it? Why can’t we just have a friendly NATO transaction where we, the United States, supply a certain amount of personnel and capabilities in a treaty partnership with those in Greenland and Denmark? Why do you need to acquire it? Why buy the cow if you get the milk for free, so to speak.

LTG. McMaster 49:22
Yeah, it’s like 50,000 people, right? And so I think what is driving this in part, and this is, I think, a positive observation, is that as President Trump recognizes, even though his National Security Strategy was not as explicit as we were in 2017 about great power competition, he knows he’s facing China and Russia, these revanchist powers on the Eurasian landmass. The part of the globe that is immensely strategically important is that connection through the Arctic. He’s looking at the map. He’s a real estate guy. It’s like, hey, that real estate is pretty important to our defense. And also, he has this agenda for hemispheric security, for homeland security, missile defense. You can’t have effective missile defense unless you defend against missiles coming over from Russia, over the Arctic, for example. He’s seen the first transnavigation of a Chinese commercial ship over the Arctic in the last couple of months, and the so-called exploration they’re doing up there. So I think he understands the importance of it.

But with so many things with President Trump, what he wants is great. Reciprocity in trade, deregulation, economic growth, energy dominance, burden sharing in defense, securing the border, let’s do it. That’s all great. But how he goes about it can be counterproductive. If I had his ear for a minute, I would say, hey, you’re big on sovereignty, which he is. If you go back to the UN speech we drafted for him in 2017, that was the theme. We respect national sovereignty, especially nations that respect the sovereignty of their people. So if you’re concerned about Greenland, you’re concerned about the subversion of Greenland’s sovereignty and Denmark’s sovereignty. Let’s be on the side of that. As you said, set the security conditions by going back to a Cold War–era footprint in Greenland and Iceland, for example, or in Alaska, for Arctic security.

And if you’re concerned about the Panama Canal, be on the side of Panamanian sovereignty. You’ve got a friendly government in Panama. Say, hey, we’re concerned that Chinese companies that are not going to respect your sovereignty are in control of this strategic location. We’re on the side of Panama, instead of saying we’re just going to take it over. So a lot of this is really about the messaging, which I think can be counterproductive. A lot of it is fueled, in part, by a nativist and neo-isolationist impulse. You might say, how does that work? How can you be isolationist, anti-interventionist, and yet say we might have a military option for Greenland? The reason is that it’s tied to hemispheric and homeland defense.

There are a number of people around the President, and everybody kind of knows who they are, who are actually more isolationist than him but also more interventionist than him, because they frame everything through hemispheric defense. They have this nostalgia, a misinterpretation of the John Quincy Adams speech. Think Quincy Institute, think Defense Priorities, think how the Heritage Foundation has been taken over in large measure by people with this worldview. I think it’s a warped and old-fashioned worldview, because the great moats of the Pacific and the Atlantic don’t do for us what they used to do in the age of hypersonic missiles, cyber warfare, and everything else. So that’s where a lot of this comes from, that hemispheric priority. You can see the theme in the National Security Strategy, but essentially this interventionism grows out of a strain of nativism and retrenchment.

Philip 53:39
H.R., we have literally three minutes, and then I have to hand this over to Lisa, who’s going to wrap up in three minutes. Are you fundamentally more optimistic, less optimistic, or no change in your baseline about the state of American interests and the state of strategic deterrence vis-à-vis our competitors and adversaries today, versus when you were in office several years ago?

LTG. McMaster 54:09
You know, I’m more optimistic that we’re now on a better path than we were on several years ago. I’m also more pessimistic because I do think the axis of aggressors is still emboldened based on the perception of our weakness. They base that perception, really, on their belief that we are, again, weak, decadent, and divided within the alliance, which I mentioned, but also divided within our own society. So it’s the vitriolic nature of our political discourse, the tendency of political parties to oppose anything, even good ideas. You know, get rid of Maduro, how could that be bad, right, given what this guy’s done? They think those divisions are indicative of our imminent demise, when in fact I’m optimistic because I believe our democracies are more resilient. I believe these authoritarian regimes are actually quite brittle. And so I think we’re going to win this competition. I begin seeing our society mobilized because we recognize the problems associated with defense. This is a big shift. I think after the massive reinvasion of Ukraine, before that we tended to see a soft-headed cosmopolitanism take over people’s view of the world. They thought we were all just going to get along as an international community. And so when I see companies like SHIELD mobilizing capital to strengthen our nation from a defense perspective, but also an economic perspective, and to maintain our competitive advantages, I think there is no substitute for the advantages of our free-market economy and our unbridled entrepreneurship. So I’m optimistic, but I think we have to get serious and stay serious about investing in defense, making our supply chains more resilient, invigorating our defense industrial base in particular, and regaining some of the strategic depth that is necessary to convince your enemy. As you alluded to at the beginning, Phil, this is a lot about deterrence. It’s a lot cheaper to prevent a war than to have to fight one, but we have to convince our adversaries that we’re capable of defending ourselves, that we’re capable of conducting operations at sufficient scale and for ample duration to deny them the ability to accomplish their objectives through the use of force. And this entails military capabilities, hard power, but it also entails competing below the threshold of a major conflict in the cognitive domain and in the economic domain. But I think we’re up to it. We’re up to it.

Philip 56:43
That’s very encouraging. It’s been a fascinating discussion. Thank you so much. This is the beginning of a dialogue for all of our friends at SHIELD and our investors. We have these types of discussions. There were some questions I was not able to get to. We will answer them and send you written responses in coordination with General McMaster. H.R., thank you so much. You’re a star, so we appreciate it.

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Transcript

Maggie 00:19
In this episode of the Mission Matters podcast, we’re joined by John Serafini, the CEO and founder of Hawkeye 360 and a partner at Shield Capital. Hawkeye 360 operates a constellation of more than 30 satellites that detect and analyze radio frequency signals from space, providing insights into activities that can’t be seen with traditional imagery alone.

David 01:13
Radio frequency, or RF for shorthand, is what we use to communicate with technologies like Wi-Fi, AM and FM radio, Bluetooth, LTE, and more. Anytime someone communicates using one of these technologies, a Hawkeye 360 satellite can detect their location, which provides signal intelligence for a wide range of mission sets useful to the intelligence community, the military, law enforcement, and non-government organizations, among others.

Maggie 01:45
For instance, it can help a customer monitor maritime activity like illegal fishing, or help a law enforcement agency gain visibility into trafficking routes or cross-border movements used by illicit networks like terrorists and narcotics smugglers. These actors may rely on tools like push-to-talk radios and satellite phones but can be difficult to detect using satellite imagery alone. Hawkeye 360—

David 02:11
—is the first truly scaled startup we’ve had on the Mission Matters podcast since it was founded in 2015. Hawkeye 360 has launched more than 30 satellites, achieved nine figures of annual recurring revenue from government customers around the world, and reached profitability. They’ve raised more than $400 million and grown to over 200 employees.

Maggie 02:35
John has a long history in the national security industry. After graduating from West Point, he served as an Airborne Ranger-qualified U.S. Army infantry officer for several years. He then received his MBA from Harvard Business School and joined the investment team at Allied Minds, a deep tech venture firm, before starting Hawkeye 360 in 2015.

David 02:56
I’ve had the pleasure of working with John for several years at Shield Capital on our space portfolio, and he is absolutely one of the foremost experts on how to build and scale enduring space startups. In this conversation, we dive into what it really takes to scale a space hardware company, how John evaluates space startups as an investor, the trials and tribulations of working in classified environments and with foreign partners, and along the way, John delivers some hot takes on the current state of the industry.

Maggie 03:26
Now on to the conversation. John, you personally have spent a lot of time building companies, investing in companies, and scaling companies. What would you say is the best piece of advice you’ve received over the years about building a company like Hawkeye?

John 03:45
I’ve been blessed with a wonderful chairman at Hawkeye 360, Mark Spoto from Razor’s Edge. They led our Series A round back in 2017. Mark’s been a great partner to me, and at the time, it was probably more of a flippant remark from his own thinking, but it really stuck with me. I was having a conversation with him a few years after we started the company about what metrics he really wanted me to focus on reporting to the board and what would be our quote, unquote KPIs at the time. I remember thinking through revenue or ARR or ACV, bookings and backlog, et cetera. He kind of stopped me, and again, he’d probably say it was a flippant remark, but to me, it stuck. He said, “John, just build a serious company. Just build a serious company.”

I think that was a really great piece of advice because it forced me to recognize that we’re not building widgets. We’re not building some nameless piece of enterprise software to be deployed by some nameless enterprise entity in the middle of nowhere. We’re building data and data analytics products that are delivered to the warfighter, to the intelligence analyst, to decision-makers who are operating in very difficult circumstances with no margin for error. Accordingly, our technology has to work the first time. It has to work every time. That mindset has to permeate the entirety of the organization and filter up to the KPIs that we care about.

From that small piece of advice grew my own personal thesis on how to build a real, serious company in the defense technology ecosystem. The first thing is you have to be trusted. You have to be trustworthy. This is a hard thing for young companies to understand. If you’re going to sell mission-critical functionality to customers like NGA, NRO, CIA, combatant commands, or their international equivalents, you have to be trusted. You have to do what you say you’re going to do. There can’t be any gap between what your capabilities are and what you claim you’re capable of doing. Customers have to believe not only in you as the CEO and your management team, but also in the integrity of your product.

The second thing is you have to be humble. I don’t mean humility in the traditional sense. I mean recognizing that you are one small component of many different products, services, and technologies supporting the warfighter or the intelligence analyst. They operate within complex systems that are often beyond your full understanding, systems you have to fit into, be compatible with, and interoperate with. Your technology has to be ruggedized. It has to be cyber-hardened. It has to be proverbially camouflaged to work in very austere and difficult environments. I like to say that the sun does not revolve around your startup. The sun revolves around the warfighter and the customer, and your technology must fit into the complexity of the systems they operate.

The third, and hardest for many peer companies to understand, is that you have to be sustainable. To me, that means you have to be profitable, and you can’t be dependent on one or two, or just one, source of revenue or customers. You need high-quality margins, the ability to attract sustainable and consistent capital, and a diverse set of inbound revenue to reduce exposure to any single customer or source. That’s difficult for startup companies to grasp.

When Mark said to me, “You need to build a serious company, a mature company, a thoughtful company,” it meant that we had to be trustworthy, we had to be humble, and we had to be sustainable.

Maggie 08:16
John, what’s a company that you admire, that you think embodies a lot of the principles of being serious and sustainable?

John 08:25
I think, I mean, it’s easy to say a company like SpaceX because they’ve accomplished so much in such a short period of time, but they’ve also had an ungodly amount of capital to grow with. At the same time, I appreciate that their growth has not been linear. Their first couple of years were really challenging, and they were true pioneers. So it’s easy to say SpaceX, but I also have a lot of respect for Peter Beck and what he has built at Rocket Lab. Not only did he build a national security oriented space startup company, but he’s been able to build it out of New Zealand, which is not exactly known as a bastion of defense technologies or a place with a huge local government requirements set for him to naturally fulfill. He’s had to build a company that not only has real functionality that customers can depend upon, but can also export that capability to the United States and other advanced economies where space based launch and other space based capabilities are in demand. None of that is easy.

We take for granted building space related companies today, which is a totally different environment from building a space company ten years ago when he got started. Back then, there were probably five or so venture capital firms that would take him seriously in a seed or Series A round, and even in a Series B round. Today, there are dozens, if not a hundred, that would take that meeting and sincerely consider financing his round. I’m also impressed by how he thinks ahead and how the organization thinks ahead. They’ve not only achieved a great amount of scale in the launch business, which is an extremely difficult business to be in and almost impossible when you’re competing against SpaceX and the scale they have, but he’s also been able to use that initial success in launch to move into other complementary business areas. That includes building spacecraft, building parts of the supply chain, and leveraging access to customers to contemplate becoming a constellation operator in other areas. All of these are complementary to his larger business thesis.

With a relatively small amount of capital and a public listing, albeit via a SPAC, which I think was a challenging path, and one where he could have IPO’d the company the traditional way, he’s built a lot in a relatively short period of time. So I tip my hat to Peter. Of course, I also tip my hat to SpaceX, to Gwynne and Elon, and to what they’ve collectively built. I think both of those companies are great exemplars for us to follow.

David 11:23
Yeah, John, I think that’s a great point on Rocket Lab and SpaceX. They’re certainly preeminent companies in the space economy and may be responsible for a lot of the progress that we’ve seen. You also have to mention that both have been able to orient themselves around the national security environment. You’ve been working in and around government for over two decades, both as an Army officer and now as an entrepreneur. Hawkeye 360 coincidentally started in 2015, the same year that the Defense Innovation Unit, then DIUx, got started. I’m curious whether it’s easier now to work with the Department of Defense and the intelligence community relative to when you started, and if there’s anything you’d like to impress upon other founders as they think about partnering with the department and the broader national security environment.

John 12:21
Well, to answer the first part, which is to compare and contrast the environment in 2015–2017, when we started Hawkeye, versus today. I actually started defense tech investing and company building all the way back in the 2010 timeframe. I could even tell you stories from the 2008 timeframe. Back then, defense technology as a category didn’t really exist. It was about guards, guns, and gates. That changed as commercialization of C4ISR became a thing, particularly with the advent of cybersecurity. When cyber became an investable technology area, people could put capital into what they perceived as enterprise software, see it adopted early by government entities that needed protection, and then use those bona fides to scale into the broader enterprise and into highly regulated industries. From my viewpoint, that was the beginning of the modern defense technology experience.

When Hawkeye was getting started, I would characterize the mindset as getting companies drunk on RDT&E. What I mean by that is there were a lot of RDT&E dollars—research, development, testing, and evaluation capital—sloshing around the system. Pentagon leaders and intelligence community leaders who wanted commercialization equated innovation and moving fast with simply putting more RDT&E capital into the system and seeing what would happen. Ultimately, though, that just created an ecosystem where companies were jumping from one SBIR to an In-Q-Tel work program to a DIU contract and back again. They were never incentivized or provided the capital necessary to reach production contracts, where you could actually take advantage of the value created at TRLs three, four, and five, do the productization at six, seven, and eight, and then deploy that technology to actually help the warfighter.

I like to say that back then you had a bunch of startups getting drunk on RDT&E work, skipping around, and not creating meaningful value. The naysayers would point to this and say, why are we funding all this work to get a company to TRL six, only for them to then need more money, pivot, lose an investor, or simply not be sustainable? What’s the point of the defense ecosystem, the intelligence apparatus, and the national security community starting to depend on these technologies if we can’t trust that companies will make it through the so-called valley of death?

That was the environment from roughly 2015 through 2019 or 2020. There was also a strong mindset that the U.S. government should not be in the business of picking winners. As companies graduated out of the RDT&E phase, even when there were clearly capable firms, the government was hesitant to say, this is the one we need to scale, provide a production contract, and put into a program of record to support deployment to the warfighter community. No one wanted to make that call.

I saw some change during the Biden administration. The overarching philosophy became something like “buy what we can and build what we must.” I think there was a lot of lip service paid to that, but things got much better under the current Trump administration. People really got religion. It wasn’t just a mantra anymore. It became buy what we can, buy what we can, buy what we can. If it’s out there, affordable, capable, and the warfighter wants it, buy it, scale it, and get it to the warfighter as fast as possible. There were no caveats or excessive requirements placed on companies, and far less policy friction that made it difficult to achieve a program of record. It was simply, if you can be successful, we’re going to drop the safeguards and guardrails and put capital behind you so you can create value for the warfighter. That has been exciting.

Today, I think we’re in a golden age of defense tech opportunity, but it comes with a real “peeing in the pool” risk. As the community opens its arms and says we’re going to work with commercial at real scale, if one company screws up, it contaminates the pool for everyone else. It makes it much harder for CEOs and companies doing the right thing and creating real value to succeed. If someone lies, forgets their humility, fails to recognize that the sun revolves around the warfighter, or can’t be sustainable and disappears, the U.S. government won’t trust companies with programs of record if they might not be there a month from now. Best behavior across the entire ecosystem is necessary for all of us to succeed.

So that’s my answer. Back then, it was extremely hard to scale and very difficult to get through the valley of death. Companies made bad decisions, like becoming services providers, just to survive, because there weren’t viable programs of record to allow linear scaling. Today, it’s a very different environment. With a more aggressive and interested customer base comes access to more capital. What we’re really missing now, and I’m sure we’ll talk about this later, is exit opportunities, particularly in space. That has always been the challenge for commercial space: a lack of exits. That’s a natural consequence of having a smaller base of strategic acquirers, and it’s something we’ll have to work through as an industry to be successful long term.

David 18:34
Well, John, maybe we get into it. I know we definitely want to bring things up to the present day with Hawkeye 360 and the success you’ve had working with the national security community. Although I just can’t help myself. We could be in a golden age of defense technology and space technology, or we might end up in a bit of a golden pool. We’ll see how the good actors operate to make that the case. But maybe just talking about the SPACs of 2020 and 2021, right, when we had zero interest rates and money was just flowing from the government into people’s pocketbooks, creating a bit of a market frenzy. A couple of years later, after a bit of a fallow period, we’re seeing a real uptick in the marketplace. One of our portfolio companies, Apex, has raised over a billion dollars. Two space companies raised at three billion. There seems to be some significant momentum coming forward. And of course, how could I forget SpaceX signaling that they may go public in the next 12 to 18 months at one and a half trillion, with a T. So what can this current generation of startups learn from their predecessors who SPAC’d, including Rocket Lab in 2020 and 2021, and how should they think about ensuring they don’t make the same mistakes?

John 20:03
Yeah, so there is a lot of froth in the system. I would point out that you can probably make a case that SpaceX’s valuation is defensible based on cash flows. They have very meaningful cash flows and very meaningful revenue, unlike many of the other companies we’re talking about. Going back to point number three I made earlier, you have to be sustainable. Part of being sustainable is raising capital on the right terms that you can grow into and that allow you to make your investors money and your employees money without setting expectations that are simply unachievable, particularly once the larger macro environment changes.

Some companies, and I won’t point to the ones you mentioned because we have a financial interest in one of them and think very highly of the company, are raising capital simply because it’s available. At some point it becomes, well, if I raise at this level, you need to raise above me to prove a point, and so on. That becomes a tower of cards that’s going to fall down at some point. I think there was some of that in the lead-up to the SPAC boom in 2020 and 2021, where some of these space companies had raised private rounds they were never going to be able to grow beyond just by accessing private markets. They didn’t have access to the scalable amount of capital necessary to build their constellations. They had to start thinking outside the box, and for them, SPAC vehicles enabled a relatively painless pathway to the public markets, where they could market themselves on the basis of forward-looking projections.

That’s no longer the case, but it was at the time. It became an antidote for some of the sins of the past, in a way, allowing them to preserve an up round while getting a public listing and having everyone, quote unquote, make money on paper, at least for a short period of time. Before the 2020–2021 SPAC boom, the only really well-known SPAC success story was Burger King back in the 1980s. It’s just not a sustainable vehicle for accessing the public markets, and you wear that stink as a SPAC company for a long time. No one associates Burger King with that anymore, but companies that SPAC’d and are still around have seen depressed share prices because of their origins, and that’s been very difficult for them to shake.

Probably the two exceptions in the space industry are AST SpaceMobile and their friends at Rocket Lab, who frankly could have IPO’d the regular way, but I think they saw the ease of the SPAC transaction as very attractive at the time. To me, the SPAC boom is indicative of the fact that accessing the public markets is, in some ways, mutually exclusive with too many peer companies doing the same thing. The more companies that access the public markets, the higher the likelihood that overall quality goes down. You get lower-quality companies and less scarcity value on the public exchange for public-style investors.

As more companies SPAC’d, and as more companies contemplate going public in the future, I think it has a marginally deleterious effect on companies that are already public, as well as on those that want to go public later. That’s why you saw the SPAC craze peter out relatively quickly. Some companies that clearly were not prepared for the public markets took that route in late 2021, and that’s when the PIPE market dried up, redemption rates hit 90 percent on SPAC dollars, and it all went downhill in a hurry.

I am concerned about that in today’s environment as well. As companies that may be lower on the quality curve contemplate going public again, and we’ll take SpaceX out of this conversation because it’s a very special case, how are they going to perform in the public markets? If they perform poorly, and I won’t point fingers, what does that do to the companies behind them and their ability to IPO on high-quality terms? And what does it do to their ability to trade sustainably?

Ultimately, it goes back to point number three. If you’re going to sell defense technology companies and applications that matter, you have to be stable. You have to be sustainable. If your stock price looks like a zigzag, going up and down every other day because there’s no basis for the market to value you, no cash flows for the market to associate a fair value with, that’s a problem. That leads you to being the kind of company that could be fly-by-night and gone the next day. You need slow, linear, solid growth up and to the right over time. That’s what I’m trying to solve for at Hawkeye: how we continue to grow by accessing the types of capital available to us in a sustainable manner, for our company, our shareholders, and our customers.

Maggie 25:40
I want to turn back the clock 10 years or so, back to the early days of Hawkeye 360 specifically. I want to ask about how Hawkeye 360 was really formed. I know you were previously an investor at Allied Minds, which focused on investing in companies spinning out technology from academic or federal labs, and that the initial technology for Hawkeye 360 came out of a lab at Virginia Tech. Could you tell us a little bit about the story of taking a piece of IP and turning it into a scalable business, and what some of the challenges and opportunities are when building a company this way?

John 26:22
I had a great partner, a guy named Dr. Charles Clancy. Charles and I had built two other companies together, one called Federated Wireless and another called Optia Labs, that were doing very well in the 2015–2016 timeframe. Charles ran the Hume Center for National Security and Technology, which was a University Affiliated Research Center at Virginia Tech. I did a good amount of classified work on behalf of the National Reconnaissance Office. Today, Charles is one of the senior leaders at MITRE. I believe he’s the CTO and is doing amazing things for our country.

Charles had this idea, and there were two other gentlemen we worked with who helped found the company at the time, one named Christa May and another named Dr. Bob McGuire. The four of us came up with this concept. Ultimately, if you can take pictures from space, a company like DigitalGlobe at the time, now Maxar and since renamed again, was taking pictures commercially, as was Planet, which had just gotten started, and BlackSky, which hadn’t even been around yet. If you can get a license to image from space, whether electro-optical or synthetic aperture radar, and sell that to government and commercial customers, why can’t you also do signals intelligence, which is another highly valued modality of intelligence that can be gathered from space?

From my simple viewpoint, there are three interesting things you can do from a government perspective in space. You can take pictures, you can communicate, both of which have long since been commercialized, and you can analyze signals. We had been doing that for decades, but it had never been commercialized in the way communications and imagery had been. We saw an opportunity to operate in a white space that was unique. We could create space vehicles, satellites that were relatively inexpensive, and this aligned well with SpaceX initiating its transporter missions, where rocket launches became relatively cost effective. That, in turn, began the democratization of low Earth orbit, which previously just wasn’t available because launch capacity at reasonable prices didn’t exist.

We could build satellites relatively cheaply, get them on orbit relatively cheaply, and as long as the regulatory environment was conducive and the stakeholder community was interested, meaning customers across the defense, intelligence, and national security ecosystem, this made a lot of sense for us to pursue. It took us a while to build advocacy, particularly in the intelligence community, and to make sure people were on board with a regulatory environment that would support commercial signals intelligence. We got there over time. It wasn’t immediate. It really was pushing a rock up a hill for a long period of time.

That effort was coincident with our first launch. We got our first satellites on orbit at the end of 2017, early 2018. They were commissioned, and we became truly operational around the 2020–2021 timeframe, when we had enough clusters on orbit to drive down revisit rates. That was when we started to see real adoption, advocacy, and interest from the broader stakeholder community. It took time to build that engagement base. That doesn’t happen overnight, and it’s not just about working with customers. It’s the entire stakeholder environment. It’s engaging the executive branch. It’s spending real time on Capitol Hill advocating for your equities. It’s working closely with the customer base. There’s a whole ecosystem of stakeholders whose interests have to be understood and addressed to make something like this work.

Maggie 30:11
Speaking of the customer base, I know that unlike the vast majority of startups out there, most of the work that Hawkeye does is in the classified space. How can early-stage startups even get started working with classified customers like the intelligence community, and what are some of the technical and operational hurdles you’ve had to navigate to work with those kinds of customers?

John 30:36
Well, part of our value proposition, Maggie, is that we own and operate a constellation of satellites that are ours, right, and we’ve used over $400 million to build them. They’re inherently commercial assets, meaning that the data we collect is inherently commercial and shareable. Yes, we have to get ITAR licenses to be able to sell internationally to our foreign customers, but inside the U.S., what had previously been a highly restricted group of people who had access to signals intelligence data coming from national systems, we could provide our Hawkeye shareable data to them and everyone else inside the U.S. government. Everyone else is a U.S. citizen, and our allies can access it with the appropriate ITAR licenses.

So we do engage in the classified environment because our customers have a lot of classified equities that have to be taken into consideration, and there are requirements and certain information about what they want us to perform that can only be shared in the classified environment. But what we actually produce, the data and the data analytics, nine times out of ten, is an unclassified, totally shareable work product that is sold on an exceptionally high gross margin basis. So that’s the reality of what we do.

To answer your question, though, we did start needing to do a lot of work in the classified environment, and in my viewpoint, it’s exceptionally difficult to build technologies, products, or services that are going to serve the classified environment if you’re not a practitioner. If you’re some guy waking up on an arbitrary Tuesday in Silicon Valley who’s never served, never worked inside the classified environment, doesn’t have a clearance, doesn’t understand the requirements, and thinks you can hang out with your dog in your Silicon Valley garage and come up with some new classified technology that practitioners are going to immediately adopt and say, “This is the greatest thing ever,” you’re just wrong.

You can’t put yourself, the warfighter, or your investors in a situation where you’re trying to push something that might make sense to you, something you came up with in your garage, onto the requirements or conditions of a classified customer, because they’re just going to reject it. It’s going to be a waste of capital and a waste of time. Yet we see this quite a bit, where companies that don’t understand the environment under which these operators are conducting missions try to bring technologies they think will work in the classified environment, but they just don’t know. They don’t have clearances, and they don’t understand the unique circumstances and missions these folks are working under.

So I think the first answer is that you have to be taken seriously by being a practitioner. Ultimately, if you don’t have a clearance yourself, I think it’s really difficult to try to build a capability that will be used by those in the cleared environment. Obviously, if what you’re building is valuable, customers are going to come find you. Probably the best meeting place is In-Q-Tel. If you can get In-Q-Tel to be an intermediary to help vet your technology, match it against classified users, and help secure some kind of work program by which you can further develop and productize your capability and then deliver it to customers who might consider it, that’s a good mechanism. It’s been valuable for many, many companies, particularly those that Shield works with.

But outside of having that kind of intermediary, you can’t expect that there are customers waking up thinking, “Oh, I’ve got to go find the next commercial thing that’s going to solve my problems, and I’m going to give them an FCL so they can have unfettered access to our nation’s classified apparatus.” It doesn’t work that way, and folks need to temper their expectations if that’s what they think will occur.

David 34:28
Yeah, John, that’s great. And I think one of the areas this really boils down to is trust. In-Q-Tel, the investment arm of the Central Intelligence Agency, is certainly a great way to broker trust with the end customer. One other area that’s often talked about, or at least highlighted, especially with some of our other startups, is working with defense primes. For a lot of people, they get a really bad rap. They’re going to steal your intellectual property, they’re going to move slowly, they’re going to be a challenging partner, but it seems like you’ve done a really good job partnering with them. For other startup founders, how would you coach them in thinking about engaging with the defense primes?

John 35:13
People like to use the primes, like a Lockheed or a Northrop, as some kind of proverbial whipping child that they point to as the source of all evils. And the case of the matter is, yes, they move slower. Yes, they have different incentive structures. But ultimately, what they build works. There’s a reason why the M1A2 Abrams tank works like it does. Now, compare that against other countries and their defense industrial base. They may cut corners. They may not have the quality and QA/QC emphasis that ours does, and they may not be anywhere near as effective on the battlefield as the capabilities that we deliver. So what we have to do is find a way to marry the defense industrial base, who move slow and don’t innovate very well but build stuff that works and can be trusted to work in extreme conditions on the battlefield, with the left-hand side, the Silicon Valley–esque mentality where we’re going to leverage innovation, move fast, break things, and leverage private capital and intellectual property to create new functionality. We have to marry that together, taking interesting ideas and creating them in such a way that they can be trusted to work the first time and every time. Again, this goes back to taking care of the warfighter. They need a ruggedized piece of technology that is actually going to work. This isn’t nameless widgets that we’re building for some nameless enterprise customer. So I look at defense industrial base partners as phenomenal investors and phenomenal partners for building better productized capabilities that I can deliver to meet the customer’s needs. The defense industrial base has been working with the warfighter for decades, 50-plus years. They understand the requirements, the missions, the restrictions, and what it’s like to be on the battlefield. That company coming out of Silicon Valley does not. Maybe they’ve got a couple of veterans, maybe they’ve done some work in the past, maybe they’ve been practitioners, but they don’t understand it to the extent that the defense industrial base does. So how do you take the best of the defense industrial base and marry it with the move-fast, innovate-quickly mentality of Silicon Valley? I think part of the rationale is having those defense industrial base entities invest in your companies. For each of our financing rounds, all eight institutional financing rounds that we’ve done, just about all of them included a strategic partner. Some of them led those financings. Raytheon led our A3 round. Airbus led our B round. Leidos and Jacobs were meaningful investors in our C and D financings. We had Lockheed invest materially in our D1 round, and they’ve all been wonderful partners to work with. The idea that these defense industrial base companies wake up wanting to steal some arbitrary startup’s intellectual property and people is asinine. That’s just not how they work. They wake up wanting to take care of the equities of the warfighter and the American public, just as much as this new defense technology company ecosystem does as well. So I’ve taken the perspective that they’re not competitors. To me, they’re not the boogeyman. They’re good people. They know how to build great systems, and if I work with them, they can probably get my technology to the warfighter so I can actually create value faster, better, and stronger than if I tried to do it myself. I would say that strategy has worked for Hawkeye. It’s worked for other companies that we’ve seen replicate it. Awesome.

David 38:52
Well, just for our audience members, John, you highlighted getting an FCL, which stands for facility clearance, and that allows you to do classified work. Another acronym is ITAR, the International Traffic in Arms Regulations, which is the State Department’s program to protect sensitive technology from getting into the hands of our adversaries. For sensitive tech like the stuff that Hawkeye is building, you actually have to get licenses to work with international partners. But what would typically be an impediment or a massive hurdle, you’ve used and gotten through, and now you work with a lot of our allied partners and sell to them. So maybe you can talk a little bit about what that process has been like to allow you to take ostensibly sensitive technology and sell it to our foreign partners, not through something like foreign military sales, but actually going direct to them to provide the type of service and data that Hawkeye 360 uniquely collects.

John 40:00
When I was growing Hawkeye in its incubation stage, one of the things we heard a lot from potential customers and stakeholders was, “Don’t be a ward of the state,” meaning don’t create your company such that it’s highly correlated to the U.S. government purchasing it, because if the U.S. government stops, it goes away. You can’t put the government in that kind of position. Somehow that lesson has been forgotten along the way, and now you’ve got this whole crop of single-use technology companies that, should the U.S. government stop buying certain types of functionality from the defense tech ecosystem, are just going to fall away in a hurry. At the time, if we had architected ourselves to be wards of the state, we would never have gotten dollar one in revenue because we would have been pariahs. By virtue of showing that we could be sustainable outside of government anchor customers, I had to demonstrate that there was a diversity of customers for us. Not wanting to really focus on commercial industry at the time, and I still think it’s not the right area for us to focus, I went naturally to the international markets, and that was a great decision for us. In 2018 and 2019, we were fortunate to pick up a couple of real, meaningful anchor customers early on who wanted access to commercial signals intelligence because they’d never had it before. Some of them might have had rudimentary organic SIGINT overhead capabilities, but they weren’t sophisticated, and they were excited to get access to new forms of overhead signals intelligence. They were willing to spend significant amounts of money and pay a premium on pricing in order to do so, and that’s been a meaningful achievement for our company. I’m very proud of the fact that 50 percent of our revenue comes from U.S. government sources across a diaspora of different agencies and customer types inside the U.S. government. Similarly, there are dozens of customers for Hawkeye on the international side. Recognizing that it’s not easy to do this when you’re ITAR controlled, you have to get licenses, technical assistance agreements, and DSP-5s to be able to market your technology to international customers. You’re certainly at a disadvantage when you’re competing against international entities that can market ITAR-free capabilities and will do so. But the diversity benefit, and being able to command what I would call premium pricing on the international side, is rewarded with very loyal customers. What we’ve found is customers that are very sticky and, in particular, are willing to sign up for longer contract terms than on the U.S. government side. Ultimately, our business is kind of bifurcated. You’ve got U.S. government customers across a number of different buying entities, which tends to be shorter term with very quick turnaround. The sales cycle is literally negligible. It could be hours before we’re on contract, on requirement. On the international side, it’s a longer-term sales cycle. When you sell something to a country like the Philippines, for example, it takes a long time to manage that sales process. It’s not exactly linear, especially for an American company, but the contracts tend to be longer and the pricing tends to be better. It’s an interesting dynamic between the two, and having that diversity in our revenue base has really helped us.

Maggie 43:25
Hawkeye is definitely the most mature startup that we’ve had on this podcast. I know from some other interviews you’ve done that you’re at nine figures in revenue and have several hundred employees. I really want to spend some time talking about what it actually takes to scale a defense tech hardware company in a sustainable way. One of the first questions is, what were some of the unexpected challenges you faced in scaling up your technology, going from that first cluster that you launched to the twelfth cluster you launched earlier this year?

John 43:59
As I mentioned earlier, in 2015 and even into 2020, the number of capital providers for defense technology and space technology was negligible. We are talking about maybe a dozen by the 2020 timeframe. Finding people who were willing to do a Series B round was hard, but it was especially hard for a space technology company in the 2017 timeframe. Being able to go into that Series B round having taken all the technology risk off the table was really challenging as well. If you are going to be a space technology company, the only legitimate way to show that the technology risk is off the table by the time you do your Series B, which should always be the goal, is by having space heritage, putting assets into space, and making sure they work correctly over a long period of time. Today, you are seeing companies raising exorbitant valuations in Series A, Series B, and even Series C rounds without having much space heritage to support those claims, and I think that is a challenge. That dynamic did not exist seven or eight years ago.

We had to think very thoughtfully about how we were going to de-risk each component of our technology architecture. For us, that architecture is pretty complex. You are talking about a space component, the sensor that actually collects the data, which is flying in a collection of three satellites. You have to showcase three assets working in harmony to geolocate a signal from 550 to 600 kilometers in space. You also have to demonstrate the processing of that data, which is entirely complex, including the geolocation, the analysis, and the conversion of that data into something actionable. There is a tremendous amount of different types of intellectual property that has to be proven across the entire continuum of that technology set. It was not linear for us to simply check a box and say it was done and move on to financing. That was a hard thing to work through.

When I think back on what I learned, there are four things that really helped us. The first was starting with a base of employees that was right-sized, made up of thoughtful, mature individuals who were previous practitioners and who deeply understood the technology. Just as importantly, they understood the requirements and the environment the customer was operating in. You cannot have daylight between what you are building and what the customer needs. If you are trying to invent, in your Silicon Valley garage, what you think the warfighter needs and it is not aligned with the reality of what that warfighter actually wants, that is a real challenge. I use warfighter here as a proverbial stand-in for the broader U.S. government customer. Bridging that gap is very difficult, especially if you are trying to get to program-of-record type contracts that ultimately make the entire effort worthwhile. So the first focus was having a small cadre of committed, thoughtful practitioners.

The second was being very careful not to get over our skis and being thoughtful about how much overhead we took on at each phase of the company’s life. I have a just-in-time resourcing mentality. As we achieve milestones with customer X, Y, or Z, or technology milestones A, B, and C, then we take on additional overhead. Then we add headcount, then we open an office, and so on. You do not do it beforehand. A lot of companies get into trouble by growing overhead too fast, and then they find themselves having to reverse course and do reductions in force, which is painful. I never wanted to be in that situation.

The third was the good housekeeping of having a thoughtful fundraising plan and knowing exactly which milestones you need to achieve to unlock the next tranche of capital. That means engaging with a good cadre of investors who are waiting for you to hit those milestones and then actually hitting them on the timeline you told investors you would. Nothing generates investor interest more than someone doing exactly what they said they would do. Every investor should have a logbook that says, when this company comes to me for their Series A, I will look back and ask whether, when they were raising their seed, they did X, Y, and Z as promised. There is always room for explanations like something unexpected came up and we had to work around it or find another technical path, and I will always give people credit for that. But ultimately, if you do not have a track record of achieving the milestones you set, why would I, as a fiduciary of investor capital, provide you with more capital knowing you may not be able to achieve the milestones required to get to the next financing round?

Those were the four things I really focused on: having a small, committed cadre of practitioners; being disciplined and just-in-time with overhead and resourcing; having a well-thought-out, milestone-driven fundraising plan that is executed as promised; and finally, making sure that everything we do is highly aligned with the needs, requirements, and mission expectations of the customer.

Maggie 49:13
Speaking of major company milestones, you said in an interview earlier this year that Hawkeye is officially profitable. When do you think is the right time for hardware startups to focus on profitability versus growth at all costs?

John 49:28
Somehow, we’ve gotten into a mindset that it’s an either-or thing. It’s not. If you go talk to public equity investors, they’ve become almost schizophrenic. They want both value and growth, and you can deliver on that. There’s no reason why you can’t grow at 30 to 40 percent year over year and be profitable. If you’re growing at 60 percent but you’re deeply unprofitable, how does that math work? Ultimately, valuations really should be based on your cash flows. That’s how you ground valuation in reality, on the basis of cash flows and on the basis of EBITDA. We should be valuing later-stage companies, in D rounds and beyond, on a multiple of EBITDA. The only real questions should be the range of that EBITDA multiple and which year you’re using, whether it’s trailing twelve months, leading twelve months, or even two years forward, depending on the financing. To me, a sustainable company starts with an excellent cost structure. What are your gross margins? What is your EBITDA margin? How much are you spending in capex? How is that going to change over time? Are you going to be able to achieve free cash flow breakeven, not just EBITDA breakeven, but free cash flow breakeven? In the space industry, where you’re spending a lot of money on capex, when can you achieve free cash flow breakeven? When can I value you on the basis of free cash flows? Because if you don’t have free cash flows, I can’t really utilize a free cash flow multiple. To me, a company becomes mature when you can value it thoughtfully on the basis of its cash flows.

David 51:08
So John, I think that’s awesome to hear and definitely something other startups should take into account. For Shield Capital, you’re a bit of a talisman. You’re an active CEO and also an investor with us. What are some of the things you’re looking for in early-stage deals that space entrepreneurs should exhibit when trying to raise capital?

John 51:36
There are the obvious things, like whether this is a mature, thoughtful group of people working together in harmony to create something important. You can look at the team. You can look at whether the team has been successful in the past. Do they have a track record, and do they have a track record of working together? You can see these dynamics in pitches and diligence, whether the CEO and CTO are aligned. There are also intellectual property milestones and technology milestones, depending on the phase of development of the company. But beyond the technology and the early adopter metrics that every startup wants to flaunt, all of that can be gamed. Ultimately, what I really care about is this: if you build this thing, does anyone give a shit? Is it a big deal if you create it? If you use potentially hundreds of millions of dollars of venture and LP capital to build this ecosystem you’re conceptualizing in space, and you’re able to develop a commercial product to sell to government customers and others around the world, is it meaningful? Does it solve a real problem? Is it sustainable? Is it a functionality that will exist for a period of time and then be competed away because someone can replicate it quickly or because you lose your economics? That’s what I think about. It’s less tangible and totally intangible at the same time. It’s like that Supreme Court justice who said, how do I know pornography when I see it? I know it when I see it. It’s the same way here. If I can conceptualize what someone is building and know it’s going to be meaningful, that gets me interested. It has to excite me from that perspective.

Maggie 53:26
John, as we close out here, we want to transition to a couple of rapid-fire questions. So my first one is: what is a technology that, 20 years ago, you expected would be further developed today than it actually is?

John 53:40
That one’s easy for me. We built a company at Allied Minds called BridgeSat, which later became BridgeComm. I actually think the company just got acquired by Voyager. Its purpose was to commercialize optical communications, optical comms through lasers, from free space. We pulled a bunch of intellectual property out of Los Alamos National Lab, which were the leaders in developing quantum capabilities and had amassed a significant IP portfolio. What we found was that it was really, really difficult to build high-quality, small transmitters to push optical data, and no one had really invested the time to build the optical receivers needed to support that ecosystem.

You’re seeing that today with the Space Development Agency and the SpaceX Starlink constellation using optical relay networks, and it’s working really well. But it’s not working well for the rest of the space architecture, especially smaller spacecraft that can’t fit a materially sized optical terminal, even with a gimbal. I’ve been surprised that no one has really figured out how to package a small-scale optical transmitter in a way that truly commercializes optical connectivity at the scale we need. The better it is, the faster we can get data down to the ground, and the better the mesh networks will be.

It also amazes me that when I built Hawkeye in 2015, we counted one day and there were over 100 launch companies out there that had raised some amount of venture capital. It could have been seed dollars or something, but still, you would think that with all that innovation, all that capital, all that focus, and with the demand signal being what it is, there would be a lot more fully vetted and highly commercialized launch companies. Instead, you have this kind of monopoly of just a handful. It’s SpaceX, Rocket Lab at a premium, because it costs a lot to use a Rocket Lab dedicated launch, Firefly coming up, and people talk about Stoke, but I haven’t seen it yet because they haven’t demonstrated it. It’s just like, wow, with all that capital that’s gone into the sector, we really haven’t seen the results we were expecting 10 years ago.

David 56:00
Maybe for our next rapid-fire question, launch is certainly an area where we do seem to see a lot more pitch decks, and we’ve sort of stayed out of it given the trials and tribulations of others. What are some of the white spaces in the space domain that you see could be addressed by emerging startups, or what gets you excited about areas that have yet to be tackled?

John 56:24
Yeah, I mean, go back to the optical relay question. I think that’s interesting. There’s a fundamental problem with getting data down to the ground leveraging RF technologies alone. There’s only so much RF, only so much bandwidth, and only so many ground stations. The answer can’t always be ground station densification. The answer has to be more onboard processing in space in order to sort the data, process the data, and only bring down what you really need. And then we need better relay networks. We need better mesh networks that are available to all to get that data to the ground faster, because ultimately constellation companies’ value is highly correlated to speed. The faster you can get that information to the warfighter, the better and more valuable it is. That’s certainly the case from Hawkeye’s perspective, and I’m sure it’s the same for many other intelligence modalities. So I think there’s white space to be developed around trusted relay partners and onboard processing technologies that can be leveraged by constellation companies and would be of interest.

David 57:30
Okay, and for your last rapid fire question, you can plead the fifth, though we’re hoping for the spice. The fate of Hawkeye 360 rests in the hands of working with one specific customer. Are you taking A, the United States Space Force, B, the intelligence community, or C, other?

John 57:50
I mean, obviously that’s a hard one to answer. I think ultimately there are a lot of different stakeholders that have to be addressed. It’s not just the warfighter. It’s the appropriators, and it’s the executive branch. To me, the ultimate customer is those stakeholders on Capitol Hill and in the White House, and the international equivalents for our other customers. So it’s a multifaceted customer situation. I like to say that when we’re doing international sales, we have to sell twice. We have to sell bottom up to the actual warfighter and the person who wants to build the spacecraft and the functionality, and we have to sell top down to get political support. So I’d say that political engagement really matters, and making sure that everyone is aligned with the interests of commercial technologies.

David 58:49
Well, John, you’ve been a successful investor, a great entrepreneur, and clearly maybe you could be a politician moving forward in life with an answer like that. Maggie, over to you to close us out.

Maggie 59:02
Yeah, John, thank you so much for coming on the Mission Matters podcast. We really appreciate your time and all the learnings from the past few years of working with you.

John 59:10
Thank you, guys. Great to spend time.

Akhil 59:13
Hey everyone, thanks for listening to the Mission Matters podcast from Shield Capital. Tune in again next month for another conversation with founders building for a mission that matters. And if you’re looking to build in the national security space, please reach out to us.

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🎧 Introducing the Techquisition Edition — a new sub-series of the Mission Matters Podcast, where David and I break down major defense acquisition news and explain what it means for technology startups building for the national security mission.

Our very first Techquisition Edition episode just dropped (link in comments). In this inaugural conversation, we dive into the NDAA’s most impactful provisions for companies working with—or hoping to work with—the Department of War. We cover:

👉 How the NDAA codifies SECWAR Pete Hegseth’s acquisition reform agenda

🛰️ New guidance accelerating DoW adoption of commercial space capabilities

🚀 What the NDAA signals about Golden Dome

🚨 Key proposals that did not make it into the bill

⚡ And much more...

You can listen to the podcast on Spotify, Apple, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please reach out if you or anyone you know is building in the national security domain.

Subscribe now

Transcript

Maggie 00:19
Welcome to the first episode of the Techquisition Edition of the Mission Matters Podcast. Techquisition is a new sub-series of the Mission Matters Podcast that David and I are launching where we will break down major acquisition news and discuss how it will affect tech startups.

David 00:54
Well, Maggie, it’s really exciting to be doing Techquisition with you, and I’m sure we’re going to have Mike Brown joining us on several of these editions. I love a good portmanteau. Today we’re going to be discussing the 2026 National Defense Authorization Act, otherwise known as the NDAA, and we’re going to focus on what this means for tech startups. Over the weekend, the House Armed Services Committee released the full text of the conference bill, which means that the House and Senate Armed Services Committees figured out what they wanted to keep in, what needed to get thrown out, and all the things we call compromise. Earlier today, the House took it to the floor and voted to pass the bill. Next will be the Senate, ideally later this week, at which point it will be sent to President Trump to sign into law. And fun fact, Maggie, that I can’t help but bring up: only once in the NDAA’s history has a President vetoed it and then Congress, specifically the Senate, overrode the veto, and that was just a couple days ago during the first Trump administration.

Maggie 02:13
Interesting. What were they fighting over?

David 02:16
Something very political that we don’t need to get into here, because that’s not what our startups signed up for, but something for them to Google on their own time.

Maggie 02:26
Fair enough. I will say the NDAA holds a special place in my heart. Back in 2021, I was working my very first U.S. government job. I was an intern on the Senate Foreign Relations Committee, and my first assignment as a Hill intern was to read through the whole NDAA and figure out all the reports that the department owed to the Senate Foreign Relations Committee, SFRC. This is a 3,000-page document. This was before the days of ChatGPT, so I was manually searching through this document with keyword search to find all the relevant reports. It was very eye-opening to me about how the U.S. government actually works and how the executive branch actually works. I definitely wish I had LLMs back then. They were very helpful preparing for this episode, actually searching through the NDAA to find some of the key pieces that we are interested in or to identify things that maybe did not make it into this rendition of the bill.

David 03:30
Totally. Speaking of LLMs, big news on the military front. I’m currently doing my reserve duty at the Pentagon, and now there are giant posters of Secretary of War Hegseth pointing at you, doing his best impression of Uncle Sam, saying “I want you to use GenAI.mil,” where we now have access to Gemini. So congratulations to Alphabet and Google for getting Gemini onto the unclassified network known as NIPR. Apparently rolling out soon will be Grok, ChatGPT, and Anthropic in the coming months. I think a lot of legislative liaisons or people who would normally be parsing this document looking for little nuggets can now do more than just PDF keyword searches to figure out how their programs are being impacted by the NDAA. Three thousand pages, lots of reports, lots of authorities, lots of funding tables, lots of everything that we’re going to get into for this.

Maggie 04:40
Fun fact: I used an LLM to count this. The NDAA requests, I think, 122 reports from the Department of War that they’re responsible for providing to Congress in the coming months. But LLMs aside, this year’s NDAA is chock full of provisions relevant for startups looking to sell into the Department of War. It includes everything from acquisition reform to encouraging the use of commercial space assets, a little bit on ATO reform, changes to the Defense Innovation Unit, and much more, all of which we are going to break down in this episode. So let’s get started. David, I’m going to start with the most basic, dumbest question, but it’s one I actually asked you yesterday, and I think some of our listeners may have the same question. What exactly is the NDAA, and how does it compare to all these other mechanisms we hear about, like the budget bill, the reconciliation bill, continuing resolutions, executive orders, and more?

David 05:39
Sure. I’ll give you an unvarnished answer. I’m sure there’s a very well-scripted way to talk about it, but for me, having served in the military, the NDAA essentially gives us the authorities by which we can do our job, specifically in Title 10, which is what the military executes. If the department wants to stand up new organizations, spin down old organizations, retire existing platforms or weapon systems, or if they need new policy or new laws to execute their missions, all of that comes through the NDAA. It is the one bill that gets passed every year through Congress, going back decades. What it has also become is a bit of a catch-all. You’ll see in this NDAA the Intelligence Act, which gives the intelligence community some of their authorities. That really should be its own standalone bill. They have their own committees that go through it, but it gets attached to the NDAA because it’s something everyone will vote on, and more often than not, it will pass because national security is so critical to the U.S. people and to our largest government body.

Maggie 07:16
So just to confirm: we have the NDAA, which basically tells the Department of War what they’re allowed to do, what weapon systems they can field, what authorities they have. And it’s separate from the budget bill, which has not been passed yet, and which actually gives the department the money to do the things laid out in the NDAA. Is that the right way to think about it?

David 07:38
Exactly. The appropriations bill, which hopefully we get this year — last year we did not — is what gives the dollars to programs or activities so the department can carry out its missions as outlined in the NDAA. Something that’s confusing is that the NDAA has its own funding tables against various programs. It matters because it provides a gouge that the Appropriations Committee, specifically the defense subcommittees in the House and Senate (HAC-D and SAC-D), will take into account. But if your organization needs money to execute its mission, it is the appropriations bill that tells you what you get. They do anchor around what the NDAA puts in, which is anchored on the President’s Budget, submitted very late this year as the new administration wanted to put their own tentacles into the department’s priorities instead of using the one the previous administration had been putting together up until they left office.

Maggie 09:06
Got it. So at a high-level overview, we have the NDAA. It has $900 billion for the Department of War. One hundred sixty-two billion of this is going to procurement. One hundred forty-six billion is going to research, development, test, and evaluation. The rest is going to operations, maintenance, and then spending on personnel.

David 09:23
And military construction. Don’t forget about MILCON, its own separate—

Maggie 09:27
Thing. Okay, and military construction, but that’s—

David 09:30
Just an authorization. But $900 billion will probably be somewhat aligned to what the appropriators decide, but they truly have the power to determine how much money and to which programs this budget goes.

Maggie 09:47
Got it. So I want to really dig into the key parts of this bill that are going to be relevant for startups building in the national security space. One of the most relevant pieces of this year’s NDAA for startups, from my perspective, is this section on acquisition reform. Just last month you, me, and Mike Brown recorded a podcast discussing the Secretary of War Pete Hegseth’s new memo on acquisition reform, which is really looking to shake up a lot of the ways acquisitions are done today, like the requirements process and program executive offices. So how does this NDAA complement or add to that memo?

David 10:29
The NDAA codifies in law the concept of portfolio acquisition executives. This was highlighted by Senator Wicker when he originally released the FORGE Act. As the Senate Armed Services Committee Chair, he talked a lot about giving what used to be known as program executive officers—very senior acquisition officials—much wider authority. PAEs are now going to have a much broader range of responsibilities than PEOs ever had. All functional elements, whether finance officers or contracting officers, are now going to fall underneath the portfolio acquisition executives. They’ll be able to make more trade-offs with the resources at their disposal to prioritize based on a more fluid requirements dynamic.

They will still get their requirements from the service chiefs. But another big thing the NDAA codifies, which had been hinted at in other department memos, is the dissolution—or maybe that’s too strong a word—of the Joint Requirements Oversight Council. They will no longer provide overarching requirements that program offices then execute. Instead, portfolio acquisition executives are expected to receive requirements directly from their service chiefs. So Air Force PAEs will get them from the Chief of Staff of the Air Force; Army PAEs will get them from the Chief of Staff of the Army; and so on. To me, this is a huge tectonic shift in acquisition, providing significantly more flexibility across a diversity of capabilities and programs and giving more authority to individuals who previously would have seen it fractured across many other personnel.

Maggie 12:43
So the way to think about this is: previously the JROC was this joint group that led the requirements process, which was the multiyear process of collecting all the specific requirements for anything we wanted to procure. But today the change is that this requirements process no longer needs to be as rigid or as time-consuming as it was in the past. And now, instead of having this joint body in charge, you’re going to have the service chiefs themselves—the CNO and others—in charge of their own services’ requirements. Is that right? Correct?

David 13:24
Yeah, and, I mean, you know, it’s not like the JROC did every single requirement, but certainly for a lot of major programs it drove a lot of timelines. We’re just delegating that authority or responsibility back to the services, and then we’re also giving the senior acquisition officials significantly more latitude and accountability to execute the programs over which they have jurisdiction, all with the goal, as the conference report highlights, to reduce bureaucracy and increase decision making.

Maggie 14:00
And what’s the significance of codifying this into the NDAA rather than just relying on this memo from the Secretary to carry out these reforms?

David 14:11
Now it’s law, right? And so the department has to fulfill this, whereas if it’s a memo directive coming from the Secretary, Congress could actually say, Not so fast, and say, Actually, no, we like it the way that it is, and you’re going against the law and we’re going to double down on the law. Maybe a good example of this and how the NDAA oftentimes differs from the wishes of the Department of War: take the retirement of certain aircraft. I think the Air Force has been trying to retire the beloved A-10 Warthog since maybe before I even joined the military in the aughts. Once again, Congress has said, No, you are not going to be able to spend one dollar to retire the A-10. You think you are, or you would like to, and we’re saying, No, you cannot. And so with this PAE construct, Congress is saying, Go do this versus waiting for, you know, Mother, may I.

Maggie 15:17
So reading through this document, I noticed there was a lot of focus on commercial space and changing the way that the department works with commercial space providers. What were some of the provisions you came across that were most relevant for commercial space startups looking to work with the U.S. government?

David 15:37
It seems like Congress is continuing to march down this road of buying commercial space as a service instead of owning the entire system from soup to nuts as a government-owned, government-controlled system. Instead, it’s continuing to explore different commercial offerings and how we can use the data coming off these satellites to fulfill our mission operations instead of having to own it full saddle. You might think of it as here on Earth: I could buy my car and be responsible for the maintenance of my car, or I could just Uber around where I need to go when I need to be there. I think the Space Force in particular has been moving in this direction, and this NDAA continues to reinforce and emphasize those salient points, because there’s a lot of benefit from a cost standpoint to doing it this way.

We’ll see. There’s one program in particular that’s been bandied about for a while: the tactical surveillance, reconnaissance, and tracking program, which gets into this debate between what the intelligence community does with its Title 50 authorities and what the United States Space Force or the combatant commanders would like in terms of more tactical information coming off satellite vehicles that they would use for their own mission sets. This continues to be an area of interesting debate, and Congress once again seems to be reinforcing the idea that the Space Force, or the services in general, can start to provide some of this outside of the intelligence community, which has traditionally provided a lot of the overhead imagery to the combatant commanders.

Maggie 17:30
So basically, instead of the US government having to own the satellites that are collecting imagery and data, now they can just buy that data from a commercial player?

David 17:41
Exactly. And this is really important, because the department is still a very large buyer in this community. A lot of companies that were built ten years ago were thinking they would have massive commercial businesses of people buying their overhead imagery, whether it was electro-optical or thermal or multispectral or hyperspectral. You name it. It hasn’t really played out that way. The United States government and the national security apparatus have very large budgets to do these types of things, but traditionally those budgets have been tied up in building and launching the asset itself, instead of just getting the good data off the bird in the first place. For us, we have a lot of investments in this area, and we think this bodes well for those companies.

Maggie 18:35
While we’re talking about space, it’s impossible to ignore the elephant in the room, which is Golden Dome. This is a major priority for this administration. What does the NDAA have to say about this initiative?

David 18:50
I think it’s really important that you bring this up, because Golden Dome is the big winner in the reconciliation bill that was passed earlier this year. But I think what Congress looked aside—

Maggie 19:04
David, what is the reconciliation bill? How does that fit into this tapestry of bills?

David 19:10
Oh man, yeah. We talked about this on an earlier, not-yet-called-Techquisition edition of the podcast, so I’d definitely encourage our listeners to go back and brush up there. It was essentially a one-time funding bill pursued by the current administration and passed by Congress to provide, what was it, $110 billion around a variety of things. I think what some members of Congress didn’t like was how little definition was provided to that overall funding pot. Very much the opposite of what we’re seeing with this NDAA and what will be the ensuing appropriations bill, where some might say Congress is micromanaging. The reconciliation bill was quite the opposite.

So for this NDAA, they’re trying to set parameters around what they expect to see from Golden Dome going forward. That includes setting US missile defense policy around deploying and maintaining the next-generation missile defense shield, protecting against different foreign attacks, and ordering a description of a system architecture, which I believe General Gutline, who’s the head of the Golden Dome program, has been putting together for quite some time. Congress is essentially articulating: we expect to see this from you.

Maggie 20:37
Moving on from the world of space, I want to talk about some of the organizations responsible for tech innovation in the department, specifically the Defense Innovation Unit—your alma mater. What, if any, changes did the NDAA make to DIU?

David 20:56
Not a lot. There was one initiative that asked them to set up several hubs around the country, and they gave them a little bit of money for it. But if you looked at the funding table, DIU, through the President’s budget, requested $48 million, and it seems like that’s where HASC and SASC landed. So they’re authorized up to $48 million. Of course, as we’ve already talked about, everything depends on what the appropriators do.

If you recall, in the past couple of years the appropriators have plussed up the DIU budget by quite a bit—some order of magnitude of a billion dollars across a couple of different funding efforts. It wasn’t necessarily totally flexible for DIU to use that money as they wished. Some of it was partitioned off to Replicator, which has now transitioned to another organization.

Another thing mentioned in the NDAA relating to DIU is a discussion on the Blue UAS program. There was some reporting that Blue UAS was moved away from DIU, so there was discussion around that not being needed from them anymore, but Congress still expects more information around Group 1 drone requirements. Overall, things were pretty quiet for DIU relative to past NDAAs. It’ll be interesting to see what happens with the appropriators, as Representative Calvert, the chairman of the House Appropriations Committee for defense, has been a big fan of the organization and has plussed them up in previous years.

Maggie 22:36
There was also something in there about the new BOOST program that’s assigned to DIU. Is that something we should be paying attention to?

David 22:43
When I first read the draft, I was intrigued. But after more reflection and talking to some other sources in the building, it seems BOOST is just the NDAA’s way of codifying what is already transitioning from DIU. There was no funding line associated with BOOST and no new reporting requirement. I think it’s really just: how well is DIU transitioning their prototype projects to production?

In past years DIU has put out annual reports, and within them they highlight a lot of their prototype-to-production transitions and how those move on to different services. We haven’t seen an annual report in a little while, so maybe this is part of that. I don’t know—that’s speculative. I’m just spitballing here.

Maggie 23:42
What did the NDAA have to say about how the Department of War is using AI?

David 23:49
Yeah, well, you know, Maggie, this would be good fodder for your Gray Matters blog, which is always writing about AI. And I think the reality is there wasn’t much in here about it, which I think was surprising. I don’t know—you kind of read a little bit about what was going on in the NDAA. How would you interpret it based on all the research and writing you’ve been doing over the last, I don’t know, two years now?

Maggie 24:15
Yeah, I was surprised that there was not more in here. There didn’t seem to be any major changes made to the Chief Digital and AI Office, the CDAO, even though in the news there’s been quite a lot of discussion about potentially changing the organization. They set up an AI Future Steering Committee to understand how AI and AGI will affect the department. They set up a task force to investigate developing potential sandbox environments for AI testing. There was a little bit in there about ATO reform. It was relatively light, but basically they were directing the different services to find some ways to speed up the Authority to Operate process, which is the process by which software vendors are able to get their software authorized to operate on DoD networks. So it’s not explicitly AI-related, but it will certainly affect AI companies.

But then something I actually did find interesting was when I dug into the document that describes the discussion between the House and the Senate during the conference in which they come up with the compromise bill. It looks like the House version of the bill initially included more on generative AI, trying to force the department to conduct a few pilots, but it was not in the Senate version and was ultimately struck from the final version. So it looks like we actually could have had a more aggressive NDAA when it comes to generative AI, but for whatever reasons—unclear from the document—they decided not to do that.

There was a little bit of justification given. It basically said the Department of War has not yet come out with a comprehensive AI strategy on how they’re planning to use these tools in a responsible and safe way. So Congress did not want to force the department to start experimenting with these tools until they had done their own strategic thinking around how this was going to be used and how it was going to be used responsibly. They were basically saying they want to see a DoW AI strategy before they’re going to force their hand. I guess we’ll see how that turns out in the ensuing years. There are certainly a lot of great people in the department working on AI adoption and a lot of companies building tools looking to improve the lives of end users in the Department of War.

David 26:49
Yeah, well, I mean, obviously we’ve now got GenAI.mil, right? So it seems like the department is reading between the tea leaves that this is something that may be important to Congress in the future and is trying to get out in front of this technology trend that has certainly had a massive imprint on the commercial world. I will also say that, just being in the Pentagon the last few days, there’s a lot of talk around artificial intelligence, specifically generative AI and using it for different work streams. So it seems to be top of mind and present, regardless of what is or isn’t in the NDAA.

Maggie 27:31
So David, what are some pieces that did not end up making it into the NDAA that you might have expected to be in there?

David 27:40
Certainly a number of things. I was surprised because it feels like they have bipartisan support. One of them was access to SCIF-accredited spaces. SCIF stands for Sensitive Compartmented Information Facility. This is where classified conversations or classified networks occur. My understanding is that this was a pretty important thing to the Defense Modernization Caucus, and for whatever reason it did not get in, although it was in the House bill. So it was in the SPEED Act but didn’t quite make it during conference.

Another area that we often talk about as being an impediment to access to government is the Authority to Operate. I would have expected stronger language around ATO reciprocity. We’re getting to a point where the tech stacks are leveraging a lot of the same infrastructure. The differences are at the user application layer, but the reality is approving officials across different weapon systems, commands, and services have the power of the pen, and they’re just not incentivized to leverage another person’s work to quickly bring software onto different network systems. I think that’s a huge miss and clearly an impediment to commercial innovation or really just warfighter effectiveness.

Another thing that didn’t make it in or was controversial—and I recommend people read about it because there were a lot of news articles—was the right to repair. This would give the services the ability to actually fix their own equipment and provide them the technical orders to do so. Despite being in both bills, it seems the defense industrial complex was able to keep that one out. So maybe something to follow in the future.

And then maybe near and dear to my heart, though I was not surprised based on what I’ve been hearing from Congress: the Small Business Innovation Research program was not reauthorized through the NDAA. That means it could either be attached to the appropriations bill, some other bill, or done as a standalone bill. Tough sledding there. A lot of small businesses and startups really depend on SBIR. It’ll be interesting to see how the services respond. The SBIR/STTR program is mandated by Congress, but that doesn’t mean federal agencies can’t execute a similar program on their own. They would just have to do it independently.

We’ll see how different organizations respond. I wouldn’t be surprised if the Army, through FUSE, continues to execute SBIR-like programs even if they’re not technically SBIR. But there are going to be ramifications for that, and we should continue to watch it.

To our listeners—because we did this in our last non-tech edition podcast with Mike Brown—if you have not talked to your congressional representatives or senators and you think SBIR should go the way of the Innovate Act, which Senator Ernst is pushing for, you need to do it. It actually matters, and it’s what gets members of Congress energized and motivated to do things that may not seem intuitively obvious to them. Okay, enough about SBIR, because this is not a SBIR podcast, and there are other things to discuss about the NDAA, but SBIR was not in it.

Maggie 31:44
I called my representative right after we wrote that blog post together, David, so I’ve done at least a little bit of my part.

David 31:52
Amazing. I live in DC, so mine can’t vote.

Maggie 31:56
Well, that’s a whole other can of worms we don’t need to go down on this podcast.

David 32:00
So another area that I thought would have made it in but didn’t was the Economic Defense Unit, which was referenced recently in the big transforming acquisition memo put out by the Secretary of War. This seems to continue building on the theme of leveraging third-party capital as a warfighting instrument. We’ve seen the creation of the Office of Strategic Capital, their work on the Small Business Investment Company Critical Technologies Initiative, providing third-party VCs with leveraged capital to deploy into critical technology areas, and now also the loan authority, which we saw with the MP Materials investment from the government. The Economic Defense Unit just continues to build on that. I believe we’ll see it in the next NDAA, and this is probably just a case of not all of Congress being on board, since we saw it in one house in one bill but not the other.

Maggie 33:10
So what were some other notable provisions in this year’s NDAA, rapid fire, that are going to be relevant for tech startups?

David 33:19
Okay, rapid fire. One thing I think was interesting was key reforms to the Test and Evaluation community, putting a lot of those authorities inside the portfolio acquisition executive and creating an accredited test pipeline to speed up software for continuous improvement on already fielded systems, so you don’t go through a super laborious process. I think that will be key to readiness. Another area was the Modular Open Systems Architecture. A lot of pen to paper on that, which I think bodes well for commercial innovation. There are still a lot of discussions around intellectual property and what the government needs to own versus what will be restricted rights based on commercial technology developed with private or non-government funding. The more MOSA is adopted, the easier it will be for commercial vendors to engage with the department without getting tripped up by the IP debate. Those were a couple of the big things that will definitely benefit the overall acquisition system for startups. Great.

Maggie 34:41
And then last question. What advice do you have for startups, given the way this NDAA came out, to best take advantage of the new provisions that are going to help push them forward?

David 34:55
If you had things that didn’t make it in that you would have liked to have seen, that tells you where some of your lobbying efforts have come up a bit short. You need to pay equal attention to both the House and the Senate, because we saw plenty of areas where one chamber put something in and the other did not, and it didn’t automatically make it into the final bill. That would be one area. Also, continue to work with the department to make sure that when Congress calls up the DoD and says, “Hey, is this important to you? We’re thinking about putting it in the bill,” the department is advocating accordingly. It’s a full-court press. Everyone is your stakeholder, and sometimes you have to bring them together to see things through. You can never start too early on government relations and lobbying efforts. In fact, if you’re waiting until the springtime, you might already be too late for what should be released in the fall’s NDAA. So get going. And we’re happy to provide recommendations here at Shield Capital, as several of our portfolio companies work with some great government relations firms, and that has made a huge difference for them.

Maggie 36:27
Great. Well, David, thank you so much for an amazing first episode of the Techquisition Edition of the Mission Matters podcast. Looking forward to many more to come.

David 36:37
Always a pleasure. Thank you, Maggie. Yes, very excited for this new part of the Mission Matters podcast ecosystem.

Maggie 36:46
And excited to see how the Senate votes in the days to come. Definitely.

Akhil 36:50
Hey everyone, thanks for listening to the Mission Matters podcast from Shield Capital. Tune in again next month for another conversation with founders building for a mission that matters. And if you yourself are looking to build in the national security space, please reach out to us.

Keywords: NDAA, Tech Startups, Acquisition Reform, Defense Innovation, Commercial Space, AI, Military Spending, National Security, Golden Dome, Defense Modernization

In this episode of the Mission Matters podcast, we sit down with the Andrew Puryear, the CTO of L3Harris, the 6th largest U.S. defense contractor, to discuss L3Harris’s “trusted disruptor strategy.” As part of this strategy, L3Harris partners with startups to bring cutting edge capabilities to the warfighter. We cover:

⚡ How software-defined warfare will push the DoD from “months → minutes → microseconds”
⚡ Lessons from Ukraine across EW, affordable mass, maritime drones, and integrated air defense
⚡ Why open systems, digital twins, cognitive EW, and missionized AI will redefine military advantage
⚡ What startups misunderstand about working with primes—and how to get it right
⚡ Where the U.S. is ahead, where we’re behind, and what it will take to catch up

You can listen to the podcast on Spotify, Apple, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please reach out if you or anyone you know is building in the national security domain.

Subscribe now

Transcript

Maggie 00:04
In this episode of the Mission Matters podcast, we’re joined by Andrew Puryear, the Chief Technology Officer, CTO of L3Harris, formed six years ago from the merger of L3 Technologies and Harris Corporation. L3Harris is the sixth-largest U.S. defense contractor. It builds a wide array of defense products, including tactical radios, night vision systems, electronic warfare systems, rocket motors, and much more. L3Harris positions itself as the defense industry’s trusted disruptor, combining the reliability and mission understanding of a long-standing defense prime with the speed and innovation of a challenger. The strategy includes partnering closely with startups and emerging technology companies to accelerate capability delivery, break traditional acquisition cycles, and move new technologies into the hands of warfighters faster than the conventional defense industrial model. As part of this strategy, L3Harris established a strategic partnership with Shield Capital to gain access to disruptive innovators for technology transfer, teaming arrangements, direct investments, and partnered contracts. Since establishing this partnership, L3Harris has partnered with dozens of startups, including Shield Capital portfolio companies like SeaSats, Overwatch Imaging, and Code Metal AI. Andrew joined L3Harris three years ago and has been instrumental in driving the company’s trusted disruptor strategy and expanding its partnerships with emerging technology startups. Andrew has had a long career in the national security technology space, having worked as a technical leader at the Stanford Linear Accelerator Center, Sandia National Labs, MIT Lincoln Labs, MITRE, and Ultra Electronics, as well as serving as an Engineering Duty Officer in the Naval Reserves for more than 14 years. Andrew is one of the sharpest thinkers in the defense technology ecosystem, and I have personally learned a tremendous amount from my conversations with him over the past few years about where the industry and technology are headed. In this episode, we cover everything from the future of technologies like electronic warfare, attritable systems, and generative AI in the national security space to how startups should think about partnering with defense primes and much more. Now on to the conversation. All right,

Akhil 02:46
Andrew, thanks so much for joining us today. Super excited to dig in. It’s been awesome to get the chance to work with you over the past years here at Shield Capital. Let me start right now. You’re the CTO managing an amazing portfolio across technologies, but you started thinking on Vassar Street doing your PhD in electrical engineering at MIT, and now here you are leading initiatives across a variety of technology domains, from the traditional communications realm to AI to the platforms and payloads and sensors that make it happen. Let me ask you, when you’re not doing your leadership work and you do have a chance to get behind code or get on a chipboard, what gets you excited, and what do you still want to do technically that maybe you don’t have as much time for these days?

Andrew 03:33
Yeah, that’s a great question. So back to my time in the Stata Center there at MIT, I always loved that MIT was an integral part of inventing radar, right? And given those roots—those deep roots that MIT has in radar—and today’s current trends in artificial intelligence and machine learning, in my off time I build models. I fine-tune models that do everything from, hey, this is how you classify RF, to generating novel waveforms, whether that’s radar waveforms or comms waveforms. It’s just super exciting to apply something that was so important historically—a decisive factor in the winning of World War II—and apply modern technology to that space.

Maggie 04:16
Andrew, are you a vibe coder at all? Are you using Cursor or anything like that?

Andrew 04:21
Yeah, and I love the trend of vibe coding because it really does help accelerate workflows. I actually tell every engineer at L3Harris that they should be looking for how to use AI-enabled tools such as Code Metal, which is a Shield Capital portfolio company. How do you use a tool like Code Metal to accelerate your workflow so that we can be more productive as engineers? What we all want to do as engineers is deliver capabilities into the hands of the warfighter faster, right? And Code Metal allows us to do that. The vibe-coding ecosystem allows engineers and non-engineers alike to start to build code. In terms of whether vibe coding is high quality or not, you see various studies that have somewhat mixed reviews. But one of the things I’ve noticed in my career as I monitor AI is this: every time someone says, “AI does X, but it cannot do Y”—okay, AI can beat the world chess champion today, but it’ll never be able to do complex reasoning. A couple of years later, it’s able to do complex reasoning, but it’ll never be able to pass an eighth-grade science exam. A couple of years later, it passes an eighth-grade science exam. What I’ve noticed is that the time constant between “it can do this” and “it can’t do that” is shrinking over time. And so I’m very bullish on AI and its ability to transform and have a profound impact on the way that companies in the United States operate, the way that we fight wars, and the way that we live our lives.

Maggie 05:49
Andrew, one of the terms that we hear a lot, both in talking with folks in primes, in the government, and at startups, is the term “software defined warfare.” What does that term mean to you, and what role do you see for startups and primes within that future vision?

Andrew 06:08
Yeah, okay, so this is an important one. One of the United States’ enduring asymmetric advantages is that we can innovate faster than anyone else in the world. Full stop. We innovate faster, and that’s incredible for our ability to maintain an asymmetric advantage. So what does innovating faster look like in the midst of the Fourth Industrial Revolution? It means deploying operational capabilities in microseconds, not months. We’ve got to go from months historically, to minutes, to microseconds. Software defined warfare, to me, is all about that: how do we deploy new capabilities into the hands of the warfighter in microseconds?

A couple of real-life examples: the kill web has to turn into code. We’ve got a sea of sensors out there looking for nefarious objects, and then a tremendous number of effectors—kinetic and non-kinetic. The decision logic to connect those together has to optimize for a tremendous number of things. If you have a large number of heterogeneous incoming threats—hypersonic, class-one UAV, cruise missile, and in cases we’ve seen recently, all of them simultaneously—a modern, mature kill web will sense the incoming threats and then optimize effectors for those heterogeneous forms so you maximize your probability of kill at the lowest possible cost. The cost curve is important.

To be able to do that and adapt, as soon as we deploy a kill web it will be obsolete, because the adversary will immediately start to adapt. We have to be able to do over-the-air upgrades. Radars, electronic attack modules—these sorts of things need to be updated with new techniques and new waveforms on the fly so we can act and react faster than any adversary.

I want to give one real-world example of software defined warfare. I’m going to pull from an exercise that was recently run: Talisman Sabre, a joint exercise between the US and Australia and INDOPACOM. One of the challenges they were trying to demonstrate at Talisman Sabre—and an area where we’ve been doing a lot of work with a product called DISCO—is this: currently, from the time an adversary deploys a new RF threat, like a radar we’ve never seen before or a new jammer that’s trying to jam our communications, to the time we detect that novel waveform, classify it, and then create a new electronic attack technique to counter it, takes months. That is far too slow.

With DISCO, if the adversary comes up with a new jammer, we’re able to detect, classify, and then create a new electronic attack technique or waveform on the fly, deploy it back to the edge platform in minutes, and we’re targeting microseconds. Something that currently takes the US and our allies months, we’re trying to compress to minutes and ultimately microseconds in the electromagnetic domain.

Akhil 09:38
That’s great, Andrew, and it’s something we did in the past during the Cold War. It was the blind man’s bluff across all domains. But to your point, it’s just getting faster, and the iterative process is only accelerating. I had two questions on what you just mentioned, which I thought were great. The first is this: you see AI and novel technologies—not even novel anymore, they’re here—in the commercial space and being applied in the perception space from a computer vision standpoint or in the multimodal space. But unlike startups, you’ve seen how this needs to get deployed at scale. What are startups missing when it comes to getting some of these software-defined applications ready for production scale with thousands of camera balls or potentially hundreds of thousands of sensors, which is the ecosystem we should have?

Andrew 10:29
Yeah, it’s a great question. One of the things that we focus on a lot at L3Harris is what I’ll call missionizing capabilities. So a startup will come with a capability, like a SeaSats UAV. It’s a small UAV about the size of a surfboard. How do you take that from “this is a really capable platform” and turn it into something that’s useful to the warfighter? You have to have resilient communications, and you have to have ISR assets, meaning intelligence, surveillance, and reconnaissance. That ties back to the EO/IR balls we talked about earlier, or SIGINT detectors and similar systems.

One of L3Harris’s sweet spots, and one of the reasons we’re so excited about working with Shield Capital portfolio companies, is our ability to work with a startup to operationalize and missionize their capabilities and get them into the hands of the warfighter. That applies to hardware, such as SeaSats or APEX, which we’re also working with, and to software as well. Overwatch Imaging is a good example. The DoD has very specific rules of engagement for authority to operate and related requirements. Thinking through the pipeline from having an eye-watering, world-class capability, through the ATO process, all while having the budget to do so, is critical.

Maggie 11:56
Andrew, I wanted to ask you about Ukraine in particular. What are some of the lessons we should be learning from the conflict in Ukraine, and what are some lessons we shouldn’t be over-indexing on from this conflict?

Andrew 12:12
Oh, that’s awesome. Do learn and don’t learn. Let’s do that. And I think that’s important, because sometimes we overfitted from the Gulf Wars, and we should not remake those mistakes.

So what have we learned, or relearned, from the war in Ukraine and the conflicts in the Middle East? First, mass and cheap autonomy can win. For many years, the focus was on exquisite, low-quantity precision missiles and precision strike. Now we’ve seen first-person-view drones and Shahed-class systems that, simply because of the cost curve, present a formidable challenge. Affordable mass with autonomy is certainly important.

Electronic warfare, or EW, is decisive in modern warfare. In layman’s terms, it’s the ability to jam, spoof, and survive in a contested spectrum. Systems are being jammed into the Stone Age. One way Ukraine has overcome that with FPV drones is by trailing a fiber because they cannot communicate in these contested environments. With the right communications and resilient approaches, it is possible to burn through the jamming the Russians are putting out, but at what cost? FPV drones are cheap. A high-end radio to defeat that jamming is not.

Layered, integrated missile defense works, but it must be affordable. We’ve seen this repeatedly, whether in Iran’s attacks on Israel or heterogeneous strikes involving drones and various missile types. Integrated air and missile defense absolutely works, and the United States and our allies are learning how to optimize these systems for current threats. But again, cost matters. A multimillion-dollar Standard Missile-3 or Standard Missile-6 for a Shahed drone is not sustainable. As a nation, we have to learn to mix effects in an optimal way: high-power microwave, laser, free-space optical laser, and other options combined with exquisite missile defense. The goal is to protect critical assets with the highest assurance possible but at a survivable cost.

Next, maritime drones have changed the naval calculus off the Crimea peninsula. These low-cost USVs, essentially missionized jet skis or Sea-Doos, forced Russian ships to redeploy away from Crimea and took many out of the fight. Some were destroyed, including the flagship, and others were pushed far out. At the same time, we do not want to over-learn this lesson. What works in a confined area like the Black Sea does not necessarily translate to the Pacific or Indo-Pacific theater. In some domains, maritime drones are critical. In a blue-water fight, you have a different operational picture.

Quickly, what do we not want to learn? I’ve heard rumblings that tanks and airpower are obsolete. I do not believe that. You still have to be able to deliver mass and lead on target. Tanks are not dead, but they will die without electronic warfare cover, deception, and combined arms integrated into a sensor-saturated fight. If you deploy a tank by itself, it will die. If you provide EW and the right ecosystem around it, it’s still part of modern land warfare.

We also should not conclude that exquisite systems are unnecessary. We have learned that over-reliance on exquisite systems is brittle against cheap mass and EW, but that does not mean abandoning exquisite platforms. We need a balanced portfolio of high-end exquisite weapons and lower-end, less capable but highly cost-effective weapons.

The key to all of this, and something we’ve talked about already, is intelligence and C2. Those are what allow you to combine effects in a way that keeps things safe at the lowest possible cost.

Akhil 17:01
You talk a lot about some great lessons there, both the ones that we should emphasize and the ones we should not. There’s a lot of learning lessons, and then there’s acting upon those lessons and actually being able to implement them at scale. To you, what are some really good success stories that you hold in high regard from past history where either the US — or maybe it wasn’t the US — was able to quickly internalize a lesson and then field what was needed from a technology standpoint, integrated with what the users and operators needed?

Andrew 17:31
Yeah, it’s a good question. And, you know, we are on a modern podcast here, but I want to go back. The United States has been doing this for a long time. Back in the early 2000s, the United States was fighting wars in the Middle East, and one of the biggest issues was IEDs — improvised explosive devices — which were having an outsized toll on American and Allied soldiers and sailors. I know the US Army had a huge effort to go out there and understand: what is this threat doing, and how is it having such an impact on our soldiers in the field?

What they did was deploy the MRAP, the Mine Resistant Ambush Protected system. It’s basically like a boat, so when one of these IEDs blows up, it vectors the force of the explosion off the side of the hull. Super interesting how they did it, and it was probably one of the fastest acquisitions of a major platform the US has done in decades. The point is that there are now all these new RCOs — rapid capability offices — and DIU doing excellent work, but the United States has been doing this for a long time. When sailors or soldiers’ lives are in harm’s way, we absolutely figure out how to get it done.

I do see OTAs, Other Transactional Authorities, as a great way to move fast. While the authority to use OTAs has been codified in law for a while, the department is expanding their use specifically to buy commercial platforms. This is one of the places where L3Harris really likes to partner. The Defense Department says it wants to buy UAVs, commercial UAVs, commercial drones, these commercial things — but there still has to be someone who really knows how to take that commercial thing and adapt it. In fact, Joby is a great example. They make these commercial flying cars.

Joby is a super innovative company. They build commercial flying cars, and when we talked to Joby initially, we said, “Hey, this is an awesome platform that can bring a lot of capability to the warfighter. We would love to work with you, Joby, to figure out how we put resilient comms in here so that as soon as the adversary turns on the jammers, we’re still able to establish command and control. How do we put ISR assets on there — intelligence, surveillance, and reconnaissance? How do we put things like EW payloads — electronic warfare — on there?” That’s where a partnership between companies like Joby, or more broadly other commercial capabilities, can work with L3Harris through an OTA to get really eye-watering capabilities into the hands of the warfighter more quickly.

Akhil 20:27
Thanks, Andrew. I will say, on the MRAP note and referencing Secretary Gates’ book, it did sort of take the Secretary to emphasize and prioritize initiatives like that. Hopefully things have changed. I’d be curious about your perspective: have you seen structurally, sitting where you are now, that the demand signal — not just from the operator, because you’re staying in touch with what is happening there, seeing how your technology is being used and where the limits are — and then the demand signal from the voices that matter, has it improved and evolved in the way that you would like in the last 20 years?

Andrew 21:06
Yeah, absolutely. It is interesting. At the end of the Cold War, the United States and our allies had a peace dividend, and we built an acquisition system over the years that was really focused on delivering a peacetime military. What’s happened is the increasingly assertive China and a major land war in Europe that, quite frankly, a few years ago was unthinkable. I think it has forced us all to take a step back and look at whether the acquisition system, as it’s structured today, is what we need — not just because the threat is changing, but because the technology is changing so incredibly quickly.

People ask whether this is the fourth industrial revolution or just another technology wave. Why is it actually an industrial revolution? To me, it’s the pace of change that drives why it is having such a profound impact on the United States and our allies.

Maggie 22:01
Andrew, speaking of some of these acquisition trends, one of the big buzzwords we hear with respect to acquisitions and the DoD budget is Golden Dome. I know that L3Harris is intimately working in the sensor space and the space domain. I would love to get your take on what exactly Golden Dome is, what it means in the first place, and where you are seeing opportunities for startups developing new technologies.

Andrew 22:35
Yeah, absolutely. Golden Dome is super exciting. As a technologist, it is super exciting, and I think it is also super important from a national homeland defense perspective. The architecture for Golden Dome is still taking shape, or if it has taken shape, I haven’t seen it yet, but we broadly know what it looks like and what functions it will have to perform regardless of the final architecture. A key part of this is that the earlier you can detect a threat— and not just one threat but many—the better. This is going to drive space sensing and custody. Space sensing and custody will proliferate across LEO and MEO with persistent tracking on orbit, fusion, and crosslinks to do all that.

I mentioned on-orbit fusion because I think it’s really important. Historically, if you didn’t have to operate on timelines that included hypersonics and react at machine speed, you could have an on-orbit sensor that detects a missile launching somewhere, pipe that information down to a ground station, process it, and then decide what to do. Honestly, that is just too slow. There will need to be the ability to deploy things like automatic target recognition to space so you can close the kill chain more quickly. Crosslinks are really important because, preferably, we will have multiple assets tracking these missile launches, and you can improve your probability of detection and correct classification by fusing all this data together. We will see things like optical crosslinks— which are incredibly high data rate—continue to proliferate so that we can do this on-orbit fusion, classification, and detection.

We talked earlier about battle management command and control, maybe in the counter-UAS scenario, but the same thing applies to Golden Dome. You have to have a high-assurance data fabric. The foundation of that will likely be things like optical crosslinks as the physical layer. Once you have that data fabric, you must be able to do AI-assisted track correlation and discrimination. These are easy problems when there is one object in the air, but imagine thousands: some hypersonic, some decoys, some UAVs with warheads. That is why you need AI-assisted tracking and correlation to discriminate between threats, decoys, and civilian air traffic.

Once you have all that and you are connecting the data and fusing it and identifying the tracks you need to prioritize, you must be able to pair those with shooters at a continental scale. This is not just a theater anymore; we are protecting the entire continental United States, Alaska, Hawaii, and hopefully all of North America. Being able to do that sensor-shooter pairing is a non-trivial problem even for AI, especially in an environment with incredibly high state space and sometimes unreliable information. Track quality can vary, there are decoys, and quite honestly, it’s just the fog of war.

So you have to be able to sense and track and then do the sensor-shooter pairing. Once you’ve paired it to a shooter, we cannot afford to have hundreds of millions of dollars’ worth of shooters, where each interceptor is super expensive. We have to have an affordable effector stack. That includes hit-to-kill interceptors— we will still have to hit a bullet with a bullet— but we also need more cost-effective layers. We will need high-power microwave and lasers, particularly for counter-UAS and counter-cruise-missile saturation, so you can use lower-cost effectors and interceptors for volume and reserve the high-end interceptors for exquisite threats.

Underlying all of this is resilient communications and PNT—positioning, navigation, and timing— all incredibly important. I cannot overstate the importance of resilient comms. Back to your earlier question about what we learned and what we should not overfit from past conflicts: one thing we overfit from the Gulf War era was the assumption that we would always have electromagnetic superiority, which means uncontested communications. That will not be the case, and we have seen this in Ukraine. We are going to have to have resilient communications, which means spread spectrum, frequency hopping, and incredibly high-end systems to maintain connectivity.

The last thing I want to mention— because I’m an engineer— is digital engineering and test. This gets to our ability to iterate more quickly. We need national-scale digital twins so we can do everything from testing to, perhaps most interestingly, training sensor-shooter pairing algorithms via reinforcement learning. You only get one chance to do this in real life, so to train these algorithms, you need to run them millions or trillions of times in simulation.

You also asked about how startups can plug in. There are tremendous opportunities. At L3Harris, we are looking for startups to plug in everywhere we are plugged into Golden Dome. Data and AI are obvious areas. AI starts and ends with data and access to data, and to the extent that startups can build capabilities for sensor fusion and discrimination, these can be microservices within a broader architecture, especially when we can provide real datasets. The same applies to training non-kinetic effectors like high-power microwave systems. There are a couple of startups actively working in high-power microwave. And, gosh, I don’t want to sound like Austin Powers— or Mr. Evil— talking about “lasers on sharks,” but high-power laser systems will be increasingly important. In the startup world, that might mean companies developing high-power laser capabilities, but there is an entire system required to actually use them. For example, beam directors: if you have a high-power laser, you then need a mirror with a steerable beam director to aim it at a target.

Digital test ranges and manufacturing technology are also important. There is opportunity across the board.

Akhil 30:00
Andrew, so many awesome things right there—I don’t even know where to start. Let me dive into a couple of them. Let me start with SCA. You mentioned the comm-resilient piece. To you, that golden dome is not new in concept, right? We’ve been talking about it; I think The Economist ran a piece comparing Star Wars to Golden Dome. What has fundamentally changed that might make Golden Dome different today? And is the long pole in the tent, from your standpoint, the technology, the resilient comms, or something else?

Andrew 30:31
No. So I think we have all the technology to build Golden Dome today. That is true. We have everything from solid rocket motors that perhaps could survive in space—material advancements—to the sensors we need to detect these things. Really, it’s a monumental engineering effort to create a missile defense system that covers a continent. To me, it’s probably the ninth wonder of the world. The technology is there; it’s a question of how we integrate it and whether we have the national will. It’s like the space race. It took the will of a president to get to the moon. I think similarly here, it will take the will of a president to drive this forward.

Akhil 31:23
Thanks, Andrew. And on that note, you talk about digital twins. We think of this beautiful nexus between the physical and digital world. Can you unpack a little bit what you mean by digital twin? In the news you hear about the B-21 Raider being designed in the digital world. At the same time, a lot of us who have served or worked in the automotive space know that at some point you need to get the thing out into the world because you’re not going to be able to model everything. How are you all thinking about that?

Andrew 31:52
Yeah, a couple of things. To the extent that we can use digital twins to move faster, so that you can take your lumps in ones and zeros rather than in hardware and a full redesign, that’s where we focus a lot. At L3 Harris we are laser-focused on moving faster. The Navy and other services are saying the fight is tonight, and that’s how we use digital twins.

I’ll say the most exciting place for me in terms of digital twins and simulation is how we can use them for training and fine-tuning AI models. An example is in the RF space. Cognitive EW is increasingly important. Any waveform you deploy—radar or comms—the adversary will figure out how to jam it, and they’re deploying cognitive EW so they can adapt incredibly quickly. We as a nation have to be very good at generating new waveforms, new EA and EW techniques, and so on.

Back to digital twins: as a nation, we probably need to set up an electronic warfare simulation environment. The goal is to create AI agents for electromagnetic superiority. If you have a model you want to fine-tune for this complex space of electromagnetic battle management—where you have to communicate while an adversary jams you and both sides are adapting—you need an EM playground. But EM propagation is so complex that you can never train a model at full fidelity. Even with future computing, you will never do that. So what we’ll need is a digital twin with varying resolution.

You start with incredibly coarse resolution in the simulation environment and use that to get a gross training of your model—you run it a trillion times. Then you turn up the resolution by a factor of ten and fine-tune. Turn it up again and fine-tune. You take this model that started coarse and refine it. Remember how AlphaGo Zero was trained? The first generation of chess-playing AI relied on data scientists hand-coding techniques. Then someone realized it’s more interesting to have one AI agent play another without even telling them the rules. Very quickly, by running trillions of games, it reached superhuman capability. Now my iPhone can probably beat the best chess players because of reinforcement learning in a simulated environment.

Doing the same thing in the RF space will be increasingly important as we move into cognitive EW, cognitive comms, and cognitive warfare.

Akhil 34:57
Thanks, Andrew. Real quick, for those who aren’t as steeped in EW, what is cognitive EW?

Andrew 35:02
Yeah, so cognitive EW can mean a number of things. Very roughly, a waveform is the way that I communicate in the RF spectrum, the way that I communicate with you. FM radio is an example of a particular waveform. AM radio is another. 5G is another; it’s actually a suite of waveforms. Cognitive waveforms can mean a number of different things, and you can think of them in levels. A relatively basic cognitive waveform would be a cognitive frequency hopper. Let’s imagine I’m communicating with you on a certain frequency—one megahertz, for instance. It’s not a good frequency, but let’s imagine it. If someone starts to jam one megahertz, I’m going to jump to two megahertz. If someone starts to jam that, I jump back to one. If they’re still there, I’m going to jump to three. So the most basic cognitive EW involves clever ways to do frequency hopping and clever ways to do your modulation. I might switch from AM to FM, for instance. That would be your lowest-level cognitive waveform.

Some of the higher-end stuff—let’s call them generative waveforms—allow you to create the waveform on the fly, just like generative AI creates a poem on the fly that is optimized for whatever you want to optimize for. In this space, you can say, “I want to optimize for throughput given this specific jamming environment,” or, “I want to mimic 5G or Wi-Fi and hide in the noise.” Because generative waveforms leverage the most advanced AI, you’re able to change the objective function and do essentially limitless things with it. I’ve seen tests where these cognitive waveforms are able to outperform classical waveforms in very harsh jamming environments.

The reason they aren’t deployed to the edge right now is that they are incredibly compute-intensive. It takes quite a bit of compute to do this. But as compute cost comes down, I expect to see these deployed more and more—probably first through SOCOM and other early adopters, and then more broadly across the U.S. as cognitive waveforms and cognitive EW mature.

Maggie 37:30
Andrew, I want to shift gears a little bit and specifically talk about how you view startup–defense prime collaboration. I know L3Harris has really been a leader in this, and it has become a big part of your strategy as the trusted disruptor in the defense space. So maybe the first question I’ll ask is: where do you see opportunities for startups to really excel, versus what kinds of technology areas do you think defense primes will continue to remain dominant in?

Andrew 38:06
Yeah. I’ll say that defense primes, and where I put all of my cycles as the CTO of L3Harris, are focused on operationalizing AI. There’s some really interesting space here where the U.S. technology ecosystem, including venture-backed companies, can work with the larger primes. Why is this a good marriage? L3Harris is really good at having exquisite domain expertise. We spend a lot of time in customer spaces understanding their hardest challenges. We tend to have access to a lot of data—we build EO/IR balls, we build radars, we build radios. All this data can be used to take a model or a capability developed by a startup or partner and fine-tune it for a mission application.

The final thing we have as defense primes is real estate. I helped stand up and was part of one of the premier divisions in the National Lab system that does AI—the AI and Data Analytics Division at Pacific Northwest National Labs. They’re great at AI for national security and high-consequence environments. They have some of the world’s best data scientists and data engineers. Their challenge is access to real estate and access to operational systems. If you’ve got models, whether they’re coming out of the national labs or the venture tech ecosystem, you have to have places to actually deploy those so they can start to have an impact on the warfighter.

Missionizing AI requires us to be really good at selecting the right model. Not every use case is an AI/ML use case. So we need to be good at determining which startup model, open-source model, or partner model we want to adopt, how we fine-tune that model with real operational data, and then how we get it through the ATO process so that we can actually deploy it to the edge. Deployment to the edge is sometimes non-trivial. This is where Code Metal is helping us. It’s pretty easy to deploy AI to GPUs. It’s less easy if you’re in a SWaP-C—size, weight, power, and cost—constrained environment with only access to FPGAs. These systems need to be very power conscious because you’re on the edge, on a radio a soldier has to carry for 10 hours—or really 10 days. It has to operate for those 10 days. Imagine if your iPhone lasted for 10 days. I’d be much happier.

Code Metal helps us translate code from Python or MATLAB into embedded code on the edge—FPGAs and similar hardware. That’s where primes like L3Harris and others are focusing: operationalizing AI. Startups, on the other hand, bring novel AI/ML, edge autonomy stacks, and synthetic data generation. These are spaces where there have been tremendous commercial investments in Silicon Valley and the U.S. technology ecosystem. If you’ve got novel models, particularly ones that could work in SWaP-C environments, we’d love to talk and figure out how we can start the process of missionizing and operationalizing them.

Maggie 42:00
Andrew, how do you all determine when you’re going to partner with another company or startup versus when you’re going to build some of that technology in house? I know L3Harris has what, 10,000 engineers or something employed?

Andrew 42:15
Twenty thousand engineers. Yeah. And so it’s a good question. All right, so we would always rather accelerate, accelerate, accelerate. And the way that I look at partnerships with startups is that we have technology roadmaps, and our technology roadmaps actually don’t start with technology. If anybody starts talking to me about technology for a technology roadmap, they’re wrong. You start with a mission. These are the hard problems that we at L3Harris want to be able to contribute to. So that’s one end of the bound. The other end is what technology we have today, meaning L3Harris capabilities that we have right now. From that, I’ve got two endpoints. I’ve got the mission, the customer problem we’re trying to solve, and the technology we have today. That’s the gap. If there is a company that can accelerate the closure of that gap, then I absolutely want to talk to them today.

Maggie 43:06
What do you see startups most misunderstand about working with a large defense prime like L3Harris?

Andrew 43:14
Yeah, I think there’s sometimes a misperception that large defense primes don’t want to go fast. And to be honest, a company as large as L3Harris is not a monolith. There are parts that will still be slow, but by and large, we care about exactly the same things as everyone else in this ecosystem. We want to go fast and hard and solve hard problems. From the flip side, if I take that question from the other angle, I get a lot of misperceptions from my engineers about startups. Some of the misperceptions they have come from engineers who, particularly if they’ve never worked in a startup, see a startup almost as a supplier. The startup brings a widget, and the engineer says, this is five degrees off from the widget that I needed, sorry, don’t want to talk to you. What they don’t realize is that if they just engaged a little bit with the startup, the startup would be more than happy, on an incredibly short timeframe, to shift that five degrees and build something that is absolutely applicable to the problem the engineer is trying to solve, that gap they’re trying to close. A lot of my internal work at L3Harris is helping engineers understand that you’ve got to invest your time in startups so they understand the problem you’re really trying to solve. You also have to be conscious of their time horizon. If you’ve got a pursuit where it’s going to be a problem in three years and you’ll finally get money for it in eight years, that is not an appropriate place to engage a startup. So we have to be aware of what problems are amenable to startups in terms of what a startup’s traditional run rate is.

Maggie 44:58
What advice do you have for startups to work with a company like L3Harris? What can a startup do well, or what have you seen startups do well? Sort of the flip question to what I asked before, which is what do they not do well?

Andrew 45:10
Agreed. So startups that do well, and this is sort of the flip-side answer, are adaptable and willing to fit into, and I’m not going to say the L3Harris need, but the customer and mission need. That adaptability is incredibly important. I think it’s actually inherent in most startups’ DNA. They don’t run agile. If you talk to a founder about agile, they’ll hit you. It is pivot, pivot, pivot until you find product-market fit. I would advise that startups not confuse a great demo with a deployable capability. You have to understand your concept of operations but also your concept of employment. Give us a call and we will help you understand the concept of employment. A lot of startups don’t have access to SCIFs and high-side information, so we can help shape your product in appropriate ways so that it is actually solving the problem the warfighter has and addressing the threat they’re facing.

Akhil 46:20
Thanks, Andrew. Maybe to flip it again, there’s a perception in certain spaces that the primes are like the Evil Eye of Sauron. They’ve existed for a while, they’re there. But I think there’s this interest from startups in some of the points you’re bringing. There’s also real value in finding the right partnerships at the right time and place to achieve effects ultimately for the mission. My question is, if you’re a startup, how should you be evaluating and what should you be expecting out of a partnership with someone that’s a lot bigger than you, who may have a direct relationship with the customer, when even the startup wants that direct customer feedback and engagement? How do you navigate the limited time a young startup has in finding which partnerships make sense and which ones are actually going to drive value across both organizations, and ultimately for those who need it most from a mission standpoint?

Andrew 47:17
Yeah, absolutely. I think you’re looking for partners who are interested in a true strategic partnership as opposed to a transactional relationship. That is really important. When you talk to various primes, make sure they’re willing to invest their time in you. I’ll give you an example. At L3Harris, we have internal money that we use to run things we call validation projects. If you come in, Akhil, and you’ve got a novel widget that you’ve invented or a software app, we invest our own money at L3Harris to figure out how that app can be used to fill one of those gaps I talked about to solve a hard customer need. That’s an example of a strategic relationship where we’re investing in the relationship, you’re investing in the relationship, and together we’re able to move faster and solve harder problems than we’d be able to do individually. I’m really looking for that. A lot of times when primes engage with startups—and I haven’t seen this at L3Harris, but I have seen it elsewhere—they want to be a bully around IP rights, like “We want to own IP rights.” What they don’t realize is that absolutely kills the startup. It makes them unappealing to investors. So watch your IP rights. Make sure the prime you’re working with is looking to generate mutual value for the prime, for the startup, and for the customer, and not just for themselves.

Maggie 48:48
If you had all the CEOs and CTOs, the senior leadership of other large defense government contractors, in a room, what advice would you give them?

Andrew 48:58
The first thing is definitely focus on open systems. The reason this is important is that the United States’ asymmetric advantage is our ability to innovate faster, and open systems—while they take a bit more time up front—really open up their architecture on the back end. If some startup comes up with a new capability, because it’s an open architecture they’ll be able to plug it in quickly, get it operationalized, and make a real difference. Whereas if we have a closed ecosystem where everybody owns their own IP and data rights and nothing plays well with each other, we’re never going to get to that future where we’re able to rapidly deploy capabilities and iterate more quickly than adversaries.

Akhil 49:47
Andrew, maybe one level deeper on open architecture: is the government providing the right incentives for that ecosystem? And what would be the one policy change you would make? When you think about modular open architecture, people are trying to build a business that’s defensible and not dependent on year-to-year uncertainty about whether their system will survive. There’s a healthy tension between what a company needs to defend its position and what’s required to provide value and create the right incentive structure. How do you see that?

Andrew 50:18
I would say I’m never worried about defending anything. If you have to defend based on a closed architecture, then you’re not moving fast enough. Our strategy is to continue to move faster than anybody can adopt, and we will continue to do that. You also need to really understand where you make your money. You make your money off your implementation of the open architecture. Waveforms are a good example—we’ve talked a lot about communications waveforms. Many of them are open; they are government-owned protocols. That doesn’t mean L3Harris doesn’t make money off them. We still take that waveform, translate it into software, implement it on hardware, and sell an operational capability. Open architecture doesn’t mean you can’t make money.

What we need more of from our customers is consistency. Probably 90% of customers say “open architecture, open architecture, open architecture.” There’s a vocal 10% who say, “Well, with closed architectures we can go faster,” because they see the upfront initial investment—maybe you’re 10% slower—as the impediment. But let’s look at a concrete example. We talked about tanks earlier. You could create a tank that is a completely closed system. You don’t allow anyone to plug in a new EO/IR ball, nobody can plug in a new communications module. You can do that faster; you can deploy a closed ecosystem right now.

But let’s say you spent a little more time and built this on an open architecture, which means you can switch out modules. As a new radio comes online, one of these cognitive radios or cognitive EW systems, you just take out the old one and put in the new one. That could come from the startup ecosystem or from a traditional defense contractor. A new radio comes online, a new EO/IR ball comes online, and it allows a much faster upgrade cycle. In this tank example, you can see how the proponents of closed systems are right that you can get a fixed capability to the field more quickly, but the long-term ability to iterate and upgrade is far better with an open architecture.

Maggie 52:31
What’s a technology that you are bearish on in the short term but bullish on in the long term?

Andrew 52:37
All right, I did mention high-energy lasers and HPM earlier. There is still a way to go before those are real operational capabilities. I think everyone’s seen a couple of interesting prototypes and examples where people have shown, hey, we’re able to kill a UAV or do some other interesting things. Today, weather, power, and beam control are the limiting factors. In the future, these will be indispensable for a layered, cost-effective defense. The other is quantum. People tend to think about quantum in three buckets: quantum sensing, quantum communications and networking, and quantum computing. At some point, quantum systems such as quantum sensing with Rydberg atoms are going to far outperform RF antennas and RF capabilities for sensing, comms, and SIGINT. In the near term, though, I don’t see an impact in the next five or six years. So again, bearish in the near term, but long term these things are going to be differentiators and game changers.

Maggie 53:41
And I know you’ve been in the national security technology space for decades now. What’s the technology that you thought would be further developed than it actually is today, back in your days at MIT or one of the labs or elsewhere?

Andrew 53:56
The technology that I thought would be further along is true CJADC2. For those of you in this field for a while, it was net-centric warfare before CJADC2, and before that it was something different. We still fight in data silos with bespoke messages more than we should. Really being able to bring that “any sensor and every shooter, every sensor and any shooter” capability to the battlefield—I thought we’d be further along. It’s been a huge focus for the DoD for at least two decades, and I hope we continue to make progress around true CJADC2. Less developed but pleasantly surprising is autonomy at the edge. Small teams are absolutely deploying incredible capabilities. Everything from—gosh—we talked about Overwatch AI to Shield AI (not to be confused with Shield Capital) to Overland AI. These are just incredible advances in true autonomy at the edge. What are some tech—

Maggie 55:02
—areas where our adversaries are ahead of us in developing and deploying, and what will it take for the US to catch up?

Andrew 55:13
One place I’ll point out is hypersonics and long-range strike. So PRC and Russia—munitions like the DF-17. I will say that the United States, and we here at L3Harris Aerojet Rocketdyne, have eye-watering, exquisite hypersonic capabilities, with the ability to do computational fluid dynamics and advanced materials. The United States does have some incredible hypersonic capability. That said, in deployed, operational hypersonics, we are behind. We are absolutely behind. That’s the space where we want to keep up. Shipbuilding and the industrial scale and industrial might that China is able to bring to the table—our fleet growth is currently being outpaced by large numbers. Tactical electronic warfare—actually, I’ll lump these next two together: tactical electronic warfare and low-cost drone ecosystems. Currently, Russia is beating us there, and it’s largely because they’re actively engaged in a war in Ukraine. What this does for them is tighten their learning loop. They deploy an EW technique or system, and if it doesn’t work they are forced to continue to update and cycle it. Our EW capabilities aren’t nearly on the war footing that Russia’s are.

Akhil 56:36
Thanks, Andrew. I want to end where we started, with you being a technologist. If you had one extra hour in your busy day—you’ve got a ton of things, the leadership aspects of running the organization, the connecting-the-dockets piece, and then somewhere in there you get a chance to vibe code—what would you spend that extra hour doing, and how would you break that apart?

Andrew 57:00
You know, I think as technologists it’s easy to become enamored with the technology, and I spend an incredible amount of time, like I said, even developing my own models. If I could find an extra hour, I would spend that time with the operators, with the people who are actually using the technology. At the end of the day, as a CTO and technologist at L3Harris, I believe every engineer at L3Harris is here to solve hard customer problems. The better understanding I can have—and that every engineer can have—of what those problems are and how we might be able to solve them more creatively, the better.

I was recently talking with a customer, and they said, “Hey, Andrew, I just need more bandwidth. I need more throughput on these radios.” We talked for a little bit, and it turns out that’s not actually what the customer needed. They needed the right information at the right place at the right time. That drives you to think: yes, I could give you a radio with a bigger power amplifier and make this poor soldier carry around a big dish antenna. Yes, that could be a solution to that problem. But because we sat down and talked and understood the problem and the threat they were facing, it turns out the right answer is deploying intelligent agents to the radios to prioritize the data so they’re getting the right information at the right time to provide decision and information advantage. More time with the customer, more time understanding what they’re facing and what their threats look like so we can create better solutions—that’s where I’d spend my time.

Akhil 58:25
Awesome. Andrew, thanks so much for joining us.

We cover:

• The details of the reforms themselves (abolishing JCIDS, changing PEOs to PAEs, MOSA, and more)

• Why some legacy incumbents may resist these changes

• How to incentivize people within the Department to make these reforms a reality

• How startups should work to take advantage of the reforms

• And more

For more, check out David’s new blog post on the subject.

You can listen to the podcast on Spotify, Apple, YouTube, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please reach out if you or anyone you know is building in the national security domain.

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Transcript

Maggie 00:19
Late last week, Secretary of War Pete Hegseth announced a series of reforms to the Department of War’s acquisition system. The reforms range from renaming the Defense Acquisition System to changing the way program executive offices actually operate. Many of the reforms dive deep into the wonky policy weeds, but there’s no doubt that once implemented, they’ll be incredibly meaningful for startups working in this space. So of course, I had to ask my two favorite defense acquisition experts, Mike and David on my team, to join me for a last-minute emergency pod to help explain what these reforms actually mean for startups in the national security sector. David also just wrote an excellent blog post on the reforms that I’ll link to in the show notes, so definitely check that out if you want to dive in further. Mike and David, thank you both so much for making the time on a Saturday morning. I know there’s no way you’d rather be spending your weekend than digging into the details of defense acquisition reform. I think this is going to be really meaningful for those of us who aren’t as deep into the policy weeds to understand what’s actually happening here.

Mike 01:46
Happy to be here, and I think doing this as an emergency pod speaks to the importance of this announcement.

Maggie 01:55
Let’s start with the basics. What are the headlines? Can you give us a summary overview of what the Secretary’s memo and speech actually meant?

Mike 02:08
Before we get into the specifics of the policy changes, I think it’s important to reflect on the themes the Secretary highlighted. It really starts with an acknowledgment that the current system is broken. That recognition isn’t unique to Secretary Hegseth—many secretaries before him and Congress itself have tried acquisition reform. He correctly pointed out that the problem is broader than acquisition alone. It’s really a combination of requirements—what are we asking for; acquisition—how do we buy it; and budgeting—how the money is allocated and how flexible it is. I like that he addressed all three, because changing only one doesn’t get you the desired effect.

The desired effect, which he made clear, is speed. He’s making speed a top priority, and he’s implementing measures to reinforce that. There’s a great piece by Bill Greenwalt and Dan Patt called Competing in Time that highlights just how broken the system is. It takes, on average, 17 years to get a new capability fielded at the Department of Defense. On the fast end, it’s seven years; on the long end, twenty-seven. That’s clearly unacceptable. The implication of moving that slowly is that we put warfighters at risk, forcing them to fight with yesterday’s technology.

He emphasized a few key points: we need to move faster; we need accountability—meaning one person in charge, which ties into his portfolio acquisition executive idea; and we need to focus on outcomes over process. Anyone who’s spent time at the Pentagon knows there’s an almost religious devotion to process compliance, but that doesn’t always produce the best results. He’s saying we should prioritize outcomes that advantage the warfighter through speed. Those were some of the big takeaways for me.

David 04:19
I’d add one other area: a recognition that the defense industrial base is a bit hamstrung. One of the points highlighted, and often forgotten, is foreign military sales. Now, I’ll admit I’ve never worked in a program office, but when you think about the defense industrial base, it’s heavily constrained by ITAR—the export control regime that restricts critical technologies from being sold abroad. That dramatically limits your addressable market. We have many allies and partners who would love to buy technology that helps maintain our military’s edge, but the process is so bureaucratic and slow that it often prevents that.

By putting more emphasis on enabling foreign military sales to happen faster, the department can help the defense industrial base make the production investments they’re currently unable to. That’s a critical, if underappreciated, piece of the reform effort.

Maggie 05:30
Both of you have spent years mired in the Pentagon’s acquisition system—at the Defense Innovation Unit, in the Air Force, and elsewhere. Why are these reforms so important in the first place? What are the implications of maintaining the status quo?

David 05:51
I think what’s interesting about this moment in time—and this memo—is how aligned it is with the things Congress has been asking for for years. Secretary Hegseth is not the first to promote change in culture and process and to emphasize speed. Secretary Carter, who established the Defense Innovation Unit, the Defense Digital Service, the Strategic Capabilities Office, and a handful of other organizations, also recognized these same challenges. But I think what we’ve seen with some of the successes of the organizations I mentioned is how they’ve provided Congress significant proof points, insofar as Congress has been asking for many of the same things through the National Defense Authorization Act.

There’s always a section in the NDAA that outlines a set of changes, updates, and modifications to the overall acquisition system. But since Secretary Carter, there really hasn’t been much emphasis from senior leaders at the Office of the Secretary of Defense—or now the Office of the Secretary of War—to make these changes front and center. Here, we’re seeing significant prioritization through massive policy memos that aim to make wholesale reforms. And again, I think it’s notable how aligned these efforts are with the things Senator Wicker, the Chair of the Senate Armed Services Committee, included in the FORGE Act last December. Similarly, the House Armed Services Committee has advanced the SPEED Act, which now sits on the Senate’s desk awaiting ratification to become part of the FY26 National Defense Authorization Act. These efforts are so aligned and in concert with one another, and I think that bodes really well for the overall acquisition community.

Mike 07:57
Yeah, I’d add that another thing we’ve seen is the growing importance of commercial technology—with a nod back to Ash Carter, who had that vision decades ago. We’re now really seeing it come to the fore, especially in Ukraine. So many of the technologies being used there are produced by commercial companies, whether they’re sensors from space, AI software used for targeting, or autonomy systems. What we’ve seen on the battlefield in Ukraine is commercial technology being used to great effect—not to the exclusion of traditional platforms and munitions, but in a complementary fashion. It’s the first time we can truly say that commercial technology has played such an important role in a war. And we’re not going to be able to acquire the commercial technology we need without the reforms outlined in the Secretary’s speech.

Maggie 08:52
Yes, I think you both mentioned that this is not the first attempt at defense acquisition reform. Secretary Carter had his own initiatives, and Hegseth, in his speech, actually noted that Secretary Donald Rumsfeld had a similar effort more than 20 years ago. In your view, what makes this attempt different, and what do we need to learn from past efforts in order to make this set of reforms more successful?

Mike 09:23
Yeah, well, I think David pointed out a really important factor, which is that we’re getting all the branches of government together at one time, emphasizing the importance of this. We have the House, the Senate, and the administration aligned—the first time I can remember that we’ve had a president get involved and issue four executive orders focused on defense acquisition. I don’t know that that’s ever happened before. It speaks to unifying the branches of government to get behind this as an effort.

I think the fact that Secretary Hegseth referred back to Secretary Rumsfeld right before 9/11 making a speech really shows how hard this is. It’s going to take the entire community of the Defense Department—everyone involved in requirements, acquisition, and budgeting—as well as Congress in support. Secretary Hegseth promised transparency and speed, and he said he’d be looking to Congress for support. How hard this is speaks to the fact that we need everyone with hands joined to make this a success.

One of the things we’ll talk about in a few minutes is what the proof points will be—what will have to happen to make some of these reforms successful. But the fact that everyone is working together, that technology is now so important, and that we have commercial technology from startup companies all point to this being a moment in time when we really need to make these reforms so we can modernize the military much faster and get warfighters not only the capability they need, but also on a timely basis.

David 11:00
I was going to highlight that because of the war in Ukraine, we’re seeing how commercial technology can be implemented, advanced, and iterated upon in real time. There’s a general recognition—right at the beginning of his speech, Secretary Hegseth quoted Donald Rumsfeld and talked about central planning as the adversary. The overreliance on process is the enemy. Knowing that kind of central planning wouldn’t work in a live war like what Ukraine is experiencing with Russia, it’s clear that the old approach won’t hold.

We had overwhelming technological superiority in Iraq and Afghanistan, and we weren’t as concerned about the cost of munitions or the price per kill. Congress continued to provide Overseas Contingency Operations funding in the hundreds of millions of dollars, so the Pentagon and the services writ large didn’t really have to reimagine their warfighting capability to fit what they had at the time. We had overwhelming force, but it wasn’t economical.

Today there’s recognition, especially with a peer adversary like the People’s Republic of China, that if we were to get into a situation requiring kinetic force, the way we operate today would really handicap our effectiveness.

Mike 12:46
The other thing I wanted to mention that relates to this being a moment in time is that we’ve now had a decade since the organizations David referred to—those Ash Carter set up—have been practicing tradecraft in acquisition. We have proof points from those organizations, whether it’s the Defense Innovation Unit, the Army Applications Lab, AFWERX, or the Rapid Capabilities Offices. There are ways we can leverage what’s already been done on a smaller scale to make a much bigger impact when applied to the whole department.

Maggie 13:23
So what will be some of the proof points of a successful implementation of these reforms?

Mike 13:28
Well, I think the ultimate proof point will be whether we can change that 17 years on average to one or two years with commercial technology—and maybe with the establishment of what’s called MOSA, the Modular Open Systems Approach. We should be able to move faster on the larger defense platforms as well. I think it really is about speed. If we look at some of the changes the Secretary is talking about, they’re designed to make speed easier. Whether it’s blowing up the JCIDS process—the requirements portion of the process—and figuring out what we need to buy faster, in fact, we don’t need a JCIDS process for commercial technology. We can buy what’s off the shelf and use some of the faster ways to procure. I’d point to Other Transaction Authority, which was given to the Department a decade ago. DIU used that very effectively, and now many people are taking and using the process DIU pioneered—what David pioneered here on this call—the Commercial Solutions Opening.

Having a single accountable executive is key. It’s not just a name change to go from a PEO to a Portfolio Acquisition Executive; it allows one person to make trade-offs of speed versus traditional cost and performance. The Secretary made the point that he’d rather have new capability—maybe 85% of what we might have specified in a requirement—sooner, rather than wait 17 years on average to get something that meets the requirements fully. Those would be some of the important proof points, and they all come down to: do we get things faster to the warfighter?

David 15:13
Yeah, that’s well said. Maybe moving a little bit more into the specifics—so we keep talking about this thing called Portfolio Acquisition Executives versus Program Executive Offices. At the macro level, it’s really about allowing trade space for a senior leader to move across an entire capability area, whether that be munitions, fighters, or something else, and to look at what’s actually performing well. It’s about getting real-time feedback from the test and operational community about what’s progressing technologically and being able to make trade-offs inside that overall portfolio.

At a procedural level—and if the audience will bear with me—one of the major challenges that the executive branch cannot address on its own is the budgeting process. Every year, Congress appropriates funding to the Department, and unfortunately, they do it through thousands of lines of programs. Each program will have what’s called a “program element” associated with it, and that’s where Congress explicitly says: you are going to spend X amount of money on this thing. Maybe it’s a certain set of munitions, maybe it’s a re-engine or engine upgrade for something like the B-52, or maybe it’s for a ground network system. That structure really handcuffs the executive branch from making decisions and trade-offs.

So for me, my first proof point that this is going to be real and effective is if we see the President’s Budget, as it moves from the Combatant Commanders to the Services, up through the Office of the Secretary of Defense, then on to the Office of Management and Budget, before being signed by the President and sent to Congress—if we see a consolidation of program elements into portfolio elements. What we should see are fewer portfolio elements with much larger capacity and more general statements about the types of capabilities they’re pursuing, highlighted by this new requirements regime that’s moving away from the JCIDS process—the Joint Capabilities Integration and Development System, I think that’s what it stands for—and requirements writ large.

Seeing that shepherded in such a way, if we can, from a systems standpoint, make that happen, will really shock the 36,000 people who work at the Pentagon every day. To me, that will be the massive proof in the pudding that we’re actually changing the system in a meaningful, dramatic way, which will then give ownership and accountability to those senior leaders within these portfolios.

Mike 18:33
Well, I just have to say how important David’s comment really is. If you work in the Defense Department, you see how hamstrung you really are by this inflexibility of money. Nothing happens at the Pentagon unless you can get money aligned with your purpose. Those 1,700 line items are far from oversight—they’re really micromanagement of the Pentagon by Congress. And it’s even worse, because now they break every dollar into a color. I can spend one color on procurement, another on R&D, and operations and maintenance has its own color. The 1,700 line items broken into specific colors mean you have practically no flexibility to move money to a different category—where you might be able to save overall because you’ve identified a new technology that’s cheaper, or you might have an urgent threat. But because the budget process started three years ago and now it’s cut up into these very small granules of program element by color, you’re completely constrained. Addressing the budget component as David did could be a huge benefit, offering a lot of flexibility to move much faster.

David 19:47
I’ll only highlight that it’s actually much worse than Mike described. Within those colors of funding, you have even more granular specification. Within research, development, test, and engineering—RDT&E—funding, you have about seven or eight different categories like 6.3 and 6.4, which further hamstring flexibility. It’s Congress’s way of ensuring that the department spends broadly across many different activities and doesn’t put all its eggs in one basket. But we see how well that’s worked with the Joint Strike Fighter, which last I saw is experiencing about a $1 trillion shortfall. Despite our best efforts to spread out funding to exercise a multidimensional military apparatus, we’re just not good at it. Central planning doesn’t work—we need to admit it and try something different.

Mike 20:48
If we look across history, I don’t think many people were very good at it. True, it’s hard to do.

Maggie 20:53
So maybe, just to make this tangible for a novice like myself—could we walk through what this new process would look like to field a new capability, and how that would compare to the old process? For example, with the F-35, we had to go through the multi-year JROC process to collect requirements, and then it became kind of this inflexible system, as you all were describing. But what might a new process look like to field the next set of air capabilities, or some other technology of your choice?

Mike 21:30
Let’s take drones as an example, where the department is way behind where it would like to be. You only have to look at what’s happened in Ukraine to see that both Ukraine and Russia are producing somewhere between four and five million drones per year. I don’t know what the equivalent number is for U.S. manufacturers or how much the Pentagon is buying, but I’d bet we’re an order of magnitude below that—so way behind what we might need if we were called into a conflict today.

We don’t need to start with a JROC process, which in itself could take a couple of years just to figure out what a joint requirement would look like for a drone. Using the portfolio acquisition executive approach, you could imagine having an office responsible for drones. That means we don’t need to say, “I need 17 types of drones,” and then rationalize all the requirements for different endurance and payloads. Instead, it would be much easier to say, “I need these four or five capabilities,” all managed under one acquisition executive, with that executive making trade-offs between how fast we can get those, what’s available today, and where we might want some development to occur.

That’s a tremendous advantage for the warfighter, for speed, and for the taxpayer. Then, using a commercial solutions opening process—something already proven by DIU and other organizations—we can quickly sample what’s available in the marketplace and put companies on contract. We don’t need to buy based on their promises; they then go into a test program to see how they perform in the field. We could certainly get that capability fielded within one year if it’s commercial technology that already exists and just needs testing.

Of course, we still need to plan for how we’ll train folks to use those systems and what support might be required in the field, but that can obviously happen much faster. And then we have the budgeting benefits—if we see new technology come on quickly, we’re able to evaluate it without waiting for another requirement or budget cycle. You can imagine a much faster iteration for commercial technology, so we can both field it quickly and replace it as technology evolves and improves—all with the intent of getting new capability to the warfighter as fast as possible.

It’s a little more complex if we’re talking about a ship or a fighter aircraft, but that’s where the modular open systems approach comes in. That’s how we buy things in the commercial world—with standards and interfaces among subsystems. If you had a design that included those interfaces and awarded that, then subsystems could be built into that design and competed as soon as technologies evolve. That would allow much faster upgrades for ships and fighter jets, as examples.

Maggie 24:39
So this is the difference between saying we need to have a drone that has a five-foot wingspan and has this specific EW payload and this specific camera system. Now instead, we can say we need to have the ability to conduct ISR within, you know, a 10-mile radius. And now we can field whatever capability could fulfill that mission set, even if it doesn’t have a five-foot wingspan or the exact camera system that we were requesting in the initial set. Is that the right way to think about this?

Mike 25:12
Yeah, I think what you just described illustrated the JCIDS, or requirements process. And then what the Secretary is also calling for is, “Okay, and I want faster buying.” That’s where something like the commercial solutions opening can come in, and then budgeting for that allows for me to shift to different priorities and adopt technology faster. That’s where he’s addressing the budgeting part of this. So all three of those can be accomplished with this set of reforms.

David 25:41
Yeah, I would just maybe add, with the requirements process, because of those specifications, it allowed the budgeting team to figure out what the expected costs were so that we weren’t going and trying to build an unaffordable military, right? But it assumes that everything is going to work out perfectly because we centrally planned it to the widget. And we just know that’s not how things work. What we sacrifice in pretending to have clairvoyance of the future is flexibility—flexibility based on the technological evolution happening in the commercial world.

Because, again, we have to remember that the system acquisition approach was under the assumption that without the Department of War deciding that a technology needed to exist, it wouldn’t. And now it’s flipped on its head. Technology is just happening all over the place because the amount of research and development funding available to the world is no longer in Pentagon coffers. That has all changed.

So maybe, Maggie, to be specific about what this change looks like—in my mind, it is a massive reorganization of the department writ large. Let’s take the Air Force. You have these major commands that are entrusted with organizing, training, and equipping. They help get the fighter pilots trained up, make sure they’ve got their fuel, set their training hours, and create the requirements for what the next generation of a fighter pilot might look like. They also produce these things called 1067s, which are modifications to existing weapon systems. That gets routed up through the Pentagon, the higher headquarters approves it, and then it goes down to the program offices—PEO Fighter/Bomber. Now they’ve got this validated requirement, and then they can go compete it out among industry based on all those specifications laid out through the 1067 process or otherwise.

What I think really needs to happen is an integration of the operational commands and the acquisition commands into cross-functional teams that have the requisite expertise to make decisions around capability tradeoffs based on real-time feedback coming from the combatant commanders. We need to get away from this game of telephone where things come from the field, move all the way up to the Pentagon, then back down to the program office, and then out to industry. We need to create a much flatter organization filled with people who have the responsibility, accountability, and decision-making prowess—with the resident expertise inside their control—to actually make it happen.

And I would say the other thing that stood out to me in the Hegseth memo was the explicit callout of the contracting officer. Today, contracting officers are a functional discipline that awards and obligates the government, and they respond to their own chain of command. So even if you are a program executive officer, you don’t have control over your contracting officers. They work for you from an operational standpoint, but administratively, they work for somebody else.

That’s kind of created its own fiefdom, as they want to protect themselves from doing something that might be out of bounds. But the natural consequence is that you just have these disconnected organizations up and down the entire military apparatus, and all of those friction points continue to insert time into the equation. And time is the one luxury we no longer have, because we are so far behind and our legacy systems are costing so much in operations and maintenance that it’s eroding our military advantage.

Maggie 30:12
So what are the implications of these reforms going to be for the traditional defense primes? And then what are the implications going to be for non-traditional vendors like startups?

Mike 30:23
Well, let’s start with startups, which is what we focus on at Shield Capital. I think the emphasis on speed is a tremendous benefit to startup companies that have been frustrated with how cumbersome and slow it can be to get a contract with the Department of Defense. I think this is part of the genius of these reforms—they’ll encourage a broader set of companies to participate in the national defense industrial base. For startup companies, it’s going to be more interesting to look at what opportunities exist to compete for commercial solutions openings programs at the Pentagon. With this emphasis on speed, there should be a way to find out much quicker whether you’re in the running, where you stand in that competition, and eventually, if you’re selected, to be paid for what you’re doing. We can’t overstate how important that’s going to be. One of the implications that Secretary Drew highlighted was that we need a broader defense industrial base. We need the primes, and we need to take advantage of the tremendous innovation happening across many different technologies—as David pointed out, that innovation is happening in hubs around the country.

David 31:35
Yeah, and I’d say for the primes, this is equally important. Right now, the primes generally receive contracts that are cost-reimbursable, so they’re honestly incentivized to let these programs drag out, because their profit margins are capped at nine to eleven percent. The way they make more profit is by generating more revenue, and you get revenue on a cost-reimbursable contract based on the number of hours of labor applied. I can’t tell you how many times, when I was in a program office—not named the Defense Innovation Unit—no-cost PoP (period of performance) extensions would be levied on these contracts all the time. We know there’s a cost to extending time, but it’s not necessarily obvious to the acquisition system. Of course, we understand there are downstream effects to the operational community.

If we can move the defense primes away from some of these contract types and instead encourage and incentivize speed of delivery, we’ll see significantly more partnerships between the primes and venture-backed startups that can deliver quickly. This allows the primes to be what they truly are: system integrators with incredible insights and understanding of the operational mission. They generally have a deep bench of technologists, and we need them to help these startups gain better access to weapon systems so that the operational community can benefit from third-party capital investments into startups delivering products that work—products that don’t need to be built bespoke to government requirements.

It’s an incredible sea change, and all of these elements need to work in concert—the requirements flexibility, the contracting flexibility, and the budgeting flexibility—to truly reimagine how the department operates.

Mike 34:00
One other benefit for the startup community could be the implementation of MOSA—the modular open systems approach—something Congress put into law about twenty years ago, but the Department really hasn’t moved forward to incorporate on a widespread basis. The basic idea is standards, so that companies could compete for subsystems rather than just the single program of record that one vendor might get for fifty years on a large defense platform. If that gets broken down the same way we think about the computer industry today—where I might mix and match a graphics card and a processor, and maybe someone like Dell assembles it all for me, but I’m not locked into one operating system or one set of components—it would open up large defense platforms to more vendors. Traditionally, it’s been difficult for many suppliers who can only work through a prime. This would open competition and create freer access points for vendors working on subsystems for large platforms. That’ll take years to play out, so it’s not a near-term advantage, but over the long term it should be much better for vendors, expand the defense industrial base, and certainly benefit the taxpayer.

Maggie 35:29
Do we expect any organizations to resist these changes? And if so, how can we protect these reforms from groups that might be opposed to them?

Mike 35:40
I don’t think anyone will be foolish enough to be vocal in protesting this, but of course we might see some folks dragging their feet. It’s human nature not to want change. There are big shifts being called for here, and they’re going to be disruptive—as the Secretary pointed out—to some business models. It’s going to require primes to adapt faster. Honestly, if they do change their business model, they’ll clearly benefit from this, but going through that change could still be challenging.

David 36:17
I’d say there are a lot of different headquarter functions across the Department. Obviously, there’s the Pentagon, which we’d call higher headquarters, but there are also many other elements throughout the organization, each with a bit of local cachet. Many congressional representatives care deeply that their base is the headquarters for a particular function. In this new paradigm, we’ll likely need to shrink some of those overhead organizations that provide support—whether writing requirements or offering Program Executive Office–type functions. If we don’t consolidate the sheer volume of these entities, we won’t achieve the residual benefits of a faster, leaner, more agile system. I could see many bases being very concerned about what this memo portends for their relevance across the Department. This will be a massive challenge requiring compromise and trade-offs, but I hope congressional representatives and local constituencies recognize that we can no longer afford the luxury of a fragmented decision-making system. It’s just not working.

Maggie 37:54
How do we actually implement these changes? I mean, it’s one thing for the Secretary to go up and talk about all the things that are going to change, but obviously the department is comprised of more than a million people. I know a lot of people talk about the “frozen middle” — people who have been there for a long time, doing things one way. How do we incentivize groups, both inside and outside of government, to actually make these changes a reality?

Mike 38:22
A big part of it was discussed by the Secretary in terms of what happens next. Between the Under Secretary for Research and Engineering, Secretary Michael, and the Under Secretary for Acquisition and Sustainment, Secretary Duffy, they’re now going to need to put on paper specific guidance. It’ll be imperative to spell out what changes are needed to get to a portfolio acquisition executive, for example, and what things go away if we’re going to create more accountability in that single person. Those are the kinds of details that now need to be specified. I think the Secretary called for that within the next 90 days, so there will be a more detailed implementation plan.

He also called for a change to the Acquisition University — to make it a Warfighter Acquisition University — and that’s where the training occurs for contract professionals. He wants that training to be more experiential, which I think is a great move. You could imagine an exercise where you’re working on a specific program, whereas before, much of the curriculum was about compliance — compliance with federal acquisition regulations, which the Secretary called out as being onerous. I think it’s about 2,000 pages of Federal Acquisition Regulations, plus another couple thousand pages on how to implement them. It’s a very complex process, and it would be great to simplify that, which has already been called for in executive orders issued by the President. Now it’s about ensuring that the curriculum taught at the Warfighter Acquisition University backs that up and makes it more experiential.

Hopefully, the contracting officers that David mentioned earlier will be part of the cross-functional team at a portfolio acquisition executive’s office, really figuring out how to move faster. We’ll have to see what specific guidance is given and how the training changes. I’d also add that the general counsels will have to be involved — they’ve traditionally been a very risk-averse part of the Pentagon, focused on making sure nobody gets into trouble. But that kind of mindset doesn’t move you forward when you’re trying to take more acquisition risk.

So I think this whole set of folks — the trainers, the leaders, and the general counsels — need to demonstrate the right behavior, reward people who embrace it, and hold accountable those who don’t move forward with the directive that’s been issued.

David 40:53
Yeah, I would hope that within this portfolio scorecard that’s going to be created around this new acquisition paradigm, it not only provides mandatory goals that you have to hit—like small business concerns, or obligating by a certain date or facing consequences in the financial spring execution review—but also that it includes positive incentives. For example, if you deliver these things early and quickly, maybe you’re promoted faster, given more responsibility, or your scope of authority increases. Those kinds of rewards would really motivate the workforce in a way that’s very different from today, where it’s mostly about being compliant, not screwing up, and checking the boxes: going to trainings, accumulating the right experiences, and holding the right roles to get promoted.

We need to shift to outcomes-based performance instead of output-based. That’s a huge task. One area where the military doesn’t always do a great job is celebrating people who do things the right way, achieve incredible results, and then rewarding them with something meaningful—not just a decoration or a day off. Generally, those people don’t even want a day off; they want to keep doing the job. So we have to get creative and apply commercial best practices that resonate, because the workforce is the most important part of any reform effort. If they’re not properly incentivized and motivated, all we’ll have are papers and nice speeches.

Maggie 42:56
Speaking of celebrating organizations that are doing things right, can you talk about some of the existing programs or organizations that are already acquiring technology in a manner consistent with this new policy—ones the rest of the department can learn from?

David 43:14
Yeah, well, Mike and I are obviously big fans of the Defense Innovation Unit and the work we did there. Maybe I’ll just point out—in the blog piece I posted last night, I highlighted the Air Force Rapid Capabilities Office. They were established in 2003, so they’ve been around a long time. The office was developed because a few compelling leaders were unsatisfied with how slow the acquisition system was moving. They knew they could deliver capabilities to various organizations faster, better, and cheaper.

That organization has had a lot of success. I’ve never worked there, so everything I’m saying is based on reputation, but I found it extremely interesting—and I mentioned this in the blog—that they were given the B-21 bomber program, even though there’s already a program office at a base near Dayton, Ohio, with a Program Executive Office specific to bombers. Why would that program go to the Rapid Capabilities Office if, organizationally, it should already have a home? There’s nothing “rapid” about building the B-21. Clearly, there was dissatisfaction with how the existing program office culture was executing.

Instead of addressing that problem head-on, the solution was to hand the program to someone else. That’s the wrong approach. We shouldn’t let a PEO for bombers continue indefinitely if they can’t be trusted by higher headquarters to execute something within their own jurisdiction. And this isn’t an isolated case—it’s happening across the department every day. That’s why we keep creating exceptional offices to go around the system.

One of the things Secretary Hegseth said was that we can’t keep going around the system every time. At a certain point, we have to rebuild the system into what we actually need it to be. That’s going to be a massive undertaking. It’ll upset people and make them uncomfortable, but we already know the status quo isn’t working.

Mike 45:39
It clearly goes to the principle that was called for, which is accountability. We need accountability for decisions. One of the additional comments the Secretary made, or reinforcing mechanisms, is that we’re going to have people in these positions longer. The idea with the portfolio acquisition executive is a four-year minimum term with a two-year extension, in contrast to what traditionally has been a three-year rotation. Anyone who has been around acquisition knows you need to be there long enough to see the implications of the decisions you make. Many people attribute the success of the nuclear submarine program to the fact that Admiral Rickover was there for such a long time—long enough to oversee the program from start to finish—and that had a major impact on how fast capability could be delivered.

Maggie 46:35
What are some of the capabilities where you all think these changes in the acquisition process will make the most difference in getting high-quality technology into the hands of our warfighters quickly?

Mike 46:50
From our experience at the Defense Innovation Unit, we’re excited about the adoption of commercial technology. That’s going to make a huge difference. Everything we’ve talked about—software, autonomous systems, sensors from space, resilient communications—the list goes on and on, because there are more and more commercial technologies that are going to be important in warfare. For all of those, this represents a pathway that’s not only much faster for getting capability to warfighters but also much faster for getting vendors into the Department of Defense, hopefully helping build strong companies in the process. I’m very excited about that.

David 47:33
Yeah, I agree. Anything that deals with autonomous capability is ripe for commercial integration and requires us to rethink the acquisition approach. The private sector has sunk billions of dollars into this space. Think about the Waymos driving around on the streets today—that didn’t come from a small Air Force Research Lab project that got a couple million dollars over five years and suddenly produced autonomous vehicles. We just don’t have the deep pockets within our research and development apparatus to develop these technologies anymore, so partnering becomes absolutely necessary.

What we saw in the space community reinforces that. I still remember in 2016 when now-Major General Steven “Bucky” Butow was highlighting all the great commercial space technology largely created out of the zero-interest-rate phenomenon known as ZIRP. While not all those companies have necessarily succeeded in the public markets, they’ve absolutely had a dramatic impact on the battlefield, especially in Ukraine. The Department was very resistant to working with them in the beginning. Now there are commercial offices up and down the chain, but in those early days it wasn’t easy to get them to partner. We’ve come a long way, but there are still a lot of program offices that refuse to think about anything beyond their traditional system acquisition approach—validated requirements, cost-plus contract types, and awarding things in classified environments to the same traditional defense industry base.

Maggie 49:41
So finally, to close us out, I’m going to ask you both the question that I ask at the end of almost all these podcasts, which is: what advice do you both have for startups in order to navigate this new apparatus, to successfully build technology for the national security domain?

Mike 50:00
Well, the advice will be very similar to what we’ve talked about before, which is that there are going to be many more opportunities in defense. It’s not going to happen overnight—perhaps it will take years for some of these changes to fully work their way through—but the whole investment thesis behind Shield is that there are going to be dual-use opportunities. Of course, that means great commercial opportunities for this technology, but also national security applications. This will turbocharge the Department of Defense in terms of how fast they want to pursue these opportunities and how much they recognize the importance of commercial technologies.

So I would say, keep your eyes peeled for what opportunities come. Many companies in our portfolio—and in other venture portfolios—are already watching what’s happening with Defense Innovation Unit solicitations and rapid capability offices that are reaching out. I think that’s going to become more of the norm, whereas before it might have been the exception relative to total defense expenditures. As that occurs, there’s going to be more opportunity for more companies. It’s going to be a very exciting time. I think we’re at the front end of a secular change in defense spending that’s going to pull through a lot more commercial technologies and new vendors. That’s tremendously exciting.

David 51:28
Yeah, Mike, I think that’s well said. I’m going to take this question in a completely different direction. If I’m a startup, I would say: do not take this level of advocacy for granted. There is going to be a very vocal minority of companies who want things to remain exactly the way they are, and they’ve been partnered with their congressional and Senate representatives for a long time. If you don’t engage with Congress, they don’t know you exist. You need to develop a relationship with them to let them know that these types of changes are absolutely critical to your company’s ability to deliver capability that the warfighter can use operationally.

We all know that technology relevant today is in large part built by venture-backed startups, but those startups do not yet have a seat at the table when it comes to the overall defense industrial base. It’s still early, but these things move a lot faster when the whole industry works together against incumbents who largely want to keep things the same. To put this less abstractly, I’ve been working on the Small Business Innovation Research reauthorization. Senator Ernst has been promoting the Innovate Act to help companies that can deliver capabilities, but this entrenched community of SBIR mills—of which there aren’t that many—has been able to hold a certain side of the aisle hostage because they are so loud, so well-organized, and well-funded enough to hire their own lobbying entities.

As a result, the Innovate Act is stuck and stalled. Many congressional representatives actually have a lot of startups in their communities, but they’re not as organized and don’t realize they’re cutting their nose to spite their face at this point. So, to end it, you need to continue to advocate. We’re all doing this together, but don’t take it for granted.

Mike 53:42
That’s a great point. You have to keep in mind how your congressional representation can help you with your agenda.

Maggie 53:49
Great. Well, David and Mike, thank you both so much for joining last minute to break down what’s happening in the world of defense, warfighter acquisition, and reform. I really appreciate you both coming on. I know I learned a lot—it really helped clarify many of the acronyms and policy changes in this memo. Thank you so much.

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We cover:

• How missile defense actually works, breaking down a) the threats b) the kill chain and c) firing doctrine

• How missile defense has changed over the last several decades

• The role of startups and emerging technologies in the future of missile defense

• The state of our adversaries’ missile and missile defense systems

You can listen to the podcast on Spotify, YouTube, Apple, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please reach out if you or anyone you know is building in the national security domain.

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Transcript

Maggie 00:04
In this episode of the Mission Matters podcast, we sit down with Shield Capital Operating Partner, Lieutenant General Pat O’Reilly, to discuss missile defense. Previously, Pat served as the three-star general in charge of the Missile Defense Agency, the Pentagon’s inter-service organization responsible for U.S. missile defense. Before that, Pat had a long career in missile defense. He was the program manager for several key U.S. missile defense programs, including THAAD, National Missile Defense, Aegis, Directed Energy, PAC-3, and radars and space assets.

Matt 01:10
Missile defense is a very popular topic of conversation in national security circles these days, primarily because of the Trump administration’s announcement for a Golden Dome, which is an air and missile defense system that would shield the U.S. from any threat.

Maggie 01:26
Yeah. I mean, I feel like every single time I go to D.C., it’s basically inescapable at any space event from hearing the words “Golden Dome.” But I don’t know, Matt, what do you think? Do people actually have a good understanding of what this might actually mean?

Matt 01:40
Well, before we did this interview, I certainly had gaps in my knowledge about missile defense and what a Golden Dome architecture could look like or cost. And when we started preparing for this interview, we realized just how complicated missile defense really is and how little we really knew about it. One important thing that I now better understand is just how difficult missile defense is to get right. It entails thousands of exquisite technologies working together perfectly for a span of a few very crucial seconds. Our missile defense posture today has roots not only in those technical challenges and what’s technically possible—it’s also been shaped by wider national security policies dating back to the Cold War. And I think those Cold War policy frameworks are still really important for understanding the state of missile defense today.

Maggie 02:31
Yeah, I will say Matt and I are both giant history nerds, so I always love to be able to dig back into Cold War history to understand why our systems are the way they are today. I’ll start by saying, you know, today, the U.S. really does not have a fully comprehensive air and missile defense system. The major policy framework that’s guided U.S. missile defense capabilities was the Anti-Ballistic Missile, or ABM, Treaty, which was signed by the United States and the Soviet Union back in 1972. The ABM Treaty restricted both countries from actually deploying anti-ballistic missile systems with the goal of preventing further acceleration of the nuclear arms—

Matt 03:12
Race. Wait, Maggie, can you explain that? Why would a treaty aimed at preventing an acceleration of the nuclear arms race focus on preventing countries from building up their defensive systems?

Maggie 03:26
Yeah, I think the idea here is that whenever one country built up defenses, another country would build up more missiles in order to actually counter those defenses. So it’s sort of an arms control treaty in reverse—that by preventing you from building defenses, it actually disincentivizes me from building more arms in the first place. The idea was that if neither country could defend against the other’s stockpile, neither would need to develop dramatically more missiles. But the U.S. ultimately pulled out of that treaty in 2001, as other countries like Iran and North Korea started developing their own ICBMs and nuclear programs, and the United States wanted to make sure we could defend against those systems with our own anti-ballistic missile systems.

So really today, the way to think about it is our system is designed to counter rogue threats—that is, a few missiles launched from Iran or North Korea, or a non-state actor, or maybe even an accidental launch from a larger power like Russia or China. But our system is not designed to counter a full-scale attack from a major peer adversary. Instead, we really have to rely on our nuclear deterrent to protect against a full-scale nuclear war.

So that takes us to Golden Dome. Today, a major part of Golden Dome—I think it’s actually officially called Iron Dome for America—is to be able to defend against any threat, whether that is a nuclear launch from China or a small drone launched by a cartel across the border. And in order to actually build out a system that really achieves those goals, it’s going to require new capabilities—and some capabilities that have never been deployed at scale before, like space-based interceptors.

Matt 05:08
And we’ll get into Golden Dome and space-based interceptors and some of these new capabilities. But first, in this episode, in order to understand what the future of missile defense might hold, we actually start with the fundamentals of missile defense. So first, we ask Pat about the types of missiles we defend against, different phases of a missile launch—including when a missile would be most vulnerable to being defended against and intercepted—and what missile defense systems we have to respond at each stage of a launch.

We talk about the different types of defensive systems, including both kinetic and non-kinetic—that’s interceptors versus directed energy—and we cover the core technologies that make missile defense possible along the entire kill chain: how we characterize threats with sensors, algorithms for sensor fusion, and choosing what we want to protect and prioritize with both human and automated decision-making.

Then we talk about why missile defense is so hard. We hinted at that earlier, with all the technologies that have to work well together and the idea of Golden Dome, including new capabilities like space-based interceptors. We conclude by discussing what technologies are still needed to improve and modernize missile defense and where startups and other innovative solutions can help.

And as we said before, throughout the conversation, we gained a much better appreciation for how complicated and difficult missile defense truly is to get right. We hope our viewers and our listeners do too. We’re incredibly grateful to Pat—one of the world’s leading experts in missile defense—for taking the time to explain to novices like us and our audience.

Now, on to the show. Pat, thanks for being here. You had a storied career in missile defense within the Army. How does one even get into missile defense? Did 18-year-old Pat know that he was going to start a long career working on missile defense issues when he started at West Point?

Pat 07:01
Actually, no—and thanks for having me here. But to answer your question, you know, in the Army, you’d see the old saying, “You do what you’re told to do.” And I had just finished teaching physics at West Point as a captain, and the next thing I knew, I was in an organization called the Strategic Defense Initiative Organization in the Pentagon in 1989. That was started by an initiative from President Reagan, and the Army did not have enough officers participating. So overnight, I found myself in the SDI Organization without any training or background. That’s how I got started, and I literally was the junior person in the entire organization.

Matt 07:53
Can you walk us through how you went from being the junior person in the entire SDI Organization to being the senior-most person in all of U.S. missile defense at MDA?

Pat 08:04
Well, like everything, things are controlled by Congress. I went to work one day and found out that the directed energy program that I was the program manager of had lost all its funding overnight. So then I went down the hallway and literally knocked on 100 doors to see if anybody needed help. There was a program called THAAD at the time—Theater High Altitude Area Defense—that was short some people, and I ended up working in theater missile defense. That’s how I shifted from my physics background and directed energy to missile interceptors.

Maggie 08:46
So, Pat, I want to start off just asking a basic question. You know, I think Matt and I seem to see missile defense everywhere these days. It’s in policy discussions in D.C., it’s in every other pitch deck—I feel like we see it especially in the space domain. But what are all the actual moving parts of missile defense? It’s a really complicated system. Can you just break down what actually is missile defense?

Pat 09:15
It actually is extremely complicated. There are thousands of technologies literally working together in real time for these systems to work. It can be greatly simplified, and I always recommend looking at it from three perspectives. One is the class of missile that you’re trying to engage. The second is the kill chain, or sequence of actions that are required to happen in order to destroy a missile. And then the third piece is the firing doctrine you use. So, with those three in mind, you can set up a framework that makes it much easier to understand what does and does not work for missile defense. I just want to comment up front: a lot of times, air defense, which is focused on anti-aircraft and drones, is intermixed with cruise missile defense, which is specific for cruise missiles, and that is also integrated into discussions about missile defense. Those are three different military capabilities, and they require different firing doctrines, different technologies, and different threats.

Maggie 10:32
Maybe we could start with that first piece. What are the different kinds of missiles we might be defending against in the first place?

Pat 10:40
There are two basic classes of these missiles that we’re most concerned about. There’s the ballistic missile, which, by basic physics, means that after it’s been launched and the booster burns out, it then coasts to its target. If it’s short range, it might be a 15-minute flight. If it’s a long ICBM, it could be over 30 minutes of flight, but it is just coasting, and it’s following basic rules of physics and Kepler’s laws, or laws of orbital mechanics. So you can pretty well predict where they’re going to go at any point in time. The other class of threat missile is the maneuvering threat, and they actually have either control surfaces or they have different types of propulsion systems on board that can steer them during flight. So it is very hard to predict where they’re going to be at a certain point in time. Hypersonic missiles that you hear a lot about today are that class of missile. But I will point out maneuvering RVs were introduced by the Russians, or the Soviets actually, in the 1970s, and since then they have been very hard missiles to intercept, because it’s unpredictable what their path is. Each missile characteristic, or a missile, is categorized by its range. You have short-range missiles that are 300 to 1,000 kilometers, intermediate-range missiles which are 2,000 to 5,500 kilometers, and strategic missiles are missiles that travel greater than 5,500 kilometers. There’s a reason they’re broken into those three categories. Number one is the speeds and the altitudes: are they flying inside the Earth’s atmosphere? Short-range typically fly inside the Earth’s atmosphere. Intermediate-range leaves the atmosphere, sure, short for a short period of time, and then it re-enters, and a strategic missile spends most of its time outside the Earth’s atmosphere. You will often ask, “Well, what about 1,000 to 2,000 kilometer missiles?” The reason they’re not covered typically is there was a treaty between the United States and Russia, and the Soviet Union for many years, that banned intermediate-range missiles. So there was very little development done in those areas, and typically the missiles today—there are very few that are in that range.

Matt 13:22
Just to clarify: you mentioned earlier ICBMs — is that the same thing as strategic or 5,500-kilometer-plus range missiles?

Pat 13:32
Yes. A strategic ICBM is a strategic missile. It’s given that range because it’s traveling between seven to ten kilometers a second, and that requires a completely different set of technologies.

Matt 13:48
You also mentioned cruise missiles earlier. Are cruise missiles part of these categories you described, or are they not considered under the same missile defense?

Pat 14:00
They actually have their own class of weapon system, because they’re so unique in having maneuvering airborne capability at the same time as the speed and the ranges of a missile. So cruise missiles are considered separate.

Matt 14:18
Got it. When we talk about missile defense, we’re talking about ballistics and hypersonics.

Pat 14:22
You’re talking about, yes, ballistic and maneuvering missiles of those three ranges: short, intermediate, strategic. Yes.

Maggie 14:31
And now, can you talk a little bit more about that second piece you mentioned, which is the kill chain and command and control?

Pat 14:38
Yes, the kill chain is made up of five different components. First is the sensor, which initially identifies a threat — a missile has been launched — and then starts to track that missile so that over time it can actually predict where that missile is going, especially if it’s a ballistic missile. Those sensors can be land-based, maritime, or space-based. An important part that’s often overlooked is the communication between these different components: they have to be secure, real-time communications that can handle a lot of data. The third piece is the battle management and control system. That’s the overall system that pairs together weapons systems to a particular threat missile that has been launched. The reason that is so important is, as I go back to what I said before, the ranges travel at different speeds and they have different signatures and so forth. Because of that, the interceptor must be paired so that it matches the type of capabilities that the range of the threat missile will have. For example, if you fire a short-range missile, that means it’s traveling most of the time through the atmosphere, so an exo-atmospheric interceptor would not have much capability. Therefore, you marry the Patriot system and the SM-2 missiles, which are built and designed to travel primarily in the Earth’s atmosphere. The intermediate-range missiles require a THAAD system or an SM-3 missile that is designed to travel at higher velocities, has more maneuverability, but operates in the upper atmosphere. And then the strategic missiles require a ground-based midcourse defense interceptor, which is designed to operate in outer space and literally can maneuver many kilometers in order to be able to hit something traveling at 10 kilometers a second. So the important point is to note that if you mix these up, you cannot be very effective: an intermediate-range threat missile, for example, would not be effectively countered with a Patriot system; a THAAD system wouldn’t be very effective against a strategic missile; and a strategic interceptor in GMD would not work well against the short range. So it’s very important that they keep track of what the inventory is, what the threats are, and which weapon system is being paired to which sensor or threat missile. Then, besides C2BMC, once that pairing has occurred, it then hands off the mission to the weapon system in order to allow a fire-control solution to be developed, and then that fire-control system is uploaded into the interceptor. The interceptor is launched; it has to take into account the flight time of the interceptor as well as the closing velocity and the flight time of the threat missile. What’s really important here is the concept of what we call the error basket. The error basket means we’ve tracked the threat missile and we can predict it to a point where we are able to fire an interceptor into this — as you could imagine — a basket, a three-dimensional basket in space, and that interceptor is flying towards that basket. By the time the threat missile arrives, the interceptor should be in the same location with enough maneuvering capability to counter any errors that occur in that trajectory prediction so that it can steer itself to an actual intercept. It’s quite amazing, because you’re intercepting something with closing velocities typically above five kilometers a second, and the size of a threat missile — if you look at them in the press or on TV — you’re trying to hit something that’s less than three feet across, and they’re trying to hit it from often launch points that are five to six thousand miles away. So this is a remarkable amount of technology that has to work in a precise way in order for that intercept to happen. And the final step of the kill chain is the kill assessment. It’s extremely important to determine whether or not you hit the target or whether you have to fire another missile at it. This becomes complicated when you have multiple threat missiles being intercepted in a close location because the destroyed missiles’ debris is flowing in front of other missiles that are still coming in. So that’s quite a challenge to complete the kill assessment, but it’s extremely important. So that’s the kill chain — each one of those five steps.

Maggie 20:06
And maybe one quick question about the different kinds of interceptors. I know we’ve talked about this. There’s both kinetic interceptors and also some of these non-kinetic or directed-energy interceptors. Could you talk a little bit about those different approaches?

Pat 20:24
Yes. Well, the kinetic interceptor is extremely complex, but the technology is in hand in order to launch missiles. You do have to take into account the battle management, the firing doctrine, the flight time, the control of the missile, what altitude the intercept is coming at — all of that has to be calculated, and the interceptor has to be flown in a precise way in order for an intercept to happen. A directed-energy system obviously moves at the speed of light, and because it’s moving at about 186,000 miles a second, the fire control is much simpler. When you hit a missile, the nice part about a directed-energy system is you may not destroy it, but you may disable it. The beauty of that is that then it doesn’t break up and cause debris that makes it harder to hit other inbound threat missiles in the local region. So there’s a lot of benefit with directed energy. The issue has been developing that technology: getting ranges through the Earth’s atmosphere of hundreds of kilometers or longer, and the power required if you base it in space — how do you get that much laser or high-power microwave power in space? Those are all still technical challenges that have not been overcome.

Matt 21:55
So today are we mostly using kinetic interceptors, then, rather than directed-energy solutions? Or is it a mix? You mentioned the technology is not fully, fully ready on the directed-energy side.

Pat 22:10
For missile defense, it’s 99% kinetic interceptors.

Matt 22:16
And just one follow-up on something you said. You mentioned that if a kinetic interceptor intercepts a missile, it creates debris that makes it harder for future interceptors to intercept other missiles. Can you talk more about that? Why does it make it harder for other interceptors to work effectively?

Pat 22:35
Because it’s creating a shield of debris that, if you’re a radar/RF, acts as what we call chaff, and it causes reflections back and makes it very difficult to see through that chaff to determine where the actual oncoming missiles are that haven’t been intercepted yet.

Maggie 22:59
One more clarifying question on the world of the kill chain. Could you tell us a little bit more about the different kinds of sensors that we use to actually track these threats? Then how do we take the data from all these different sensors and actually make sense of it in the first place?

Pat 23:16
That’s one of the greatest challenges of missile defense, and it’s been focused on for decades: how to take not only different sensors, but each sensor has its own angle of looking at the threat target. Each sensor has a different spectrum it’s usually looking at, even the way the data is transmitted — it has different formats. Most of these sensors were either strategic or they’re airborne or they’re on ships, and they were all designed for different missions originally. The C2BMC system, the battle management and control system for missile defense, has to take into account all of these inputs and also the reality of geometry. If you’re close to a sensor that’s not high resolution, but you happen to be in a location very close to the threat missile that’s flying by, it may be your best sensor. Five seconds later, it may be a strategic sensor that’s 1,000 miles away that is your best. So the system has to continually go through and calculate what is the best sensor at that moment to use in order to predict the track so that an interceptor can be fired to it. The last point you made was extremely good: the question on fusing. There’s a lot of definition of fusing. Fusing a lot of times means make sure you pick the right sensor at the right time. But the real definition of fusing is that the accuracy of the combined data from all the sensors is better than any individual sensor. To achieve that is extremely difficult, and the promise of artificial intelligence and AI agents has made that more realistic, where we can come into these very precise calculations of where the missile will be in the future, given its trajectory and flight, just using sensors that have been used for years, and improving on the speed of those calculations and the actual fused accuracy of the resulting trajectory.

Maggie 25:44
And the way you’re describing sensor fusion here, you know, if I have a sensor on some ship somewhere, and then a sensor in space, and then a sensor on land, and I want to be able to combine all the data from all of them to get an accurate picture, like, what is the communications technology needed to manage all that data and make those decisions in real time?

Pat 26:04
Well, the network is extremely important in this architecture. And also you may have not only the particular sensors during the flight of a threat, you may have your best sensor because of its location, but also you may have it because it has an unobstructed view. Long-range missiles, you know, you have to deal with the curvature of the earth, and so a space-based sensor may give its first warning, and the next best warning comes from a sensor that’s at an allied location in another country. We had a recent example when we upgraded our sensors, originally back around 2000 or so. When we turned on some of these new high-fidelity sensors, we actually got some disturbing news when we were watching the space shuttle, where it appeared the space shuttle was cracking, was breaking up on us, and in reality the sensor was so accurate we were getting four or five returns off the space shuttle, whereas in the old ones, using the old algorithms, we’d get one return. So we’ve had a lot of exciting moments during that period of time. But the accuracy of these sensors is getting so good, and like you said, they need to communicate with each other. These networks are designed so that if only part of the network is working, it can still operate, and it’ll take its best guess at where the flight trajectory is on a threat missile.

Matt 27:43
Yeah, so we’ve talked now about the sensor fusion piece, the communications between all the sensors. And you mentioned that AI and agentic systems might be able to better make sense of all those sensors in the future, but today, once you have all that sensing data in one place, once it’s all been communicated with each other, how is the decision made about whether to engage a missile threat? Obviously, you don’t want to engage a threat that’s not actually a threat, like in the space shuttle incident you just mentioned. So how is that decision made, and the decision about which specific interceptor or countermeasure to use against the threat?

Pat 28:24
Well, first of all, there’s pre-planning before a missile defense architecture is established, and the most important part is to determine what are you trying to protect. So you have locations on the ground that are marked off that are what we call the defended area. And if the threat missile is obviously not flying into the defended area, we do not engage. We just let it fly and hit a target on the ground or the ocean that is not seen as an asset that has to be protected. So that’s the first thing. Second, you have to determine the type of missile — try to differentiate the different types of missiles that are out there, the threat missile, and figure out what it is carrying on board based on historical intelligence. And the third piece is to, as I said before, ensure that you have an interceptor that’s capable of intercepting that missile, and when you are going to engage it in flight. So this is all pre-programmed into the missile defense architecture, hopefully before an engagement even occurs.

Maggie 29:46
So we’ve now talked about the threat. We’ve talked about the kill chain. So the third piece that we need to understand about missile defense is the doctrine.

Pat 29:54
It’s the firing doctrine. And the first thing to look at in a firing doctrine is the phases of a threat missile. When a threat missile first takes off, it’s in the boost phase. Obviously its boosters are energetic at that point and usually cause a big infrared signature. Normally a space-based satellite will pick up that thermal signature and indicate a missile has been launched after a few minutes. By observing the missile’s trajectory, even in boost phase, you then determine whether or not it is going into an orbital trajectory, meaning it’s probably a satellite, or if it’s going into a ballistic trajectory, meaning that it’s probably a threat missile. That occurs in boost phase. One of the most important phases is right after boost. Right after boost phase, the threat reentry vehicle usually separates at that point, and you go into post-boost phase that lasts a couple minutes. At that point it’s the very beginning of its long coast towards its target, and that is a phase where you’ve had enough time to track the missile that it becomes predictable of where it’s going to be for the next minute or so, and you actually have a chance, possibly, of hitting a missile during post-boost phase. It’s also where it’s so early in the flight that it’s typically very difficult to deploy decoys or anything, so the missile is most vulnerable right after boost in that post-boost phase. Plus it’s extremely hot because it just flew through the Earth’s atmosphere, so it’s a very bright signature at that point. After it cools down and continues to coast — and sometimes the coast could be for 10 to 20 minutes — it goes into the mid-course phase, and that’s where it’s flying above the atmosphere. An ICBM, like I said, can fly for 10 to 20 minutes even before it starts reentering the Earth’s atmosphere. And when it reenters the Earth’s atmosphere, that’s the terminal phase, and that only lasts a few minutes, and it’s moving at extremely high velocity. You have plasmas being formed around the reentry vehicle; you have all of the disruption. It’s not a smooth flight — a lot of bumpy disruption occurs to those RVs as they’re coming through the Earth’s atmosphere, which makes it harder to hit at that point. So mid-course is a nice spot to hit it; it’s a relatively stable target. Boost and terminal are challenging.

Matt 32:56
Maybe to start to match the systems you mentioned earlier with some of these phases, I assume that you wouldn’t use the same interceptor at any phase of a ballistic missile’s trajectory. So could you talk a bit about what kinds of interceptor options we have at each phase of a ballistic missile’s trajectory?

Pat 33:20
Well, it often comes down a lot of times to geometry. If you happen to have an interceptor launcher that’s near the missile that’s being launched, you’re able to launch it, and you have a good chance of hitting it during post-boost. But that means you have to have a launcher that’s very close to where the threat missile is being launched from, and that is typically an Aegis ship with an SM-3 or an SM-2, or there’s a longer, higher-velocity Standard Missile. That’s what “SM” stands for; we have co-developed it with the Japanese, and that has the opportunity to hit missiles that are not strategic but in the intermediate range and speeds and velocities. So one way is to just be close to where the threat is. You can also do it with land-based systems, for example in the Middle East, where they locate them on the other end. You have what we call goaltending, and it’s like hockey. You don’t have to be at the goal, but it’s best to be in between where the shooter is and where the puck is going to travel past. So another place to focus your missile defense is around the defended area, as I mentioned before, where you want to intercept just as a defender would on a hockey team — a forward hits the goal.

Matt 35:01
Got it. So the first examples you gave where you have your interceptors close to the point of launch was for boost or post-boost phase, and then?

Pat 35:12
Well, post-boost. Boost phase is extremely difficult because you’re hitting something that is accelerating and usually out of reach. It’s being launched from a location that is safe for the threat — your adversary — so it is very rare you’re close enough to actually hit something in boost phase. Post-boost you’ve had enough time and it’s no longer underpowered flight, where you probably have a better chance. The most mobile systems we have for land for that velocity would be THAAD, and for maritime it would be the Aegis system.

Matt 35:55
So the reason that it’s more feasible to take out a missile in post-boost is because it’s now closer to where the interceptor is, or just because we’ve had more time to respond? Or—yeah, don’t totally understand why it’s easier in post-boost than boost phase.

Pat 36:11
Because you’ve had time to respond. You know, the boost phase is usually only a couple minutes, and now the—if you’re in the right location, the post-boost that’s flying near you, and so if you’re located correctly, depending on your intelligence ahead of time, you can be as close as possible. In the post-boost, you’re no longer in powered flight, and it’s fairly predictable where it’s going to fly, and you’ve had enough time, and it’s difficult to deploy decoys in the post-boost phase. You can, but they’re going to eventually become evident that they’re decoys in the terminal phase. Again, if it’s a short—if you’re worried about short-range threats, you can have the Patriot system there. The Navy has the Standard Missile 2 for that and for shorter range, and actually for air defense too, both of those systems. And then for mid-course, it’s either the SM-3 missile with the Aegis system on maritime ships, or the THAAD system for a ground base. Again, these interceptors are being used that way because the characteristics of the interceptor—the seeker on board, its guidance system, its control surfaces—are all designed for operating in a certain part of the atmosphere, and that’s why they’re paired up with threats that fly in that part of the atmosphere.

Maggie 37:45
I know today there is a lot of discussion about what it would take if we wanted to try and hit a missile in the boost phase. Like, is it even possible to do in the first place if that were a goal of trying to take these missiles out before they’re able to deploy multiple warheads or decoys or elsewhere?

Pat 38:04
So the challenge with boost phase is, again, first of all, you don’t know when it’s—once. You don’t know when it’s going to happen, and once it’s launched, you have very little reaction time. So it’s going to have to be an interceptor that can be fed information from a sensor that a launch has occurred and its path has been predicted, and it’s in a location, typically in outer space, that can reach the target within a couple minutes. So that’s extremely fast, which means you have to have a very high proliferation of these boost-phase interceptors on orbit so that they can actually, literally, reach their target within a very short period of flight time. If the threat missiles within that air basket and the interceptor is flying to that air basket, when it gets close to the air basket, the sensors turn on on the interceptor itself—the kill vehicle—and the kill vehicle guides itself into the path of the oncoming missile.

Maggie 39:24
Pat, what is the state of our adversaries’ current missile capabilities? Have there been any major changes over the last couple decades? And, you know, what do we need to be prepared to defend against?

Pat 39:37
Well, the growth—the proliferation of ICBMs, in fact missiles of all classes—is very unnerving. Over the past 20 years, it’s been exponential growth, not just exponential growth on the black market and in indigenously developed missiles themselves, but also their ability to be launched off of mobile launchers. In the old days, very old days, when long-range missiles were launched off of launch pads, you knew where the launch pads were, you knew where to watch, and you could counter those launch pads if you had to. Today, many of the—even ICBMs—are on mobile launchers that can be hidden. They can be moved. They can be camouflaged. It’s very, very difficult to track where they are and know where they are ahead of time. So the system has to be basically able to react to them after they’ve been launched, because it is so difficult to find the literally thousands of long-range missiles that have now proliferated. It’s very well known that Iran has developed missiles, and years ago they tested many tens of missiles being launched simultaneously, so they have that capability. It’s well known. North Korea is continually testing their long-range missiles, although the testing for ICBMs is not that impressive yet, because it basically goes straight up and then comes straight down, which is reminiscent of our early missile tests in the 1950s, but they are making progress. And then Russia is using the historic Soviet missile arsenal that’s been developed. And finally, China has had a very large proliferation of long-range missiles on mobile launchers.

Matt 41:51
You earlier mentioned the Ground-Based Midcourse Defense system, which was, you know, the primary system used to take out some of these very long-range ICBM-type missiles. I guess the question is: is that system—which you mentioned we have some in Alaska and some in California—meant to stop an all-out, high-volume attack from a near-peer adversary like China or Russia? Or, you also mentioned some of the tests from Iran and North Korea, which presumably have significantly less developed ballistic missile capabilities. What kinds of threats are they able to take out in that regard versus not able to defend against?

Pat 42:45
In the case of strategic missiles, the U.S. Ground-Based Midcourse Defense system was set up by law—the 1999 Missile Defense Act stipulated it was designed to counter threats from Iran or North Korea or an accidental launch from Russia or China. The location of the interceptors themselves, especially in Alaska, which has 40 interceptors up there in the open press, and Vandenberg has four more, those are optimized for flights from Iran or North Korea towards the United States. Those locations are not optimized for a launch, obviously—just geometry—from northern directions toward the United States. So there is a limit to how far a missile can go and how fast the missile can go. That’s just basic physics and geometry that does limit the capability of those systems. I would also say that when you look at a missile to defend a city, that missile has to be extremely high—have extremely high reliability—and that is very difficult to achieve in a system that’s made up of over a thousand parts, which they are. All those components have to work perfectly. So statistically, you’re not going to achieve or can count on a 100% reliable missile. What that means statistically is, if you want to achieve 100% reliability, or close to it, you need to fire more than one interceptor at each incoming target. So that’s another consideration they have to have, which is part of the firing doctrine.

Matt 44:44
So, for example, if North Korea could launch 10 ICBMs and there are 40 interceptors in Alaska, that’s something like a four-to-one ratio of interceptors to missiles. But how much does the number of missiles launched matter relative to, say, the types of countermeasures that those missiles have, in terms of the reliability of the interceptors for actually countering that threat?

Pat 45:11
Well, the countermeasures are often described as balloons and other things, but in reality, actually using them is much more difficult. It’s hard to make them appear like an RV over a long period of time. You can fool them for a short period, but over a long, 15-minute flight, it becomes extremely difficult. And so our systems are developed in order to differentiate between the different types of objects that are up there.

That’s one thing. The other is, again, the reliability of these interceptors is taken into account to determine how many interceptors are fired. Part of the firing doctrine can be, if you have enough time, what we call “shoot-look-shoot.” You shoot at the missile and then determine the kill assessment — did you hit it? And if you didn’t, or it wasn’t successful, you have an opportunity to shoot again, the second shot.

Depending on the time of flight, the command and control system very quickly calculates the optimum firing solution, and you try to fire as few interceptors as you need to in order to destroy a missile.

Maggie 46:34
So, Pat, I want to shift the conversation a little bit to the hot topic of missile defense today, which is Golden Dome — or, I guess, the executive order is called Iron Dome for America. In reading this executive order, and I know it’s still kind of a new concept that has not been fully fleshed out yet, from your perspective, what is really the new idea here for this next generation of missile defense that we don’t have in our current missile defense system?

Pat 47:05
I think there have been some technological advances over the past few years with our sensor resolution, and the proliferation of commercial space is making affordable sensors flying at low Earth orbit, called LEO. Many of those satellites can now be put into space at an affordable cost because of the commercial reduction of launch costs. It used to be $20,000 to $30,000 a pound in the 1970s; today, it’s about $1,500 a pound on a Falcon 9, for example.

That’s a tremendous reduction in cost, allowing us to put a great number of sensors up there at low Earth orbit because they’re affordable. They can also be built so they don’t have to last 10 or 20 years — they can have a shorter life, return to Earth, burn up, and be replenished. That gives us a significantly greater amount of sensor capability to monitor the threat.

As we referred to before, the command and control system involves literally tens of thousands of calculations going on simultaneously in any large-scale attack. Using artificial intelligence, neural networks, and agentic systems, it’s greatly simplified the software architecture required and allows the command and control system to take in a much greater amount of input data to calculate.

In terms of the weapons themselves, the propulsion systems and so forth are pretty much standard — they’ve been developed over the years, particularly the kinetic interceptors. The one area I think could be different would be launching the interceptors from space — SBI again. That architecture would depend on what the threat is that it’s trying to counter and how many interceptors you need.

If you’re just trying to conduct a mid-course intercept from space, you don’t need as many space-based interceptors. If you’re trying to hit in post-boost or boost phase, you would need a tremendous amount of space-based interceptors so they’re close enough to the launch.

Those are some of the significant technical advances that have occurred. From the point of Iron Dome — as you referred to — I was involved in that development for many years in Israel. That’s a much smaller piece of ground you’re trying to protect versus, obviously, the geographic area of the United States. You’re fairly certain of where the threat trajectories will come from, so you can do goal-tending and other things.

As I said, to protect the United States, you have to be concerned about threats that could come from almost any direction. And again, if there are short-range threats being launched off, let’s say, barges or submarines or nefarious vehicles, you’re going to need an awful lot of short-range missile defense systems. Just by counting up the number you would need for Patriot, it would be a tremendous number of Patriot systems.

For strategic interceptors, you’d need a much larger number and they’d need to be located in places other than Alaska or Vandenberg. So, it’s a much greater undertaking.

Maggie 51:24
When officials go about designing a new missile architecture, what are some of the trade-offs that need to be made?

Pat 51:32
Well, first of all, it’s driven primarily by the threat — where they think the threat is. Second, it’s driven by what you’re trying to protect. High-value targets — typically military bases or assets that give us the capability to respond and deter a threat — are usually considered high-value targets, as are seats of government and population centers.

All that has to be taken into account to design the goal-tending between where the threat is launched from (or estimated to be launched from) and what you’re trying to protect on the ground. Then you decide where in that trajectory to place your interceptors, sensors, and so forth.

I will say, it’s hard to comment on Golden Dome at this time because the architecture has not been publicly released, so it’s very difficult to determine what factors were traded into that architectural design.

Maggie 52:52
So, as we look toward some of these future missile defense plans, as venture capitalists, of course, we have to ask the question — what role do you see for startups in missile defense?

Pat 53:06
I see several. First of all, we’ve talked a lot about calculations and computations that must go on in real time so that kill chain I described. If there are technologies or algorithms or software modules, genetic agents, things that are set up that can calculate faster and get to a good enough answer—every millisecond matters. That is one area where there could be a significant improvement in the firing doctrine, even using today’s interceptors, due to the speed that the kill chain can operate at.

The second one I would think is associated with that would be the different types of technologies associated with object identification and resolution of existing sensors today. Again, it’s driven by calculations, and so those are the principal ones. Propulsion systems are very capital-intensive, and they tend not to lend themselves to that. You can do it, but it takes—the safety factors are significant—that you have to take into account, and that drives the cost, and that drives the time that it takes to develop. Those are normally done by larger corporations.

Matt 54:51
Whether it’s startups or existing contractors, where do you see the biggest need for investment to improve missile defense technology—to have more reliable systems, systems that can counter a wider range of threats? You’ve mentioned many today that have room for improvement.

Pat 55:12
So, craftsmanship and quality control systems that are in a lot of the factories building the thousands of components that go into interceptors and the different parts of the missile defense system are key. That’s an area that—if you’re building, you know, a car in Detroit off an assembly line—the precision, the requirements for that quality control are tremendously less than trying to build what we would call a space-based or space-qualified component.

Technologies that can improve quality control, for example, may not sound like a flashy technology, but it is critical. The higher the reliability, the fewer interceptors you have to fire, and the greater the probability of defeating a threat launch. So that’s one example right there.

Matt 56:18
We talked a bit earlier about Israel’s Iron Dome, and obviously the executive order for Golden Dome is inspired directly by Israel’s Iron Dome. What are the major differences between the interceptors needed for Israel’s Iron Dome and the U.S.’s Golden Dome?

Pat 56:39
Because of the size of Israel, most of the interceptors used in Iron Dome are short-range interceptors, so they’re lower in cost. You can proliferate the number of them, and the sensors are within line of sight of the threat missiles, typically, so you don’t need a long-range communication chain.

In the United States, it’s obviously many, many times larger geographically, and the threats could come from a far greater number of trajectories. The ranges can vary greatly, and the amount of time you have to respond can be much less. It also requires a mix of interceptor types. The short-range around the coastline—you’d have Patriot or SM-2. Large cities would require THAAD or SM-3 if near a coastline. And ICBMs obviously are the only things that can counter those types of threats.

Maggie 57:58
Going back to looking at the international stage, we’ve talked a little bit about Israel’s current missile defense capabilities, but what do our adversaries’ missile defense capabilities look like? And are there lessons that the United States should be learning from how others have designed their own systems?

Pat 58:20
Well, there are a lot of similarities with some of these systems to ours, which is quite interesting. I have literally shown Russians, many years ago, an intercept that they thought was done by the THAAD system, and it turned out it was a Chinese system. They were surprised by the advancement that the Chinese had.

The basic technologies of command and control and sensors and propulsion systems have reached the point where kinetic interceptor missile defense systems are proliferated, but primarily with only our larger, near-peer potential adversaries. They’re less seen in smaller countries.

The real concern is non-nation-state threat actors such as cartels and others, because of the proliferation of threat missiles being sold on the black market. Associated with that is the use of software and modules—and maybe AI, I’m not sure at that level—but it greatly simplifies the training required to launch a missile. You can be a fairly untrained person and successfully erect and launch a missile bought on the black market. That is a tremendous concern, because now you’re not dealing with a nation; you’re dealing with all of these other, as I said, non-nation-state threats.

Matt 1:00:16
Anytime we think about a new missile defense architecture, or making a change to it—thinking back to the ABM Treaty and limits to the amount of defenses that the U.S. and the Soviet Union would build to maintain deterrence with each other—how should we think about the ways our adversaries might respond to any changes to our missile defense architecture?

Pat 1:00:41
First of all, what I just mentioned is the greatest threat, because it’s really hard to deter a non-nation-state actor—some criminal group or so forth—that may want to hold a region hostage. We recently saw the Houthis, for example, threatening international shipping off Yemen for the last couple of years and the impact that has had. So the architectures now have to be extremely agile and flexible, to adjust to not only defeating missiles coming from a certain region but also focusing on the defended assets, no matter what direction they come from, which is a much greater challenge.

Matt 1:01:33
Great. Well, Pat, thank you so much for being here. We really appreciate it.

Pat 1:01:38
My pleasure. Thanks so much.

We discuss:

• What investment casting actually is and how Rangeview is revolutionizing the ancient manufacturing process

• Why China dominates much of today’s manufacturing landscape, particularly in the world of consumer electronics

• How modern defense manufacturing today differs from the manufacturing we did during WWII

• How industrial policy combined with new technologies can help bring manufacturing back to America

You can listen to the podcast on Spotify, Apple, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please reach out if you or anyone you know is building in the national security domain.

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Transcript

Maggie 0:00

In this episode, we’re joined by Cameron Schiller and Aeden Gasser-Brennan, the founders of Rangeview, a startup revolutionizing investment casting through novel 3D printing techniques that are enabling the next generation of autonomous systems and advanced manufacturing. Investment casting is an ancient process—it’s been around for thousands of years—used to create everything from jewelry to jet engine components. But despite its importance in manufacturing critical parts for aerospace, defense, and automotive industries, the fundamental process has not changed much since the 1960s. Meanwhile, the U.S. has lost over 100 investment casting foundries since 2001, creating a strategic vulnerability at a time when our defense systems are becoming more complex and our adversaries are modernizing their manufacturing infrastructure.

Akhil 01:20

What’s particularly striking is how this old-school manufacturing process has become a bottleneck for innovation. As companies like SpaceX, Tesla, and Varda—as well as more established aerospace and defense companies—are pushing the boundaries of what’s possible with modern systems, they’re discovering that traditional manufacturing just can’t keep up. They need components with complex internal geometries that are really impossible to create using conventional casting methods—think turbine blades with intricate cooling channels or missile components that need to be both lighter and stronger than ever before.

Maggie 01:53

Enter Cameron and Aeden, two college students who saw an opportunity to bring this ancient industry into the digital age by combining custom 3D printing with advanced material science. Not only are they making the casting process faster and cheaper, they’re actually enabling an entirely new set of designs that were physically impossible to manufacture before. It’s not just about efficiency—it’s about unlocking new capabilities for America’s most innovative defense companies. Cameron and Aeden, thank you guys so much for joining us.

Akhil 02:22

Awesome, guys. Cameron, Aeden—so excited to be here with you. It’s been awesome to see the journey from your Berkeley lab a couple of years ago to where you are now. It’s been great to see what you’ve built and how you’ve executed. Before we dive into all of that—and honestly, maybe share with a good amount of the listeners what investment casting actually is—let’s actually start geopolitically.

So, over the last couple of weeks, a lot has been happening in terms of geopolitics, tariffs, and the state of the nation’s industrial resilience. To start, where do you think we are in terms of the state of U.S. manufacturing? We can dive beyond generalities since you’re living it on a day-to-day basis. Where are we at? What’s your assessment, and where does your work fit in?

Cameron 03:10

Well, the state that we’re in is—everyone listening, take a look around right now and see if you can find anything you can confidently point to that was made in America. It’s not great. Slowly, over the past 20 years, we’ve let it all slip overseas through globalization and the whole story of how we got here. The truth is, we’ve really hollowed out our industrial base for the promise of more freedom and flexibility—and what we got on the other end was a supply chain that’s more fragile than ever.

The great Americans responsible for making all the stuff underpinning our critical defense systems—and everything else in life—are retiring. Most of them are on their way out or already gone, and there are fewer and fewer people to make the parts we need. Those parts are mostly made overseas. So, for defense and energy applications—where we’re tripling the energy usage needs with the AI boom coming—there’s just no supply chain on the back end of it.

I’m excited to talk about that in more depth today. I think most folks don’t know just how bad it’s gotten, and that could be a real awakening for us if we ever need to pull that lever and start making lots of parts the way we used to.

Akhil 05:02

Definitely. And Cameron, it’s not just necessarily the globalization piece. Having watched you over the last couple of years, it’s also about the ability to innovate—the fast feedback cycle between new, novel systems and platforms, both civilian and military. It’s kind of hard to do that when you’re shipping a part every week or two from somewhere else. The cycle time to accelerate innovation isn’t just about production, but the unique design aspect as well.

Cameron 05:24

Yeah, that’s exactly right. That’s a big point that a lot of people are starting to pick up on now. When you’re building a system, the first thing good engineers do is engineer iteration rates. The easiest way to collapse iteration rates and reach higher levels of innovation is to bring manufacturing as close as possible to the final design space. Some of the most innovative folks out there are actually doing their own manufacturing. They understand the constraints of the system they’re building.

There’s this great art that’s been lost in America now, which is called DFM—or “design for manufacturability.” At a cultural level, it means understanding how something actually gets put together. We’ve lost that a bit. And believe it or not, most innovations happen in the design space of manufacturability. You can’t just make something new—you have to make something new that can move its way into the world. Understanding manufacturing is critical to innovation, and the way you understand manufacturing is by doing it. We need to do it so we can collapse those design iteration rates and really bring the best and brightest designs to the end user—the warfighter.

Aeden 06:31

I think there’s a point to be made here. Early on, when we were starting the company, one of the clear indicators that the old paradigm was collapsing—the idea that we’d do all the design here in the U.S., ship the manufacturing drawings overseas, and make all the money because we controlled the designs and the brand—was the rise of Chinese consumer electronics companies killing their American counterparts.

The greatest example is DJI, right? DJI—which is now obviously extremely relevant militarily—started as a consumer electronics company. Why does DJI do so well? It’s a good question. Why were they so much better than all the American drone companies, at least for a while? The answer is that they could manufacture everything down the street. Their iteration rates were incredibly fast. They could do more technically interesting things at lower cost and get those to market faster.

If you’re a manufacturing company—or a company that makes a product—your advantage is the ability to iterate quickly. That was a clear indication that something was wrong. The theory was that with America’s great universities and engineers, we’d build the best products. But that doesn’t work if you can’t manufacture those products in-house or iterate and develop quickly.

Maggie 07:43

And why is it that we lost so much of that capacity? And, you know, what are the levers that we are actually able to pull to bring that back to the U.S.?

Aeden 07:54

So, I have this kind of saying: the right industrial policy is the one that actually changes the unit economics of manufacturing in your country. Everything else is a short-term solution. As long as it’s actually more expensive to manufacture here, new manufacturing won’t come back.

I’m a bit of an outspoken believer in tariffs because tariffs do this, right? Strictly, it is more expensive to manufacture here. But if you—well, I think China’s a great example. It’s really worth looking at what worked so well. Obviously, it started with labor; that’s why we started sending things overseas. But over time, China’s real advantage today is that they are consolidated and have a ton of things in close geographic proximity. They have this ability to get things quickly, build new things quickly, and deploy new technology out to the factories quickly.

Maggie 08:47

They can literally walk down the street and talk to their friend who’s actually doing the castings or forging. And then redesign a part in the course of a couple days or hours.

Aeden 08:56

Exactly—and not only that, they can go down and buy the ceramics feedstock from their friend three streets over, and the mine that’s making the raw iron is only a few miles away. So this real consolidation of all these different causes in close proximity is the real benefit.

I think this is a huge project to build back in America. We had this—America was the king in manufacturing up until around the ’80s or ’90s. I think you have to start in the places that have some sort of DoD significance, where the interest is already there from the government. You need to start with who actually wants the manufacturing back the most and start building capacity there.

There’s a flywheel to get started: if you start in the processes that are most critical for the people who care, those processes will make it cheaper to do all the other processes here. There’s the idea of a learning curve, but there are also compounding learning curves in manufacturing. The more of everything you do, the cheaper it gets. The more things that are adjacent to what you’re doing, the cheaper it gets because you share labor and equipment, and things are amortized over more parts.

I think the policies the government has pursued have been a little misguided in a few key ways. One is that the government is really good at funding development—they love funding development—but there’s an issue: a lot of things get developed with government money and then never go to production. There aren’t enough incentives to actually build capacity.

If I were to change our industrial policy, it would be less about development contracts or qualification contracts and more about: if you build this amount of installed base capacity, we’ll fund your CapEx, or this becomes a tax write-off, or something to that effect. That actually changes the economics, as opposed to funding a million early-stage development contracts proving out new technology.

This happens again and again—America develops amazing new technology, and China implements it at scale. America invented the CNC machine, and yet, I don’t know what percentage of CNC machines are in the U.S. This will keep happening so long as the government just funds development.

China is a great example: funding CapEx and providing cheap government financing really does drive growth in manufacturing because it’s geopolitically relevant for them. It’s geopolitically relevant for us too. I think we’ll start to see this happen more and more, but historically we’ve focused too much on funding development instead of scaling. What we should really be doing is scaling more similar processes that have less of a technical moat—less difficult to develop—and focusing on building lots of capacity.

Akhil 11:30

Aeden, here we are talking about manufacturing — your focus on investment casting. There are probably folks listening in, or even, frankly, when I first met you, I had to learn a ton about what investment casting was and what you’re doing with it, what’s novel?

Aeden 11:42

Yeah. So I’m going to walk through each step of the process and explain what we do, what an official foundry does, kind of explain it from the customer’s view, right? Because that’s who matters at the end of the day.

So, you’re a customer. You want to make a part. You come with a drawing, CAD file, budget, requirements — density requirements, mechanical properties of the part, what kind of processing is allowed, what shape it is, how we measure that shape — all these things, right?

And you start out at a foundry. We do the same thing. We look at this and say, “Okay, how are we going to make this part? How are we going to set it up? What’s the right process to make this?”

For us, it’s largely similar across a lot of parts. Foundries, though, are actually very different. So, they’re making some tool to start — a big block of metal — and that block of metal has the shape of the part cut into it. Usually it’s actually tweaked a little, because the part might deform or change shape during the process.

The foundry starts by making a wax pattern. Rangeview doesn’t do this. The foundry makes the wax pattern, then assembles a bunch of these patterns together.

If you want to make a spoon, you have a wax spoon. You may take a bunch of spoons and put them together — they’ll have a wax tree feeding them. You’ll see this big wax tree that holds a bunch of wax spoons.

Next, you dip that in a ceramic coating — usually dip, dry, dip, dry — it takes a few weeks. What you’re doing is building up a layer, like a clay layer, on the surface. Then you melt all the wax out, burn the remaining wax again, and finally fire the ceramic shell.

You’ve got basically a big, complex mug — a strong ceramic mold.

What Rangeview does is make the mold directly. We print direct molds, so we skip all those steps — all the manual labor — and, really importantly, we skip all the variability in the final part that comes from human decisions. You want the technical characteristics of the part to be driven by software and machines, because then it’ll do the same thing every time. Your tolerances are much tighter, and you can rely on the process more.

At the end of that whole process, you’ve got a part inside a big ceramic cavity. Then you pour metal into it. There are a variety of different casting processes — Rangeview works with one that produces reactive or very high-temperature alloys. You pour the metal into this mold, remove the ceramic after it cools, and you end up with a single part.

You throw away the ceramic each time and remake it for every new mold. That’s how you make the part.

Then you cut the part off the tree and do a ton of post-processing — you might take X-rays of the part to look for porosity, coat it with a penetrant to show cracks, cut some parts apart to pull mechanical tensile bars and test strength. Then you’ll heat treat, machine, and coat them. Generally, at that point, you’ll have a final part.

So, the whole process traditionally involves all this fixed tooling to make the part. For us, it’s the same process every time — we directly print the ceramic mold. It’s a process we’ve built in-house, and it allows us to make different parts without changing any tooling.

Today, the U.S. has offshored almost all of its investment casting capability. Investment casting is used in enough of these “commodity” capabilities that people have said, “Well, this isn’t defense-critical, maybe we can push this overseas.”

But there are a lot of cases where people actually got exemptions to manufacture critical parts overseas because it was cheaper. Investment casting is full of labor — the traditional process has hours and hours of manual work. You might have 40 hours of labor going into a part that fits in your hand. So, in that case, it really matters if you can save another $20 or $30 per hour of labor. When you have a very unautomated process — which is the traditional method — that’s a huge factor.

Akhil 15:35

That’s awesome. It sounds like the previous instance hasn’t changed for thousands of years — some sort of wax base to ceramic, you pour metal into it, and… great.

Aeden 15:46

Yeah, it started with beeswax and river sand — that’s how this process began.

Akhil 15:50

And critically, now you’re able to, because you’re 3D printing and designing this in a digital foundry way, actually make a whole new set of complex geometries that you can pour whatever you want into, correct?

Aeden 16:01

Yeah, and we’re enabling a whole bunch of designs there that you couldn’t make in the traditional process. Those are some of the most exciting parts we make. And it’s also worth saying that almost every one of those post-processing steps I described are generally done by people.

So, the way you cut the casting off in a traditional foundry is a guy sitting on a saw. This is a horrible job, right? It’s a super dangerous job. It’s super loud, the saws break and send bits flying—you know, people die doing this. It’s really a horrible place to work. It’s not somewhere I’d want to work. It’s not somewhere I’d want my kids to work.

And it’s the same thing with everything else—the person grinding the part, the person heat treating—it’s a bunch of people stacking parts in a big furnace, closing the furnace, opening the furnace. In our factory, almost all of this is done by a machine. The person is programming the machine, setting it up to do a new part, but they’re not the one actually cutting the part or grinding it. That’s all done by a robot, really, at the end of the day.

The traditional process to make any of these parts—and any of the traditional competitors—has a very inflexible process that cannot be changed without huge budgets. You’re making a part, you want to make it slightly differently, you want to iterate on a design—it could take six months, a year, two years.

The second piece is there’s a huge amount of extremely skilled labor that goes into this, and it’s really hard to scale. So, if you’re an investment casting foundry and you want to get bigger, you want to double your capacity—there are no people you can hire. These people have all retired.

So, the things that are built are factories that are not dependent on specialized human labor to make components and are not dependent on tooling to make parts. What these foundries look like is—you want everything to be made by computer. How can you give the computer the tools to make your casting?

We use a variety of different processes that make sure each manufacturing process in our factory is software-defined. This starts with making molds. You want to make sure the molds can be made in a software-controlled way. We’ve done a huge amount of innovation on the process there—in the equipment and the materials—to make sure that when we make a mold, there’s no fixed point associated with it, and you’re forming it all digitally. The same thing applies to every single piece of equipment and process that comes after.

Then you’ve got eight or nine steps in our process internally to do that, and for each one, we have a digital definition. The machine is running with telemetry going back to the system and running to the prescriptive definition that we’ve given it for that process. This includes things like pouring—what temperatures you pour the metal at, how fast you pour it, what kind of environment around the metal, the vacuum levels, and things like that.

The big thing is: our factory is not running on highly specialized labor; it’s running on software-controlled equipment. I can form different parts with just changes in software and without retraining people. So that gives you the high level—I can dive into all kinds of details, and I’m sure Cam can talk to that.

Akhil 18:51

Super, super helpful. Maybe one more high-level—just walk through, if you can, even just a couple of the steps from design to 3D printing to cast. What does that sort of look like?

Aeden 19:01

So, traditional process here—and what an average aerospace customer does—is they want to make a turbine blade. They have some preliminary design, and they want to get into production. First, they have to get to design validation. The goal is they want to be making turbine engines in six years, at rate.

Generally, what will happen is they’ll go out to as many foundries as they can and try to find someone who will bid the part. The first surprising thing is that most of the parts get no-bid most of the time, because most foundries are overbooked and don’t have capacity—and also can’t scale. They’re stuck because of their labor.

So, the first process of design, at least for you as a customer, is to try to find someone who will bid on your part. You might not have a finished design at this point, so you’re going to tell them, “Hey, look, I want to make a few of these. I want to do some prototyping.”

Generally, they’ll give you back two really important quotes. One is your upfront quote, and the other is your piece price. The upfront engineering and tool making might be $300,000 for a part and might last six to eight months. Then you’ll go into that and also provide a huge amount of technical documentation.

For each of these parts, if you’re making a turbine engine, you might have 100–200 pages of technical documentation for a single small part. That’s a contract between the design engineer and their requirements and the foundry. What the foundry is agreeing to is: “I’m going to meet all of these requirements.” It might take many iterations to meet those requirements.

For the foundry, every single one of those iterations means iterating on tooling, retraining people to work on the new parts, and trying to hit those requirements—and that’s what stretches it out.

For us, when we receive something, we’ll ingest it, do some design, and essentially just put it straight onto our printers, which make the molds for the casting—and then get results quite quickly.

Akhil 20:47

And these are 3D printers, right? Standard 3D printers.

Aeden 20:51

So yes, we use a bunch of in-house developed materials and processes to make these castings and molds. Essentially, we’re forming the geometry that’s going to form the part with a printer. The end part is actually just a normal casting. So, unlike a lot of the additive processes—the metal 3D printing processes—there’s no requalification, there’s no retesting. The material properties are the same as these casting alloys that have been developed for 50 years, and then we get a part straight out of that process. Maybe that gives us a high level; I can dive into more details.

Cameron 21:28

Thanks, Cameron. I can come back to you on the discussion we were having around the iteration cycle. Can you walk through an example—whether it’s a real or hypothetical customer—how you would have done here, both Digital Foundry and the novel casting process? The full lifecycle has just allowed for that incredible acceleration in both speed and scale.

Yeah, absolutely. And I’m not able to use direct customer names in the line of work that we do, but I’ll give an example of something that we see happen and how ultimately it results in, you know, American supremacy on the battlefield.

So, as Aeden was speaking about a little bit earlier, when you’re making a part, the end designer is actually just delivering the capability. And that capability may be, you know, let’s build the engine that can fly the furthest. Let’s build an engine that can fly the fastest. And ultimately, that comes into a balance with reality and physics. When you try to put those metal particles through their paces in a jet engine, it’s going to be how hot you can get it.

A really common one that we see—because we do a lot of turbine blade work—is: what is the exact shape of that turbine blade? We’ve gotten good at simulating physics to some level to help us figure out how the air might flow through that turbine blade. But the real way to figure it out is to put it on the test bed and let it run. The simulations are never perfect. Simulations are only as good as the data you feed them, and so there may be a few variations of how that blade should be shaped that a designer is looking to go through. What they’re really trying to figure out is what shape is going to be the best for production on this engine.

Every form of manufacturing has some inflexibility associated with it. The way to think about this in manufacturing—the term is called tooling. Tooling can be hundreds of thousands to millions of dollars to set up a set of machines to do a set of instructions. And this tooling is hardcoded—it’s coded in the actual cavities of the molds that you’re producing. So when you ask that tooling to do something a little bit different—to figure out if that little bit different shape on the blade results in a little bit more or a little bit less performance—you have to pay hundreds of thousands or millions to change it. But once you’re in, you’re good to go.

The qualification process of a lot of these components often involves changes. And when you move that tooling from a physical world to a digital world, you unlock a whole other world of possibilities—not just for cost reduction, but for achieving the optimal design.

Now, there’s this other kind of intricate layer that’s starting to come into play as America becomes more serious about producing. This is maybe a bit more general of a comment on the state of the DoD world right now, but lots of folks are delivering to kind of low-rate initial production. But a lot happens when you go into full production. We’re talking about what is the capability—not just to make engines that fly as far as possible, but how many engines can you really make a year if you had to make every single engine that you could? It’s a different scenario when you have to hit full production.

In many cases, when people are designing today for these flexible manufacturing technologies, they’re using a different manufacturing technology. You might metal 3D print something, because then your tooling is digital. But when it comes time to make full production, you’re moving to a traditional form of manufacturing—you’re moving to casting, you’re moving to stuff that just scales. So one thing a designer has to look at is how serious they are about production. And if you’re serious about production, you’re going to design to the constraints of the manufacturing technology that you use to scale production.

This is one of the core beliefs that we coded into our technology stack. Our technology is capable of iterating on quick-turn qualification to allow that part designer to get the shape and the blade that they want. But at the flip of a switch, they can go to full-range production with the same constraints—the same casting constraints. We don’t have to change our blade thicknesses. We don’t have to change our overhang angles. It’s directly the same manufacturing technology.

And then I’ll give you another one, which is on the tail end of this. We’ve seen this with past sustainment issues before, but at the end of a lifecycle, you store that tooling. And you store that tooling on a wall while you’re making the next, newest, and greatest part. That tooling, believe it or not, will get lost, rust, or wear down. The tools wear down over time. And when you go to pull that part back off the shelf—when you need to make 14 joysticks because a plane is down and that joystick has to be remade to put it back on—you have to build up that $100,000 tool and that million-dollar tooling all over again, just so that you can serve a hilariously low quantity that the industry calls alien castings. They literally call them alien castings, or these onesies, twosies that they need just to sustain stuff.

So you have this other flexibility request on the tail end of these programs. And once again, this is what we’ve designed our production technology to do. And I think the bigger picture, when you zoom out from all of this, is you’re looking at manufacturing holistically. You look at the problem—it’s not just about making one part, it’s about making a process that can consistently make things at scale. And that’s what Rangeview is about.

Akhil 27:35

About. That’s right, and that’s your sort of idea to speak of the digital or cyber founder, Cameron. What’s the Cyber Foundry? What’s the vision for it?

Cameron 27:43

Yeah, Cyber Foundry is Rangeview’s first product. And the Cyber Foundry is simply a factory that is making America’s most critical componentry with the workforce that America has and with the technology that we invent here. So it’s a collection of custom-built processes, materials, and equipment to make a digital file of a part—which we’ve gotten really good at building in America—into an actual part, a real part that can be certified and clicked into a plane, ship, or vessel, and unlock the capability of those systems that we’ve designed so well but have been hampered by not being able to be made. You know, unlock that problem for the U.S., DoD, and our other partners.

Akhil 28:43

Awesome. That’s from digital design iteration, digital manufacturing, and then actually the real hands-on production.

Cameron 28:51

Every stage. I mean, our factory is just as much of a computer as it is a metal-shaping device.

Aeden 29:00

Yeah, I think it’s worth saying a big part of our philosophy is that the next generation of American manufacturers has to have a huge amount of engineering expertise in-house. You’re not going to innovate on process if you don’t have the expertise on how your process works. And it’s really important that the manufacturers—not just the designers, but the actual people designing the process, building the equipment, setting up the factory—know what’s going on and are incredible engineers.

Maggie 29:23

What role do you see for new technologies in accelerating reshoring of manufacturing capabilities to the United States? And what are those technologies that are actually going to drive those trends?

Akhil 29:39

Yeah, and maybe, Maggie, in addition to that, to your earlier answer, Aeden, we can’t necessarily replicate what other nations are entirely doing, right? We have certain advantages here. And you guys, among many other things, are innovating from a technological standpoint—from both a digital and physical standpoint—the software-defined aspect. So, a little bit of an addition to Maggie’s question: how much can we actually rely on technological innovation as part of it, and then what else needs to be done?

Cameron 30:07

So, technology is the way forward. It is the only way forward for us. But that’s a great American trait—America knows how to do that, and it’s not that complicated. The first thing you’ve got to do is pull your manufacturing technology into the 21st century. I mean, it would blow you away if you walked into a foundry today. All the folks—the heat-treat shops, the anody shops—all those folks need to pull their furnaces into the internet. They need to bring laptops into the work and just run it the way a modern company is run. And so I don’t think that’s reinventing the wheel; I think that’s getting more focused into the industry.

So, you know, it’s tough because the factory owners—that was a bit of our origin story. We were just two robotics guys, gonna sell robots to factories. What a journey. You know, we thought that. We thought that manufacturing was further along and was just ready for someone to sell robots. But the truth is, they didn’t even have outlets on the walls. So we had to go down to the studs and start there. So, you know, I don’t think it’s reinventing, no. And there are many companies doing this right now. I mean, go look at SendCutSend—this amazing company that chose their manufacturing technology.

That’s a good way to think about manufacturing too: at a company level, you go to the processes. You know, manufacturing is down bad as it is in the country—it’s actually still a bigger market cap in America than all of tech combined. And so if you think about it, you can’t compare a FinTech company with a healthcare company—they’re completely different sectors and completely different things. And manufacturing—the process—is the sector.

So there’s this amazing process, sheet metal fabrication, where you’re making stuff like doing origami with really strong paper. There’s this company out in Reno that just figured it out. You know, the founder’s a software engineer that came from doing SaaS work, just wanted to help his country out, and he’s built this amazing shop that’s, yes, software-enabled, but it’s just the modern tools of manufacturing put into a process.

I think a lot of this is going to come. I think this is what’s happened elsewhere. There’s this strategy that China used when Xi Jinping was building—it was an actual initiative you can look up—it’s called the “Made in China” initiative. And they very cunningly required American firms, in order to access the cheap labor and other subsidies associated, to partner with a Chinese factory partner to learn what they were doing.

And of course, we now learn what happened: we taught them all how to do it, and then they kicked us out. Uber—this happened with Uber, this happened with Google—they were operating in that market, they told them how to do everything, and then it was just a one-for-one move over. Chinese factories are probably running the best processes right now in the world.

So I’ve seen a few places where you can flip the script and say, well, there are some great Chinese manufacturing approaches—all the equipment is modern. You go buy the best manufacturing equipment. We didn’t just lose our factories, right? We lost our equipment. There are no factories to sell to college or business.

So, if you want to see what a really good piece of modern industrial equipment looks like—natively digital—it’s got an Ethernet plug, goes straight to the modem and the router (which is why you have to be careful). But just go look at the way those machines are built overseas. So maybe there’s an opportunity there.

But we really don’t have to reinvent the wheel. We just need to get a lot of folks interested in doing this again. I think Aeden is totally right—you set that up by getting the unit economics right, and the unit economics are really, really wrong. Technology won’t do it alone, unfortunately. I wish you could innovate your way out.

But, you know, if you do a little bit of Excel, it’s frustrating. You look at some of these parts—the part costs more to make in America, if you just paid for the electricity and the metal, than it does to have a fully turned part in China. Unless you can develop technology that makes the metal free or the electricity free, or a 99% reduction in labor because you have this perfectly automated factory—or equipment that costs $1 because you figured out how to scale this stuff to the moon—it doesn’t matter. You’re still losing. That’s because of subsidies. That’s because of vertical integration. I mean, it’s been weaponized. We’ve totally, totally, totally come up against weaponized industrialization overseas.

Akhil 35:12

Yeah, Maggie and I come from the other part of California, the Bay Area, where you can’t throw a rock without talking about AI. There are aspects of AI—or let’s just call it software-defined generally—but as you look at the sort of AI space, a lot of it’s digital, but fundamentally a lot of it’s moving to the physical world. What actually makes sense? And I hate using AI as a sort of, you know, “we sprinkle it in our coffee,” but where does it make sense to actually apply either a machine learning or some other artificial intelligence capability when it comes to the physical data?

Aeden 35:44

So, the truth is, it’s much harder to build stuff in the physical domain. It’s much harder to build stuff in the physical domain when you have extremely safety-critical applications depending on it, right? And so it’ll be a while before an AI system can make a decision that is accepted by, you know, one of the, as we talked about, conservative aerospace primes. That said, there are so many parts of operating a factory that are not as critical, where it comes in first in places where then things are going to get verified by a human, eventually verified by a test. And so, you know, we do all kinds of things at every level of this—from extremely simple things like how we inspect parts. There’s a whole bunch of things that are normally done by a human, verifying that a certain number is less than a certain number and greater than a different number, right? And we do a lot of that with software and a lot of that with, you know, I don’t want to call it AI, but more sophisticated software systems, often that are trained on a lot of data. And it’s the same kinds of approaches at the very high level. And we’ve started to toy around with, you know, an LLM that has access to a huge amount of the data in the factory. Is it making all the critical decisions today? No. Will the software get there and the technology get there so that it can sometime in the future? I actually think probably yes.

Cameron 36:55

So AI is only as good as the data that it’s fed, and the amount of data that we have, for instance, in something like self-driving cars, is orders of magnitude above the amount of data that we have on part making. The first problem is, part-making data is in the heads of humans that are retiring right now. Like, this is the first problem—let’s get these into the computers, right? And then after that, we can start to put sensors in place and directly train that system. So I think a good goal is for computers to know just as much about part making in a few years as they do about driving cars.

Akhil 37:38

When you talked about addressing this via technology, processes, and people, I want to actually come to the people part—and we can dive into more of the other two. People—I’d love to get your take on talent, what you just talked about. But actually, first, I want to come back to your story of you both in Berkeley, working on robotics. I remember first meeting you all one summer on Shattuck, at UC Berkeley, in, you know, a small little place. Share a little bit about where you came from. You shared that initial story about, you know, wanting to sell robotics, and then you turned into casting. What was that story like?

Cameron 38:15

Yeah when you met us at Berkeley we, you know, we were in a garage—one of the garage startups. So, in a garage before Berkeley, it was a huge upgrade at this old Sprint store in downtown Berkeley. Border does, because Berkeley is a crazy place to build what we’re building. But yeah, you’re right, we met you there—it was a great day. Yeah, yeah. I mean, we wanted to reindustrialize America, and we thought that the way to do it was by building robots. And I think a lot of folks see this right now, where, you know, we just have to add modern technology. We have to automate. We have to bring robots in and have the robots do the human tasks. We charged you that Rangeview was actually Rangeview Robotics—that was our formal name there.

Akhil 39:01

And that came up because you both were robotics champions in high school, right? Two at one point—is that right?

Cameron 39:07

Yep, yep. We were competitors, and Aeden and I have known each other for a very long time. Yeah, we did competitive robotics against each other — you know, Los Angeles BattleBots, the fighting ones on TV. Even before that, Aeden and I did a lot of high school robotics. And by the way, amazing program — talk about getting started early. I don’t know if I’d be doing this, or if you’d be doing this stuff, if robotics wasn’t a big part of the early education system. And it’s amazing. There are some fantastic people who built that whole system out — FIRST, back to robotics. There’s a lot of great stuff. China’s doing a really good job at robotics education too. DJI actually built probably the best robotics student competition in the world called “Masters,” and it’s incredible. You know, there are roboticists in China who are held to the cultural significance of, like, a quarterback in America.

Akhil 40:04

That’s crazy to me. You’ve got Texas football, and then you have a DJI roboticist.

Cameron 40:09

Yeah, a little bit different in America. You know, it’s hard because Aeden and I were definitely on the nerdier side growing up. So, you know, I wouldn’t say that people — put it this way — people weren’t inviting us to parties because we were good at robots. Maybe one day that’ll change. It depends on how much we really need robots to build. I think we really need them to be built.

So yeah, competitive robotics — that was it. But we looked at it and we said, wow, we need to decouple from labor. There’s no way America, with our way of life, will ever be able to support the hourly rates of overseas labor. And if we’re going to automate manufacturing, this is the big question. Everyone wonders, “Why manufacturing in America? Why don’t we nearshore to another country?” But the truth is, if you decouple labor from the manufacturing cost function, it doesn’t matter where you make it from a cost perspective. And where you make it will bring all the jobs — the people that build the factories, the people that build the robots.

That still means that people are critically important, but their value is being accrued in different or complementary portions. Think of it this way: think about a farmer. A farmer is an amazing roboticist. They’re doing the work of thousands of people with one big tractor. The tractor maker didn’t replace those jobs — the farming industry and agriculture created abundance everywhere. And we can go out and specialize and do all these great things. But what you’re doing is giving a human leverage.

The comparison I made on manufacturing in America is that it’s critically important that that leverage becomes American leverage. So we have to build factories here — not factories for everything. We don’t have to make plastic forks. There’s some stuff that, you know, we should share across the globe. But for what we’re working on, we chose very specifically to work on the things that America deserves to be excellent at.

Akhil 42:25

So you went from Rangeview Robotics to Rangeview.

Cameron 42:30

Yeah, we just lost “Robotics.” It’s like, just Rangeview.

Akhil 42:32

It’s cool, but you haven’t necessarily lost that mission, because a lot of the components you’re now providing will absolutely carry forward, whether it’s robotics or just the autonomous systems wave of the future.

Cameron 42:36

Robotics is in our DNA. Yeah, that Rangeview Robotics is in our DNA.

Aeden 42:41

It’s worth saying that the counterfactual between two people losing their jobs to robotics is not actually “automation or no automation, jobs or no jobs.” It’s actually, “We don’t do manufacturing in the U.S., and no one gets any jobs,” or “We do it here, and it supports people at the labor rates that they want to be paid here.” It’s either good jobs or no jobs. That’s the only counterfactual that there really is.

And so it’s a huge part for the factory to have very few low-wage, low-skill positions, right? This is not what Americans want to do. It’s not what the nice factories are going to be like. And it’s not actually how you make good parts at scale. You don’t want to be reliant on people that aren’t that motivated to be there to make your parts.

Maggie 43:23

So, you know, at least my sense from the outside is that the manufacturing industry — the aerospace and defense industry — is a pretty conservative industry. What does it actually take for you guys to build trust with these customers and for them to entrust you with building some of their most critical components?

Cameron 43:40

Yeah, I think Aeden’s got a really good bit on this, so I’ll give it to him. But these systems already exist. Actually, there’s an entire quality industry whose whole job is to take the liability of ensuring that a part does what you say it will do. And that is something from day one we have designed for, because there have been other innovations that have been hung up on this—saying, “Well, if we just make a cool enough thing, people will want it.” The truth is, you have to be able to prove that that part will behave the way you say it will in order for it to have real value over time. So I’ll kick it off to Aeden here for comments on qualification and what that all means.

Aeden 44:23

Yeah, no, it’s actually a good question, because I think there’s a lot of noise that comes from a lot of new manufacturing technologies about how hard it is to qualify. I’m actually a little bit less sympathetic than you’d think to this. I mostly think this is the case of that technology not actually performing. If you actually have the data to show that your process produces parts that are good enough, you probably don’t have a huge issue qualifying. The issue is when you fail spec and you need someone to change their design or redesign their system—and that’s where big problems show up.

And so for us, a big thing is, you know, we’re not doing level three. We’re not doing some new process that requires totally new design allowables and new designers to be trained up. Because the truth is, those adoption curves are extremely long. I mean, that’s what’s happening in metal 3D printing, right? You’ve just seen these companies that have amazing technology—I mean, I love laser powder bed infusion—but it’s not a technology that’s going to scale immediately to cover the whole industry, and it certainly isn’t going to scale to cover the parts that were designed in the ’70s. And you know, the designers are not only unwilling—they’re actually not even working anymore. They’re retired. You’re not going to change those parts.

And so the way that aerospace works, right, is there are these long, long campaigns to make sure that your part meets specifications. There’s this contract between you and the designer, and you just go through the test. If you pass the test, it’s objective. And so for us, the huge thing is always talking to designers to understand what they need before we’re even making parts, and making sure that we’re building a factory that goes in that direction. But the truth is, if you make a technology that has advantages—if you have cost advantages and can meet all the technical requirements—there aren’t actually so many issues. The issue is when you’re trying to do something new that pushes the designer in the wrong direction.

Akhil 46:00

And it’s not just the cost and technical requirements. You are fundamentally, with the way in which you orchestrated your digital range of your boundaries, able to make novel points.

Aeden 46:11

So that’s the biggest thing. The biggest thing is when someone designs a part, goes through a long simulation and testing campaign, and then says, “Okay, we need to make the first prototype,” and they can’t make it. This is a huge problem. It’s the exact same case as the designer having to redo all the work, change the design, reduce capability.

And so the greatest customers that we work with are the ones that went to somebody else who couldn’t make it, and now only have one way to make it—and we’re enabling something huge for them. Not only are we faster and cheaper, but we’re also enabling the missile to have 10% higher thrust, 10% higher range, and higher reliability. Maybe the cost is lower because they can do one part instead of five in some cases. Those are really the best cases for us. That isn’t everything, but when we can do that, it’s a huge benefit for everyone.

Akhil 46:53

Aeden, are you seeing—you mentioned their scalability, right? And the actual ability—and Cameron were discussing earlier Freedom’s Forge, right? For those, I think we’ve talked about it before. Awesome book, and a good complement, a good sister book, is Arsenal of Democracy. The benefit we had during that period was that there was this two- to three-year, if not longer—really ten-year—period before December 7, 1941, where we in the United States, because of what they were seeing geopolitically, were actually already putting in motion the movement toward scale, right? I mean, you saw Ford already start converting some of its plants toward B-24s; you saw the work on Liberty ships. Obviously, that was a different year, different era. But are we seeing—the question I have is—are we seeing on the end-customer side the actual drive and demand beyond low-rate initial production, beyond just prototyping, to actually drive the rest of the manufacturing enterprise upstream to facilitate that?

Cameron 48:01

No, I mean, we gave it all up. It’s not here. When you don’t make consumer goods here because you’ve hollowed out the consumer base, you don’t have that surge capacity anymore, right? Who’s gonna build this stuff? The factories—and the factories for those parts—aren’t here. Even if a Ford is assembled here, they’re getting a Bosch component from a casting house that’s often in Taiwan, or often China, or often Mexico. Once again, a lot of this stuff—they’re screwdriver factories. So when you shut off that spout, like in the case of, you know, if a balloon does go up—I don’t think if a balloon goes up, the faucet’s gonna probably be shut off—and they’re gonna be in the supply chains that exist under the all-American factories that exist today. So, you know, they’re making a car in Detroit, Michigan. That car is not being made with parts that are from Detroit, Michigan. It’s unfortunate, but it’s just the place that we’re in, and so we need to shift that back.

But I don’t blame them, because that part can’t be made on good margins at a good price with the weaponized subsidies that have been leveraged against us—and it really exists in the shadows because we still think that these cars are made in America, for the factories that haven’t moved yet, right? You know, most folks are just looking at that level, saying, “Okay, well, you know what, factories for car making are still in America.” But the ones that are here—Tesla is an outlier, for sure. Tesla makes, I think, something like 70% of their cars with American parts.

But, you know, the hard parts are really—you know, if you just go on a quick deep dive here—neodymium magnet production: almost all neodymium is processed through China, or through some stage of the neodymium process. The furnace step and magnetization step are done almost exclusively in China. There are a few neodymium magnets that are, you know, all through NATO and allied supply chains—and, you know, the prices are more than 15x what you’ll find in America.

But when you talk about these factories and the surge capacity, you aren’t able to say, “Hey, you’re making alternators for a Ford. Now go start making motor components for these new autonomous systems,” or even your old legacy systems. There is no supply chain shift. It just doesn’t exist.

Akhil 50:57

It’s compounding. It’s not only there. The other aspect—I can’t just turn a Model T plant or a Ford car plant into a B-24 production line. It’s just not—if you want American parts, indeed, right? I mean, we’re doing things that are arguably a little bit more complex, but your underlying point is, even regardless of that, we don’t have the capacity. We’ve hollowed out the capacity here to be able to do it all the way upstream.

Aeden 51:23

It’s also worth saying that modern defense systems, I think—the difference between a modern defense system and a car, and a World War II defense system and a car—I think the World War II B-24/Ford maybe a little closer than the modern systems. Like, modern defense is much closer to consumer electronics, right? It’s lots of complex electronics, lots of complex sensors and cameras, navigation, right? This is closer to an iPhone than a car, and we don’t make any iPhones here, right? Maybe we make some cars here, but the consumer electronics supply chain has really been built overseas, and it’s really coming to what the latest defense systems are as well.

Akhil 51:59

Yeah, so if you guys had to—you were czar for a day—and you had two to three things you could do to reshape or reformat the manufacturing base here, what would that sort of look like? And maybe some specific sub-questions there: would it be centralized, decentralized? Would you have edge nodes where it’s closest to the potential user or operational standpoint? Obviously, we’re talking about civilian and military buy capacity—that’s it. It doesn’t matter, whatever incentive structure works.

Cameron 52:34

Buy capacity. Buy as much capacity as possible, and have contractual obligations on that capacity to go make the things that might be needed in the case of, you know, a surge scenario. But there needs to be—like, at the end of the day, someone’s got to make the parts. And the way that parts get made is because you have machines and people that know how to use the machines, and one day they’re cranking out one thing, and the other day they’re cranking out another thing. And that doesn’t exist because of the economics right now. So we have to at least match the subsidies of our adversaries to ensure that we have that when it comes time.

But we have to start doing this now. The lead times on these factories are not a year—they’re not even two years. I mean, in some cases, our foundries are looking at procuring equipment that takes over two years from order to making the first parts. So this is a decision that you have to make even before you want the ability to use it or not. So you have to get on it quick.

But I think the most certain path to maintaining the capability that is required—or building the capability that is required—is to buy capacity. I think the DOD can do this through a series of preexisting mechanisms or through some new mechanisms. DPA Title III is a really great one with good history here, but it needs to be hyper-specific capabilities. So we’re choosing a process, we’re choosing a partner, we’re choosing an application that’s proven to make sure that the execution side of this really works, right?

This is one of the great things about a factory—you can’t really put makeup on a part. The part passes qualification, and you made it in X amount of time with Y amount of throughput—or not. You can buy a factory that makes 12,000 doohickeys of X type for Y platform. In the case that platform needs to be scaled to 12,000 units a month, you don’t have to make that right now. You can use that capacity to build something else with a similar set of requirements, and that will feed back into the American private economy. But you need to have the option to be able to flip that switch. And today, you don’t have that option because you don’t have that capacity.

Maggie 55:04

So I know you all hosted INDOPACOM Commander Admiral Paparro at the factory a couple of months ago. I’m curious—how is DoD thinking about a capability like Rangeview in a future conflict in the Indo-Pacific in particular? And how will a conflict like that need different kinds of manufacturing capabilities than, say, what’s happening in Ukraine or the Middle East or elsewhere?

Cameron 55:33

The Navy can’t get parts right now. I mean, a sub will come back, a ship will come back, and there will be no way to get a part back on that system except by cannibalizing another system. There are some crazy statistics out there for just how bad it’s gotten, but the easiest way to look at it is: for these new programs, there’s a lot of funding behind them—throwing a lot of money at trying to build submarines. And if you look at the difference between the shipbuilding capability that America has versus our adversaries, it’s astonishing.

And if that’s new stuff—if that’s where everyone’s focusing—imagine just how bad the sustainment and maintenance component is. That’s one of the biggest things that Paparro was interested in when he came by our foundry and saw our technology. I think the flexibility of Rangeview—offering a capability that can one day be making critical components for the private sector, then shift when a submarine comes in and needs a ball valve to be able to make that part on the spot—is a massive capability that no other casting technology currently offers the Navy.

Akhil 56:55

Yep, and there’s a litany of congressional reports, and obviously the last reconciliation bill reflected a lot of the need to sort of recatalyze that. Specifically, Cameron, to what you just talked about—if a commander like the Indo-Pacific Commander, or just the DoD in general, wants this flexibility, does it matter where it’s produced?

And what I’m getting at is: do we need some sort of edge manufacturing capacity? Does it matter where it’s put? And does it actually make sense? If we want to try and build that out—exactly—you’re not going to print drones on the battlefield. It’s just, you know, it’s actually more wasteful to send raw manufacturing goods to those printers. Manufacturing doesn’t have an above-100% yield; it has less than that. So there’s waste generated.

Cameron 57:42

Right. So it is more space-efficient and more material-efficient to actually send preprocessed goods to the end-use point than to ship the manufacturing plus the raw goods to that use point.

And, you know, I’ve heard a few arguments—“Well, what if the need changes? What if one day we need a drone that can fly 500 meters, and another day we need a drone that can fly 1,000 meters?” The work that goes into a drone design to achieve those two capabilities is not work that can be done on the battlefield. That’s work that’s done preprocess. They might load up some instruction file to the system, but the truth is that instruction file—whether it’s the printer’s job or the whole factory’s job—can be programmed somewhere else.

And you can, you know, send 500 drones of one type and 200 drones of another, and the difference in that flexibility is far more beneficial than if you instead had an edge-deployed system that touted bringing that flexibility out of you. I don’t think we’ve really seen it—look at Ukraine. Ukraine is not printing drones on the battlefield. Ukraine is shipping shipping containers filled with thousands of these systems, fairly—at least relatively—close by from where those production facilities might be.

Aeden 59:17

I mean, I think there’s a pretty good razor as to when some sort of edge manufacturing makes sense. And actually, there’s great precedent for this, right? We’ve had machine shops on aircraft carriers since they were new—since World War II.

The case that matters is if you have a very, very big, expensive system that can be taken down by one or two spare parts. Those cases are the rare ones when you want a little bit of edge manufacturing, because it will not be cheaper—it will be much more expensive. It will be much more painful to operate. The logistics of getting materials and maintenance to the actual edge manufacturing site are going to be ten times worse than they’d ever be on the mainland.

But it’s occasionally worth it if there’s a really, really big system that needs to be kept up. And so there are some narrow cases. Most of the time, though, you really want a nice, safe, big factory that doesn’t have to worry about operational security, doesn’t have to worry about being bombed, doesn’t have to worry about, you know, the humidity changing because they’re on a tropical island and there’s a rainstorm. That’s what you don’t want.

In general, you want a big workforce. You want to be able to replace people quickly—if someone gets sick, really obvious things. That’s how you get to efficiency, and that’ll be the bulk of all manufacturing forever. There are special cases, though, when for really big, expensive systems you need to keep them up, you need to turn them around quickly—and there, edge manufacturing is a great solution.

Maggie 1:00:33

What do you think is most misunderstood about manufacturing and reshoring from outsiders?

Aeden 1:00:40

I think there’s one thing to say, which is that people picture manufacturing as, you know, just another thing—like it’s just another industry. And I think when you actually start to get into what manufacturing is, manufacturing is building the physical world, right? That is what manufacturing is. The breadth of different kinds of processes, different kinds of things that are done, and the dependency between those—and how much, you know, having a mine in a particular place can affect the price of valves—is mind-boggling to a lot of people. And I think, you know, people forget, it’s not just one process. It’s not just like fixing magnesium supply in America does not fix the magnesium casting supply, nor does it fix the helicopter gearbox supply problem, nor does it have anything to do with the helicopter gearbox inspection problem, which are all distinct, huge problems with thousands of people that work on them in the U.S. And I think it’s often forgotten, just the scale of these things, because, you know, people don’t see factories all the time. They don’t walk down the street. They don’t have friends that work in factories, right? We don’t have this—especially if you go to the coastal cities—this is nowhere to be seen. And so I think people just lose some of the scale effects of what are all the things that are going on, and how they depend on each other, and how complicated it is to change something in manufacturing, right? If you want to change where something is manufactured, there’s a lot of different pieces to it. I think that’s a pretty big one.

Cameron 1:02:01

For some context, helicopter gearboxes are oftentimes magnesium. They’re a very big supply chain problem. So just to connect that a lot—like they’re all magnesium problems—but, you know, there’s probably a billion-dollar business in multiple of those magnesium problems.

Maggie 1:02:20

What advice do you guys have for other founders looking to build either in this manufacturing or national security, defense industrial base space?

Aeden 1:02:30

Never build a cost model. Just do it on vibes.

Cameron 1:02:40

Build a cost model day one. Update it every time anything changes. We’ve already created so many competitors. Like, literally within two days—but, like, literally, we were ready. There’ve only been like two founders that just 100% exist because we existed, right? So, I mean, even if we say build a cost model, don’t go build robots day one—that’s a good one. We’ve really spent hundreds of thousands of dollars on that lesson, right? Like, that’s actually a pretty big lesson. Purchase Rangeview’s system.

Aeden 1:03:12

Don’t build software. Build an actual company that makes parts. You know, build a factory. Those are up there.

Cameron 1:03:19

Yeah. So for other startups—focus on how many parts you make a day. That’s the metric of success that matters. We need parts, not tools for someone else to maybe use. Go make parts. Make parts yourself. Go make a factory. Don’t build software for a factory that may want to use yours. Factories don’t want to use software. This is why we’re in this space. Go build a factory and make lots of parts, and make your internal success metric proportional to how many good parts you’re shipping a day.

Akhil 1:03:48

Who are you looking forward to come join Rangeview?

Cameron 1:03:52

Oh, anybody who’s tired. Anybody who’s tired of, you know, working on stuff that might not matter as much. And not to say—it’s important that the work you do matters. I think you’ve got to wake up and look around and say, beyond the money, what are you doing? Your career is going to take up the vast majority of your life, right? What are you doing with that career? What are you doing with the world? And if you’re an engineer—a really principled, strong mechanical engineer, software engineer—if you love to learn about castings, please, I didn’t want to plug it here, but our website has a careers link. You click on that—we’re expanding our team like crazy. If you want to build custom vacuum induction melters, if you want to come work on the next generation of 3D printers, you know, if you’re excellent at what you do, I would love to speak with you, and we can build this cyber foundry together.

Akhil 1:04:58

Awesome, Cameron. Yeah, where’s the company going to be in a couple of years? What’s the vision?

Cameron 1:05:05

Yeah, I mean, well, we need another Westinghouse, don’t we? You know, we need someone that’s making the world’s stuff. And I think that’s going to end up with folks that understand the new paradigm. I think that’s folks that understand modern technology as it relates to manufacturing and folks that understand automation. I think we’ve got a pretty amazing team here, and I think everyone here is doing it for the right reason. So I’d hope to be making a lot of parts.

Akhil 1:05:33

Awesome, awesome. Well, Cameron, Aeden, this has been awesome. Thanks so much for taking the time. Excited for what you’ve already built, what you’re unlocking both in what can be built going forward, what is impossible, and what can be scaled going forward. Excited to be part of the journey with you.

You can listen to the podcast on Spotify, Apple, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please reach out if you or anyone you know is building in the national security domain.

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Maggie (00:04): In this episode, we're joined by Mike Flanigan, the CEO of Seasats, a startup building the future of autonomous systems for the ocean. I'll say Seasats is definitely one of my favorite portfolio companies, in part because I think it's one of the easiest of our portfolio companies to explain to people who work outside of this industry. They're building some super cool stuff. In short, Seasats builds solar-powered autonomous drone boats that sail themselves thousands of miles across the ocean.

Matt (01:06): Yes, and the Navy has decided it needs a lot of autonomous boats. One thing that struck me learning about this space is that the unmanned surface vessel industry isn't actually new. I mean, you can go all the way back to World War Two, where several major powers used USVs for offensive operations, minesweeping, and even dummy practice targeting. And then 80 years later, you have this operation in the Black Sea in 2022 where the Ukrainians used remotely controlled drone boats to sink part of the Russian Black Sea Fleet, and it's considered this watershed moment in maritime autonomy. And now Congress, the U.S. Congress, is planning to allocate nearly $2 billion for USVs. So I think there's this important question of why now? What about future conflicts makes these platforms so important? And why haven't cheap, unmanned, and autonomous vessels been adopted at a large scale before? Thankfully, today we have Mike on the show to explain this unique moment in maritime history, both technically and geopolitically, and what it all means. Seasats is one of the leaders in maritime technology, so we're super lucky to have Mike here today. Mike, thanks for being here.

Mike: Absolutely, thanks for having me on.

Matt: Let's start there. The USV industry isn't new. So why is there so much momentum for the industry today, both technically and strategically? Why was the Ukraine war the first time that cheap USVs were used for such an important strategic effect?

Mike (02:41): Good questions. Yeah, as you pointed out, Matt, the USV industry has actually been burgeoning or growing for a long time. It's kind of been this building momentum, or maybe tension, of like, okay, the commercial market value has always been there. It's very expensive to do anything on the ocean, which we can get into later. But the technology tipping point, I would say, has been held back. And then one of the interesting things about the Ukraine-Russia war is that full-scale conflict releases some of the rules of engagement. And that actually suddenly crossed us over the point where unmanned systems become incredibly effective and revolutionary, game-changing overnight. I think when the very first videos were hitting Twitter of USVs sinking Russian ships, it was like, okay, the next day at conferences in D.C. and San Diego and California and really around the world, people are talking about this. They're like, okay, we need to change what we're talking about because everything has changed for maritime. So I think that is really what led to the tipping point, kind of unleashing it.

Maggie (03:48): Mike, maybe could you differentiate? I think we have both USVs, unmanned surface vessels, but then also ASVs, autonomous surface vessels. So where actually is the tech today? What's actually being used on the battlefield, and where are we heading?

Mike (04:06): Yeah, that's a good one too, Maggie. So USVs has been the traditional term, particularly for the Navy. They've gone with unmanned surface vehicles or vessels—it changes a little bit. We like to use ASVs to distinguish the autonomy. It's like, hey, you don't always need a human in the loop. I mean, some things are really bad. A human in the loop would be someone needing to take active controls just to continue the mission. Imagine someone who's holding down the go stick—that's a human in the loop. Human on the loop would be someone monitoring to make sure that it's doing the right thing, and that would be a USV. And an ASV would be like, okay, maybe the ASV is conducting its own mission, potentially without communications, and then it's pinging back information and asking for decision-making input. So really, an autonomous system, as far as we know—particularly some of the kinetic USVs that have been used—would probably be properly termed USVs. They're using video feeds to conduct targeting where an operator is watching that feed, directing the vessel, and conducting final guidance maneuvers. And that's both in the Black Sea with Ukraine as well as in the Red Sea with the Houthis, as far as we can tell.

Maggie (05:20): And why move towards ASVs rather than just stick with these remotely piloted USVs?

Mike (05:27): Yeah, so on that one, it's interesting. Ukraine-Russia is totally the modern lab in terms of warfare and what's changing incredibly rapidly. One of the open pieces of contention is people saying, like, hey, don't over-learn from Ukraine. I would say that there's—I'm more usually in the camp of, hey, those people are usually in a traditional camp and have something to lose if things change and everyone wakes up to that. But one example where that's probably accurate is, okay, for a real near-peer competitor, let's say a global threat like China, really you're probably going to be dealing with very sophisticated systems like intensive jamming, intensive electronic warfare. So a USV might not be appropriate because those links are very easy to pick up on in maritime and to cut and to sever and to disrupt. So you might need the autonomy. And I would say in terms of getting to—the second reason for needing autonomy is for persistence. If you think about it, you have this scaling problem. At Seasats, we build these very long-duration, very long-range platforms. If we put out 1,000 USVs or ASVs, sorry, and they're out there for months at a time, well, it's very unscalable to then have a whole bunch of human operators watching. You really want someone doing that command-level intelligence.

Maggie (06:54): So what is the state of tech—I guess first I'll ask—of our adversaries? I know you mentioned China, you mentioned Russia. I know the Ukrainians are using some of these more remotely piloted systems. Where are our adversaries in both developing and then deploying maritime autonomy today?

Mike (07:12): Well, one thing's for sure: definitely China is the manufacturing leader of the world, like it or not. And so, particularly if you look online, the number of USV systems that are getting proliferated by China is actually massive and at incredibly cheap price points. They're not all—or the majority of them don't seem like very sophisticated or useful products. But at the same time, it's kind of like there is a quality to quantity, if there's just thousands of really kind of crappy systems. Well, you do need to contend with those. I think that's one of the things that the U.S. in particular has learned. If we're talking about the state of technology and affairs, we'll go from—let's say we just touched on China, which I'd say is mass manufacturing. In the Red Sea, the Houthis are launching relatively cheap drones, like missiles, and then also USVs, and some really interesting USVs in their attacks on—you know, terror attacks on global shipping. But if you look at them, it's like these are very much like maritime IEDs, like improvised explosive devices. You've got fishing boats loaded with explosives with decoy things in the front to look like a human driver, to create confusion and uncertainty. Unfortunately, even such crude systems need to be countered by usually more sophisticated systems. So the U.S. ended up in this very difficult cost equation where it's like using expensive missiles to shoot down very cheap drones. So that's a problem.

In Ukraine, I would say that they're at a little bit more of a sophisticated level with their maritime technology, where, despite them being remote, they've shown definitely the world's leading implementation of USVs. I mean, they're launching 10 drones at a time to go do things. They're swarming Russian ships, taking out propulsion first, and then striking critical equipment second, and doing follow-on strikes. As well as now, Ukraine has again kind of opened up the history books and made everyone look because they then mounted aerial vehicles and are launching long-range USV missions with aerial strikes at the end into Crimea. And then taking that even further is kind of like, what is the logical counter to USVs? Typically aerial vehicles, and really helicopters are able to match speed and probably have the best gunnery and perspective advantage to stop USVs. Well, then the Ukrainians added surface-to-air missiles and even, I think maybe an FPV—but I might be wrong on that—but at least a surface-to-air missile and took down a helicopter and then took down a fighter jet. So now it's like, okay, even those counters don't make a lot of sense. So definitely, the pace is changing extremely quickly. I would say Ukraine is definitively the leader in this space, even if what they need to do due to their ongoing war is maybe not what the U.S. needs to focus on.

Maggie (10:02): So then, where is the U.S. Navy in this whole ecosystem, in terms of actually adopting USVs and/or ASVs at scale?

Mike (10:14): Yeah, well, there's certainly a lot going on. The U.S. Navy has a lot of folks, a lot of logistical power, and a lot of budget to be spent on trying to solve problems. I would say it's been fractured and very spread out between many different groups, whether that's Service Warfare Centers, autonomy-specific groups, innovation-specific groups like DIU—you name it. It's kind of like this was getting worked on in a ton of different areas. There have been recent big bets with the Replicator program by DIU and Hellscape. I would say that one of the common threads is everyone's aware that it needs to move faster.

And one of the things that I definitely see from the Seasats perspective, because we actually work with a large number of the different Navy groups, both through their exercises, through combatant commands, and through field operations—one of the things that I would say is a common thing that a lot of the folks within these groups know, the service members, is like, oh, we need to be testing in more realistic ways. The whole innovation cycle—the DoD is very focused on solicitations and big bids. Unfortunately, that lends itself really well to lobbying and marketing clout and the fanciest proposal winning, and it does not lend itself well to effective, cost-effective, and mission-success-based products. So when we do see the DoD do kind of testing, I think sometimes the results are surprising. We can't talk about them all right here, but one or two of our customers, more in the special operations side of things, we've seen do straight-up competitions and end up with some very interesting results that are not always the biggest names who have raised the most money.

Matt (11:59): Super interesting. I want to kind of pivot to the platforms that Seasats builds. To your point, Mike, on some of the customers you work with and the platforms that Seasats builds, and what use cases you guys are focused on. So yeah, we've all seen in the news recently that Seasats successfully sailed a Lightfish from California to Japan autonomously, and then separately, I saw you guys released a photo that was a high-resolution image of a Chinese destroyer in the South China Sea. Those seem like a big deal to us who are outside the companies and the government organizations that are working on these problems. But can you contextualize that a bit for us? Are these things that every company is doing, and what do these announcements tell us about Seasats' capabilities and what you guys are designing your platforms for, and why?

Mike (12:53): Yeah, thanks, Matt. It definitely, I would say, is a big deal. It's pretty exciting. Our company was excited, tons of our customers were excited, and tons of people who just follow the industry were excited. I think one of the reasons that this is a big deal is if we look historically at what programs have been able to do cross-ocean missions, they're all large. We're talking about 200 to 300-foot ships, typically. That's the amount of material and resources required to cross multiple thousands of miles.

It's an interesting problem because for the Navy in general, these oceans are both historically a great protector of the United States and any country that has big oceans. It's like, okay, someone has to cross that whole ocean. In the investment world, we use the word "moat" to indicate a very small ring of water around a castle or a defensive piece of technology. It's like, if you have an ocean protecting you, someone has to cross entire oceans to get there, and they need a way to get across. You need heavy equipment to be moved. So typically it's required massive ships and equipment.

I think what was very important and kind of contextually relevant for the Seasats cross-ocean mission was, hey, we're showing that very small vessels can do this. And in today's day and age, with satellite technology, RF sensing, et cetera, big things are very visible. The world's never been so transparent, and so ships that it used to be that aircraft carriers could go hide in the ocean. You know, in the war in the Pacific, Japan and the US were going around and didn't know where each other's ships were. We had to send out scouting planes to spot the fleet and then go engage. Now that's changed. With the proliferation of low Earth orbit satellites and the intelligence agencies getting very good at their jobs, everyone kind of knows where the big ships are. They even know where the bases are. This is becoming a massive problem for the DoD in general.

So for small things to be able to do these missions is very important, because we're showing hey, small things that cannot be tracked are very hard to disrupt and are very inexpensive to build. So the cost equations on our side can be very, very relevant to today's missions, because you can cross entire oceans. You can go put them within a couple feet of a key area with great precision. So it's certainly kind of changing the understanding of what is possible.

Matt (15:19): So it seems like, from what you're saying, the unique value proposition of Seasats is doing these long-range, high-endurance missions that are typically reserved for orders of magnitude more expensive and significantly more visible ships. Really, that's kind of the key advantage you guys have built. Is that fair to say? And are these the types of use cases you'll stick to in the future, or do you plan to expand the technology and product suite to other parts of the maritime domain as well?

Mike (15:53): Yeah, I would say maybe I'll answer the future expansion second. But I think the first part you hit is really good there. It's like, okay, things that were typically much larger and more expensive. So you asked about the Chinese destroyer that we had this 20-minute encounter with on the Pacific Ocean journey. Well, typically, a destroyer like that, once a carrier strike group goes out to sea, they're not going to encounter anything except for other large vessels, maybe occasionally long-distance ocean-going commercial shipping traffic. But it's kind of an empty world, except for these other large capital assets. No ships out to sea are, frankly, as low cost as a Seasats Lightfish.

So the fact that we're able to be out there and say, like, hey, you have to contend now with the fact that you don't just have to have your watch on high alert when you're within 100 miles of coastline. It's like anywhere in the ocean, we can proliferate ASVs and both deliver high-quality, high-resolution, near real-time intelligence, and potentially also layer in offensive effects if necessary. So really, it kind of changes the dynamic. Just looking at that one specific one, a Chinese Type 055 destroyer that costs nearly a billion dollars to build—it's like $930 million. A Lightfish sells for $250,000, so it's actually less than that. But really, the asymmetry there is very remarkable.

Matt (17:26): So on what you guys are sensing in the ocean side, one example is sensing and being able to detect and characterize a Chinese destroyer. What are the other use cases for having this proliferated constellation of really cheap, low-visibility ASVs that you guys make?

Mike (17:53): Yeah, one of the fun things is we started the company very much in the commercial space, and so we've done work from subsea mapping, which is important for construction of offshore oil and gas, offshore wind, for monitoring pipelines. We've done work for the fishing industry, like shellfish monitoring, monitoring water quality. Unfortunately, every year someone gets poisoned by shellfish that have toxic water in them. And so being able to monitor those things in real time is very impactful.

We've talked about industries that drive the maritime economy. There's a whole range of these things. It's a pretty exciting and interesting world. People, particularly on the security aspect, has gone up a lot in recent years. You know, it used to be that folks would build things in the ocean, and then it's like, well, it's safe just because it's in the ocean. Like you lay down an internet cable or a pipeline or build a dam, and it's like, well, no one's gonna mess with this. It's all the way out there. That has certainly changed. There's a lot of gray zone conflict of people sabotaging equipment. And so now we're getting a lot of outreach from commercial companies asking us to do what is essentially very routine security jobs. It's like, hey, we just want data analysis and very timely warnings so that we can protect what ends up being many hundreds of millions of dollars worth of critical nation-state infrastructure.

On that side, it's very fun because we're definitely in the lead in terms of commercially viable technology. Unlike US Navy technology, there's a lot of stuff that's focused on pointy, full-on warfare. However, most of those products don't have the safety systems, the liabilities, or just the commercial viability to be at all relevant to the commercial industry. Many of them talk about dual use, but realistically, we don't see a single sale that they can point to in the commercial space. And that makes sense, because the commercial world is much more sensitive to ROI and actual stuff just making practical sense to a layperson, rather than the harder mission, but a very different mission, of delivering ordnance on a target.

Maggie (19:54): Yeah, Mike, speaking of those commercial use cases, I mean, I think about the autonomous vehicle industry in San Francisco. Matt and I both live in SF. I know we both take Waymos all over the place, and from a non-expert's perspective, this seems like a harder problem—getting cars driving on the streets of San Francisco, where they might hit somebody walking in the middle of the street, or where there's gonna be random U-Hauls just parked in the middle of the street or whatever. The open ocean seems like it would be an easier—which I put in quotes—problem, or technical problem. So I guess, why are we seeing the maritime space sort of lagging behind the ground vehicle space when it comes to deploying autonomy? Is this a regulatory thing? Is it actually a technical thing? Is it just a market-based question? What's your perspective on that?

Mike (20:48): So I would say, to answer that in two different lights, the hardware problem on a lot of the different things, I would put open ocean maritime robotics closer to the space industry, like satellites and such, rather than the autonomous car industry. But I do think the autonomy is directly related to the autonomous car industry. So let's talk about that first.

I think that something that was interesting that we saw with the autonomous car industry is everyone kind of thought that it was gonna be pretty easy—that was like, oh, we can solve this right now, in maybe the 2018 timeframe, kind of the breakout of some of the new machine learning models. It's like, wow, computer vision is so much better, neural nets—we're just gonna smash this. And there's a huge surge of funding and companies, and then, really, none of them solved it. And the only ones we have left are Waymo and Tesla, who are actively duking it out in relatively confined rollouts. You know, Waymo is kind of like a very progressive, building chunk by chunk very reliably, and Tesla is kind of still this big unknown of like, are they suddenly going to unlock full vision-based, incredibly affordable autonomous driving? We'll see.

In the maritime space, we have the same problem. What held them up, what killed all those companies, I would say this is a long tail problem. So the problem is that 99% of the driving is easy and solvable, and they probably all did solve it quite well, but that 1% chance of like, okay, kid runs out from behind a car, and a human driver is incredibly good at identifying in milliseconds and then jamming on the brakes, and we come to expect that out of autonomous systems. We don't want to let an autonomous system out on the road that is just a terrible driver in these really important moments.

Maritime has the same long tail problem. Okay, a kayaker comes up, a jet ski comes up, a tanker is crossing on a windy day through a tight canal, and there's a sailboat coming, and it's like the rules of the road say that one should give way to the other, but a captain or a mariner or pilot needs to make a tough judgment call to say, like, ooh, I would rather let us bump than cause the situation like the Suez Canal or the Ever Given that got stuck. You name these massive maritime disasters—they're really tricky. They're basically these maritime situations that still have really high, critical, important moments, but now it's actually much harder, because instead of having a massive bulk of training data to get through the bulk of this, there's very little. It's very low volume, and it's a false sense of security. Like you can go out and operate for months and say, oh, we have COLREG-compliant software. And it's like, no, they probably don't. They just had very few interactions. And anytime someone gets nervous, they switch on a Starlink and just watch the cameras and do a little nudging if they need to. So I think that long tail problem is the tricky thing that's holding up maritime.

Maggie: Mike, what’s a COLREG?

Mike: COLREG—thanks—the collision regulations. These are a set of guidelines about how vessels on the ocean should interact with each other, and it's the International Maritime Organization, or IMO, that published them, jointly with a bunch of different nations, I don't know, maybe 50 years ago or something. And yeah, ASVs have been struggling with them ever since.

Matt (24:08): Yeah, going a bit deeper on the tech stack, I want to better understand where Seasats comes into this. You talked about being the only company in the military maritime space that also has a commercializable product. You said you started commercial, have commercial customers, and then that would seemingly give you a lot of technical differentiation in the intelligence and surveillance and reconnaissance ISR missions, right? Could you talk a little bit more about what differentiates Seasats technically from other companies in the maritime space or from legacy ship companies, and what are the hardest parts of that tech stack you guys have built? What are the hardest challenges you've had to solve?

Mike (24:58): So I'll start with the traditional companies and then move towards some of the newer companies. I would say the traditional differentiation is that in maritime, to build these ASVs, and I'm going to keep it focused on the offshore, so offshore and longer endurance missions where you need to be out for more than one day, greater than 24 hours, and operating at least a mile offshore. When you do that, you go from hundreds of competitors down to just a handful that say they can do it, and even fewer that have proven they can do it. We're probably talking about a single hand's worth of companies. The field thins dramatically.

Why is that the case? It's because you need to solve a wide array of problems and you need to be competent, or even expert, at all of them. You can't just be good at one or the other. So there are a lot of boat building companies that say they can build autonomous boats, but if they don't have modern software, they don't have great electrical engineers, they don't have the full expertise that these autonomous systems require, then they just don't succeed. It's a good looking boat, but it doesn't actually do what they need.

There are other companies, like in San Francisco, where I've seen some startups that pop up and say we know software and we're going to build a sweet autonomous boat because boats are easy, and it demos really well. But you see 8020 aluminum, which is a very common prototyping aluminum, like rickety stuff bolted together, ripping around for demos in the bay, and that's essentially irrelevant to the real mission. Until those companies recognize that they need to hire really good mechanical engineers, really good naval architects, and even really good electronics and electrical engineers, they won't succeed.

You can't just find off-the-shelf solutions. If you just buy a Jetson, like an NVIDIA Jetson, that typically sucks five to twelve watts. Doesn't sound like a lot, but most PhDs in autonomy have not considered power consumption being a problem. If you're out for days and days and days, you need to manage your power budget. You need to switch things on and off. You need to handle different communications networks. Just the number of problems you need to solve is massive.

Even just communications, which I just mentioned there, if you just run Starlink all the time, it's 60 watts. Now maybe you're having to run a gas generator. But guess what, if you run any type of internal combustion engine like gas or diesel, you typically have a person service those every couple hundred hours to change the oil and change the seals. Even our cars do not run close to that long, even though automotive is one of the highest reliability industries in the world, and they need a lot of servicing.

So I think the problem here, technically, is that there are a lot of things to solve, and it's very easy to start, but it's really hard to finish. It's just another one of these long tail problems. It's really hard to get to the last couple percent, and those end up mattering in the ocean industry.

Matt (27:42): Yeah, I think that's a super interesting point about how to build autonomy. From what you're saying, what I'm taking away is that to build autonomy, it's not just a software problem, but especially in maritime, it's a hardware problem as well. But I feel like we see companies in the space who are saying, "Hey, we know how to build boats. There are a lot of people out there who know how to build boats. We don't need to reinvent the wheel. We're just going to build the software that retrofits those boats, or maybe we make some slight modifications to handle the power, the comms, or the other problems you just talked about. But we're not going to have a proprietary design for our vessel, because people know how to build boats." So could you talk more about why it's really important to be the ones building the boats yourself? Why not just retrofit boats with software kits and maybe a few other things that help you monitor and manage things like power and comms?

Mike (28:41): Yeah, that's a good question. And you know, if we could buy boats off the shelf that did the missions that we needed, we absolutely would. We joke all the time that we would love to outsource more. We wish we could outsource more.

One of the things that Seasats started with was these man-portable boats. Some of our very first government customers were special operations, and they had these hard requirements of, "Hey, we need to be able to show up to a location and with just people, get this thing into the water and start the mission, and do that without lining up a crane or a forklift." So that immediately puts a very hard requirement in terms of how much weight is acceptable.

And so for us, we end up very much in this composite, very compact space, trying to build these really long range, really capable stealth platforms. And they have that weight and size limit. Now because of that, we have to pack all this stuff in and do all this design work. And really, we have to own the entire solution. It's not okay to throw it over the wall and say, "Well, someone else will hopefully solve that," and then have a vendor send it back and it's a little bit too heavy.

That has led us to a point where we're now winning sole source awards, and where our customers tell us, "Yeah, you know, there's nothing else out there that is that size, that capable, with that range and has proven performance. It just doesn't exist." You can look at the trade space, and there are dozens and dozens of companies, and they make big things, they make fast things, they make short range things or small things, but nothing that hits both of those requirements.

The cool thing is, I didn't realize, and I don't think we realized, just how helpful this would be for commercial market growth, because it turns out that shipping around the world is a huge pain. And if you can make something small and portable and very capable, then you can also ship it really affordably. So we get a lot of contracts where they say, "Hey, we need to do this thing in this other country, and we have six weeks to do it." And there just are not many options for what you can actually commercially air ship around the world. We're right at the limits. We already have to have people who are really experts in shipping, logistics, going through customs, doing all this stuff.

So yeah, it turns out the size and weight, I kind of like to think about this like cell phones or computers. You know, it used to be that you had giant computing rooms, and then it was like, "Hey, now it's only the size of a fridge." Then it's like, "Oh, now it's the size of a refrigerator or a microwave," and now it's in our phone. And it's like, okay, if it's smaller, you can scale it better and faster. So really, everyone would do everything as small as possible if they could. Typically, you go bigger if you have to. So the smaller the better. It's just that it requires a lot more engineering.

Matt (31:18): Yeah, I imagine on the US government side, there would be a lot of contested logistics interest in a platform that can not only be shipped overseas easily, but in some cases, can ship itself overseas easily. Is that something that your customers have gotten excited about?

Mike (31:35): Yeah, I think that's a cool one. Because in contested logistics, okay, how do we maintain a fighting force, or standing force when we've got conflict with an adversary and where supply lines are not as easy? You know, you can't just fly a big cargo plane in or send a big boat. It's going to be a target.

Well, the cool thing about the stuff that we're doing, if it's really long range and small, is we can change its logistics balance, both in terms of maintenance. You know, it's like, "Oh hey, that might be difficult to maintain, right?" Well, what if you only have to maintain it twice a year? If you maintain it twice a year, it's like, well now, I mean maintenance every six months, sure, just stockpile a tiny pallet, and you're good for multiple years. So you totally delete this problem by making the things be very, very long endurance and self-reliant.

And then the second one, like you mentioned, is they can just go super far. So it's like, great, you can basically get into contested areas, and the smaller, the better. I think signature management is a huge thing that people are learning in terms of unmanned systems.

Matt (32:33): Yeah, I wanted to ask just another quick question about how you're designing for persistence. The Trans Pacific mission, what was the one where you went from California to Japan? What was the hardest thing to get right technically to make that mission successful, and from a design standpoint, what did you learn from it?

Mike (32:58): Here's the thing about all these challenges - there are the problems you don't want to solve, and those are probably the ones that are most important. You could build the boat lighter, or you could build the boat faster, but you really need it to work day in and day out, so you have to respect those constraints and requirements.

Our vessel is actually a hybrid vessel. Not many people know that. People either think it's an electric motor that's battery powered and forget that all the solar panels actually harvest an enormous amount of energy when you're very efficient with your power budget. For many months, you need solar power. But it's also hybrid - it uses a fuel cell, and that's really important because it has the ability to work for weeks even if it's very cloudy with big storms. For other applications that are carrying high power, high draw payloads like electronic warfare payloads, they require hundreds of watts. You can only do that and then recharge quickly if you have a hybrid system.

That required a lot of engineering. When we did our first prototypes, it was not hybrid - it was pure solar electric. We realized from doing missions that we needed to tackle this hybrid challenge, and we invested in it. It took a ton of engineering. Some of the cross ocean missions actually unveiled things about those hybrid systems that you're only going to learn when you have boats out in massive storms and huge waves. You have to decide how to choose the right level of simplicity versus complexity. If you make the design decision to add some actuator to close some air vents, that adds configuration management, extra parts to build, and extra failure modes. You need to carefully weigh the decisions to add those things. Those open ocean missions are really where we prove that stuff out, where we validate our design and share it with the world so that people know what the status of this technology is.

Maggie (34:53): How do you guys go about actually building some of the machine learning models and tools that you deploy on these systems? I know you mentioned, and we've heard from others, that there is a big shortage of maritime data to train something like a computer vision algorithm. There's only so much real world testing you can do. What does that pipeline look like, from data preparation to training to testing, simulation, and evaluation?

Mike (35:21): Well, I think we're fortunate that the machine learning world as a whole has moved forward massively. We leverage open source models. We take the best in class, and then we have our own data libraries that we've built up. Then we fine tune and train to a maritime perspective that's relevant to our boats, because it's all about matching data distributions. If you take the best Tesla model and then ask it to do something random in your house that it's never seen before, it's probably going to do poorly because it just hasn't actually seen that type of data before. Having on-target data is really important.

Maggie (35:56): Is that just data that you guys have collected, or are you using simulation or synthetic data?

Mike (36:01): Yeah, typically for us right now, we've evaluated synthetic data, but currently we have this advantage where we have boats all over the world, and they've been out there for years. In some cases, we have a lot of data, and we're getting more every day. Our amount of data is accelerating. Currently, the best data is real data. I anticipate eventually we're going to use synthetic data to replicate certain specific things that are really hard to see variety in. But right now, we're sitting on a very good host of data, and we're even doing some data collection contracts for other folks in the industry because they say, "Hey, we don't have a way of getting this affordably." So right now, we're putting out a lot of data.

Maggie (36:41): And then are you doing all real world testing, or are you also doing testing in simulation?

Mike (36:46): We do a ton of simulation, as well as accelerated hardware-in-the-loop testing. That's very common in automotive and aerospace. I will say, with some pride and joy, that back when I was writing software at Seasats in the very early days, one of the things I contributed was writing our simulation engine - our first simulators. That allows us to test a huge amount of our code without the software ever knowing that it's not actually out in the real world. You can simulate sensors, you can simulate comms jamming, you can simulate a lot of things. Then we pair that with real world validation, because certain things like comms degradation - there are tools to simulate them, but a lot of times they're not quite accurate to the real world.

Matt (37:27): You mentioned that you now are actually selling some of these data sets to other customers who want to use it to train their maritime autonomy stacks. To me, that seems like something that can serve the whole industry and potentially be a large part of what your company does itself, just because of the unique data quality and quantity that you're collecting out on the ocean. How do you see that in terms of being part of your product offerings in the future? Is that a big part of it? And secondly, are you planning to deploy missions for the express purpose of collecting data that you can sell, or is this just downstream of having a bunch of Seasats out there conducting missions that you're able to sell the data from?

Mike (38:14): It started as the second, where it was a downstream effect of already having the boats out there doing something, but it's definitely moving towards the first, which is specific missions tailored towards getting specific data and then being able to sell that data stream.

When we started the company, our name - the abbreviation is Seasats, but the long form is C Satellites, C Satellites Inc. We were in a space-based accelerator, Tech Stars, and we had early investors and advisors who were all out of the space industry. They really saw what I fully believe in, which is that this is going to transition to the point where these USVs are very much treated like satellites. We have fleets of them out off coasts, off Economic Exclusion Zones, able to provide continuous, affordable, high resolution data.

The people that need it - Coast Guard, Border Patrol, DEA, mapping services, fishing industries - they subscribe to that data and say, "I need to know when someone crosses into this area." We become the contractor that keeps the satellites working. We maintain the boats, we improve the autonomy, we handle collision avoidance, liability, all these different things, and we just provide uptime. We've done that pretty successfully for the US Navy and for a couple of commercial customers in a few different cases, and they've always been really happy, and we've always been really happy because it's a great business model.

Maggie (39:36): Mike, have you all had to go through the process of actually integrating some of your systems with DoD systems or with Navy systems and some of their data feeds? I know we've heard - we just did a podcast earlier with some technical leaders in the Navy - and they said integration is one of the number one challenges that they see startups and honestly primes alike manage. I'd just love to hear about how you all have gone through that integration process.

Mike (40:04): Yeah, I listened to that episode with Justin and Artem, and I totally agree. The integration problem is super key. Luckily for us, we knew this industry—we'd been in the space for about five to ten years specifically before starting Seasats. And so integration was something we took seriously from the beginning. One way to solve that is making sure that you have very open APIs at the endpoints where they need to be met. So we spend a lot of time writing software to integrate with systems like Minotaur Lattice, L3Harris systems, Copiers, AFS—you name it, all these different common operating and common intelligence or collaborative autonomy systems. And we've integrated with close to ten at this point, and it's always pretty easy for us. We use standards that are well known, government developed, and are easy to work with.

You know, I also really enjoyed that part of the podcast, which asked the question about just how hard it is to get onto Navy ships, or how hard it is to integrate with operational units. And I think one of the things that was recommended on there—I forget whether it was Justin or Artem that recommended it—was to initially go for standalone systems, because it's easier to get the paperwork approved, and then later move to fully mature, super tightly integrated systems. That's the route that we went, and it has been successful. We've managed to get Seasats onto grey hull Navy ships in important parts of the world. And it's always done because, basically, people realize the critical need. They realize the capability that a Seasats system can offer. They look at its size and say, "You know what? We can slap that in this area, have minimal approvals necessary, operate it slightly in parallel, and it offers the military a unique capability." And so that's how we've gone about integration. And then now that we're at the phase of larger sole source contracts, we are bridging some of those tight integration efforts where the government invests in saying, "You know what, this can be something we're gonna have for five to ten years, and we need to wrap it in tighter."

Maggie (42:02): Speaking of some of these government developed standards, I know one buzzword that I hear a lot is MOSA—Modular Open Systems Architecture. I'm curious—I've heard maybe mixed things, both positive and negative about it. I'm curious, is that real? Is that going into effect? Is that something you all are working with? Do you have any thoughts on it?

Mike (42:20): MOSA and UMAA get tossed around a lot. What's UMAA? UMAA is—I'm gonna mess this up a little bit—Unmanned Maritime Architecture, something like that. But I would say MOSA is the closer of the two to being a good, realistic thing. I would say MOSA in intent is excellent. We try to be accurate with our stuff, so we say that we're a MOSA-designed system, because they want to know that it's modular, open systems architecture, and absolutely Seasats—we design everything around that. We've carried probably forty different mission payloads from unique different companies doing unique effects. It's probably higher than that now. I wouldn't be surprised if we're over fifty, but every one of those requires—if you haven't designed in a modular, open way, every one of those is a custom engineering project. I mean, I've had folks from Navy Information Warfare Center say, "Oh yeah, typical sensor integration could be a million dollars and take half a year to a year." We do it in a day or two, and sometimes we don't even charge because, you know what? We just want our library to grow. If it's a mission value-add sensor, we want to add it to our platform. We're just gonna do this as fast as possible. So MOSA is important. UMAA is important. I would say sometimes in the technical details, those things kind of miss the mark. They get a little overwritten, a little over-prescribed, but the intent is correct.

Maggie (43:43): Another technical question that I had was, how are you all seeing LLMs and transformers play a role in maritime autonomy? Are you all actively experimenting with this, and where do you see the most promise for this technology?

Mike (44:02): Yeah, we definitely do experiments because there are certain parts of the autonomy perception stack that we have done LLM-style, or these new large transformer models. And you know, the initial results are super promising. Because this is a long tail problem, they're not quite there where we've deployed them to vessels where it's like, "Okay, we're gonna have to invest some time to get that right." I'm super excited on the LLM side, in particular, because we spend so much time—we get a lot of compliments, we don't advertise a lot about our user interface, but we get a lot of compliments from customers saying, "Oh wow, this is super intuitive. This is one of the best things in the industry." I mean, I've heard this from competitors as well. They say, "Oh man, how'd you guys get that so clean?" I think the future of UX is gonna be LLM-based—you're just gonna talk to this tablet the same way you'd talk to a person. You'll be like, "Hey, it's getting dark. Should you change anything in your sensor behaviors?" And rather than trying to make this intuitive through traditional interfaces, it's just gonna prompt you with the correct settings, or it's like, "Hey, enter a stealthy observation mode. Hey, we're entering a contested area. Set yourself up properly." And I think that will be totally enabled by LLMs. And I'm super excited to see that workflow improve.

Matt (45:17): I want to ask about price and cost. We talked earlier about the Ukrainian drone boats and sinking the Russian Black Sea Fleet. The cost asymmetry there is enormous, and those boats cost around two hundred thousand dollars or something like that. And then, you know, I was reading a Reuters article the other week that was talking about some of the challenges that the DOD has been facing with our own small USV industry. And it was saying that those platforms cost a million to two million dollars, and it very starkly drew the contrast between those costs and the cost of the Ukrainian platforms. Why is there that cost asymmetry between what Ukraine is spending versus what the DOD is spending? Why can't we pay one-tenth the cost that we're paying now and buy ten times the vessels? And then also, just curious, how do you think about the right way to price these platforms more broadly?

Mike (46:14): Yeah. So, you know, I think that Ukraine is in a unique scenario, because they're in an active war—every dollar, every round, every life matters. So they need to make really conscious decisions. They don't have the luxury of time or space to potentially get something overpriced, to invest in something that doesn't have an effect. It's that "a bird in the hand versus two birds in the bush" thing—they're taking birds in hand all day. And so, you know, it's interesting—when they put out their open source, crowdfunded initiative for, I think, the Magura platform, which was the very effective USV for driving back the Russian fleet. According to open source, available information, they're releasing those at two hundred and fifty thousand dollars, I believe. And so it's like, okay, that's a pretty good analog. They wouldn't post that number if they thought that was wildly overpriced, because they're opening up to the world being like, "Hey, help us fund these things." It's not like they're soaking up huge profit margins there. They're trying to drive ahead in a war. So I think that's a good reference point to recognize that maritime is hard. You need a lot of these systems to work. You need waterproofing on almost everything, which drives down the volume and increases human touch time. So maritime is expensive. Ukraine is probably a bottom price—that's probably the simplest systems that you can make, even though, to their credit, they're the most sophisticated in the world in terms of effectiveness.

In terms of the US, you know, I think that article quotes a Saildrone platform at maybe two million dollars—I'm just quoting what they put out there. I think there's some challenges here where it's like, okay, the US DOD is very used to asking for very high-end capability, so it's gonna be more expensive, and they're preparing for very high-end conflict. So it's like, okay, you need really sophisticated systems. They're definitely gonna be more expensive than the cheapest possible systems on the market, which let's just call Ukraine or China. So it's some price between two hundred and fifty thousand dollars and we don't know what the upper end is—maybe it's two million dollars.

How we think about pricing is from a commercial value stance. It's like, okay, could we realistically just replace this boat with people and contractors and go do the mission? And if you're in the millions of dollars range, it gets hard to justify. You can do that really effectively with just commercial solutions. And frankly, yeah, I think that also becomes a crutch. If you think about the liability—I don't know who the CFO is at Saildrone, but if you tell the CFO at Seasats or Saildrone, "Hey, we're going to be driving around a two million dollar asset offshore, unattended. It's just gonna be floating out there for days," they're gonna be like, "Ooh, what's our financial risk liability position on this?" And suddenly it's like, "Well, how about we have a couple hundred dollars a day chase boat out there with a crew to attend it." And now, once you got this chase boat out there, then it's like, "Well, we can also have a backup comm system. We can do all these things." You end up in a totally false, fake, basically testing environment, because you always have someone there to baby the system and to bring it home. You don't need to get good at navigating remotely through channels and difficult things, because you basically have a human to kind of watch it. So I think that's a problem with these really expensive systems—they get expensive, and then they get babied during testing.

So we were really aggressive about keeping our price low. And right from the start, we were doing fully unsupported test missions, and we could only do that when we were bootstrapping and starting this off of extremely small amounts of angel funding. We couldn't put out a multi-hundred-thousand-dollar system because we didn't have hundreds of thousands of dollars. We had to be confident in our equipment at very low price points.

Matt (49:55): Do you think that the fact that the US is looking for boats that have more autonomy capability on the software side is making their platforms more expensive? Or are there parts of the technology stack that are more sophisticated than what the Ukrainians are using that make it necessarily more expensive?

Mike (50:15): More sophisticated? Probably yes. Whether that's more mission effective is the open question. It's like, okay, who can complete missions better? Which is what you need at the end of the day. If you just want a nicer car, then you can always go up. You can be like, "All right, I want a Porsche or a Ferrari or McLaren"—you can spend more money if you've got more money to spend, and if you want nicer things to buy. I don't think inherently the software needs to be that expensive. Yeah, it's not a very hard computer vision problem, so I don't think it needs to be as expensive as it is. I think the prices will come down, and that will put pressure on companies to find viable price points and viable dual-use solutions, or to go out of business or have down rounds. We'll see what happens.

Matt (51:00): Last question on the lessons from Ukraine. You talked earlier about how you balance learning and not over-learning. Are there lessons from Ukraine in the maritime space that you think don't apply, specifically don't apply to a US future conflict, or how the DOD thinks about its posture and maritime autonomy?

Mike (51:25): Yes, absolutely. I think that a lot of folks saw the Ukraine very successful defense and offense with their USVs and said, "Ooh, we need exactly that." I would say it's very worth remembering—Ukraine was a defensive nation fighting a war against a much larger aggressor, and in an all-out war scenario. I like to consider this back to wars in the Middle East, like Iraq and Afghanistan, with roadside IEDs or improvised explosive devices. The IED problem was a massive problem to US forces. But there were not a dozen IED startups that were like, "Hey, we should be building IEDs for the US." It's like, no—cheap defensive weapons are not what the US invests in. We typically are investing in precision strike missiles, aerial systems, et cetera, that also have really advanced safety systems, for morality purposes, like last-minute aborts and things, which drives up the cost.

So I'd say now the US is in the unfortunate situation of potentially facing near-peer conflict where it's like, okay, we can't have as exquisite systems—economics are a real factor. But at the same time, I don't think water-borne IEDs, super cheap, kinetic solutions are really the right place for the US to invest in. I think we need to look at those lessons and build new ones, or build more appropriate things to integrate into US doctrine.

Matt (52:53): Transitioning now to some rapid-fire questions as we get close to closing out here, what's been the biggest surprise building Seasats?

Mike (53:03): Maybe just the number of places and the number of needs and things we'd get involved in. I think Elad Gill's startup handbook, or whatever that book is, talks about not realizing just how big the world is. And that is totally true. There are so many people who reach out to us on literal cold inbound sales, and I'm like, "I did not know they would need autonomous boats."

Maggie (53:25): What's the most surprising one of those, if you can share?

Mike (53:28): Jellyfish detector. We didn't know if this was a joke or not, but it turns out that nuclear power plants are typically by water sources, and they have big water grates. And if you get a big plume of jellyfish that float along on currents, then they'll clog the grate, and suddenly you'll have everyone panicking about a nuclear meltdown because they can't cool the plant fast enough. And so these folks building power plants were very seriously contacting us in the early days, and doing presentations around using fleets of Seasats to provide early warning for underwater jellyfish swarms. And we were like, "Wait, really?" Yeah, we thought it was a joke at first. That's definitely the weirdest.

Maggie (54:04): What's your hottest take about the current state of defense tech or maritime autonomy?

Mike (54:11): Ooh, there's so many hot takes. Okay, here's one. I think that there should be way more testing. Everyone is excited—I think what has really happened, why are defense companies clustering and racing to Ukraine? Besides protecting democracy and helping a nation protect their sovereign borders and stuff, it's because they've become the de facto testing lab for the world in terms of defense systems. What's the big shame to me is that the US has so many regulations that we have failed to create effective test environments in the US. And I've talked to folks in the government about this, and folks who are trying to reshape things, and my conclusion is often like, "Gosh, we should probably raise some money and just purchase some private land, or purchase some areas and just run a commercial testing facility." Because it's crazy that we're so bad at this. I mean, I love looking at Zipline drones. They couldn't get FAA permission to do early UAV stuff in the States, and so they just went overseas to do testing, delivering important medical supplies, where they could do it.

Maggie (55:15): How far out do you think we are from being able to take an autonomous cruise ship?

Mike (55:20): Oh, I love this question. I can't say never, because that surely is wrong, but I'm gonna go fifty-plus years. Oh man, I know that might sound like I'm a pessimist. It's not for technology reasons. It's just like airplanes—commercial airliners have been able to automate the entire flight, the takeoff and the landing, for a long time. But we need pilots for liability, for responsibility—there's so many reasons that humans are so good and versatile. When you're talking about big cruise ships, it kind of just doesn't make sense. Someone's telling me they're gonna get rid of the final crew on these super tankers, and it's like, really? There's only fifteen people on there, and they're transporting—what?

Maggie (56:03): What about a whale watching boat, like there's ten of us on here, sort of thing?

Mike (56:08): Okay, okay. We have toyed about offering around Mission Bay beer cruises, where our autonomous boat just tows people around with tubes and coolers full of beer, because we've done that for ourselves, right? This was kind of a fun gimmick—we should have people get toured around for romantic cruises with no driver. That might be sooner. We could do that kind of whenever you want, if you want to Venmo us, we could probably do it once illegally.

Matt (56:27): Specifically in the USV space, what's the most commonly misunderstood viewpoint about the industry?

Mike (56:39): I think the one—this is just like, over and over, I beat this point—but I would say just that the demos are done on days when everyone wants to go to the water. It's sunny, it's nice. If it rains, it pours, there's bad weather, and then everyone doesn't do it, and it's like, "Oh, that doesn't make sense." And so often the tests are scripted. It's like, "Okay, and now the bad guy is gonna come and we're all gonna point the cameras, point the weapons, and report our duties." It's just totally fake. And so the combatant commands are actually really the point of the spear, in my opinion, on this, because they're out there doing missions in the world, oftentimes that are not scripted. It's like, okay, trying to stop smugglers, trying to stop conflicts and being in kind of more contested zones, even. I saw an article where someone was like, "Hey, we should be using this as a more aggressive testing environment, because we're trying to stop smugglers." And it's kind of separated from adversaries. That makes total sense to me. Anything that can make it more real is critical.

Maggie (57:39): What advice do you have for other founders looking at starting a company in the national security space?

Mike (57:44): Find amazing investors and teammates and advisors who get how long it's gonna take and how hard it is, because maritime defense is a problem where you can't just be good at one thing. You need to be kind of amazing at one thing, which is what gets you your differentiation—that classic startup ten-times improvement, to get people to try it. But then you really can't suck at anything else. It's like, if you're bad at contracting, if you're bad at legal, or if you're bad at some core competency in your technology stack, then it's just kind of doomed for failure. You'll never get all the way there because you basically need to be good enough at everything. And I think the only way to do that is to have a good team, and that counts all the way to the investor network, which, you know, Shield Capital is a phenomenal investor. Nice plug for any startups looking for capital.

Maggie (58:37): Well, on that note, Mike, thank you so much for coming on the podcast. I definitely learned a lot about the world of maritime autonomy, and really appreciate your time.

Mike (58:46): Totally. Thanks for having me on, Maggie and Matt. This is a lot of fun. Glad to be on here and glad to get to share a little bit about what's happening.

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This month on the Mission Matters podcast, we sat down with Justin Fanelli, the CTO of the U.S. Department of the Navy and PEO Digital, and Artem Sherbinin, the CTO of the U.S. Surface Navy to discuss the future software-defined Navy. We cover everything from computer vision deployment in the maritime domain to why technology will matter in a conflict with China to what “software defined warfare” actually means.

You can listen to the podcast on Spotify, Apple, YouTube, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please reach out if you or anyone you know is building in the national security domain.

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Maggie 00:30

Welcome to the Mission Matters podcast, a podcast from Shield Capital where we explore the technical opportunities and challenges developing and deploying commercial technology to national security customers. In this episode, we're joined by Justin Fanelli, the CTO of the Navy and technical lead for PEO Digital, as well as Artem Sherbinin, the CTO of the Surface Navy. Justin and Artem are two of the key technical leaders bringing the Navy into the 21st Century. Now, Akhil, I figure this conversation probably hit home especially hard for you based on your first hand experience with the current state of technology in the Department of the Navy, from your time as a Marine back in the day.

Akhil 01:31

Yeah, thanks, Maggie. You know, preparing for this discussion did, in fact, remind me of my brief but very memorable time aboard naval shipping and really experiencing firsthand the technical challenges facing our maritime forces, whether that's planning and executing as a disaggregated force under limited communications and, oh, while having to use systems that have to survive the salt water the extreme of the maritime space. I think also what makes this conversation particularly timely is just everything happening in the world right now. Justin and Artem are at the forefront of making the Navy more lethal and capable in confined waters like the Persian Gulf and the Red Sea, as well as being able to do things like maintain presence and deter our adversaries in the vast expanses of the Pacific Ocean. And so this conversation is going to cover all of that, and I'm excited to get into the nitty gritty details of deploying computer vision for maritime to what technology looks like in potential conflicts with peer adversaries, as well as what software defined warfare actually means.

Yeah. Artem Justin, I think this will be a little bit of a unique podcast for us. We've spent the last couple episodes really diving deep technologically into some of it, but I think we'll have a chance to kind of hit that intersection. You guys both come from deeply technical worlds, but are also involved in managing technology adoption. Before we get to the latter, though, we'd love to ask you both a softball question, what's the one tech area, application sort of challenge that keeps you up at night, that you can't read enough about and that you're really trying to get your hands around.

Justin 03:04

For me right now, resilient comms is actually finally starting to get resilient comms. And so resilient comms used to mean like two and now we can be way more diversified in the different inputs, but I'd say that there are a lot of folks who are kind of nascent, or these communities didn't used to talk to each other. And so when I was at Davos this year, we said, oh, it was unthinkable for the space folks and the 5G folks to have conversations just maybe 18 months ago. And so how do all of these different communities of interest blend to solve harder problems together? It's a great time to be a versatilist, and I think there are more of them coming together, and that's going to result in to me, new protocols, new interfaces, and then ultimately new opportunities for deploying capability faster and solving effects problems in more creative ways.

Artem 04:10

If you ask two Navy people, what the hardest technical problem is, the answer always comes back to integration. Integrating with like large legacy capital assets is always hard, especially if they're made by like a prime contractor using whatever it is, resilient, comms, AI, software, hardware, anything, integration will always end up being like the hard problem to solve.

Justin 04:36

Now that said, this could be there are reasons to believe whispers that this could be the golden age of integration, because of what we're seeing with generative AI, because of model context protocol and a few other things that are coming out. And so if I don't know, 70 cents on the dollar goes to integration. And, and folks who are using specifically on the software development side, the vibe coding tools and things like windsurf or other products to go much faster, if we level that up in a significant way for interfaces and we can really go after the bottlenecks across the board. I would love to have someone who's listening to this podcast say, “Hey, we've done this for a defense application, and here is the time we've saved.” We've seen one offs, but benchmarking that and then making that the new baseline would be a real win.

Maggie 05:46

So Justin, you're telling me your vision for the future the Navy is just vibe coating our way into the future of conflict.

Justin 05:55

That is another interesting topic. I think what we said was, if we can 1/10 or 1/20 integration complexity based on applying solutions that we've seen other places, then perhaps the sky's the limit.

Akhil 06:15

That's great. Justin. In order to do that, we actually have to get some of these applications and protocols on network, on the environments that we need to but I concur with you. I mean the future in which we can collapse the data fusion, ETL, network to network collaboration is pretty awesome, but I know both of you work a lot of issues related to actually deploying software and adopting technology at scale to your point. Artem, you didn't really answer the question on integration, on tech area, but is the, is your focus still around the integration piece, or is there a specific tech area that has gotten you excited?

Artem 06:57

Yes, integration is always a focus specific tech area. You kind of hinted at it at the at the end, there is data integration. It's not particularly sexy, like ETL is a somewhat of a solved problem, right? Lots of options, ranging from Qlik to Etlworks to etc. But, you know, Foundry from Palantir, but it's a skipped step, right? The entire department is very hyped up on AI. The entire US government is very hyped up on AI. None of that matters if your data isn't right and if you have not solved the data integration problem. So I would say that's my kind of favorite problem to work on, because it combines sort of all three aspects of my job, technical, policy and, actual implementation. All three of those have a part to play there.

Maggie 07:45

I want to take a step back and really set the stage here. You know, why does all of this matter in the first place? You know, what is the state of geopolitics with our adversaries? What is the Navy's role in a potential conflict and like, like, why does it matter for us to rethink the way we design our force right now? And is there a sense of urgency?

Artem 08:10

Defense tech is really hot right now. I think that's why you guys started a podcast. And there's the reasons for defense tech being attractive to venture capital are different sometimes than I think the reasons that we need new technology, but those two are intersecting, right? If I look at the last, the last five years of venture investing, you had this big peak around 2020, in in SaaS, right, Software as a Service things. And then it just took, like a nosedive right around COVID. That money had to go somewhere, and it conveniently found its way in defense and around 2021, and 2020 to 2023, you see this just huge uptick in VCs investing nearly across that those three years, nearly $150 billion, so nearly $150 billion in private capital invested in defense.

At the same time as that's happening over in the public sector, you see this like big push of, hey, we really, you know, across political parties, across government agencies, whether you're in defense, commerce, the intelligence community, everyone's sort of coalescing around one singular strategic challenge, and that's the at the moment, peaceful rise of the People's Republic of China. And so I think that the reasons that defense tech is hot and the reason that the government said, Hey, China's a problem, were probably different. But now we're all on the same team. Now we've hit the intersection point. We're all driving towards the same problem.

So I think we should really understand that problem well, and I'll break it down like very simply, the leadership of the People's Republic of China, right the Chinese Communist Party, and specifically their president and general secretary of the party, Xi Jinping, has publicly stated that they have objectives to reshape the international world order that's currently led by the United States and our Western allies, and that they publicly have stated that they would like to reunify with Taiwan. Those are two very big strategic challenges of the United States, and so from a national security standpoint, it is our job to field the very best military that we can to deter those potential objectives of the Chinese Communist Party. Why so I think that's why that matters and why those two spaces have come together.

What does all that mean next for these spaces? It means that right now, we're in a really critical time period to do to bring in that technology and execute deterrence. There are a number of factors ranging from more conflict around the world, economic stagnation and deflation inside of China that's potentially driving leaders to make maybe even rash decisions, and a military on the United States side that is more expensive and by uh, by extension, smaller than it ever has been. At the height of the Cold War, we had 800 ships under Reagan in the 1980s today we have under 300 we said we want 350 we only build one and a half destroyers a year, and roughly the same submarines. The Chinese build three. So in this present moment, all of those factors have collided. And so not only is it critical that we get these technologies in, there's also just an immense amount of urgency to do.

Maggie 11:33

So what is the current state, as far as we know, in the open source domain of our adversaries’ adoption of next generation maritime technologies that would be relevant to the Navy, whether that's autonomous systems or AI or others? And how does the US stack up?

Artem 11:52

So the our number one adversary, as we've talked about a lot, is the People's Republic of China, and they have a concept that is actually, you know, riffs off of the US system of winning the Cold War called Military Civil Fusion. Military Civil Fusion is the Chinese looking at how the US won the Cold War, which is through by, you know, world class companies in Silicon Valley bringing technologies like the microprocessor to life, and then the government adopting the microprocessor and sticking it into weapon systems like, you know, cruise missiles and dumb bombs, and making them smart cruise missiles and very smart bombs, right?

So the Chinese looked at this and said, hey, the United States is, like, really good at the diffusion of technology. We should do that too. And so they developed military subtle fusion, which is this idea that Chinese companies work directly for. You know that their work directly supports the technologies being developed for the People's Liberation Army, which is the Chinese military. And they're doing this across the board in in areas ranging from energetics to, you know, rocket propulsion, to AI to autonomy, and you know, some examples include, in the open source you can find Chinese specifications for a software defined warship. In fact, they launched a medium, unmanned surface vessel for experimental purposes that meet some of those specifications. So that's a real example of that partnership coming to bear. The good news is the United States is just far better at this, right? We have a long history of taking, you know, innovation and fielding it for military advantage, and I feel fairly confident that we'll be able to continue doing that.

Maggie 14:00

What do you feel like the US most misunderstands about our adversaries approach to military technology?

Artem 14:10

Man, that's a tough question. I don't think that there's something we don't understand. I think we're just in the middle. It's hard to be number one for a long period of time, right? The United States has not had a competitor peer adversary since the fall of the Soviet Union in 1991 and today we do and when I say peer, I mean, this is, this is the first time I could, you could really say peer competitor. When you look at the Soviet Union by scale of military they were a peer competitor, but in every other aspect of intrastate competition, they were not. They were a near peer. China is most definitely a peer the GDP of China in. Uh, is just a smidge below ours. The GDP per capita is actually, you know, far lower, but the actual overall GDP is is just below ours. So China is the world's second largest economy. They are the world's largest Navy. They are the world's second largest army, right By every metric they are, they are close to us. And we have no institutional memory of facing a competitor like this, since probably the time of the American Revolution, where, you know, Britannia ruled the waves and was the global superpower of the day. So since that time, the US has never faced a competitor that could match us and actually exceed us in areas like industrial output. That has just never been the case. And so it's not necessarily that we misunderstand something about our adversaries. It's that we're facing a completely new kind of adversary.

Maggie 15:54

So one of the big topics of conversation that I know you and I have discussed, and I think is a hot topic right now in the broader defense tech community is, what lessons should we be learning from the war in Ukraine as they apply to a potential future conflict in the Indo Pacific, and what lessons should we not be over learning?

Artem 16:17

So I'll start with the easy one is, what should we be learning, and it aligns well with what I said before: Software Defined platforms are critical and cycle times of change are faster, largely driven by the software defined platforms those changes occur on. We're seeing that across the board on legacy things like tanks which have to be modified, like the physical tank has to be modified because of the advent of first person view drones and top down, you know, top attack munitions, all the way to electronic warfare systems, again, more of a Software Defined Platform than an analog tank. But the chain, the rate of change is just so much faster. And I suspect that any fight in the Indo Pacific would encounter something very similar in this very rapid rate of change.

What lessons should we not be taking away? There's a statistic thrown around all the time that 70 to 80% of Russian casualties today and Russian Ukrainian casualties on the front line are the result of first person view drones. I won't comment on the factual basis for that statistic itself, but the idea that all fires are now based on drones is probably an overreaction and an end and a bridge too far. One of the reasons that Russia just yesterday, from the filming of this podcast, launched over 300 drones at Kiev, and just under 70, I think it was 64 cruise missiles, as reported in the in the economist this morning was that Russia can produce more Shahad drones than they are roughly at a rate of 300 every three days. Then they can produce cruise missiles. So drone warfare is not necessarily just a function of the fact that this is the new way of war. Drone warfare in Ukraine is a function of what those countries can produce. And I suspect a fight in the Indo Pacific would look different. Moreover, the fight in the Indo Pacific will be between large capital assets, primarily armies, are still going to clash on islands, whether that's on Taiwan or other parts of the Western Pacific, but at the end of the day, it will be ships and aircraft that have the lead, and that is just going to be a fundamentally different conflict.

Akhil 18:49

As we maybe switch a little bit to the actual adoption, the actual technology, and then managing technology adoption, I'm reminded by a story from the turn of the 21st Century, a young Lieutenant William Sims, which is a classic case study of the Navy basically rejecting new innovation. Right for the listeners out there who don't know the story, basically, this young lieutenant out in the Philippines, stationed in the western Pacific in 1900 learned about this new technique around continuous aim fire for basically gunnery. The Navy spent a year saying this is probably not going to work. Did their own flawed tests, and it basically took this young lieutenant writing a letter to then Theodore Roosevelt, who was one of the assistant secretaries, to get him to elevate this to a level that needed, needed to be elevated and ultimately adopted. I think there was some wild statistic of a 500% increase in gunnery accuracy in the Navy by this one sort of technique that was initially outcasted. And so I think there's an argument to be said that the Navy, in particular, over its history, the Navy has had a real challenge when it came to adoption of new technology or just new practices, whether that's because of some of the legacy institutional culture or something else.

I'd be curious one, the Navy has changed a lot since 1900 it is actually, in a lot of ways, at the forefront of what geopolitically is happening from an experimentation standpoint, and where the potential points of friction, points of conflict are, and so I'd be curious to get, maybe to start off, a high level take on, how would you would assess the way in which the Navy has tried to adopt new technology or new novel techniques? Where do you think we can still go if there's one or two areas to really spend our time, spend our focus, if you were going to spend only had one hour or one marginal dollar, where you'd spend that time to enhance and increase that way in which we adopt technology.

Artem 20:56

I'll start with the last question. First, if I had to pick one place that I would change how the Navy adopts technology. I would say that every platform should be software defined, right? We historically, you know, we've, we've heavily vertically integrated our platforms, whether that's a ship or an aircraft. It's usually made by some more, you know, Prime Vendor, that prime vendor, will deliver the hardware, and that hardware, in order to put software on top of it, will have some sort of proprietary interface. And occasionally they need to have data rights. Occasionally we won't, even if we have data rights, we'll have to pay for like the decoder ring to be able to like interface. Those two things together, and they're very tightly coupled. And unlike an iPhone, or, you know, modern consumer electronics, benefits significantly from vertical integration. We found that defense things don't so effectively. Building software defined platforms on open source, like protocols with like open source code is, I think, the future, and we already, we already seen this in Ukraine, where software defined platforms ranging from drones to electronic warfare systems are updated overnight with new code, which in turn leads to some sort of operational outcome that should be our gold standard. You know, every night a ship is in contact with an, you know, an adversary potentially in a high end fight, and that ship just gets better because we deploy new code to it. So that's, that's the one kind of vision of the future I have. Going back into the past, the Navy has struggled with technology adoption. I think the sim story is just one of dozens the and I would point to kind of three high level things of what, what makes working with the Navy potentially challenging from a technology integration standpoint. The first is that large capital asset bit that I mentioned earlier. 70% of the Navy's budget goes to, you know, ships, aircraft, carriers, submarines, airplanes, etc. That's different than the other services. Akil, you're a Marine. 65% of your services budget goes to humans, right? So we're used to buying things. We're not used to buying software. And the second is, the Navy has a unique culture of, you know, kind of bottom up innovation, but that means that, you know, top down is hard, and that dates back to the notion of independent command at sea, and the idea that, you know, ship captain goes over the horizon and loses communications with everybody and just has to make decisions on their own. That's created kind of a centralized command and control system and a very hierarchical approach to, like, how our service operates. That's hard. We're working on getting better. Thanks,

Akhil 23:42

Artem, I wanted to pick up quickly on your software defined portion one, I think spending more time in the space. I think folks sometimes get what software defined means to be actually wrong. So I want to really, really distill what to you is software defined in the military context. And maybe as part of that question, you talk a lot about open source and being able to iterate constantly. Are we always going to be at concentration tension with the DevSecOps process of how we ensure whatever that means on the security side, with our ability to continuously iterate and ship and commit code on a nightly basis at scale.

Artem 24:22

So software in the military context, Software Defined warfare refers to the idea that your hardware platforms are getting better on a on a rapid rate, so in hours and days vice months and years because of the deployment of software to those hardware platforms. So just like a Tesla or your refrigerator potentially gets a software update overnight, and that piece of hardware now has new functionality, we want to see that in the military domain and adaptation is, you know, the. Uh, the side that adapts the fastest in conflict wins. Historically, adaptations came in the form of doctrine, tactics, techniques, procedures, or potentially rolling out a new technology. You know, the tank replaces the horse today, adaptation means deploying code, and in turn, the deployment of code drives those other changes. It drives tactics, techniques and procedures. It drives doctrine, it drives training, which is kind of a it's a new paradigm, and it has really changed the character of war.

Justin 25:33

So building off of that just a little bit, Artem is invoking both Darwin and then Krepinevich, right? And so this goes from the species to the Origins of Victory all the way to getting very wonky like DOTMLPF, here's the point: Maneuver warfare became the primary mode of marine philosophy, essentially like execution 1989 that scaling out and applying to technology as we've watched the wave of software grow is something that needs to be more tightly approached. And so what we've seen there is that the this OODA loop that so many people talk about is very measurable in terms of how long it takes to adapt. And so when you mentioned Sims, looked at the 500% there's a lot of talk, there's a lot of activities, but ultimately, the time it takes to turn a ship, or the time it takes to change the way that we are defending or countering is a very measurable thing. And so we talked about software defined warfare. Obviously, that's the fastest moving piece. I'd say just extending that a little bit modular across the board is particularly important.

So depending on how we do interfaces, including hardware, the more of these components that are swappable, the better. So we have a new line of ship builders the ability to navigate for autonomy or with or without GPS, are open questions. The idea of doing this vertically is an open question. And so we've seen some success with, for instance, In Q Tel, taking Anello Photonics and saying, Hey, instead of your Alt-PNT solution, swap that out and then swap in this new piece of hardware like that. Ability to mix and match all the way through hardware is ultimately something that I think is going to be extremely important to adaptation.

And so we have a few adaptation cells. We have one that we work with within the seal community. We have a few back office technical teams, and those are days and weeks mix and match that's extremely important, especially if we're not getting live production contact, and so I would say that watching this and being able to make those trade offs in real time is something that is allowing this bottom up to be pulled all the way through something we already knew there are often really good solutions closer to the problem, right? You're more likely to solve a problem if you're in it than if you're in some building Far, far away. But how long does it take to make through and how many letters do you have to write to Congress or somebody else? Well, we want that to be more data driven.

There's an obvious difference between private sector and public sector. Public sector is not measured on return on investment. Historically, there's no good sense or way of doing that. And so when you say something is five times better, that's really impressive. But like, the denominator is not standard at all. And so we've standardized the denominator to say if you are changing outcomes in a significant way, it's less important where the solution comes from in terms of where in the stack, and more important that you're moving the needle for the war fighter and so like a tactical example of this is occasionally, we'll use KPIs that specify how something works in the requirements document. And so we'll say there needs to be this upload speed and this download speed, but also we're specifying that we need coax cable at this installation. And the reality is we just need connectivity. And so what we've recently done. One is allowed for proliferated Low Earth Orbit and to compete with traditional, wired and so all this across the board, hardware and software, where outcomes are the basis for acquisition and scaling decisions, everyone is better off.

Maggie 30:20

Could you give a story of a time when fielding a software defined system really made a difference in some environment?

Artem 30:31

I think the best real world example for today is Ukraine. We brought that up, but I'll use a relevant example from the US Surface Navy. Our ships since October of 2023 have been an active engaged in active combat operations in the Red Sea against the Houthis, which are an Iranian backed militia movement in Yemen. The that means that our ships, for the first time since World War Two, have been under, you know, inside of the weapons Engagement Zone of an adversary for a consistent period of time. And so we've at, you know, at the filming of this podcast, we have engaged roughly, you know, 300 plus air breathing threats. So that's, that's a lot of data points. And at the start of that conflict, it took us weeks to get data off our ships. We have since gotten that down to days. We want to get that down into hours. And the data from those ships has improved. You know, when it gets back to CONUS to the United States, it has improved everything on the spectrum, from the tactics that those ships are using to shoot down those threats, all the way to the actual radar systems on board the ships where we have analyzed the data, sent a software update back on a CD. You know, ideally it would go over the air, but baby steps, sent it back to the ship, and then and the ship's radar systems have improved. So that's just one example of a software defined, you know platform yielding a measurable, you know impact and in combat.

Justin 32:10

And so there are there EW cases. There are also just infrastructure and connectivity cases that kind of allow everything above those to improve. And so we weren't doing a ton of telemetry a few years ago. And so at this point, the way this works CONUS and OCONUS is we're watching those flows proactively. We can do a cyber example after this, but now, instead of using phone calls or emails as the trigger for where connectivity problems exist, we're extremely proactive, and we can Do hot swap redirects or load balancing proactively, and so in this particular case, this is a re envisioning on how we modernly manage the highway for which all of the cars and bits and flows operate. I would say that prior to a couple of years ago, that wasn't pro grade, and now it's first in class.

Maggie 33:30

As we talk about fielding more of these software defined systems. What does that mean for the current capabilities that we have? You know, does this mean we need to throw away all of our aircraft carriers and F 35 and field just armies and armies of USBs and UAVs. Or does it mean something different? And if it means something different, you know, how do we envision kind of the future of this software defined force?

Artem 33:56

I really love this question, because we hear this, the Navy gets this, I think, more than the other services, because we are so platform centric. We get told all the time that, hey, the character of war has shifted towards autonomous systems that are software defined. You can just throw out all the expensive manned things, the F 35 there was a prominent tweet that suggests that those could be replaced. You know, the $135 million F 35 could be replaced by the $10,000 hobbyist drone, and that just isn't the case.

What we have found in our war games is that generally, when we face off against a peer competitor, that is usually the People's Republic of China, our program of record force, meaning the things we have today, our aircraft carriers, ships, submarines, et cetera. You know, occasionally win, occasionally lose. We want to win every single time. And when we war game that same scenario and add these new capabilities, these software defined capabilities in a hybrid fashion. So the traditional manned platforms operating with an unmanned system. So think in F 35 operating with a collaborative combat aircraft, a large Navy destroyer operating with a medium unmanned surface vessel, which itself has a fleet, its own little flotilla of small unmanned service vessels. When we war game that hybrid force against the, you know, the People's Republic of China, we come out on top more often than not. And so that's the Surface Navy strategy: how do we feel the best hybrid force? And if you and we've had that consistent message for a few years now, because we recognize that you're not going to replace these orange capital assets, but you need kind of a high low mix, which is a Cold War term of a small number of high end exquisite platforms and a large number of low end tradable systems.

Justin 35:47

And so that barbell strategy, I think, applies a number of different places, right? Ultimately, it's as much an economic strategy as it is a technology strategy. But where that plays out, or where that bears, I mean, we can double click on kind of any domain. And so, let's say, from a logistics perspective, how many different government off-the-shelf applications do you need? Ultimately, the way that I'm viewing this, and we have a number of now memos and invitations to say, let's not just let commercial in, but let's do one-to-many replacements. And so we're piloting commercial capabilities, but they go so much better when someone says, “Here are the seven aspects of logistics IT that we can wipe out from a GOTS perspective with one COTS application.” If we don't have time for BASF to do, to harken back to the early 90s, that says we make everything a little bit better but we don't replace anything, that's not good enough. And so we are looking for divestments across the board, even if they're not apples to apples.

Another example of this is software-defined, but perhaps with a little twist. I recently was with the strategic submarine PEO, and they were working with Gecko Robotics. Within that Gecko Robotics example, I asked, “What are you replacing?” They're replacing manual action. They're replacing services. They're replacing, and with that, getting both productivity gains and safety gains. So this is a place where, between maintenance, cleaning, and manufacturing, we had one way of doing things, and we would like to open the door to say: we will give you our problem and you figure it out. Or we will give you how we're doing this right now, and instead of just incremental improvement, what is your horizon three solution for doing this differently?

The hardest part here is that it is not intuitive that there are incentives for people to change the way they work. We know there are mavericks, 10 to 15% of any organization, willing to work against their own self-interest for the greater good. We have an incredible mission, one of the best imaginable. We've catalyzed that into 15 to 20% of groups that are willing to do more work and adopt commercial solutions or think creatively about something. It's almost always more work at first, both for the company bringing it in and for the PM and support staff reimagining all these different pieces. Most people would prefer to do things the way they’ve always been done. But if there are more groups who want to be pilot leads and accelerate commercial adoption, then, as Steve Speer, professor at MIT, says, great organizations always look for the suck. There's suck in every organization, and you can always find the weakest links.

If we're doing this quantitatively, and we're saying either look at the numbers or talk to a sailor or Marine, where are the pain points? Then, how do I extrapolate that to a solvable technical problem and scale it across the board? We can have fewer systems that perform at a higher level, combining hardware and software. This is a time for reinvention, and we can do that quantitatively, even from the outside in. So whether it’s more private than public sector, we are pulling them through, or, like the earlier point, it’s someone at the ground floor who sees something, tries it, and then we scale it. In both cases, we now have the ability to stamp something as an enterprise service. Across the board, those can be apples to oranges, as long as they have calories, as long as they nourish. We're ready to make those trades.

Maggie 40:36

So I wanted to ask this is kind of on a on an earlier point that we were talking about in terms of integrating these new technologies with our existing program of record force. I want to see if one of you guys could maybe tell a story of a startup or company that did a particularly good job doing that, and, you know, maybe what were some of the steps that they had to get through, like, you know, step one, what's required to even integrate with a data source coming off of a ship or an aircraft carrier. What's kind of you know, hardware edge, compute constraints do we have or access do we have? You know, what kinds of AI models do you have? What kinds of data do you have? I know Artem. One of the things we've talked about is computer vision and some of the challenges of doing that at sea. So I wanted to see if maybe you guys could just give us, like a life story, life cycle, of what it looks like to actually integrate a system with the program of records force that we have today.

Artem 41:36

So I'll start with saying it's not a zero or one, like, you're not totally air gapped and you're not totally integrated, right? There is a spectrum in between. And I think the success stories we've seen in the last two years are sit in that middle area where we've delivered some kind of in the case of computer vision, some CV models to our ships and those models you know, live and operate in inference on commoditized commercial hardware, and that hardware, in most cases, is air gapped from the rest of the combat system. Is the best thing possible, like for us to connect those absolutely is, could we deliver the commoditized hardware and the model to the you know, to run at the edge in a month, as opposed to going through a three year long integration process? Yes, and so that's why we chose the like in between solution where an operator is kind of looking at a laptop, as opposed to looking at like their display in the combat information center as part of the Aegis combat system.

So in that particular example, that's a like in between integration story. But we've also seen examples where we've done the full integration work from start to finish, to bring some AI models to our combat system, and that involves working with the prime contractor that delivers that combat system. That means the working with a third party that does the integration work, because that prime contractors code is in, like Ada or in Fortran, which, like, for those that don't know that Fortran is the was the DoD is, like, proprietary code base the so that's why you need, like, all of those moving pieces, and that took a couple years. I'm being non specific on the industry partners, just due to the classification of the work involved. But the we've done both, we're doing more of the first and the first is what I urge most like startups to do right? Startups want to get a product out and make sure it's usable, or get an MVP out. You're not going to integrate with an F 35 or an armor cost destroyer in a month. So get some standalone hardware that maybe has like, one integration point with, like, if you're moving data, maybe you use the ship's routers and switches, but you're not tied into the combat system, or you're delivering a model, but you're running on your own hardware, as opposed to the ship's hardware. Yes, that's a limitation of working with the Navy, but I think it's one that we're working towards overcoming,

Justin 44:17

And then on another ship, example, but not weapon systems, CANES. Within CANES the Consolidated Afloat Network Enterprise Services, this is the largest chipboard network, and it's where between some NIPR and some SIPR. So some some unclass and some classified functions that we have a lot of different capabilities running on one backbone and one set of computing. And in this particular case, we have taken some of the capabilities that are virtualized, and tried to, in a lab, find more efficient ways to do them again, one for the price of multiple and swap those in. And so we've now unleashed some COTS vendors to look at a native capability within canes and replace that in a virtualized fashion, and just kind of hot swap those. And so that's something that we're getting a little bit better at.

We're also doing that with flank speed edge that more modern hardware. And so between those two, here are ways that we can take external software capabilities and pull them in and lower the time to integration on that that is, to me, repeatable. And then this, I'm going to call back to the initial point where we said, like, integration can go way differently. The when I started doing that type of work 18 years ago, when I was actually doing ship installs, we had a binder, and you had to follow all of these steps, and you're in the operating system and you're, you know, swapping from Solaris to like other like lower down components. How all of that goes forward is, is something that we've toyed with streamlining. I think that looks very different in the next year and to this point when we look at what can be replaced, the more that we sandbox that up, and the more that we can invite people through structured challenges to figure out what they can divest, instead of doing a one for one request to divest. Then this became, this becomes like downhill running.

Maggie 47:20

What do people outside of the Navy or the Department of Defense most commonly misunderstand about Navy or DoD tech adoption as a whole?

Artem 47:34

I think the I know we've talked so much on integration, and I hate belabor in this point, but I think people really misunderstand how hard it is to put something on a warship. You are not just like you're not bolting a computer to the side, right? I mean, even to upgrade. Justin, at some point, talked about the afloat OT and IT infrastructure on ships to replace that. That means cutting a hole in the side of the ship, taking out a bunch of server racks and then putting them back in. That's not like a week long process or a month long process. That's 180 day long process. And so technology integration with the DoD is hard. It's not just hard for the for for the technical reasons I just described. It's also hard because of our risk tolerance.

Remember that when you're delivering, you know, if you're a startup and you're delivering a capability to a war fighter, that means that there's a human being, you know, an American sailor, soldier, Airman or marine or guardian from Space Force, who is potentially in close contact with an adversary trying to kill them. And so our risk tolerance and our threshold for something working is just so much higher than deploying an app, and you know it being buggy and potentially not working, and you know you losing some stock points that day on the on the Dow because of that higher risk threshold, you know, we're really, we are going to test, you know, do Test and Evaluation in a way that maybe mimics industry in terms of process, but it has a longer timeline and has some extra steps, and you really have to think carefully about how that technology will be used, especially when it fails, and what failure looks like, because failure can be catastrophic.

Maggie 49:26

So you're telling me all DoD software completely bug free, running perfectly smoothly.

Artem 49:30

Yeah, it's excellent in every regard. No, in fact, what I'll say is the DoD sometimes mistakes process, like, the process through which we follow like, let's say you're getting an authority to operate an ATO, which means your application has been designated as, like, cyber safe by the DoD, because we like, read all of your source code, and then we've like, now, like a human being read all of your source code and then we deploy it to a secure. Environment that doesn't magically like, mitigate cyber risk. Similarly, writing a requirement by committee and having like 10 people on the committee like, say, thumbs up to the requirement in the Navy. We call them requirements, resources boards that doesn't like, magically de risk the technology. And so I would say we mistake our processes as being risk mitigators, and true risk mitigation is like a very sound technical implementation.

Maggie 50:30

Are there any special considerations that startups need to consider when building for the Navy, as opposed to some of the other DoD services?

Artem 50:40

The Navy is very again, because of our, you know, large capital assets occupying most of our budget. And large capital assets are not built by startups. They're built by traditional prime vendors. And the defense primes refer to companies like Lockheed, Martin, Raytheon, General Dynamics, Boeing, etc. When you build for the Navy, you really have to your technology is going to interface with the technologies made by those vendors. You're not just building to interface something with a common API that you can just find the API key online and you're like, good to go. You're building on top of, you know, decades of legacy hardware and software. So you're going to have to, you know, we talked about interfaces are hard. You're going to have to really work with those prime vendors and build partnerships at like a human level, with those engineers who, you know, painstakingly, over the course of decades, have built the world's strongest military, and today are also striving to bring in new technology.

Maggie 51:48

Artem, you know, one of the major themes that we have been discussing this conversation is, how do we get commercial technology that that we already sort of know works, or more or less works, into the Navy and the Department of Defense. Can you maybe share an example of a technology that we think of as mature, but that maybe has some unique considerations or challenges when applied to the maritime domain? Yeah,

Artem 52:17

A problem that's really near and dear to my heart because of my time working on, you know, supporting Maven is computer vision, and I think that this is a largely believed to be a solved problem in Silicon Valley, right? AlexNet, 2010 you know, since then you have, I mean, almost everything, whether it's your iPhone or your vehicle has, like, some sort of CV model, like running very effectively with, like, just great F1 scores. You're detecting everything, and we think of that as a solved problem.

Well, when you pivot that same technology to the maritime domain, it is absolutely not a solved problem. It is on the cutting edge of DoD AI problems, because, for one, you don't just have 1000s of ships going around with cameras producing model ready data that you just feed into an open source model, like YOLO v10 and say, like, oh, look, I now have computer vision at sea, right? So you have an absence of data. You're also not you're also dealing with, like, a really unique environment with significant background noise, atmospheric changes that you just don't encounter in the, you know, the regular just if you're a car driving down a street.

So really great example, computer vision in the maritime domain of a commercial technology that is a solved problem, but requires some additional steps when you're looking to work with the DoD. And this is why partnership is just so important, right? The DoD is the world's largest I'm not 100% certain on this, but I feel confident enough to make this statement. We own the most data of you know, ships floating in the ocean. I feel fairly confident in us saying that, and so you want to do a CV for horizontal motion imagery at sea. Come work with the DoD, right? There's a partnership. Figure out which prime vendors you need to partner with, because they're the ones deploying those electro optical or infrared sensors at sea today, and then figure out which government labs have dedicated, you know, decades of research to this problem that potentially, you know, it doesn't have a commercial application today, and so a normal startup just wouldn't go after it, but the government labs, which have those, like, long, 10, 20, year horizons, did choose to go after and have done a lot of like, great research to really help us feel these capabilities.

Maggie 54:44

So now this is a question I have to ask, because I'm sitting in San Francisco, and all anybody ever talks about is generative. AI, where are you seeing the most interesting and exciting use cases for generative AI, in the Navy today?

Artem 54:59

Man, there's. Much I can say about generative AI. All right, so the first is, the first is that the government is not immune to there are no special like special use cases that are exclusive to the government on generative AI, most of the things that are adding value in the commercial sector, I would say, like RAG as a as an example, right, basically, search your own documents, or, in some cases, right, search your own knowledge base. So instead of doing a SQL query, you're now having a, you know, a conversation with a model. Those are like the areas where the government is seeing the most use, which is a one for one, analogous to what we're seeing the commercial space.

How do I see generative AI more generally, in the competition between the US and China in the military space? I think is actually a more interesting question. The United States labs such as Open AI and Anthropic have really been focused on the model and really being on the cutting edge of model development in China, with the exception of the innovations we saw with deep seek r1 you're seeing a lot of emphasis on the actual commercialization of the technology, and that's a problem, because historically, if you look at how a technology, especially a generalizable technology, like electricity, and today, like AI, has won a great power competition, it was not the country that developed the technology first, or even the country that refined the technology first that won that great power competition, it was the country that was able to diffuse the technology and yield outsize economic benefits as a result. And I'm not so sure whether you're a shareholder of a Fortune 500 company, or you're the leader of a government agency, such as the Department of Defense, you're really seeing that, you know, significant return on investment today, or the diffusion of that technology today. Conversely, on the in China, you're seeing significant diffusion of AI into all sorts of technology verticals. And you know that that that doesn't bode well for long term Great Power Competition,

Justin 57:26

there are still folks who are clinging on to building things in government that probably shouldn't be anymore, and so we've explicitly stated that we're going with a fast follower first strategy as acquisition, as the 18 program executive offices within Department of Navy, five of them have shifted over to portfolios that we can make better buying decisions based on capabilities and effects. As that shifts, we want to both reward the people who are contributing from every aspect of that as well as the ones who are actually doing, making the difference. So doing what we have requested and what the Secretary of Defense has requested and what the President has requested. And so the PM of Lionfish, small and prime small USV and Dragonfish, large UUV. These are cases where PEO, USC and UWS are trying to pull in different things, and that may even compete with something that's happening in a lab or internal development. But those shifts right now are either going into overdrive or we're not moving fast enough.

Maggie 58:45

Yeah. Justin, thank you for naming a few folks that you're seeing who are who are really doing a good job right now when it comes to fielding the systems that we're going to need in this increasingly geopolitically complicated world I wanted to see you know, could you maybe tell us, what about those organizations has been so successful, and what can the rest of the Department of Defense or the Navy learn from some of these success stories?

Justin 59:19

Yeah, so number one, trying to do something new alone, the first time that we endeavor, it rarely works well unless we have a really strong partner. In all three of those cases, Captain Alex Campbell at DIU was involved. This is a person who gets it. This is a person who is bringing the weight of that organization, who has been interacting with industry in a mature way. It doesn’t take a whole program office to agree. What I have seen is that it just takes an O-4, O-5, O-6, or a courageous civilian to say, “Okay, we will figure out how these compare, and we will show that even if it is not a perfect fit, there is likely a requirement or capability needs statement that will allow us to do things differently.” Translating the technology into outcomes where it is affecting results in a more significant way allows us to provide top cover.

I will use a specific example. We had an O-6 who was a CSO on a carrier, and he said, “Send me what you are doing for the ashore systems. Send me a hyper-converged infrastructure stack to my carrier and we will deploy that.” There was a lot of paperwork, like Akil and I were talking about, because this is not how it is supposed to work. Sometimes people get bogged down with emphasizing every aspect of process as opposed to the outcome. This was a combination of heads down, nudging through—it is always more work than you expect—and then wavering and justifying. Part of the way we justified it was by showing the difference it was going to make. This was not just about being the loudest voice. These were two senior people saying, “Here is the baseline for connectivity on ships right now. Here is what that is doing from a quality of life and quality of service perspective. And here is the difference we can make.”

That leap still required influence, but we had the numbers. Captain Kevin White made it happen on one ship, and I believe it was the documentation from that case showing that it was a thousand times better for connectivity and user experience—one of our outcome-driven metrics—that led to deployments on five more carriers, and then to Flank Speed wireless. The capability we are talking about, known as “Sea to Sailor, edge afloat and ashore,” is now turning into a fully scaled capability at a high level, and it happened very quickly.

Artem 1:02:39

The best partnerships in government like to get tech in government are obviously partnering with commercial that's a given. That's partnership number one. And then inside of government, you need kind of three groups, right? And then the so the end user, meaning the war fighter, the sailor on a ship, the Marine in the field, the airman on a maintenance line. And then you need the acquisitions community to help you bring the, you know, the commercial thing, in. And then you need a resource sponsor. So that's somebody sitting in the Pentagon that's willing to do the mountain of paperwork that Justin described in order to make sure that this capability that is clearly measurably better than what we had before actually gets into the budget and stays funded for the long term, you have to have all four of those. And I think we've become really good at a, you know, the flywheel effect of building those teams, you know, be and those, those private, public partnerships,

Akhil 1:03:39

If you had a single slide to articulate one metric for your respective office. What would that metric be?

Artem 1:03:48

We’re in the government. We love slides. If I had to pick one thing–

Akhil 1:03:52

I know, I asked you for a single one slide, not 40 slides here.

Artem 1:03:57

Well, you know, we if I had to pick a metric, it would be how few slides we use to get something across the finish line. Bit of a joke there. But the I would say today, we measure things by what Justin hinted at, cost, schedule, performance and cost is how expensive a thing is. Did we go above or below budget? Schedule is, was it delivered on time or usually, the answer is no. And performance is, did you meet a requirement? And what that means is, did you meet the mark, according to a piece of paper that was likely developed five to 10 years ago, that isn't how we want to judge success. We want to judge success by operational outcomes. And so if it's a piece of software, if it's a user facing piece of software operator input would be like number one, meaning, like, here's how I used to do my job. Here's how I do my new my job now, because right, like, you're delivering a software application, the process is the product you're changing how that that operator is doing something and. Then number two, closely behind it would be like the real world operational impact if I'm delivering a new, let's say, command and control user interface for unmanned systems. Was I able to a group of sailors? Were the sailors able to control 10 robots before this, and now 20 robots, and now the robots can swarm, because it used to take 10 clicks, now it takes two. Those are the kinds of metrics that I'd like to display on that slide, user facing and operational outcomes.

Maggie 1:05:33

Can you tell us about a startup, or maybe a VC backed startup that has been particularly successful building and deploying technology for the Navy, and what can other startups learn from what they did in order to achieve success?

Justin 1:05:49

When you say building and deploying technology for the Navy, let's talk about cases where, like they're building and deploying capability and the Navy is making use of that. So maybe Project Ammo for MLOps, where we had a decent amount of in house software, and then, kind of like a coagulation of COTS, we had companies like Domino Data Labs and Latent AI that were doing commercial work that said, we do this for pharmaceutical and healthcare. We can do ML, we can do machine learning operations for defense functions better than you can build something up yourself. And so there was a Hey, meet this team, work on this problem, take a look at our algorithms. And so that relationship grew. They showed the difference that they were making. They brought that business mindset where they could show, here is the difference that we're making.

And then they did something else, that is an unlock, which is they found other people's money to apply to the problem, and so they applied to the APFIT program, and got a plus up there that was significant, that helped, certainly the Navy, hopefully also the Marine Corps. And as that group showed the difference they were making, understood who the players were, applied their knowledge and experience from other sectors, and then found funding for that valley of death until we can get them into the larger scale, like sustainment budget, like those are the big factors for how they can make that difference, and now they've also bought enough time to show here how outsized effects can come out of their next batch of work.

Artem 1:07:53

I'll use two really quick examples. One is a hardware example. The Navy brought in Saronic to build the prime. Which prime is a DIU Defense Innovation Unit contract for small unmanned service vessels, sUSVs, a year ago, we did not have, you know, 1000s of attractable sUSVs vs a year from now, we will when we actually ran the prime solicitation, Saronic had not built the Corsair, which is the boat that the Navy is buying in mass so, in fact, that company actually did not exist three years ago. And the idea of using a small, fast moving boat to blow up large capital warships didn't exist, you know, at in the same way that it does today. And so Saronic is a great example of a hardware company that's that the Navy has brought in, adopted the technology and is now developing the tactics and standing up, we've actually set up two unmanned surface vessel squadrons, so two new units that didn't exist. You know, even one of them didn't exist a month ago. So that's the rate of change here.

And then the second, a software example that's like, really a success story. Justin mentioned MLOps, I'm an alum of something called Project Maven and DoD, which was the application of computer vision to overhead intelligence gathering satellites, overhead imagery satellites. The success of Project Maven is that the government set up a data environment and gave a bunch of industry partners, ranging from large companies like Microsoft down to small startups like modern intelligence access the same data and said, compete and build us the best models. And so that's a success story for two reasons. One, we brought in a bunch of new entrants into the defense industrial base, companies that previously wouldn't have been able to work with the department defense were because of the technical implementation of this program. And the second is, we're bringing market forces into government, right? So instead of competing, usually, the government can have. One program of record to build a missile. Well, wouldn't it be great if there was one program of record, but like five missile vendors below them, all building and competing with each other, and that's the that's the environment we set up for Maven for the delivery of computer vision models into DoD, and that is now the joint program of record for automatic target recognition in the Department as a result.

Akhil 1:10:22

Justin, Artem, as we're kind of coming up on time here, I wanted to come back to maybe your thoughts and perspectives to give to the startup and sort of industry community. Artem, I thought you made some great points about aligning the right incentives between venture capital that's spending more time in the space the government that has a real need based upon geopolitics and industry who wants to get involved, either because of the mission or something else. Sometimes those alignments can be a little bit unaligned. And so curious to ask you a little bit maybe just generally, I'm a new startup in this space. You know, what are? What are some pieces of advice for startup founders in particular that might be thinking about getting into the government space or working on a really tough and important national security problem set?

Artem 1:11:10

I think it might surprise folks, but the best piece of advice you can give any startup founder, I think, is always know the problem you're solving, and really like, know the people whose problem you're solving, that isn't always super obvious in government, when you look at the government and you look at the DoD, the DoD is the single largest employer in the world, right? So where do you even begin? Like, who is your end user? Which problem? Let's say you're really passionate about solving an electronic warfare problem, you could go talk to a requirements officer in the Pentagon, somebody at the Washington Navy Yard that works in a program office that buys things, or like a Navy SEAL at a unit somewhere deployed forward, deployed in the western Pacific. All three of those could potentially be some semblance of an end user. So it can be challenging to figure out who you really need to talk to. I'd say my number one piece of advice is find, start with that person closest the edge, right, the operator in a camouflage uniform, you know, ideally on, you know, active duty orders somewhere forward deployed, is the is the end user. No matter what, you know, a program office will tell you that they're not responsible for buying things like the person at the edge isn't responsible for buying things. That's okay. You should still be talking to them, because that's whose problem you're solving.

And the second piece of advice is that it's going to be a long, long game, right? Defense is a slow defense is slow moving capital, right? We operate on, on what are called FYDPS, right? So we operate on these, like long capital cycle times. So recognize that you know, if you're solving a defense problem, not only are you choosing to solve one of the hardest problems out there, both from a technical standpoint and from a delivery of a capability standpoint, and also some of the most important problems, I might add, you're also dealing with slow money, so persistence is going to be key. And I would say those are my two big, big pieces of advice.

Justin 1:13:25

On that last piece, it's you have to be impatiently patient or patiently impatient. This to say, like even if it's slow, there is work to do every day, and I would put a bulk of my effort talking with people who get it. And so whether they're we're using unleashed Mavericks, or if they are thinking about problems, traditionally, you're unlikely to change their mind if you want to spend time talking to people who have done things the other way. That is good community service. But if you find people who are fellow travelers, who are wanting to be commercial adopters, who are disruptive, you will notice that, and that's where I would dedicate my time. It's a kind of like table stakes, to have something that is too good to be ignored. It is table stakes to, in my opinion, have something that you can turn off when you find what you're solving and you're close to that problem, and you have people with the light bulb over their head, and they get it with you, then work with them to denote what is severable and what you can carve out in fiscal year 26 fiscal year 27 fiscal year 28 until we get that refined budget, and so we should be turning off or replacing capability and solving problems at the same time. So you have to do the gain creation and the pain reduction at the same time in order to walk the walk. Otherwise, you have to tell your investors, hey, will they really like it, will see something in three years. If this is a contact sport, if you are not severing something in the meantime, then you're probably at the wrong part of the snack.

Maggie 1:15:31

If you were granted three wishes from a genie, and you could only use them to advance the state of DoD tech adoption, what would you wish for?

Artem 1:15:39

Do we both get three, or do we get three total?

Maggie 1:15:43

Okay, you guys can both get three.

Justin 1:15:46

All right, that's a nice Genie.

Artem 1:15:48

That is a nice Genie. I like, yeah, it's like, there's a queue for the genie, and each person gets three wishes. This is great.

Justin 1:15:54

Down. I think we should both get three and then decide a consensus, three.

Artem 1:16:00

I like that. My number one is that the entire that every program manager in the government is tied to the hip to an operator that is ideally, like, under the age of 30, just like brand new thing has not seen how we've always done it, and is just eager to, like, try new things, and so that each program manager, one is tied to the hip to an operator. So they're solving that operators.

Problem number two is that that program manager is doing it with commercial tech. Instead of looking at something in a government lab or looking to do like a five year or 10 year acquisition, they're looking to, like, bring in a thing that's ready to go off the shelf today.

And the third is that the government has more flexibility. And specifically, when I say the government, I mean the executive branch, has more flexibility to move money around inside of the execution year. And what that means is, Justin talked about, like fiscal year 28, 29 that's like, where our heads are right now, like when we're in the Pentagon, we're thinking about those, you know, what we're going to buy five years from now? That's kind of a ridiculous model. We should be thinking about what we want to buy right now, because we don't know what the tech is going to be five years from now. So I hope that genie lets me move different, you know, money around today to divest from Legacy things and recapitalize that money immediately to a new thing using that program manager that's that knows commercial tech and is tied to the hip to an operator.

Justin 1:17:30

I think those are really good. If there's anyone who's listening to the show who either has done Maverick things that we haven't documented or wants to please reach out to us on LinkedIn, if you're outside or Teams, if you're on the inside. We We want to expand the Unleashed base so that we can show just a compounding return on investment from hearts and minds to effects across the board. Now is the time.

Maggie 1:18:04

Thank you guys so much for coming on the show and sharing some of these great success stories.

Akhil 1:18:09

Hey everyone. Thanks for listening to the Mission Matters podcast from Shield Capital. Tune in again next month for another conversation with founders building for a mission that matters. And if you yourself are looking to build in the national security space, please reach out to us.

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Maggie 00:04

Maggie, welcome to the Mission Matters Podcast, a podcast from Shield Capital where we explore the technical opportunities and challenges of developing and deploying commercial technology to national security customers. I'm Maggie Gray.

David 00:16

And I'm David Rothzeid,

Maggie 00:19

And we are your hosts from the investment team at Shield Capital. In this episode, we're joined by Mike Brown and David Rothzeid, two of my teammates from the Shield Capital investment team. Mike and David, are extremely knowledgeable about the state of defense budgeting and acquisitions and contracting. They both hail from the Defense Innovation Unit. Mike was actually the head of DIU for a few years, and David led a lot of their work on acquisitions for many years at the beginning of the unit itself. So in this episode, we're really going to break down what a lot of the news that's coming out about defense budgeting actually means for startups. There's a lot of terms flying around here. You have the NDAA, the Appropriations Act, the President's budget request, the Big Beautiful Bill, reconciliation. So we're going to talk about what that actually means and where we are really seeing opportunities for cutting edge startups. So to start out, I've been seeing all these headlines. They say that there is a trillion dollar defense budget this year. It's a big number, but what if that has actually been passed so far? Where are people getting that number from? Mike? Yeah, over to you.

Mike 01:47

Yeah, there's several different components, and it is complex, because some have been passed and some have not been passed. So there is a normal defense appropriations process underway where we will get a National Defense Authorization Act followed by a defense appropriations that is based off the President's budget request and the targeted amount there is 831 and a half billion dollars, which is pretty close to fiscal year 25 that we're in right now, not passed yet, and that will depend On an appropriations bill funding the entire government for the fiscal year 26 that begins next October, 1. The part that has passed it's a bit unusual, is the Big Beautiful Bill that's a reconciliation bill for the budget of $150 billion for defense. And the unusual feature about that is it can be obligated anytime between now fiscal year 25 and the end of fiscal year 29 usually these appropriations are year by year. And this one has that unusual feature of could all be obligated in the next few months, unlikely or spread out over the next couple of years. And there's been some criticism from Congress that, gee, we'd like to see an amount like that added to the defense appropriation every year, rather than something spread over so many years. With the recognition that we live in a dangerous world, we probably be spending more on defense than we are.

If you add up that trillion dollars, it's actually only 3.4% of GDP, which over the historical time period last 75 years, is really at a relative low point. We've spent as little as 2.9% but if you go back to the Reagan buildup, we were spending 6% of GDP. The additional component, if you took the 831.5 plus 150 billion, Big Beautiful Bill, it leaves a little bit 20 or 30 billion, and that actually is money that is executed by Department of Energy part of DOD stop line for our nuclear program. So that has things in it, like more plutonium pits for nuclear missiles. So that's an additional point that gets you up to the trillion dollars, which in itself, is a record level of nominal spending for defense. So the only part that's been approved would be the 100 and 50 billion so far, DOD can start spending that. The rest still needs more work by Congress.

David 04:14

Mike, I think that was exceptionally well said and well articulated. The only caveat that I would like add into it is what makes this year a little bit more confusing than most the reconciliation, Big Beautiful Bill notwithstanding, is traditionally the President's budget comes out in the February timeframe so that Congress can use it to really help understand where they want to go with both the NDAA and you know, its funding tables, as well as the defense appropriations bill, or as a part of the larger appropriations bill. This year, because of the new administration decided not to use the previous administration's budget build up for fiscal year 26 which will begin one October. Sure, and they just recently submitted it to Congress, not too long ago. So about five months behind schedule, and what would generally really help educate or inform the NDAA and the appropriations bill? So things being happening in parallel, more than usual.

Mike 05:20

One of the things I know we're going to want to talk about Maggie is actually what's in the bill beyond the top line. And I think one of the things we can probably easily agree on is that one, if you add these together, more defense spending than we've seen recently, and there's a lot aimed at what will be beneficial for startup companies, venture backed companies that are focused on new capabilities for the Department of Defense. So that's top line. What's really exciting about, about what's happening with this spending?

Maggie 05:52

Okay, so it sounds like, right now, the one thing that's actually set in stone is this, $150 billion for the Big Beautiful Bill from reconciliation. So what are we actually seeing in both that amount that is actually set in stone and then also from the President's budget? What does all this actually mean for startups, for this next generation of technology? Why did we decide to have a podcast breaking this down in the first place?

Mike 06:20

I think we are seeing the recognition, and it's because of world events, it's what we're seeing in Ukraine that commercial technology is having a very big impact on the battlefield. Is going to be critical for enhancing the capabilities of our military, meaning we're recognizing we need more than the ships, tanks and planes we've had historically, and this means a lot of additional spending for new capabilities, specifically sensors from space, unmanned systems, additional software, cyber and AI, and we're seeing funding lines for the first time dedicated to these items that go beyond research and development. So typically, the department has spent money in what's called RDT&E research, development, test and engineering looking at these, but that hasn't been the same as ongoing funded programs. Now we're seeing dedicated lines for these types of capabilities, and a perfect example would be Golden Dome, which will at 25 billion, is kind of a down payment on what will be 175 billion expected to be spent over the next three years, which really will benefit from sensors from space, a key part of the shield portfolio. David, you might want to talk about how that's going to affect some of the space portfolio companies.

David 07:41

Absolutely so when the first Trump administration broke out the Space Force a lot of it was to ensure that prioritization of space capability, which was more than just a force multiplier for air, land and sea, it was becoming its own contested domain. And what we're seeing with Golden Dome is a significant recognition and an increase in Space Forces funding to get after more novel technology capabilities like advanced mobility in space, additional communications, rendezvous, proximity operations, you know. So these are elements of Golden Dome and a larger emphasis on Space Force and their budgeting capability beyond what was otherwise going to be appropriated in previous presidents budget, which, despite breaking out Space Force from Air Force, you know, both underneath the Department of the Air Force, you kind of saw starting a bit of a flat line in Space Force capability. And so this really does ramp it up.

And for Shield Capital, where we've been investing in several different space technology companies that have good application for the national security apparatus, as well as building bridges to larger and better commercial opportunities. You know, this will just be an acceleration of some of those capabilities, but with Space Force and the national security apparatus really helping bring this to bear, and I think a lot of it is the pressure being put on the space domain, as our adversaries are also exploring, you know, these novel technology concepts and really starting to undermine the United States's dominance and in that era, in that area,

Mike 09:31

And if we look at unmanned systems, there's about $20 billion in total that's being added in a category called expediting innovation to the warfighter. So a number of different initiatives within that 1.5 billion, specifically for small unmanned aerial systems. So the smaller drones that we're seeing to such great effect in Ukraine, we're seeing the Defense Innovation Unit budget doubled again from 1 billion to 2 billion. One, a particular program called APFIT, accelerating the production and feeling of innovative technology has been tripled now up to a billion. All of these, I think, will have a focus on unmanned systems, for example, expanding what DIU has done with a Replicator program over the last couple of years that only had a half a billion dollar budget for the last two years, and now tremendous increase in what we're seeing as a recognition of the importance of unmanned systems in the air, on the surface of the sea, undersea, all of those together.

David 10:34

And I think you know, really what this amounts to is a recognition by the Department of Defense, as well as Congress, in seeing the innovation that's happening in the commercial sector being, you know, underwritten in large part, by the venture capital community that has really moved significant resources to this industry space. And you know now the Department of Defense is starting to buy in quantities significantly larger than in the past, though, Mike, I don't know if you would disagree with me. Probably agree that it's not quite enough, so heading in the right direction. But you know, when you think about the size of the overall defense budget, it's still, you know, almost budget, maybe not quite budget dust anymore, but something larger than that, but certainly not the lion's share.

Mike 11:26

Yeah, I totally agree with you, not dust, because now we're talking about billions of dollars. We used to be talking about 10s of millions, but yeah, we I think there's in the Pentagon, I think there would be general agreement that we are behind with these new capabilities, not yet taking advantage of the tremendous investment that's already been made in the private sector, in unmanned systems, in AI, in cybersecurity and sensors from space. So pitch book says that there's been 150 billion in venture money that's been spent in defense tech since the year 2021 so that gives the Defense Department, the taxpayer, tremendous options in terms of choices of what the different technologies from multiple vendors to go test and see what can be put into production. So it's really incredible opportunity for the military to be able to take advantage of all of the spending that's been done, all the investment and great ideas that entrepreneurs have put into practice.

Maggie 12:29

So we covered space sensors. We covered unmanned systems. What about artificial intelligence, of course, the holy grail of Silicon Valley right now. And cybersecurity. Are we seeing any trends in those tech domains?

David 12:41

Well, I'd say, you know, on the AI side, this is maybe where the Department of Defense still has significant catching up to do, as far as applying AI as part of their fundamental operations in ways that you know are far from this, the fear mongering around killer robots, you know, just thinking about how different enterprises are using AI in their you know, business decision making to help understand the data and increase their decision velocity. You know, if you look at the private sector, you know, over 66% of all venture capital funding in the first half of 2025, has gone to artificial intelligence. There's hundreds of billions of dollars. You know, I would say on the DoD side, we're really still in the single billions of dollars as far as spending on AI capability. Again, a remarkable increase from the days when, you know, you could only look at Project Maven as like the one artificial intelligence program that was doing anything of operational relevance, but still, you know, far, far lagging behind adoption on the size of, you know, commercial trends that we're seeing, and certainly, you know, our adversaries are incorporating this type of technology into their use cases. I would like to highlight, you know, that the Chief Digital Artificial Intelligence office, CDAO, has been releasing several contracts to some of the largest, large language model companies. And I think that is moving in the right direction. But if we're going to actually integrate these types of capabilities, you know, across various components of the DOD, whether it's in supporting a budget build up, or if it's in pre positioning, where assets ought to go, still a lot of green space for the department to lean into these technologies. And that's going to take a lot of training, a lot of you know, a lot of understanding, from a culture standpoint, of like, how to incorporate these technologies in meaningful ways. And then, of course, you know, I think what really needs to occur is more investment in the infrastructure to enable these various data silos to actually communicate in in modern ways that the private sector has enjoyed a. Have since the inception of the internet. I don't like anything else to add there.

Mike 15:04

Yeah, David's absolutely right about this. Data from Obviant, which is a SHIELD portfolio company that is actually bringing a single source of truth to the defense, acquisition, procurement and contracting data shows that artificial intelligence, dedicated spending has actually increased 50% year on year so but it's only gone from 1.5 to 2.2 billion to David's point still a relatively small number, not being adopted by DOD as fast as we see it being adopted by enterprises across the economy, and the still the largest AI project that David mentioned, Project Maven, which is about a decade old now, is really about computer vision. How do we make sense of satellite data? So that means that we're not spending significant amounts either on improving back office operations, which tremendous amount of the Pentagon manpower is spent on, or some of the more forward leaning applications which would be targeting, as well as Decision Optimization. So there's still a long way to go in terms of additional capabilities that we can bring. David is right. It requires also an investment in the infrastructure, because data has to be available, and you've got to have compute and networking capacity to take advantage of AI.

Maggie 16:29

So which technology domains are we seeing still lagging from Department of Defense signal?

Mike 16:39

I say electronic warfare is one of those, because we've seen a $300 million research and development increase in the budget for EW. But given the importance of that and what we're seeing in Ukraine, I'd say we're not spending enough in that area. We saw a lot of us vendors of drones basically be ineffective in Ukraine because we hadn't properly incorporated what we needed to withstand the effects of jamming and have those, you know, small UAS systems be survivable. So I'd say that's one area where we were behind David. What else would you add?

David 17:18

I would still venture that like, you know, autonomy, you know, despite Mike, you are, you know, riffing a lot of different areas where we're seeing an increase, you know, these are force multipliers, where our manpower, you know, we just have these natural shortages. And if we think about the ability to incorporate mass on the battlefield as a form of deterrence, you know, it's not going to be through manned systems. It's really through autonomous capabilities, whether that is for undersea all the way into space, and I think that's an area where significant more investment needs to occur. You know, on the Air Force side, you've got collaborative comrade aircraft. This has been a program kind of in the making for a decade, and we still really haven't started to field anything. And I'd say that there's almost this fear of, you know, perfect testing that is not allowing these assets to sort of showcase their capability. And what that has led to, you know, is the pushing forward of the F-47 NGAD 6^th-Gen aircraft, that's still going to be a man piloted entity, as they say, hybrid, right? So, some will be manned, some will be unmanned, but you know, that's going to be several billions of dollars in development and production. And you know, only becomes an opportunity cost to where you could be pursuing more autonomous solutions that, again, are going to be significantly cheaper and increase the overall mass of your force structure.

Mike 18:53

I think David was really making this point. But I'll just emphasize that the lesson from Ukraine that we should be learning, in addition to agility, how fast technology was adopted on the battlefield is cost. Cost is critical. So as we continue to pursue ever more expensive, large defense platforms like f 47 the opportunity cost is to have that we're not being able to fund large volumes of attritable capability. So this is something we're going to need in a future conflict, high volume attritable systems that can be put in theater, and that those are going to be unmanned systems, not manned systems. So I would agree with David very much on that we're behind there, and that's going to be very important for the military in the future.

Maggie 19:51

What were some of the biggest surprises to you both from the recent bill?

Mike 19:56

Well, I'd say one of the areas of decline. Planes, aircraft. So the F-35 the most capable fighter has the procurement would go from 74 aircraft down to 47 so that decline was a big surprise for me.

David 20:13

Yeah, I would say I am keenly watching the battle for the E-7 Wedgetail radar plane. So again, this is a manned aircraft that's supposed to be able to provide command and control, by some estimates, not super survivable for areas of conflict. That would be of relevance for needing such a capability. The Air Force has come out and said they don't necessarily want this asset. Congress has said, “No, you do want this asset.” And it wasn't too long ago, the Air Force said, “No, we do need this asset.” So, you know, this kind of changing position, this is an area that that I'll be watching from a budgetary standpoint. It also doesn't hurt that when I was my last time in the Pentagon, you know that this was a program of sore contention around the modernization we were trying to do and moving away from some of these legacy wide body aircraft to provide command and control in the air for ground forces and air forces, and whether or not that type of capability could be provided through space assets or other means.

Maggie 21:22

So, it sounds like there's really a lot of opportunity for new players to tap into some of this new budget, $150 billion that maybe was not there in the past. What does it actually take for startups to access that budget? What’s your advice for startups to actually get some of that $150B or more?

David 21:46

I mean, I think first and foremost, you have to have a great ground game and know who are your stakeholders and champions. So, you know, the best way to be able to put funding for your capabilities is to have access to available contracts, right? Because when you think about the overall acquisition system, yes, you do need a requirement or a need. You do need a budget, but you also need the little “a” part, little acquisition, the contracting piece of it. And so if you have those available to you, whether it's through an SBIR Phase II with, you know, additional ceiling, or some sort of a production other transaction agreement, which is another sort of innovative contracting tool, among other types of contract vehicles, you know, having available ceiling and the right amount of scope that's targeting these areas where both the Department of Defense and Congress have said, are areas of need. This is the way that you help, then your stakeholders quickly execute funding against these lines of effort.

The other thing I would advise the startups to do is to make sure that they do have a good government relations entity, and that they are engaging with Congress and the professional staff members to artic to help articulate the need and how they solve a near term problem quickly with the capability that they're bringing to bear, and being able to quickly then inform their investors about how they're going to leverage that venture capital funding to accelerate adoption for the Department of Defense with this $150 billion. Because I recall that you know, some of the some of the concern on Capitol Hill as the reconciliation bill was being pushed was the lack of of detail around where this funding was exactly going to go and you know, so what does that mean? I guess it means that there's a lot of flexibility for the Department of Defense to be able to execute it in areas that they think are of greatest need. And I think it's then incumbent upon the startups, you know, to then help educate and inform their stakeholders about how they help solve the needs that are critical priorities, whether it's to Indo-Pacific Command or European Command, or just general service requirements that have been challenging for a long time.

Mike 24:12

Maybe one way for startups to think about approaching the government is to think about two dimensions. One is, are you a component going into a bigger system, or are you a system that the Defense Department would buy? The Defense Department does not like to buy and assemble things. They like to buy things that are ready for use. Good news is the Defense Department now has a lot more flexibility to buy things as a service, which means you can now sell the data if you're a company that has sensors in space, meaning the government doesn't have to own and operate the underlying asset. So that gives more flexibility. But if you're a component, you probably need to think about, how do you get into that in system? Which may mean I need to be thinking about one of the prime contracts. Actors who will have access to a large government contract versus selling yourself or I might have access to Office of Strategic Capital's loan capability, over a billion dollars, with very flexible loan terms, meaning you might have to, might not have to repay that until you have a liquidity event, could be available to you as a component supplier.

The other dimension, besides component versus Am I system ready to be used by DOD, is kind of what my technology readiness level is. If I'm an idea or I'm early on in developing the technology, I might look more to the Research and Engineering budgets, DARPA, AFWERX, all the other “WERX” that that have budget to provide grants that help you develop a capability. If I already have something that's developed and ready for testing, well now I might be looking to an organization like DIU that could help me help you put something into test and see if you can get on contract much sooner through the mechanism that David talked about, and Other Transaction Authority. So I think spending some time up front, kind of seeing where you fit in the landscape can be very helpful to determining what's the most productive path to getting a government contract

Maggie 26:16

Within these new budget lines, where do we see or where do you see the most opportunity for startups versus where do you think the defense primes legacy players are really going to continue to dominate?

Mike 26:31

Well, the large primes are going to still be putting together larger systems. So if you think about Golden Dome, there's probably going to be a role for, you know, putting together a complete package of sensors and integrating that together, fusing that data together as an example. So that means, is there an opportunity for individual providers of capability? But that might be as part of a larger program. If you're talking about unmanned systems, there's going to be more of an opportunity to be selling those directly to different branches of the military. So still going to be bottom line role for both. We're going to need the primes to be successful on programs they win, and we're going to get a lot more capability from startup companies that the primes can't offer on their own.

David 27:24

Yeah, I'd say, you know, with like, Group 1 drone, so these are, like, kind of small handheld, this seems to be an area where this budget actually starts to put some real funding behind and that might help separate some of the winners who have been building really good technology, which has by and large been coming from sort of the non traditional defense ecosystem, a lot of these venture backed startups. So we've been seeing a proliferation of this type of capability, and the effects that they've had, both in Ukraine and the Middle East over the last few years. And it finally seems as though the government, through a number of different initiatives, is recognizing that that value proposition, and so there's going to be some pretty good opportunity to win significant capital or fund procurement money to sort of advance your technology,

Mike 28:17

Drone and counter drone technology are going to needed by all the services. So you've got, you know, the ability to approach the Marines, the Navy, the Air Force, Army, they're all going to need it.

Maggie 28:27

A big debate in the broader defense tech community is over whether it makes sense to be a defense only focused startup versus to focus more dual use that is, you know, pursue customers within the US government, but also pursue customers outside of the US government. Do you think that this additional $150 billion of budget for the Defense Department should change the calculus for startups to focus either dual use or to go defense only now that the budget is so much larger?

Mike 29:01

Yeah, personally, I don't I think whether you can be dual purpose versus single use is really determined by what technology you're offering. You know, if you're a drone company today, there's not a large commercial market for drones. Now, the President's Executive Order now requires the FAA to do its homework and figure out what capability drone providers can offer this beyond line of sight. So there could be some regulatory changes underway that could accelerate the adoption in the commercial market. But by and large, it's been very slow to develop. So if you're a drone manufacturer, certainly what we've seen with the demand in Europe, based on what's happened in Ukraine, means you're primarily military. If you're AI software, there's no question you should be doing dual purpose. You might need expertise on what does the military need, but you should be pursuing the tremendous market that's out there for AI software, same with size. Uber, I don't know what you say about space. That's probably also a dual use area.

David 30:06

I think that space is, you know, not only the ultimate high ground, but the ultimate, you know, example of how dual purpose technology can really inform both industries. You know, I think one thing to recognize about the national security apparatus is, you know, space is very expensive. There's, if you're going to put something up there, you're going to have to spend money. And by and large, you know, a lot of the use cases are still, still significant needs of the national security environment, and unlike the commercial sector, the DoD is willing to provide non dilutive research and development funding to help you get over some of those costs. So, you know, I think the conglomeration of private capital and non dilutive research and development funding to help put assets in space that are addressing national security needs while also driving down the cost to accessing future commercial markets, creates a really interesting flywheel effect.

In fact, I'll just take this moment to highlight Maggie's recent blog on this very topic that she co wrote with First Lieutenant Nestor Levin, a Space Force officer, as they sort of highlight the historical elements of how the space economy has evolved and the more recent utilization of venture backed startup technology and how it's had An effect on, you know, the war in Ukraine and how it's been used, even to image what happened in Iran with the Florida nuclear blast site, right? And how space technology is really being leveraged by lots of different entities, still predominantly the domain of nation states and national security needs, but more and more with the advent of SpaceX and driving down cost of launch, providing more and more business opportunities for different commercial markets. So to me, I think the rest of the DoD could truly learn from Space Force and their approach to leveraging venture backed commercial technology and incorporating it into their concept of operations. And Mike, something that you had highlighted earlier in the conversation, buying something as a service. You know that is part and parcel to how a lot of these data providers, whether you're Hawkeye 360 whether you're Maxar, Black Sky, Planet Labs, and in the future Albedo, with their first satellite in orbit. Now, these are really great opportunities for the DOD to not have to spend as much money, but get just as exquisite capability,

Mike 32:52

And importantly, be able to continue to improve the capability as those vendors improve their solution. So something we're not used to seeing in the Department of Defense, because we typically buy off one specification and from one vendor for 30 or 40 years with large defense platforms now, buying things as a service means the military can upgrade the capability as the private sector upgrades that solution. That's a that's a huge benefit for us.

Maggie 33:21

Thank you for the shout out. David. So David and Mike, I know there's a few kind of interesting bills moving their way through Congress right now, the FoRGED Act, SPEED Act, are some of the ones that come to mind that have some policy changes that we believe could really be beneficial for startups. David, maybe could you talk about some of those actions that you think are going to be the most impactful that you're most excited about?

David 33:50

Sure, thank you, Maggie, you know, first off the off the top, I'll say, I think this might be the most consequential NDAA since the Nunn–McCurdy Amendment of like, the late 80s, and what that meant for the Department of Defense and reforming acquisition in certain cases, that got us into a little bit of trouble. But I think you know, directionally, it was going in the right, right way, and now we do need, like, kind of a wholesale new approach to recognizing the way that the economy and economic security tied to national security can create, you know, really good opportunities for entrepreneurs and for, you know, America's businesses writ large and so, you know, maybe a little bit wonky, but I'll just highlight two things.

One is this desire to move to, in certain cases, consumption based contracting. So if you think about your energy bill, or the way that startups or large companies pay for compute, you pay for it in the rears, right, as in, you get your bill, and then you pay for it. And for the most part, you know the DOD has to pay ahead of time, and so you need to always be estimating exactly what your spend is going to be. And it's really challenging to do in these dynamic operational environments where your compute costs can scale up or down depending on real world activities or real world needs. And so now having an ability to pay in the rears or based on consumption, I think is a pretty novel thing that Congress is allowing the Department of Defense to do, but it's going to be something that requires a bit of training for the acquisition community.

Okay, so that wasn't nerdy enough. I'm going to get even a little bit deeper, but the other one is the I'm seeing a distaste from Congress around cost accounting standards. And so just a really quick primer, if you operate in the normal world, you are held to GAAP, generally applied accounting principles, and that is how you do a lot of your accounting for business operations in the government, they have a different system. They have cost accounting standards. And for pretty much any large major contract, it is going to be subject to cost accounting standards, which forces you to break out costs between your labor, your overhead, and your GNA. And that can be really challenging from a profit margin when you think about building a piece of software and having to account exactly how many labor hours went into building a piece of software, because for those of us that have been in the venture capital community for a long time, you recognize that you build it once, and then the marginal cost for distributing it goes down to zero, and this is how you get fabulous returns, or fabulous multiples on revenue and EBITDA. But that is sort of anathema to how the government does their accounting, and it sort of is forcing these startups, in certain cases, to measure things that don't make sense for how their businesses operate, and in both the SPEED and FoRGED Acts, they sort of take to task this idea of cost accounting standards, and they want to make it even easier for non traditionals to apply commercial standards to their contracts, so that they don't get forced to comply with something that really was built for government when they were the only buyer in town of any technology that mattered.

And, you know, happy to go into more detail with anybody that wants to after this podcast gets released, but I'll just leave it at that. Those are two things that I thought were pretty compelling coming out of the forge and speed act, among many others. But Mike, maybe over to you for something that you thought was really useful.

Mike 37:48

Yeah, you talked about the cost accounting systems as if they're arcane, and probably the way you implement them are, but it really in layman's terms, is you have to keep two sets of books if you're a company, because I need GAAP for all of my investors and from a public company, that's what the SEC will require. And now I get to keep a separate set of books for the government. And if I'm a small company, that's can be cost prohibitive. So I think that's a major barrier today for many small companies thinking about doing business with the government. Yeah, yeah, in terms of the SPEED and FoRGED Acts, I'll just add one more, which would be the idea that we could aggregate up budget categories into a portfolio or a capability based approach. It another thing that sounds arcane, but is pretty important. So the defense appropriations are basically allocated into 1700 different line items, and those are further divided into what's called colors of money, meaning I can't take procurement money and mix that with R&D or mix it with operations and maintenance money. So you get a very granular system which allows for very little flexibility if I have an urgent need and I need to move money from one category to another, one line item to another, and if I see some exciting new technology I want to leverage, again, I am still hamstrung by the budget process here. So this idea of a portfolio approach is maybe I don't have to specify exactly what I'm buying by vendor by specification, but I might have an entire category, like small drones, and I don't need to upfront specify which spec and which vendor. I could just say I've got a pot of money for that portfolio. And now, as needs change, and as technology changes and different vendors leapfrog each other, I have the flexibility within the Department of Defense to say, okay, Congress has given me money for small drones, but now I can move flexibly from one category to another. I think that's going to be a very key innovation, and it was recommended by the PPB&E Reform Committee on Innovation, which our partner Raj served as a member on.

David 40:05

Yeah, I think that's great, Mike. And you know, when I do reserve time in the Pentagon, we talk a lot about this and one topic that comes up is like, if we could have this portfolio approach, let's take, you know, aircraft modernization, or fighter aircraft modernization, and what you would do is you would pool the F-15, the F-16, the F-22 and the F-35 and all of their modernization money into one portfolio, versus it being broken out by aircraft and as one aircraft, you know, vendor starts to do really poor. Say, still, I don't mean, I don't remember who builds the F-15, but say the F-15 modernization program, for whatever reason, it's just languishing. Well, instead of, you don't have the ability to move that money to maybe the F-16 vendor who's doing exceptionally well and accelerate some of the timelines for modernizing that aircraft. Instead, what you have to do is a mea culpa and hope that through these arcane budgeting processes called below threshold or above threshold reprogramming, BTR and ATR, that somehow you're able to move the money across to something that like at the end of the day, what we're trying to do is have air superiority in the Air Force, but the program executive officer who's in charge of all of the advanced aircraft does not have the ability to move the money across his or her programs to maximally affect readiness in the departments. And that is just like, I think, one good snapshot of how this portfolio approach, still, you know, it's focused on these capabilities, air superiority being one, but allows you to move across these different platforms.

Mike 41:58

Yeah, the way I think about that is, we're asking our military to really achieve, up to now, higher levels of speed and flexibility in what they're doing, but the budgeting process doesn't manage match that. We got a process that basically takes three years to get $1 of spending approved, and now I can't mix and match, as you said, David, from where it was allocated a year or two ago to where it's needed now. So we need the budgeting process to embody that speed and flexibility that will match what we're asking our warfighters to do.

Maggie 42:34

So we've talking a lot about what Congress is doing with the Big Beautiful Bill, with appropriations, but what are we actually seeing coming from the executive branch? I know there have been a couple executive orders that have come out over the last six months or so that are really pushing the needle forward on how innovative startups and non traditional contractors can work with the Department of Defense. Maybe, Mike, could you talk us through some of the EOs that you are most excited about?

Mike 43:02

Yeah, really, a lot of what we've talked about here in this podcast is the “what” of the budget, what would we be spent on, versus what we've spent on in the past, and the recognition that we're now going to be buying some new capabilities, and that will mean new vendors, but there's an equal emphasis from the administration, very positively, on “how” we will buy those things.

So four presidential executive orders so far, and some directives from Secretary Hegseth on the “how” of buying things, which are really if you put those all together, it's how do we reform Federal Acquisition Regulations. 2000 pages of documents that's longer than war and peace, and there's a similarly length, 2000 page document on how to use it and apply it, kind of a guidelines for you. So no one person could comprehend that. And there's a recognition that that should be simplified. I heard that simplified down to 100 pages. I hope that's true. We'll wait to see what that looks like, but the President has basically mandated that the Federal Acquisition Regulations should be rewritten.

There's also an emphasis on more commercial methods, things that we pioneered at DIU, something that David really pioneered, the Commercial Solutions Opening, which is basically how to buy things in a more commercially oriented way, which brings in more competitors and actually test these things before we would agree to buy them. So that process is now well documented and used well beyond DIU an emphasis on commercial first, which the Congress has asked for the last 30 years. Let's not look to how we can make something custom by the military, but as we look at these new technologies that are being developed commercially, how can we use those first, rather than asking for something custom by the military, that's going to result in much better value for taxpayers, and a recommitment to something called modular open system architecture, or approach. Image, which really is the way the commercial world operates. You think about the computer, computer world, where we have interchangeable parts, and if I buy, you know, a operating system from Microsoft, and that goes on a computer, we know that's going to work on multiple pieces of hardware. That same idea applied to the military, I need a modular architecture so that I can mix and match and buy from different vendors and have things working together. So all of these are aimed at more speed and flexibility, more commercial use of technology by the military, which I think can only improve our capability and at lower cost.

David 45:42

Yeah, I think that's well said, Yeah, over my I guess now, over 16 years now, between active duty and reserves. You know, rarely have we seen the executive branch move out ahead of Congress, mandating through something like the NDAA, yeah, the only example really that I can think of is Ash Carter. When he was, you know, the undersecretary of what was then Acquisition, Technology and Logistics, AT&L, then his time as DEPSECDEF, and then his time as Secretary of Defense, he was one of the few that would go ahead and, like, push forward for what made common sense, maybe sometimes just in advance of legislation, or helping, you, know, inform legislation to then sort of reinforce what they what the executive branch was trying to do. I think this is a pretty rare moment where you do have an executive branch highly inclined to do things that would, you would traditionally see in in the business world, right? And trying to apply those good practices to the Department of Defense. So we're all for that, because a lot of it does focus on commercial capability, leveraging private capital markets, you know, providing opportunity for entrepreneurs, all things that are part and parcel to our investment thesis.

Maggie 47:06

So turning back the focus to Shield Capital, where we all work, we are a firm, we're predominantly focused on four technology areas: AI, autonomous systems, cybersecurity, and space. And at least historically, we have primarily focused on investing in more dual purpose companies, companies that have the potential to sell both to the US government but also to the commercial sector. So Mike, do you think that this investment thesis still makes sense? Are there changes that we should be making, in light of both new budgeting and appropriations data, as well as some of these new actions coming out of the administration, and other just trends we're seeing in the market?

Mike 47:53

What I think the changes in administration so we just talked about some of the executive orders on and directives from Secretary Hegseth on how things will be bought, and then most of the podcast on what will be bought, I think, reinforces that thesis we have at SHIELD. So those four domains are all going to directly benefit from the appropriations in FY 26 and probably do a more significant degree than we would have seen in any subsequent year over year change. And I think we're at the start of maybe a decade long trend of where we're going to see investment in these new capabilities to complement the traditional investments we've made in defense, in large platforms, ships, tanks and planes.

So what we're seeing around the world is becoming more dangerous, the need for more defense spending and the need for these new capabilities, because they've already proven themselves on the battlefield. So that makes me feel even more comfortable with the thesis that we have. I think those four domains are ones that are going to continue to be multi billion, in fact, multi 10s of billions of dollars in their market size and grow at double digit rates, meaning there's going to be tremendous opportunity, and they all have significant impact for national security. So to me again, reinforcing the thesis we have at shield, and what we will continue to do is look for companies where we can or technologies too, where we can add value to bringing those technologies into national security establishment. And nobody's better than that at shield than David, who really understands the acquisition process in depth and has worked with a lot of our portfolio companies to make sure that they know what are the mechanisms to get on contract and how to most effectively work the process so that it can be in the best position to be on contract. So I think we're at the very beginning of seeing that strategy really pay off at SHIELD.

David 49:54

Thank you for the compliment, Mike, and I think you covered that exceptionally well. It's true.

Maggie 50:00

Well, Mike and David, thank you guys so much for coming on the podcast and breaking down the very complicated world of appropriations and defense acquisitions, I certainly learned a lot, and I think our listeners will as well.

David 50:15

Thanks so much for having us. Maggie, thank you, Maggie, always a pleasure.

Akhil 50:20

Hey everyone, thanks for listening to the Mission Matters Podcast from Shield Capital. Tune in again next month for another conversation with founders building for a mission that matters. And if you yourself are looking to build in the national security space, please reach out to us.

• The role of cutting edge technology like cybersecurity, drones, and AI in the conflict

• The current state of Iranian proxy forces in the Middle East

• How the conflict in the Middle East compares to Ukraine

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Maggie 00:00

This episode features a conversation between Shield Capital Managing Partner Philip Bilden and Vice Admiral Kevin “Kid” Donegan. It's a little bit different from some of our past episodes. This one definitely sparked the Model United Nations kid within me with my love of geopolitics back in middle school and high school. This episode does not feature a conversation with one of our portfolio company founders, rather Admiral Donegan, breaks down the current state of the conflict between Israel and Iran. And you know, of course, we have to talk a little bit about the role that technology played in that conflict. We discussed cybersecurity, drones, AI, etc. We cover everything from the current state of Iranian proxy forces in the region to how this conflict differs from the war in Ukraine, I learned quite a lot from this conversation. So really, really appreciate you setting it up, Philip.

Philip 01:30

Oh, it's a pleasure, Maggie. Congratulations to you on these wonderful podcasts. I'm a big one of your biggest fans. So this is a different format. This was a moderated discussion that I had the privilege of hosting Admiral Kid Donegan, call sign “Kid,” it's funny, in the Navy, Top Gun pilots and other aviators all have these wonderful call signs. So we didn't discuss how he got his call sign. That's always somewhat personal issue, but we'll leave that for another another discussion. Maybe you can get it out of him in your in another one of your podcasts. I've known, I've known the admiral for well over a decade. He and I had the pleasure of working together on what was called the Chief of Naval Operations executive panel in his last two years of a four decade distinguished career as one of the senior most Navy and military leaders. And we talked about the Mideast then, and it has only become more more relevant in recent years. And in fact, the the two weeks that surrounded the beginnings and then the cease fire of the Israel and Iran war, the so called 12 day war. Admiral Donegan and I were discussing what was happening as it was happening. And in fact, on the weekend that the United States took action to intervene and to take out the nuclear sites. The admiral was actually in the Middle East. He was in Bahrain where he was there talking to very influential national security leaders, and I was concerned for his safety, and so thankfully, he made it out of that airspace and back to the US with, I think, about 48 hours before we had the webinar. So I think you're the you know, the podcast in this format is going to be highly informative for anyone who wants to understand what were the preconditions of this war action, what were the what was the assessment of the execution of the war plan, both by the Israeli military and intelligence community as well as by the United States, with our friend, General Dan Caine, a former SHIELD venture partner, now serving as the senior most military advisor to the President on all matters military, but in particular on this extraordinary operation called Operation midnight hammer. So it's a fascinating one hour discussion, and I think your listeners are going to really enjoy it and learn something.

Thank you for joining us, and it's such a privilege and a pleasure to be with my friend and mentor of many years, Admiral Donegan, who I had the true honor of serving with on the Chief of Naval Operations executive panel at the very end of his distinguished four decade career in the Navy. The admiral has served in the Middle East and meaningful leadership positions. We're going to hear more about that today, and I think that will help. I. The context to understand some of Admiral Donegan, unique and timely perspective. So kids, so good to see you. Thanks for doing this, and I greatly appreciate it. I will just want to remind the the attendees that, in addition to your distinguished service. You were actually just in the Middle East prior to the cease fire during combat hostilities, and a two Sundays ago, you and I were on text message on signal, the encrypted app, and I was inquiring as to your safety, given that the Iranians decided to take counter measures, counter offensive measures, with 14 intercontinental ballistic missiles raining down very close to you, on us, installations in Qatar. So maybe that's a great place to start. Can you just describe, you know, recent activities, you know, from your being in the region, your where you're, where you were formerly in command positions, and maybe let us know what you were doing, to the extent that you can?

VADM Donegan 06:14

Thanks, Philip, it's always great to be doing, being involved with anything to do with SHIELD. You're right. Philip, I happened to be in Bahrain on a trip unrelated to necessarily the ongoing conflict. Was fortunate enough that flights flew and I was able to get there. And then, of course, my main job there was to meet with the senior leadership of that country on other matters. But of course, with given all that was going on, we spent a fair amount of time discussing the current, current conflict. Interesting enough, Philip, that was, you know, the very first time that I think I was deployed to the Middle East, was 1983 and it was because the Iranians were refusing to let international inspectors in to look at their nuclear sites. So it's pretty incredible that this Iranian situation that's on the front pages now has its roots in decades of history in the region. So bottom line, I was there on other business, but was fortunate enough to get a chance to engage with leaders. I go to the Middle East on a regular basis, predominantly the United Arab Emirates and Saudi Arabia. In this case, it happened to feed Bahrain. So that's why I was there. And my wife wanted to know what I was doing there, of course, when all these things broke out, but she thought that stuff was over.

Philip 07:38

Well, you certainly have a very timely perspective. In addition to all that you did in uniform, maybe you can just talk a little bit about your command responsibilities during combat operations in the Middle East, specifically with Iraq and Afghanistan, and what it means to be an operations officer within Central Command, the combatant command responsible for the Middle East area of responsibility, as well as commander of the Fifth Fleet, you know, part of the numbered naval maritime fleets in the US Navy. What does that involve? And you know, really, What? What? What has changed over that time to where we are in the last you know, 12 day war, as it's been called.

VADM Donegan 08:26

Yeah, that's super you know, the perspective that I'll give you is one from studying and being in the region a long time. As I mentioned, the first time I deployed, I was a young junior officer to the Middle East, but I also commanded a strike fighter squadron there during operations Desert Storm, and what came after, I commanded an aircraft carrier that was deployed during the peak of the Iraq and Afghanistan war. And as you mentioned, I worked as the CENTCOM Director of Operations. And I guess to put that in simplest terms, I worked for both General Petraeus and General Mattis as their Chief Operating Officer at the peak of the wars in Iraq, when we had 100,000 troops in Iraq and 60,000 troops in Afghanistan. And then we shifted that to go to zero troops in Iraq to 93,000 troops in Afghanistan, all while we were fighting al Qaeda in both Pakistan and Yemen. So that's the stage that I looked at. And one of my predominant jobs, then, when I was director of operations in Central Command, was the Iranian problem set. And as matter of fact, on my it was back in 2010 when I first started there, that this weapon systems and capability that you saw put into play, this, this penetrator weapon was developed, and we actually ran exercises to test it, and then we ran exercises to simulate the entire operation, including launching B twos and flying them halfway around the world to practice this mission. As you can imagine, that's gone on now for some time, and then later, when I got to. Bahrain. I lived there for three years during the time when you saw the rise of the Houthis, one of Iranians proxies come up, and it was my ships that got attacked, and we retaliated against the Houthis with TLAM strikes against the Houthis. And that was back in 2015 so the perspective that we'll talk about today is based on all of that experience. So to speak, Philip, I don't usually talk about that in that kind of detail, but to help, since there's many in the audience that don't know my background, that's that's we'll be talking about. That's the basis that I'm looking at, or the lens that I'm looking at things through today.

Philip 10:38

Yeah, completely understand and appreciate that, and thank you for kind of defining terms and the like for the non military in our audience. So Admiral, yeah, here we are at the end of a 12 day war. We're less than a week into a cease fire, and yet there's been extraordinary military and intelligence and technological activities since the October seven Israeli conflict with with Hamas. But as you just referenced, going back to when you were in uniform, the activities in preparation for the US intervention involving the b2 and the bunker buster have been going on for over a decade. So this is an extraordinary set of events, measured in years, but also in days and weeks. Where are we now? You know, as you assess all of this with respect to the viability of a cease fire, holding the nuclear non proliferation assessment of you know what damage you know has been done to Iran's nuclear facilities, and really just reflections on the past couple of weeks it's been changing by the by the day.

VADM Donegan 12:09

Well, well, super Philip, what I'll do is I'll take that question in three ways, one in a broad perspective about what's the Middle East look like now, and why is it so different than it was before October 7. I'll dive in a little bit and talk about, if you like, the my assessment of the nuclear capability now, after what's happened that Iran possesses, and then I think it's logical then to kind of move to the ceasefire and if that's going to hold, and what that, what that looks like in the broader perspective. But first, just to set the context, you know, the framework of the Middle East for years, Iran was a country that really didn't spend its fortune on building the best military. Instead, they built really good defensive capability and a really good ballistic missile capability and drone capability. In other words, they built the missile side, not the rest of the conventional arms, and then separately, they built something called proxies. And these are elements that work in one way or another, by and large, to the same purposes for Iran that were spread around the region. And they use those to do their bidding, and then claim when they use those forces, it wasn't them that was using them. So those forces that were their key proxies were Hezbollah, Hamas, the Houthis and militia that they have in both Iraq and Syria, just to name a few. And then they have sleeper cells in other places, including the United States. And those would be the arms that if Israel or the United States would do something, those would be the arms that would reach out and touch back on Israel. Hezbollah would launch 1000s of missiles they had, potentially into Israel, or bases would be attacked that the US owned, if they used facilities. We saw that when they went and attacked a base that we had in Jordan. We've seen them do it in Iraq. So that was the stage that Iran had. That was the power that they had. Well, what's happened since October 7 is the Israelis, by and large, with us, support, certainly, with our equipment and our kit, were able to destroy Hamas. They were able to decimate Hezbollah in a matter of days, including killing all their key leadership, so much so that Hezbollah hasn't done one thing in this into retaliate against Israel since Israel and Iran had been at this attack, the US went in and did a pretty good job weakening the Houthis. And then another thing happened, Iran's closest, really, and only ally in the Middle East, Syria Assad, got driven out of power in a matter of days and had to seek refuge in in Russia. And so now a country that would have been aligned with Iran on this time is sitting not just on the sidelines, but vocally against the regime in Iran. So if you look at that and now combine it to what the Israelis did. Right during this 12 Days of War, they did a couple things. They went in and, of course, took down all their defensive systems. They did that back earlier when there was a previous strike. But then they went in and finished that job off. So they quickly got complete air superiority over the corridors they wanted to operate in Iran and then the Israelis took out key leaders. This is significant key leaders across the Iranian military force, but especially what's called the IRGC or Quds Force, that's the arm of the military that runs all those proxies and owns all those missiles. In other words, they went out there and decimated these and killed these leaders, where they slept in their residence, where they worked, when they were commuting, and they took them out. And if you can imagine how destabilizing that would be, at the same time, they attacked all the missiles and systems and what would be the backbone of support, the places those things are built and manufactured, where more can be replenished. They destroyed those missiles and systems in their own country, while they went after the nuclear sites, with the exception of Fordow, which was deeply buried. And then we saw the United States go in and use that system that you described against it. So what you have now is an Iranian regime that is attacked in the following way. Their military was weakened, their IRGC Quds Force especially weakened. And now that's weakened the Iranian regime, but it's still there. The regime is intact. And so that's the stage that everything's set in now is a tremendously weakened Iran, but you also heard the Supreme Leader step up and say, we won, and that's because his bar for victory is regime survival. Basically, he stood up to the blows that the Israelis could do, the blows the American could do, and is still in control of his country, and all the rest of the stuff, though we build that over time, is the lens that they look at it through, and that's kind of the stage we're in. And that brings us to the nuclear site assessment. But let me stop there before we talk about that, and see if you have any questions on that frame setting.

Philip 17:17

Sure we'll come back to regime status, whether Khomeini will be able to retain his power. You have some insights into some of the diplomatic initiatives with the US administration and the Israeli leadership, so we'll come back to that. But I would like you to touch upon before we go to nuclear, what you saw in the use of technology, techniques, procedures that just led to this extraordinary set of events where the United States, well Israel and the United States, jointly controlled the airspace and had decimated much of the senior leadership of the Iranian Quds guards, and really put a sense of panic in the Houthis in terms of, were they next on an exploding pager?

VADM Donegan 18:10

Super, yes. So, you know, this gets to the heart of SHIELD, really, Philip, when you talk about it, you know, with SHIELD’s, focus being on, on, on autonomy, and being on space, and being on AI, being the enabler for all of those and how they can, how they're coming together for the future. What you saw the Israelis do was facilitated by all of those things. Think of the ability and the deep penetration that the Israelis must have had into the Iranian network to be able to know where all their leaders were at that given time that they needed to know. In other words, and it wasn't just one, it was all of the leaders. Another example, as you mentioned, was their ability to get into the supply chain of Hezbollah, probably equally into the Iranian supply chain, we just haven't heard that. And how do they access that? They assess that access that through some human intelligence, but predominantly electronic intelligence that comes from space. It comes from systems that can understand signals intelligence, but also can understand how networks are put together. So think about cyber right? So clearly, the Israelis had to have access where they penetrated all those networks of the Iranians and then exploited them to understand not just where they were, but what they were doing and how they were making decisions. And then, and then, when they went to employ they didn't just take take the systems out by flying overhead at 40,000 feet and dropping bombs. You probably saw that they had forward deployed elements in the host country of Iran, that deployed drones that helped finish off the integrated missile defense systems, anything that was left from what they took out before. They took that out before their fighters ever got to the airspace, using the same kind of things you saw the Ukrainian Jews, but on on steroids. So then, then what else? Of course, they denied the they would deny, then to blunt any attacks that were coming back on them. They deny. They use those same kind of systems to deny the Iranians the ability to do precision targeting with GPS type denial systems and such. On the inside, the Iranians were doing similar things, denying GPS signals. But the but the kit that the US used was able to be much more. I mean, that the Iranians used could work through all of that problem. So in essence, you saw cyber, you saw space, you saw AI all put to use. Because if there's one thing the Israelis are experts at, it's integrating all that information, infusing that phenomenal intelligence they gathered to make sense out of a picture that they could then exploit in their combat operations.

Philip 21:02

Yeah. Well, thank you for that. It's not by accident that we see as SHIELD. A lot of fascinating companies started by Israeli former military technologists, entrepreneurs, so you were very early to introduce cyber into Central Command. That was one of your duties and innovations as the Operations Officer, technology has changed rapidly and in that time. But how would you assess the use of cyber specifically among all the other asymmetric technologies that we saw and maybe didn't see, but no, we're, we're operative in this operation.

VADM Donegan 21:45

Yeah, I'll have to be careful here, because I was intimately involved with the planning for the operations that we would do here. That, as you can imagine, intertwined the National Security Agency operations, which, which worked for the intelligence community, with CENTCOM, which are the employers of all that, right? And if you think of cyber, you have to think of it. Everyone likes to think about the offensive capabilities of cyber, right? And, and you can go in there and like the Stuxnet virus, and destroy centrifuges without ever having to put somebody on the ground,

Philip 22:20

One of the earliest Israeli use of cyber against Iranian nuclear proliferation going back over a decade.

VADM Donegan 22:29

That's right where they entered a particular set of malware directly into the control systems of the centrifuges can cause them to spin up at a higher rate of speed and basically destroy themselves, if that makes any sense. So one of the things that that's always at play when you have that's the things that people think are the cool things related to cyber. But cyber has many other uses. It has the capability of giving you access, to listen and understand and then further develop networks. And AI gets applied to that, and now you have a much Completer picture of how Iran does things, how they supply things, how you learn their supply chain. And so the other side of cyber is to defend, but it's also to use those accesses to understand so then you can take apart the enemy. And so I would say that when we were in the initial phases of bringing cyber into our operations, everyone wanted to go to that offensive side. But as you can see, the way the Israelis used it there, there was probably offensive elements of their cyber, but the key elements of their cyber was to under to use it as access to understand and augment the things you're getting from space and signals intelligence and stuff, when you actually can, can, can use it to to understand exactly what the enemy is doing, how they're communicating with each other. And now imagine you're one of those Iranian senior officers or generals and all of your buddies got killed, and now they promote you. You don't know what means you can talk on that isn't being listened to, and you don't want to be the next one to go away. And you don't know who even you can talk to, who's a good guy and who's a bad guy. You don't know how the Israelis are getting information on where you are, and you don't know what, who you can give an order to that won't be overheard. So you can imagine the paranoia that it would put in place. And think about that as an amazing use of cyber that isn't necessarily talked about when you get a glom on to we can take out the centrifuges.

Philip 24:38

It's basically a psychological operation in cloaked in technology, Admiral, you were going to discuss the nuclear status now with the three destroyed sites. We're still awaiting, I guess external intelligence on the battle damage assessments, the so called BDA. What's. Your take. I mean, you were involved in the initial planning, you saw what happened. And I want to also ask you, what's your assessment of the Commander in Chief, leadership and Chairman of the Joint Chiefs of Staff and just executing the US part of the operation in this surprise operation Midnight Hammer?

VADM Donegan 25:22

Well, it's interesting to bring that up, because, as many of you know, Dan “Raisin” Caine is the chairman now, and he was, you know, he was formerly associated with SHIELD, so Philip, you know him. Well, some of the others out there may not have met him, because he had to step away from that role when, when he took that job. But there's no tougher job than the chairman. When you have a crisis like this, the chairman's job in that time is to is to take the options that the combatant commander, this case, Central Command brings to present to the President. Because what a president wants isn't an answer to the problem. He knows the problem exists. He wants a range of options to choose from. And if you can imagine in this situation, President Trump had many options to choose, including joining Israel, right up front, right and being part of this operation, or, if not joining them, how do at what time should he join? Should he join at all and nd is there, if we join to what level do we join? Do we join? Take for do or join more broadly? And what's our role in defense of Israel? All of those things together are what general Caine would be talking to the president about, and he'd be helping him understand those are called courses of action, which ones the president chooses. Like any CEO of a company, he's not going to want just one option. He's going to want to understand the range of options he can employ and have the right advice on which ones of those so general, Caine isn't controlling operational forces, quite the contrary. He's advising the president on helping him select those, those range of courses of action that would be in the national interests of the United States. And we saw how that played out.

The President didn't choose to join Israel on the front end. He chose to let Israel play this out. We did, of course, provide them the kit, provide them the weapons. We probably collaborated on intelligence. Maybe we collaborated on air to air refueling and things like that, but we weren't directly over Iran with them initially, and then there was a choice made to go in and finish the nuke sites off, but we also defended Israel. We were active participants in in keeping the hundreds of missiles that were fired at Israel, and blunting that effort to significantly reduce their effectiveness when they got to Israel. So let's talk about the nuke site. There's lots of press about it, and lots of people that want to tell you this or that, fundamentally, Iran's if you have to look at Iran's nuclear program, not as one thing, in other words, not as what's in for do you have to look at it as, what if the entire program that gets you to a nuclear weapon, and that includes the centrifuges that spin uranium to get it to the right level and purity that you want right? It also includes, though, the technology to put that on some kind of delivery device. It includes the technology to make the bomb. It includes all the scientists that have knowledge of it. It includes the other leaders that run the programs. And if you put that all together, and you look at what was attacked and what is gone today, Iran's nuclear program as it existed is gone. What remains are elements of it, if that makes any sense. But the string of programs, the entire program itself, is no longer in existence. What is there are there's, there's probably a certain amount of of uranium that's enriched to 60% that is somewhere however, we may find out that the lion's share of that is buried in the taunts, and some of it is probably buried at for do. Their ability to spin centrifuges, to get uranium above 60% is damaged in some way, their key leadership that runs all these programs is gone. Their ability to make the actual bomb itself, the metallurgy and all that goes with that has been decimated. It doesn't exist anymore. So that's how I can make this statement. Over time, we'll understand how much of Fordo was gotten at. Now, not being an expert, and I don't see the BDA today, what we did wasn't designed to collapse the entire internal, all the tunnels that exist in for, do we were, what was, what that operation was designed to destroy those centrifuges that that could spin uranium to a higher level. And as you heard the International Atomic Energy Organization say, uh. They're 100% assured that those centrifuges can't do that anymore, because their tolerances are built that they can't take vibration. They're built to these super tight tolerances because they spin at super high speeds. And if you can imagine, it doesn't take much to damage that. And then when it's damaged, they become unrepairable. So look at the program that way, as opposed to, oh, is it for dough, etc. And think of Natanz. When that site was attacked, it may be years before anyone can even go in there, because there was uranium stored there, and all of that is now buried, and what's contaminated with alpha particles, they may not be able to go in and even inspect it. Does that make sense?

Philip 30:41

It makes perfect sense. Thank you for that assessment. So regime stability or instability, it's your guess is going to be better than most. This is something that's very difficult to plot out, but you spend a lot of time thinking about these issues in uniform and actually in some of your post Navy career life on various policy boards. What are the prospects for Khomeini's regime to remain intact now that their largest source of leverage, the nuclear blackmail you know, has been severely degraded, right?

VADM Donegan 31:25

This is a real interesting question, so I'll frame it this way, anytime the United States is involved in trying to impose a regime change, we really weren't successful, except you could argue once with Japan, and that's because of unconditional surrender that happened, and we rewrote a constitution for the country and helped implement it under MacArthur, spoke to Germany, again, an unconditional surrender, but maybe less successful, because we only got the world, only got about half that right at the time, and Germany got split up, and it Didn't work out the same way. But beyond that, our track record for regime change is not good, and the reason is because it's very difficult, it's impossible, probably, to build a military plan that can get you regime change. What you really want in Iran is a revolt, right? You want the people of Iran to cast the leader out, and then that puts you in a different stage. It's unlikely to have that happen in Iran, at least in current times, so that may come over time, but it's unlikely, and that's because the regime has built a system, a network of command and control, that suppresses any kind of revolt early. And I'll give you one example, if you remember the women's issues that came up that started to gather attention about a year and a half ago, and and everyone thought this was going to be the beginning of something in a matter of a few months, that was put down, and it's put down with the regime that roots that out as systems. And and people know that if, if they get vocal, them, not just them, but their families, end up in prison and jail and off somewhere. So, so the regime change thing is, is not something you design a military operation for. What you can do is topple a government and have a failed state, right? And so could that happen? It's unlikely now, because the Supreme Leader is still there, and if he were to be killed as an individual, that mechanism for the would still exist with a different leader.

Philip 33:33

So you and I have had some discussions recently about the role of the Trump administration having a restraining influence on the Israeli leadership? Do you want to just provide a little bit of color there?

VADM Donegan 33:50

Well, one of the problem, you know, one of the most interesting relationships that exist is probably the one between Bibi, Netanyahu and Trump. But no one really knows what that relationship is, except the two of them. But it certainly had, you know, it's, it's had its ups and downs, but where, where they collaborated, you know, you'd have to argue has been in this operation was, well, right in the end, Israeli did the lion's share of the fighting with us, kit, and when needed, of course, you know, campaigned hard to have the US do what they could do in Fordo. Not that the Israelis didn't have a plan on for dough, but they knew they couldn't be as successful probably, as we. We could and the US did choose the operation to go after for dough. But after that was over. I thought that, you know, the US was really clear that we weren't going to be in it to go much farther than that, that that's where we wanted to go. And then President Trump wanted to influence Netanyahu to cease the fighting at. That point that that the nuclear program was decimated enough, as I described, and, you know, and we were sharing, of course, and had the same intelligence the Israelis had, and, and at the time, he probably understood the, you know, this revolt versus regime change problem set that I described, because everyone's been studying it hard and convinced Netanyahu to stop at the same time, though, Netanyahu, just days before, was indicating, even before that, that he was going to that they had probably achieved the key objectives that they wanted to and I'd say this, that I don't think the Israelis would stop if they hadn't successfully gotten through everything that was on their list that they believe that they could still get at. So that kind of brings us to the ceasefire. Philip, which is, I would say that it's, you'd have to look at it. It's probably a one sided ceasefire. The Iranians have stopped. The Israelis are watching. They're doing their own BDA, they're understanding. And I believe that in their mind, they reserve the first right of refusal to go back in there if they find something that they should have gotten that didn't get serviced. I hope that doesn't happen, because I think, you know, there's a great opportunity for Iran to be at a table now, somewhat disadvantaged, but we have to be cautious, because Iranian, the Iranians, if there's one thing that they're experts at is negotiations. They correct. They are really good at that, and they understand the interplay of the international community very well, and use and use that, you know, use entities against each other to buy them time reconstitute and rebuild and those elements of the nuclear program that remained, and other things that they have, they're bargaining chips now for them at the table,

Philip 36:47

You had mentioned previously, sleeper cells in the United States. How concerned should all of us as Americans be whether, and this would not have been the first attempt by the Iranian regime to have assassination efforts against specific leaders.

VADM Donegan 37:11

So now, a matter of fact, as you know, the Iranians tried to years ago, had tried to assassinate an, you know, an Arab leader here in the United States, it was failed and foiled in but the example you know that that whole operation is is what they have as part of when I mentioned proxies and goods force and terrorism, it's why the United States designated the Quds forces a terrorist organization, because they do have those sleeper cells out there. And they're not just in US countries. They're in our allies countries. They're in Arab countries. You know they and what I what I can say about it, is you can never say they're not you know that that's not an issue, but you can imagine it couldn't be higher on the priority list of the United States intelligence services, the Israeli intelligence services and the intelligence services of our allies and partners, and no matter what you see at summits and G sevens and such about people not getting along, the one place that the collaboration across intelligence agency is, is, is, is intertwined, is when it comes to counterterrorism and the passing of this kind of information. So I won't say, Don't worry all as well. There's just not some business, not a reason for Iran to do that right now. They're in a position now to to negotiate from what they believe, where they still hold some cards to play. One of them is, do I even participate with the, you know, Atomic Energy Commission? Do I walk away from, from the nuclear proliferation treaty that allows inspectors to come in? That's a card to whatever is left to their of their nuclear program to to the other things, like the other weapons they have. The Israelis destroyed a lot of their long range ballistic missiles and drones, but they still have 1000s of missiles that can range all the Arab countries that are virtually untouched other than their leadership and command and control has been attacked.

Philip 39:20

So okay, let's talk a little bit about your relationships and perspectives with Gulf allies. We've talked a lot about Israel, but MBs and Saudi, the UAE, Bahrain et cetera. And then I want to expand the aperture to think about what's happening in North Asia, with China, as well as the current and active hostilities on the European continent, with Ukraine and Russia. And what lessons are being drawn from the military and political leaderships in those areas based on what they're seeing on the ground in Israel?

VADM Donegan 40:00

So if you can imagine, and you're a you're a China, you know, or you're a Russia, you're looking at this whole operations through a different lens than we just discussed, right? So let's take your Putin for example. You're somewhat ecstatic because you're going to have a free hand while this is all going on, to continue your operations that you know, when the world tends to jump on one problem at a time. And so for if you looked at the news cycle and the attention of world leaders during these 12 days, there was little about Ukraine going on. And even though the horrific things Putin was doing, he continued to do so for so from that lens, you know, Putin is watching this, comforted that the attention isn't on him at that moment in time. But if you're China, it's a different lens. First of all, you get the majority of your energy from the Middle East. So you don't want there's lots of talks about Straits of Hormuz closing, you don't want that happening. So you're behind the scenes ensuring that you can still get your oil and energy right, and they pay for it at a regular price to the Gulf nations. A large portion of the GDP of both Saudi Arabia and the UAE, and to some extent, Qatar, comes from dollars paid by the Chinese for that energy, then the China gets at a huge discount the black market oil that Iran is not supposed to sell. They're selling that crude to the Chinese. So basically, you want the Straits of Hormuz open. So does Iran, because they continue to then get money from the Chinese, who are the only folks really buying that oil from them. But the other thing you're looking at in China is you're looking at two things, Ukraine and this war, and seeing different ways of warfare being fought. In Ukraine, you saw this innovative use of drones, innovative use of technology, commercial Fast, fast fast reaction time to refine weapon systems and make them work to where the Ukrainian was. The Ukrainians were able to decimate the Russians Black Sea Fleet without a navy, right? That's innovation, but now you watch what the Israelis did, and see this way of war fighting that not only went in and took out targets, but did it from internal to the country and decimated leadership at the same time with with precision accuracy and get into the supply chains. So if you're China, you're probably looking at all of what you see and saying, okay, you know any future war is going to have dimensions that I better really understand my vulnerability to before I take that step going forward. And then one you didn't mention is North Korea. So if you're the leader in North Korea, your lesson is clear. Uh, never give up your nuclear weapon. So, you know, thinking you better and you better be careful where they are.

Philip 43:09

Ukrainians would agree with that. Ex Post Facto after the fact, yeah, yes, yeah, yeah, massive leverage. Uh, given up, or, you know, at risk.

VADM Donegan 43:20

If we talk about our Arab nation partners, let's just talk two of them for a second, Philip, because I think they're super important to especially to SHIELD and and those in tech, you know, between Saudi Arabia and and the UAE, you have two of the largest investors in tech in the world, right, the and they've decided both those countries to go all in when it comes to moving forward with the United States in the development of AI and and you're not going to see a change to that and that it means their sovereign wealth funds are looking at in different ways. Saudi Arabia is doing it different than the UAE. Are looking at the right firms to be involved with in the United States and globally, but specifically in the United States, to get on the cutting edge, and they want to be part of it early, so they can have claim to the utilization of it if needed, of those capabilities as they're developed, if that makes sense, and it can be by having part ownership, or it can be by co-development, like G42 is doing in Emirates.

Philip 44:33

Fascinating, because you were very early to identify G42 specific to the UAE in their artificial intelligence ambitions. So I suspect you would agree with the overall assessment that these asymmetric technologies that are fundamentally commercially developed technologies by mostly startup founders, scrappy startups coming out of. University labs and the like, as opposed to large research labs, you know, DARPA being, you know, the prototypical one going back from the Cold War. Um, and not necessarily coming from large defense primes. So these technologies are, were very much on display. They're not going away. That's why we set up SHIELD to go after them. But you know, we when we when Raj Shah and I decided to do SHIELD several years ago, before actually having a fund business and a full team. This was before Ukraine. This is before what we just saw, and it's unfortunate that the world's going in this direction, but that's not our decision. It's going in this direction. You and I were talking earlier about alternatives to GPS. Can you just share what happened when, when you were in the region last week in terms of your lack of GPS and how that even happened?

VADM Donegan 46:06

Yeah, sure. Before let me just finish one thought that you just brought up there, and then we'll do the GPS piece. What's crystal clear to me that the reason that you're seeing this heavy investment in AI being to the earlier stage companies is because it's about speed to innovation, right? It's about the it's about what you saw in Ukraine, right? How can I take something and rapidly develop it? And when you talk about primes, it's harder for them to have that same cycle of speed, and although some are are working on it. So what the, what's, what's really cool about this is these Arab nations, especially the UAE and Saudi have decided, when it comes to AI to invest, to be with the United States and not China and and that was a hard, singular decision that they made. MBZ in the UAE, made that decision to step away from China and join with the US, because they see the future being in those same companies you described. If that makes sense, they know that we're going to do it not just in the right way, but will also be profitable, and will, our American businesses will drive it to the right answer, right So, and they couldn't get that with China. There's no way they could get that and and, you know, NBC was supposedly said it was easiest decision. MBZ is the leader of the United armor Emirates. It was the easiest decision he made to align and make sure G 42 his work was with the United States and not China. So GPS, you know, is interesting because it's kind of indicative of technology, right? It's what allows our weapon systems to be super precise, right? And there's different ways to guide, etc, but the advent of GPS weapons changed warfare right before to get a weapon on a precise target, you needed a laser. You needed something because the inertial measurement units weren't as precise, right? They could get it through the window of a building, you know, to hit this particular whatever. So, but then what came up, just like you see in drone technology now, counters to that, right? So, okay, if I have something I want to protect, I can put GPS jammers all around that target, and then it can never be struck to the precision that the weapon system could have. It may get close, but it may not get as precise as they want it to be. And think about a bunker busting bomb trying to hit one tiny little shaft to get to go down as an example. Well, when I was in the entire time I was in the Middle East, my iPhone here, and I've got it in front of me, it never told me where I was accurately for the duration of that conflict, and the time was never corrected. You know, I was in Iran one day and in Europe the next day. Because obviously, you know the coalition forces, the you know, the allies of the US are using GPS jamming so that the Iranians can't target but the Iranians were also using it, and they were using it in the waters of the of the of the of the Arabian Gulf. And if you go and just do a Google search, you'll see that there have been almost ship collisions and ships going off course that are trying to drive back and forth through the Persian Gulf because GPS isn't working anymore, or wasn't working. Reports are now. It's kind of back to normal, and they also so that kind of technology is classic. We see the same thing in drones, right? Drones have a capability. So where's the technology going in drone defense, right? And how do I counter the drones? And then it's just the technology starts to just build on itself, but, and those. Countries that understood it, like the United States, we can still deliver those precision munitions where we wanted to, despite GPS jamming and Israelis using us kit, were able to do the same thing.

Philip 50:10

Fascinating. Admiral Donegan, thank you so much. This has been a fascinating conversation. You and I get to have these frequently, but for many of our investors and friends, this is rare and is certainly privileged. I am much more optimistic today than I was even a couple of weeks ago, just given the massive shift in facts on the ground in a volatile part of the world, I think there are many lessons on deterrence that are being absorbed, as you point out, with adversaries the United States that will take note, the technologies that Shield Capital is supporting are very much on the ascendant. Going to be increasingly important. And you know, good guys and bad guys may have access to it, but we're supporting the good guys and mission matters. That's why we do this, in addition to generating returns for our investors. So just want to thank you and very grateful for everything you've done for me personally and for Shield Capital, and I hope you'll be at our California event so that some of the people that you haven't met are able to spend time with you.

VADM Donegan 51:27

Well, thanks. I'm also optimistic, Philip, I think, from the Middle East, time will tell on how we capitalize on what's been achieved. Be careful, though, the Iranians, you know, want to slowly rebuild and you know, and that can happen over time. They got a big hurdle to get through, but there's tremendous opportunity now for maybe sustaining this change in the Middle East for the good.

Philip 51:53

Fantastic. And with less than two minutes, I think we'll leave it there. Shield meeting, start on time and end on time, sir, thank you so much. Greatly appreciate it. Thank you.

• How Obviant is building the “source of truth” for DoD budget, contract, and program data—replacing PDFs and spreadsheets with structured, searchable intelligence and providing its customers with a decision edge

• The painful reality of legacy DoD software systems like ABIDES and DTS, and why commercial technology should be powering national security workflows

• How the DoD is rewriting acquisition playbooks—embracing OTAs, CSOs, and the software acquisition pathway to bring in non-traditionals faster

• And more…

You can listen to the podcast on Spotify, Apple, YouTube, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please let us know if you or anyone you know is building at the intersection of national security and commercial technology. And Obviant is hiring! Please reach out to their team if you are interested in working in the future of DoD acquisitions intelligence. Tune in next month for our next episode!

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Maggie 00:00

Welcome to the Mission Matters Podcast, a podcast from Shield Capital where we explore the technical opportunities and challenges of developing and deploying commercial technology to national security customers. I'm Maggie Gray

David 00:16

I'm David Rothzeid

Maggie 00:19

And we are your hosts from the investment team at Shield Capital. On this podcast, we discuss the technical challenges of developing and deploying commercial technology to national security customers, as told from the founder's perspective.

In this episode, we're joined by Brendan Karp, the CEO of Obviant, a government market intelligence platform. I had a lot of fun co hosting (and also a little bit interviewing) this podcast with my colleague David Rothzeid, who led this deal at Shield Capital. He really could have actually used this product back when he was an acquisitions officer in the Air Force, so he was the perfect person to have on this podcast talk about the exciting world of government, acquisitions, contracts, budgeting, data, etc.

David 01:16

Well, Maggie, I gotta say it was an absolute honor to finally come on to the esteemed Mission Matters Podcast, especially Yes, to talk about a company like Obviant that may appear mundane to the casual observer, but for those of us steeped in this national security government procurement system, this is truly critical, especially if we're going to achieve efficiencies in government and better outcomes for taxpayers and for startups that are trying to sell compelling technology into the government apparatus For those who don't know, but maybe you do, because you're listening to this podcast, the procurement government procurement system is made up of 1000s of different systems and information sources. Alarmingly, some of it still runs on paper and spreadsheets and is siloed off in hundreds of different databases. And you know, just for an example, the upcoming $1 trillion defense budget, yeah, it's going to be delivered in 1000s of pages of PDFs. And you know, for Obviant, they're tackling this problem by building the data source of truth for programs, acquisition, organizations and budget data for all of the Department of Defense, they've built an AI platform that creates a common data operating picture with incredible workflows on top of that data foundation. And I'm just really excited for that conversation we had with Brendan.

Maggie 02:38

David, Brendan, so great to have you guys both on the show today. We have Brendan Karp here from Obviant, the CEO of Obviant, and then David Rothzeid from the Shield Capital team is joining us today for this special episode on the world of DoD budgeting and contracting and acquisitions. Thank you so much for coming on the show. I want to just start laying the groundwork. You know, can you tell us a little bit about what is Obviant and, you know, how did you get into the world of government contracting in the first place? It's not exactly the sexiest topic that you can end up in.

Brendan 03:15

No, definitely not. There's not, typically not how I describe it, you know, I think it's a it's a really niche but, but somewhat important thing is, especially as you think about the budget and the acquisition side of it. So I'll give a little bit of background as to why I chose to focus on this problem space.

So I grew up in the DC area, in around the beltway, but actually had no exposure to government whatsoever, right? I grew up in a family with no government involvement, and you know, the last company I was building, last startup, most of that business was in the private sector, funding early stage technology companies. However, we scaled a $20 million Homeland Security innovation program where we would take those same non traditional companies and fund them around mission needs. And that was my first exposure to public sector problem sets. And I was hooked, because for me, it was this amazing intersection of getting to build but for a problem that actually mattered, right, like the public sector mission sets, we got to focus on for that program, first responders, homeland security use cases, was incredible.

And the flip side of that story, though, is that although is a ton of fun working on those problems, it felt like punching a pillow at times, trying to make progress. And I think anyone, and especially I know David, will resonate with this. Anyone that's been part of the government acquisition or innovation ecosystem feels that right. So, flash forward. We scaled that program great. The impact, honestly, was somewhat limited by that acquisition process, and I knew I wanted to build a company from zero again. And the thing that was missing for me in every other space that I explored, whether it was enterprise SaaS or otherwise, was that mission piece like that was really real for me, of like, why am I going to wake up every morning and want to work? On this problem set, and it was the impact. And so for me, it was kind of a no brainer at that point to focus on the government space and take all those learnings in that experience that I had building that last company and do this specifically in defense and national security, because I truly felt that this was the highest order problem of our time to work on, and that's what drove me to start avian and work on this, this challenge.

Maggie 05:23

And David, you led this investment at Shield Capital, along with Mike Brown. What got you so excited about this space? You're obviously an expert in the acquisition space. What about Obviant really stood out to you?

David 05:36

Well, thank you, Maggie. I think expert is definitely in the eye of the beholder, but I have had the privilege of being in this defense acquisition system for quite a long time, and I will say very rarely in my you know, I guess 15/16+ years of being around defense acquisition rarely have ever come across somebody who was like a complete independent party, didn't grow up in the system, wasn't an acquisition or a contracting officer, and really understood the subject material and not just that, like the high levels of, oh, the defense industry base, it's shrinking. Oh, the defense industrial complex, it's challenging to work with. Oh, I've, you know, tried to work with it, won a contract or didn't win a contract, and it's terrible. Like no Brendan truly understood some of the insides and outsides. Like, I think, the first time we met, we got very wonky on the what's called a DoDAAC, a DoD activity, address, code, and I would be hard pressed to find 5% of acquisition officers in the military who know what a DoDAAC is, right. So like some of this nuance stuff that I knew that what Brendan was building would be very compelling. And I will say at first, when I started exploring this space of what are all the tools out there that can help a company understand the marketplace, right, the federal marketplace, at first, it was, who can I partner with on behalf of Shield Capital for all of our portfolio companies and try to get them a discount? And when I met Brendan, it turned into, okay, how can I be a partner and collaborator with Brendan on a full time basis, ideally, through an investment to help accelerate the opportunity that's in front of us to really build out the source of truth around government procurement data.

Brendan 07:37

What one thing I gotta call out is, I think that that is I think that that is the one and only time that having knowledge of what a DoDAAC is has actually gotten me points, because it is a terrible party trick otherwise.

David 07:49

So, yeah, I wouldn't bring it up too often otherwise,

Maggie 07:53

So Brendan, can you tell us a little bit about what is actually the state of tooling to track DoD contracts and budgets and acquisitions today, both within the US government and in the private sector, and how is Obviant really pushing forward the state of that tech? And David, I don't know if you have any horror stories here from your time In government, if you want to chime in with anything like that.

Brendan 08:26

Yeah, I think just, real quickly, and then I'll let David speak to some of those horror stories, or whatever you want to call it, you know, truly appreciate, you know, all the belief and conviction that David and you and the team at SHIELD have had in us. But you know, that was always our goal, right? Was like to that point where he was able to look and look and say, this person or this company gets it right, was always like, how do we build this for the people that know this system and have a deep level of empathy for them, of like, are working it inside and out every day, and represent the data in the way that they wish they had it right.

And so to your point on, what is the landscape of tools that is a lot of the challenge is that the way that folks like David and others who have been in those chairs, right, the tools they wish they had don't often exist. It's often PDFs or spreadsheets, phone calls to other people who have information that they don't, right, and then separated different enclaves and systems that don't talk to one another. So, not only is there a base level access to the data problem, right? So we don't even have access to that, and that takes weeks, months to coordinate that for much of the information, which is open source, by the way. The second level is then, even if we had access to it, the tooling that we're used to in the commercial sector, right? You think of like something like air table in terms of how you can manipulate simple data sets or build your own database, you know, analytical dashboards. None of that really exists in the form that we have in the commercial sector, side, in the government.

David 09:47

Yeah. I mean, I'll just go back to my time at the Pentagon. We used a system called ABIDES, which stands for automated budget, interactive data, enterprise system. It recently got replaced in 2022 with its with a new thing called program and budget enterprise system. But ABIDES was built in the 1970s It was DOS based, and you had to, like hit F2 and F7 to move through it. And this is how the budget was built, program element by program element and then rolled up into some other system at OSD, and then sent off to the office of management and budgeting OMB. And it was just sort of like, like you had defense contractors in the Pentagon solely for the purposes of being able to, like, maneuver with that type of a system. So, you know, it's really not a surprise that the Department doesn't necessarily understand everything that's going on when you're still constrained to systems and large parts that were built, you know, in the 1970s on these mainframes that really should have gone away a long time ago.

Maggie 11:05

So Brendan, tell me why is Obviant need to exist in the first place, and who are really the different kinds of users that you guys are targeting?

Brendan 11:16

Yeah, so go back to what I was talking about a little bit ago, right? Which is like, how does this process actually play out right now? So if we talk about the acquisition process, where is the funding? What budget is available? What are the different programs that that funds? What who are the organizations and the people that actually own those programs? What is, what does Congress think about that? And how are they changing that money, adding to it, subtracting from it, and then the company's capturing it. All these questions are surprisingly difficult to answer, right? And most people can't get the answers, not that they don't know how to but it takes a long, long time to do it.

Just answering one of those questions could you take you weeks of if you're on the outside of the building, diving through 15 different PDF documents, three different websites, Googling on, you know, on searching on Google, or looking through LinkedIn to kind of connect those dots and all that information exists out there in this weird mix of structured and unstructured format, right? So there is no actual source of truth to actually follow the money, and so that first archetype that I'm speaking to is on the private sector side. And when we started Obviant, that's who we thought we were solving for.

But what we quickly realized is that same problem is equally as acute within the building right like to make critical decisions, and if you're in David's shoes to actually execute acquisition or innovation programs, you don't have that data at your fingertips, and so what do you do? You have to do that same research process, dig into different systems or make phone calls and try to get that data from other people right. So what we do is, we ingest all that information, so we pull from 1000s of different sources, like an open source intelligence company, right? And fuse that all together into an actual source of truth, right? We use AI and machine learning to actually structure and connect that data up.

And so who that benefits is that we've realized is on the private sector side of things. We can help a company understand what is their execution roadmap, where is their capability relevant? Where can they solve problems, and where's their funding for it, from an investor standpoint too, where are the largest markets and where are the trends going? Where should we deploy capital? And then within the government, it's actually how to execute efficiently, manage their portfolios, collaborate, understand where there might be duplicate efforts and could be, could be, you know, working together. And lastly, one of the biggest things is technology transition. So we're funding all these different capability areas, but where is their long term sustainment funding and partners that we can work with? And so kind of tying all that together, right, if you listen to that, that all those parties are asking similar questions from different angles, and it all kind of boils back to this fact that there is no common operating picture, from a data standpoint, for them to ask those questions and get an answer in a structured, organized way.

David 14:12

Yeah, that was masterfully said Brendan, and couldn't agree with you more. You know, the way that the DoD on the inside, it is organized around different functional areas. And so if you were to say, what is the budget for this grouping of programs around this technology area, and who are the organizations that are executing, it would be a very manual process to put it together. In fact, it would come from some sort of a request for information on one of those terrible systems that, you know, does taskers, and then, you know, would kind of filter out to a bunch of people like me, you know, like a former O-4 or O-5, that are, you know. Providing oversight for a myriad of different programs. And then we would reach out to the outstations you know, and say, hey, does this thing you know, is it? Do you think your program subscribes to it?

And maybe I'll just give like a specific example, when I was still in the building, the Undersecretary for Research and Engineering highlighted 14 critical technology areas, you know, things like biotech and hypersonics and artificial intelligence and cybersecurity. And the way that the Department kind of rolled up how much funding was going into these different technology areas was by asking all the different like program elements. You know, how much of your budget is AI, how much of your budget is hypersonics? Of course, like the program I was on, we had $0 in hypersonics, but my program was the advanced battle management system, right? Which was the Air Force's major investment into Joint All Domain Command and Control, which was another amorphous topic. I sort of, I don't know, I don't know how much of my $5 billion budget over the future year defense plan is associated with artificial intelligence, but I gave a number.

And so it's like these types of things that where what Brendan is doing is taking the actual data that is being executed against these contracts and lining it up to the organizational structure and the people that are executing them and the programs that Congress cares about. And I guess what, creating this, this taxonomy whereby you can understand what these similar but not necessarily functionally aligned elements are telling you and at a high enough level, you can really derive some valuable insights. And so whether you are a program manager doing market research around a solicitation topic area, and you want to know who are all of the performers that have executed against these types of capabilities in the past. Or you just want to get better insight into how much funding is going into these types of capabilities, you know, based on actual data that is being executed against, whether it's in, I forget what the Federal Procurement Data of FPDS, right? You know, you can start to get real meaningful understanding of what's happening in the Department, and that can greatly inform where you choose to apply your resources or how you do your evaluations.

And then on the VC side, like, totally agree. You know, if we're seeing, you know, how many counter UAS companies do we see Maggie, like, so many, and how much actual budget is going towards this area? Like, not that much. Or if they are, who are they going to it tends to be the large defense primes. You know, it becomes a bit of a challenge to make an investment here, because one the total addressable market isn't that big for who you would expect to be the largest buyer, national security. And it seems like it's got pretty well locked down with the defense prime. So, you know, these are just ways that we can help inform our startups, you know, or inform our investments, and then help our startups think about how they can penetrate the defense industry, the defense procurement system.

Maggie 18:32

I'm curious Brendan, how does Obviant actually maintain its database for these insights? You know, I'm thinking about the President's budget request just came out, and they're devoting a lot of resources to programs like Golden Dome. And I know this is a new term, but it's probably going to actually incorporate a lot of existing and future programs. Like, how do you guys think about organizing that data for something like that?

Brendan 18:56

That is one of the key questions we get all the time is one, A) how do we organize it? And B) how do we keep it up to date and make sure it's accurate? And so one thing that I think is really important, so obviously, startup urgency is critical, right? And moving fast and with incredible speed. But I also felt that building this space, you have to build something that really works, right? Like vaporware in the government market does not work, right? And that there are real mission use cases that has to be dependent on and so for us, we actually went heads down and did nothing but data engineering for a year to figure out how these data sources were structured, how we could accurately represent them, and build the pipelines and structuring mechanism to actually keep that up to date, right?

So, to your point, you've called out a few of the larger sources that we pull from, but there's also 1000s of other sources that we have to ingest to populate that, that core data structure and the schema, right, that underlies everything that we do here at audience. So to your point on, how do we keep it up? Keep it up to date? Well. We're constantly going out there and collecting more information, right, but making sure that when we do structure it, that it is at parity and we can trace it back to a source of truth, that this exact piece of a PDF or this point in a video hearing, right? And then now, because we've done that, we can consistently add to it, right? So how do we keep it up to date for existing sources, that just happens in the background. But now, when we work with folks on the government side or within industry that say, Hey, we also have all of our own data that we want to understand. What that means against the information that you collect, we want to rationalize that out against the acquisition landscape. It's easy for us to bolt that onto that data structure, kind of in a secure environment for them to unlock their own insights from it.

So the data engineering challenges is where we started, actually, before we launched a product, to make sure that we had that. And along the way, we've had to really solve some of these more complex natural language processing problems to take these amorphous concepts, right? And my favorite is contested logistics. What is contested logistics, right? It is the big buzzword. It is the it is one of the top priorities right now. But knowing that contested logistics means these 10 things which have these other seven components which relate to one another in that taxonomy tree, those are some of the hard things that we've had to do to not only A) ingest and structure the information, but then B) can, you know, continuously translate against it to unlock what people are looking for.

David 21:27

Maybe Maggie, if you don't mind, I'd love to ask Brendan a question. So, say the DoD came to you and they were willing to give you some of the inputs that would go into their systems of record. Because right now, you're only seeing the stuff that's publicly available, which in a lot of cases can be very rich, because these are contracts, right? And contracts, it's a double ledger. So like, you know, there's real money going in, and people are signing their names. So like, trust me, like it's very real. But what about getting the inside some of the messiness as the programs are being developed, or, you know, with in the services themselves, they're doing gives and takes, and then the budget rolls up to OSD, and they're doing more gives and takes, and then it goes up to OMB, and they're doing more give and takes, like, with that sort of insight, you know, what do you think something like Obviant could do for the Department?

Brendan 22:32

To that exact point, that's where I get really excited, right? Is that really, it's, a data challenge, and then how do we actually build the workflows and the product outcomes that that meet the day to day challenges that we face in the Department, right? And so to your point, you know, fusing government data, whether that is the programmatic side of things, or, you know, solicitation, CSOs, to what we were talking about, that that they might issue, and understanding what is the full pathway with that. You know, some of the things that we can unlock that we get excited do, get excited one, one piece right now is just following the money audit. Right?

We talk about audit a lot right now in terms of ensuring that the DoD finally passes an audit. That's one area. Can we trace the dollars all the way from budget through to contract execution and understand where that money went? You know, another big one that I think is super top of mind is that, when we're talking about developing non traditional capabilities, that oftentimes starts out in the R&D side of things, but what is the transition pathway for that? Right? So you fund these non traditional companies, it is fundamentally an equal parts collaboration. So like, how do you work within the building, but also to in order to collaborate effectively, you need access to the data to do that. So if you're able, at the outset, to understand, I'm funding the CSO as company, right, and I'm within one of the R&D organizations, there's realistically one of two, three transition pathways that that's going to follow to PEO missiles in space, right? Or, you know, IWS on the Navy side of things.

So really like solving these data problems and getting access to some of the other information, which, which we're working on right now with the government, can unlock a broad range of use cases, everything from the financial management side of the house and just portfolio, but all the way through which, which I'm personally most passionate about is that capability development side. How do we make sure that we actually take these capabilities that exist in the private sector and make sure they don't just die on the vine, but they actually get into the hands of the end users, and critically at scale?

David 24:32

So if I heard you correctly, you know, go back to April 2023 when Jon Stewart interviewed then SECDEF Kath Hicks on fraud, waste and abuse and the inability of the DoD to pass an audit, you think, with the power of Obviant, you know, at its disposal, and granted, would take some time, but you think the DoD could maybe actually pass a financial audit?

Brendan 24:58

What I would say to that is: what gets me really, really excited is the opportunity to partner with folks like that, right, and hopefully reach that outcome together. So I think that you know so much this is back to, you know, the product and capability and culture side of things is that taking a great, phenomenal, high performing team, which, which we think we're building here at Obviant, and pairing that with folks on the inside that feel the exact same way from the mission side of it and reaching that outcome. I think anything is possible. I really, really, really do.

David 25:28

So you know, all audits aside, Brendan, maybe you can highlight how your current customers are leveraging you today and extracting a lot of value. And if there's any anecdotes that you want to share, we'd love to hear it.

Brendan 25:44

Yeah, for sure. I think that is the most rewarding part. Is like when you're able to be part of building a product and you actually see it make a difference, right? Like it's producing the outcomes that that you, that you hope it would free user. And so I'll talk about a similar thing across all three sides of our customer base and on the company side, right?

We had a fast growing defense technology startup, right? Think Series B onward, that has a capability, and they weren't quite sure how they could actually make that hop over to the program of record side and into the program office, right? And as we know, that's a multi year battle. It takes a lot of different pieces that you have to connect and stakeholders. And so what we were able to help them understand is that for their capability, where do they actually mesh, right? And in this particular instance, that they fit in a couple of intelligence oriented program offices across the DoD and in particular, they were able to understand that this one program office had some very early RDT&E funding, and that RDT&E funding was actually being allocated for an emerging program, right? And it hadn't turned into a program of record yet. And so really early on in its life cycle were they not only able to understand A) where their capability maps, but B) understand something that is capturable, see all the atmospherics around it, and the current players in that program office, where the strategic thinking was going there, and how they're speaking about this, and then even down to the exact stakeholder to engage with. And what we found is that that actually put them in the running to get a contract with that organization right.

And so that exact thread of basically taking something from capability all the way down to execution is playing out with investors and funds that we work with, where they say we want to make an investment in offensive cyber, right? What is all the money out there? And then who does that drill down to from an execution standpoint, and can we get to conviction there, right? And even on the government side, if you're developing that capability from the other side of the coin, right? You possess that early stage funding, and I'm the one that's prototyping these intelligence capabilities. You know, how do I take that all the way through to actually identifying my transition partner, right? Who is the organization that can actually fund this through sustainment, being able to power those kinds of workflows are the success are the success stories that have just been unreal to be part of.

David 28:04

Yeah, that's awesome. I've definitely used the tool a few times to sort of really understand how much success a given company has had in a given area, and then been able to then also see other organizations that they're not working with, and be able to point them in that direction, and it's only with a few, you know, semantic queries pretty, pretty simple, I guess. What would you say to companies that are interested in using something like Obviant, but maybe a little bit reluctant from from the spend standpoint, and maybe you could also highlight, like, what's the earliest stage company? What's the latest stage company currently using your platform today?

Brendan 28:48

Yeah, yeah. So we've worked across that entire spectrum, right from early early stage companies that have just gotten their first SBIR awards and are already thinking strategically about, well, what is my transition plan? What is my transition pathway, and what can I capture along the way to get there right, and then all the way up to the top 10 primes right that we work with? So what we found is, for us, it's always been, I said this at the outset, how do we take the workflow and the knowledge that the experts like you David, have in this space, right? People that know this market like the back of their hand, and how do we democratize that and just make it dead simple and easily understandable and a beautiful product that that that folks can leverage and make it intuitive so working across that spectrum, right? Obviously, budget and spend tolerance is vastly different, and one of the things that's always been really important to us is making sure that we build a business model that can accommodate all sides of that spectrum. However, what I will say is, at the end of the day, it's you're making a long term investment.

And one of the things that we hear, oftentimes, that companies in the defense market have to do is engage on the Hill, and engage on the Hill, and engage early and. Oftentimes that entails hiring a lobbyist, and that is not cheap. But the thing you oftentimes hear is, if you don't do that, though, your upside is inherently gonna be capped, right? And where you need to get to without that congressional engagement is gonna be super hard. And we think that that program office problem, right, and the funding, identifying that and running a strategic business development process is the same way that, if you're not investing in it early and continuously and running that effort in parallel with the immediate things, whether it's SBIRs or OTAs or otherwise, at the end of the day, you know you're gonna have to be playing catch up over the long run, and it's a critical competency that you have to build early on.

Maggie 30:38

So I want to take some time to really talk through some of the big changes that have been happening in the acquisitions and contracting space over the last five or six months or so. Right here we have two of the experts in DoD acquisitions and contracting. So I want to take the time to really break down some of these big changes. So Brendan, can you talk through what are you seeing as some of the most important or impactful initiatives coming from the administration thus far? And can you break down what do they actually mean for both, I guess, traditional defense primes, for the DoD and for this new generation of startup?

Brendan 31:23

So I like to think about it in a couple of different realms, right? So one is really the how we buy side of things, right? And the how we buy has to do with more of the regulations and the processes around that. The other side of things, I think it's important to touch on, which is the what we buy, right? And that's this discussion that we're having right now is shift from these large platforms to commercially available items, products, and what we actually need for the future from a national security standpoint, and the two are deeply related, right? So that first part of things is how we buy, right? And you saw this with the executive order around rewriting the FAR, right, something that has been around for decades and decades and decades, which I'm sure David can tell us lots of frustration stories about, can you define, define the far what does that mean? I will, I will defer to David on the actual definition on that.

David 32:15

Sure it stands for the Federal Acquisition Regulation. It is about 3000 pages around all the things you can and cannot do when acquiring goods and services for the government. So extends beyond just the Department of Defense, it's for all federal agencies in the executive branch. And then, of course, beyond just the Federal Acquisition Regulation, the DoD has the DFARS, which is another set of tombs, further refining things that are more bespoke and specific to the DoD. Not to be outdone, the services tend to have their own, you know, variations and variants on this document. And then, of course, you get down to the individual programs. And they have their cultures, their guides, their instructions. Lo and behold. You know, it's easy to see why the culture of compliance sort of permeates across the entire acquisition workforce.

Maggie 33:09

And I assume, David, you've read the full FAR, cover to cover.

David 33:13

I have not read the entire thing, but I am pretty good at most of the various parts of it, right? It's broken up into all these different parts. And so at times, I have dug in and really tried to hone in where, you know, I can find exceptions for things.

Brendan 33:29

And that's one of the reasons so, the last thing he just said there, and why, I think it's wanted to defer to him to define that right, like exceptions for things, right? In order to be able to navigate that effectively and actually drive change. You have to know, within this 1000s and 1000s of 1000s of pages framework, know what part of it you can actually use to get done. What do you want to get done right and find the exceptions within it. So back to kind of your original question, Maggie. One is this rewrite of the FAR and then two, one of the other big things is, is, is, is promoting things like the software acquisition pathway, right, or commercial solutions openings, right, which David and the team at DIU years back pioneered and actually started right. So this idea of we can leverage these other authorities, different than the far right, other transaction authorities, etc, to actually accelerate the acquisition landscape. This is a huge shift in terms of the way that acquisition is done. And the big area that that's being pointed at back to that, that other category here, of what we buy, the big area that's being pointed at, commercial solutions, openings, again, is commercial technologies, things that can be adapted towards mission needs, or non traditional startups that we can bring into the fold on prototyping agreements that are these more lower cost or adapted solutions that actually meet the capabilities that we need today, not three years out, or 40 years ago, from a major platform standpoint.

Maggie 34:59

So Brendan. And you mentioned the commercial solutions offering a couple times now, but I want to take a step back from some of the acquisitions contracting jargon. What does it actually mean to buy commercial and why is that even important in the first place?

Brendan 35:15

What this is essentially saying is that if there is commercial, if there's a commercial alternative, right, and technology exists in the commercial sector that we can either leverage or adapt, right? We should be doing that which, which makes sense, I think, like one of the, one of my, one of my favorite, uh, unfortunately, anecdotes is, like a number of folks that I've talked to who are still active duty, they talk about how difficult the payroll process is, right, like how awful the experience around payroll is, of like, missed paychecks or having to go back and request pay that's been missed or time off. And that, what does that tie back to? That oftentimes ties back to these massively complex, custom built systems, right, where the private sector, again, has built some of the best in breed, right?

You think about companies like ADP and on the on the startup side of things, what we know is like a Rippling or Gusto, right? The the sector has been building these systems and, and so this, this whole shift, is to say, Well, can we leverage things like that, right? And, and, if not, off the shelf, adapt it right again, from a prototyping standpoint, to meet the mission needs, right? So when a commercial alternative exists, can we leverage that? Because what I think it's a shift to say is that there are certain things, absolutely, from a basic research or a custom, you know, needs standpoint, that should not, cannot and will not ever exist solely in the commercial sector. But there's a whole lot of things that the government does right, and the government needs, excuse me, that exist in the commercial sector right now that the incentive is out there for the commercial sector to develop that is the best in breed that leverages, you know, top engineering talent across the board and capital incentives from investors that the government can benefit from, right? And get that at not only a lower cost than it would be to build these systems over time, but a far superior capability, because the private sector is going to maintain that and upgrade it.

David 37:09

Maybe my favorite anecdote that Brendan you were just highlighting around payroll, which, yes, is an absolute nightmare, and I had to call on the phone more than a few times to figure out my MilPay back in the day, especially when you move from organization to organization. Well, you know the defense travel system DTS is probably the bane of a lot of military and civil servants’ existence that was designed, developed by Northrop Grumman. I don't know if you knew that they were, you know, known for their travel website, ferocity. I mean, I thought they were more about building weapon systems, but yeah, Northrop Grumman won the contract to build defense travel system in 1998 so this is pre dot-com bubble now, and they've gone on to win task orders, you know. And it still remains to be the same system that is quite cumbersome. So much so that if the, you know, I'm still in the Reserves at the Pentagon, and if the Reserve said, David, you can no longer drill locally to where you are, because I live in Washington, DC, you now need to go to, I don't know, say, Wright Patterson, Air Force Base. So now for my reserve duty, I'd have to engage with something like DTS to get over there. I would definitely at year 18, almost to 20, I would say, sorry. You know, it's not worth it, because that system is just so brutal to work with.

Brendan 38:42

And I think it's back to your question, Maggie, right on, you know, the experience on this and what does this buy, commercial meet all mean, all this ties together, because what we're talking about is, how do we bring these non traditional commercial companies into the fold, right or accelerated pathways? Well, are those like, how do we actually get them on contract? Then, if they have to go through a multi year contracting process, or the acquisitions officer doesn't actually have the tools in their toolbox to work with them quickly on prototyping for that solution, so these things really all kind of converge.

And back to, you know, a lot of what we focus on is, well, how do we identify those capabilities. How do we identify the acquisition pathways? Well, what funding is available, right? So on the government side, how do we actually tap funding to leverage this? Like, where is there money in either my budget or elsewhere that I can partner with to do this? And it's equally as challenging on the private sector side, not only is it a Pathways problem, but it's also a demand signal problem, right? So from the private sector, how do they know that this is a problem worth solving, right and worth focusing on, meaning that if I have an expense management platform or a travel systems platform, how do I understand what, what millions or billions of dollars there is for me to capture in the DoD to go after? That and adapt my solution and justify that to my investors, right? There is no source of truth for that is one of the hardest parts. So I think, like all of these things again, really tie together is everything from the approaches to, if we're aligned on the approaches and we and we fix a lot of the authorities and regulations around that, conveying that demand signal is equally as important so that people can execute on both sides of the equation.

Maggie 40:24

So how can we actually measure the effectiveness of the administration's new initiatives around streamlining defense acquisition? How do we know if rewriting the far or pushing the commercial solutions offering software acquisitions pathways actually makes a tangible difference in the state of acquisition efficiency, and

Brendan 40:48

That's one of the challenges that that we're hitting head on right, which is there is an easy way to understand when we leverage the software acquisition pathway or we leverage CSOs, what does that actually translate into down the road, right? So let's just pick an example here. Let's say a lot of the C-UAS efforts that we hear about, right? That’s counter small unmanned aerial systems. So think a lot of the things that we hear about in terms of small, commercially available drones that folks are using, that we have to defend against. Currently, a lot of the times we're using missile systems that cost, you know, upwards of 1,000,002 million bucks a pop, to take those out, right? And, and so, how do we bring into the fold more affordable alternatives to that that, again, might be commercially available and, but there is no way to track that great we leverage the CSO right now.

What did that translate into a year, two years, three years down the road, right? What percentage of the overall capability that was fielded can we attribute back to that original OTA? Or if an OTA started off in prototyping, right, which means more that R&D stage, did that OTA transition to production? Was it fielded at scale? And one of the core problems, and this is what we're hitting head on, is that data is not either a structured that way, or structured to begin with, because, again, A) it might only be in a PDF or a contracting document and B) there's no traceability between those handoffs, right? So the R&D organization that might issue that prototyping agreement. There is no data source of truth between that and the production organization, whether it's a program executive office or otherwise that fields it.

So to your question on “Well, what is the effectiveness of these things?” That's a lot of what the Department is trying to figure out on its own end right now is, well, what is the pull through and the follow through of when, when we use these new methodologies, what is the overall success rate in terms of companies that are transitioning to programs of record? And it starts with the data right? And because the data is not set up to answer those questions, and then we're not manipulating it, we're not able to get a clear picture of that.

Maggie 42:55

Brendan, where are we today in terms of using some of these more innovative contracting mechanisms, like OTAs and CSOs. And where do you expect us to be within the next few years?

Brendan 43:11

I’ll start with the end state. And I think exponentially different, right? I think that we are at the beginning of really you look at kind of things like the CSO and you can go back from there. You know, consortia is the first models of leveraging this right at some level of scale, but we've really only scratched the surface. If you look at OT, other transaction awards, in the last year or so, in both years, it's less than 5% of all awards issued by the government in terms of dollars, right? Less than 5% of money is going to these innovative mechanisms. So if we look at all the discussion and the talk about defense tech and leveraging the software acquisition pathway and CSOs and OTs, it is still such a very, very small piece of how we actually contract today.

However, with the momentum that we're seeing and the discussion around it, and the actual policies that we're putting in place, I think that that looks exponentially different if we look three to five years down the road in terms of how, not only the percentage at which that we leverage these authorities, but also the outcome that it can drive. You know, if you look at the number of venture backed companies, non traditionals, that have transitioned to a program of record. And I think that this is and I think that this is correlated, there's less than a dozen right that have actually gotten Program Office contracts like we are still so so much in the top of the first inning in this transformation.

Maggie 44:35

What will it actually require within the DoD to take these top down directives and actually make them a reality and a part of the culture across the organization?

David 44:48

I think it requires a lot of training, and then I think it also does require more publicizing of the anecdotes that are going well. Other transactions have been in the Department as an authority since the mid 90s. One of the biggest programs to leverage it was called Future Combat Systems, FCS, and it was like this massive, multi billion dollar program that the army was going to sort of digitally revolutionize all of their capabilities. So it was a hardware, software, data like, I mean, it was kind of this crazy program, and it failed spectacularly. Now, if you go back to Rick Dunn, who's the greatest historian of other transaction authority, because he did bring it to DARPA in 1989 and then helped shepherd it into the DoD after that. You know, he will tell you that program was only an OT in name. But if you look at the terms and conditions of the contract, if you look at the milestones and how it was executed, and Boeing, I believe, was the primary contractor, it was only, it was only OT and name it really had nothing. It did not leverage the value proposition of that authority. And so, you know, these things go, they ebb and they flow based on how successful or not successful things are. I think we need to just sort of mandate it, as we are seemingly doing. But then really take you know, to the craft and teach and and celebrate the successes and showcase. You know what is, what is good look like, and I think that's kind of how you move the Department over time.

Maggie 46:34

Brendan, what would you say is your most controversial hot take about DoD, acquisitions, budgeting, contracting,

Brendan 46:43

Yeah, to be honest, not really a hot take guy, yeah. Prefer to just focus on the execution side of it. But I'll probably kick this question to him, because I'm sure he might have one.

David 46:54

You know, in spirit of Maggie, your question, one thing that has me a little bit concerned, and I haven't heard a lot of people talking about it, is with the people taking the return to the office and then being offered the fork in the road. A lot of great contracting officers, acquisition professionals have taken it, and I am concerned that the most innovative ones who should be awarding the contracts in this new, like mandated way, leveraging, you know, underutilized contracting vehicles, like other transactions, etc. I'm afraid that we're going to have a bit of a glut in awarding contracts and getting non traditional companies into the industry base. So a little bit of, you know, cutting our nose to spite our face with what we're trying to do in the Department, I think it'll get worked out. But maybe something Brendan, if you wouldn't mind, highlighting, like, you know, is there a way to sort of see a trend analysis around some of these policies being enacted, and whether or not they're having the necessary effect or the velocity of contracts being awarded, is that maybe gonna shrink or not meet the same pace as previous years?

Brendan 48:17

Yeah, and I think that what you're speaking to, there's tracking what the downstream effect and outcome is, right? And this is one of the things that we find that in order to do that. So the platform that we've built right, allows decisions to be made more effectively at every level, right? And so whether that's downstream from the end user or technology transition, right, if you're a program manager, all the way up to the headquarters level to understand, well, whether it's at the services or DoD right, what are the implications of the changes that we make. And so to that same anecdote that I like to speak to is that OTAs are currently much less than 5% of all award values right annually. The same thing, we can look at the data here to understand, when we make a policy decision or an HR decision over here, what is the impact in terms of contract velocity, right? And we can look at that information understand, has that dipped, has that gone up? Did we see an impact on these more innovative mechanisms that we wanted to use? And I think what I would say is that all ties back to the thing that we're so focused on. Is, how do we not only make this data accessible, but then do analytics right and manipulate it in a way that gives us the answers that are timely and critical to the actual decisions that need to be made that are gonna that are gonna transform this how we do business at the Pentagon.

Maggie 49:36

What advice do you have for other startups building in the national security space, other than “buy Obviant,” which is obviously a given.

Brendan 49:46

No, I appreciate that, you know. And then I love to hear David's take from the other side of the investor angle and government side. You know that? I think that the biggest thing is like be strategic, and play the long game, right with what you're doing. Know that signing up to build a company is a 5 to 10 year journey, right? And in this case, it is that and then some meaning that you might not see the payoff until three to four years into that journey, right, in terms of exponential returns. And so the biggest thing, I would say is really like, you know, focus on something that you're truly passionate about, and that, you know, you feel that you have a connection to from the mission side of it, and know that you're playing the long game, both in terms of building, not only building the company, but also in terms of how you think about how you're building that product and executing the sales motion that everything that you need to do in this space, I think, needs to optimize for what that long run is.

David 50:47

That's awesome. Brandon, I guess, yeah, for me, advice for other startups: have a co founder and choose them very carefully, because it is a really hard, long journey, building something from scratch, trying to convince customers to try you out, trying to convince investors to take to collaborate with you, and then trying to hire employees right to go on that journey. And I think a lot of times companies where the co founders just aren't totally in lockstep, it can be really, really challenging for the future success of the startup.

Maggie 51:24

Brendan David, thank you guys so much for coming on the show.

Brendan 51:27

Really appreciate. Maggie,

David 51:30

Yeah, awesome.

Brendan 51:30

Thanks so much for having us.

Akhil 51:35

Hey everyone. Thanks for listening to the Mission Matters Podcast from Shield Capital. Tune in again next month for another conversation with founders building for a mission that matters. And if you yourself are looking to build in the national security space, please reach out to us.

This episode was super fun to record — Brian is incredibly well versed in the nitty gritty reality of building and deploying AI to DoD customers. We had a great conversation about killer use cases for AI he’s seen in DoD and enterprise customers, the current state of AI infrastructure in DoD, policy changes he would make within DoD to accelerate AI adoption, and much more.

Episode overview:

• Brian Raymond’s journey from the CIA and National Security Council to building Unstructured, an AI infrastructure startup.

• The “unsexy” data and infrastructure challenge behind LLMs and agents — from PDFs and XML to chunked JSON.

• How SOCOM, the Air Force, and the Army are leading the way in practical GenAI deployment

• What commercial enterprises like Nestlé are doing with agents today — and what the DoD can learn from them

• A tactical roadmap for AI adoption in national security — from policy fixes to compute access to trust-building

• And much more

You can listen to the podcast on Spotify, Apple, YouTube, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please let us know if you or anyone you know is building at the intersection of national security and commercial technology. And Unstructured is hiring! Please reach out to their team if you are interested in working in the future of AI infrastructure. Tune in next month for our next episode!

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Here is the full episode transcript:

Brian 00:00

We're going to need to figure this out faster than our adversaries on how to utilize LLMs coupled with agents right in order to advance mission as fast as we possibly can.

Maggie 00:12

Welcome to the Mission Matters Podcast, a podcast from Shield Capital where we explore the intersection of technology startups and national security. I'm Maggie Gray,

Akhil 00:22

And I'm Akhil Iyer,

Maggie 00:23

And we are your hosts from the investment team at Shield Capital. In this podcast, we discuss the technical challenges of developing and deploying commercial technology to national security customers, as told from the founders’ perspective. In this episode, we're joined by Brian Raymond, the CEO of Unstructured, a startup building the future of data tooling for generative AI transforming unstructured data into structured data that can be used by AI models. It's common wisdom that AI models are only as good as the data they're trained on and the data they have access to. However, much of the world's most valuable data is not stored online in a structured way that AI models can access. Rather, it's stored in PDFs, PowerPoint slide decks, emails, photocopies of paper, documents, satellite images and other hard to process data formats.

Akhil 01:25

Brian saw this phenomenon firsthand while working in government, in the Central Intelligence Agency and on the National Security Council, and then again, as a VP at Primer AI, which is a start up building natural language processing tools for the US government. Brian was inspired to build Unstructured, really, in order to accelerate the adoption of AI and a lot of the tooling needed for both the public and private sectors.

Brian, so excited, man, for you to join us here today. Really excited about what you've built already and what's yet still to come. And we're excited to just dive right in. And so I'd love to first maybe chat you came from a super sexy background, the Central Intelligence Agency and here you are digging through the dirty laundry of the AI infrastructure ecosystem. What got you excited about working on those types of really unsexy piping infra issues as you were thinking about what to do next and to build your own, your own company?

Brian 02:22

Thanks for having me and excited for the discussion today. It was a really, let's call it, non linear journey, and so I spent several years as a CIA analyst, did a few tours overseas, left government after a stint on the National Security Council, and after business school, ended up at a company called Primer AI, where they were doing some really interesting work with natural language processing and knowledge graphs. And so I joined the company very early on, right after they closed their Series A and had really like a front row seat to AI in action. This is in like the 2018/2019 timeframe. And at the time, natural language processing and language models more broadly, were having a bit of a renaissance after being dormant for several years. And so there's a lot of excitement about how to use these models and a lot of potential for accelerating various missions. So we were working, at the time with companies like Walmart, Goldman Sachs and others. And then we also had an In-Q-Tel work program, and so I had the privilege of helping lead a lot of the work related to that In-Q-Tel work program, where we were deploying these models, model pipelines and knowledge graphs into into classified spaces, and saw firsthand just the friction of trying to leverage these incredibly powerful models, which are tiny models, now in retrospect, in conjunction with mission relevant data. And so after four years of Primer I was looking at this problem space, and I said, look like there's this really ugly, nasty problem that no one else is really well positioned to solve at the far left hand side of the equation, which is, how do you take raw enterprise data and render it rapidly, render it in usable formats so you can use it in conjunction with these incredible models. And so that was really how Unstructured was born.

Akhil 04:20

That's awesome, Brian. For those who may not know, can you briefly explain what a work program is? But more importantly, as you were looking at that type of program, how unique or differentiated was their messy data infrastructure portion relative to some of the commercial companies you had looked at?

Brian 04:39

That's a great question. So the In-Q-Tel model is one in which they invest in dual use technology companies, primarily companies that actually have great traction in the commercial space, that are fairly early on and as part of their equity investment comes like a body of work to help more closely tailor that dual use technology to. So networks that you know, handled sensitive information to workflows that are more relevant right to the national security or defense space, until you take that base application and introduce some amount of additional work on it to just more allow it to be deployable and usable in those applications. In our case of Primer that lasted almost three years the work program, it was an extensive body of work that had an incredible outcome that led to, that led to, like, a multi year contract coming out of it. And so a lot of the manual work for that two and a half, three year work program was around taking raw XML data and then transforming that into chunk JSON. I mean, if that's not enough to put you to sleep, like, I don't know what is, but this was really a problem from hell, because each you know, each document, each kind of bit, and byte of data, it was non standard. And so anytime like, you know these, we'd have to hard code all these regex pipelines, these regular expression pipelines, to try and transform it, and then maybe a document layout might change, and then it'd break the pipelines, and then you'd have poor inference. Then you'd spend all this money on this knowledge graph, and you have to go back and redo it. It was really a lot more manual than a lot of the magic around AI would lead you to believe. And so the good news with that, though, is that like that XML to JSON, in this specific instance, everyone kind of deals with that. They deal with PDF to JSON. They deal with dozens and dozens of different file types to get it into the lingua franca for language models, LLMs, whichever may be which is generally chunked embedded JSON or markdown or HTML, but in any of it, you need to render into a canonical schema in a standardized format.

Maggie 06:54

Yeah, Brian, thank you so much for sharing that background on Primer. You've obviously been working in the national security space for a long time and been working at the intersection of AI and national security for a long time as well. So I'd really be curious to hear, when you started back in the government and at Primer, what was really the state of AI adoption within DoD and AI infrastructure within DoD, and how has it changed over the last decade or so to where we are today?

Brian 07:28

It’s a really interesting topic, because around 10 years ago, you saw natural language toolkit NLTK, a range of other models begin to emerge. But it wasn't really until 2017 when transformer models were introduced, that you saw the industry around this begin to explode, as well as the use cases that were reachable by machine learning begin to emerge. And so shortly after that, Project Maven was formed, right? And you saw significant investments around object detection, image classification models. So really around computer vision, that sort of work, there's a lot less around the language models. And one of the reasons, or a few of the reasons are because, like around the computer vision, there was an immediate need for this in Afghanistan at the time, and a lot of work going on in Syria around taking drone feeds, for example, and being able to classify rapidly classify targets in it. And it was a great application for the tech at the time, and so they were able to put money against labeling data, fine tuning models, deploying these models at scale, and then nesting those within different mission applications.

On the language side, there was intense interest. But the one of the main challenges with these models is that, if you think of it like horse blinders, they had very small token windows. And so, like our context windows. And so today we're often we see context windows, 50,000 tokens, a half million or several million tokens. And so you can put an entire book in that context window, like think ChatGPT, and ask questions of it. Back then, your thing the context window was around 15 to 20 words. And so what you were able to do with it was not really take a huge amount of data and then ask questions of it easily. Instead, what you had to do was structure that data using these models so pull out like named entities or topics, or do different classification tasks, and then index all of that and then do Boolean queries against it. That is as slow and boring as it sounded coming out of my mouth right now, but like how. A lot of potential for interesting things, right? And so the limitations on the models call it like pre 2022 relegated a lot of the natural language use cases to really interesting like proofs of concept, but that weren't necessarily scaled in the same way that these computer vision use cases scaled out of Maven and across DoD.

Maggie 10:24

So then, what are some of the different ways you're seeing people in DoD actually adopt AI today, and what are some of the big use cases that are popping up that are delivering real value to end users?

Brian 10:38

We’re about two and a half years into the LLM generation of machine learning, right? Or this, this most recent epic and ChatGPT was released in November of 2022 and then in this first half and throughout 2023 industry as a whole, as well as, like data scientists and government, started to try and understand, like, “Okay, how could we use this to engage with our data in new and interesting ways?” And so a new term has now proliferated, RAG – retrieval, augmented generation. I believe, like the first RAG deployment was done in January 2023, like two months after, after ChatGPT was released on a on a classified network, and since then, most of the use cases have been knowledge related. So really accelerated search, right as well as some light levels of automation.

Some of the things that like hindered adoption, at least from you know, 2022 through call at the end of last year were one the political climate. There was huge amounts of anxiety with among the previous administration at the highest level of the government, with adopting kind of a forward looking Gen AI strategy. Instead, there was a huge amount of effort to study it, to measure risk, to mitigate risk, rather than operationalize the usage of it. What that resulted in was a proliferation of bottoms up initiatives. And if you go on LinkedIn any day, you see lots of discussion on this, but you see NIPRGPT, CamoGPT, SOF Chat, as well as a range of other applications across the defense space that are all aimed at, like bringing your data to these models and being able to not only query it, but hopefully help summarize it, automate it, maybe draft new, you know knowledge products in the process that that really defined. I call it like 2023 and 2024 the limiting factors there was model availability, GPU availability, as well as budget and support among service chiefs, COCOM chiefs and others, which really wasn't there. So you saw just lots of 1000 sprouts kind of spring up from inner enterprising units across the landscape using open source tools as well as what limited kind of commercial tools were available.

Maggie 13:34

On that topic of where people are really seeing success adopting this technology in DoD, what would you say are some of the unique challenges of adopting this technology within DoD compared to just a traditional enterprise, and where are there similarities in those challenges?

Brian 13:55

I'd say the use cases are almost indistinguishable, from what we were talking about around like, chat your data type applications to trying to, we'll talk more about this later, deploy agents across your data in order to automate. Go from kind of Copilot to autopilot in a lot of use cases. That's similar. What's different is that DoD is great at buying, let’s call it, solutions, right? They're not great at buying infrastructure. And so if you go work with an investment bank or a large CPG company, Fortune 500 of any case.

The way that Gen AI has unfolded has been the CEO told the CIO or the CTO or the Chief Data Officer, “We got to go figure out Gen AI.” And somebody got made the Gen AI czar back in 2023 and then the Gen AI czar cast about for use cases across the organization and like big companies. Companies typically have between like 50 and 100 use cases that they identified. And then what do they do? They put resources across those and so they'll resource them with people, they'll resource them with compute with models, with data, and then they'll graduate those that have the most potential into production, and then scale them right. And so you have a CIO who's got a relationship with one of the hyperscalers from a from a cloud standpoint, they have a relationship with Anthropic, OpenAI, Google Gemini, whatever it might be, right? And they're able to make those infrastructure investments that are required to vector resources across lots of these use cases.

In contrast to that in the federal space, especially the defense space, you do not have that. You do have cloud contracts, right, with models that are riding on those, but you don't have CIOs who have directives from service chiefs to go find those use cases, provide them with compute, with models, with data, with support in terms of human capital, in order to identify which of those is going to hold the most promise against mission sets. Rather, what's happening is that they're using SBIRs. They're using $5 or $10 million contract vehicles. They're using individual like seat licenses or having individuals by tokens to utilize open source or more universal kind of like DIY do it all, kind of like platforms, in order to try and, like, work their way up. And so I'm optimistic that that might change in the future, but I think that there's, it's going to take a lot of concerted effort, because you what you don't necessarily have in the commercial space that you have here, just don't have ATOs, you might have one ATO that you have to do, like, if you don't want to work with JP Morgan, you got to get your models approved. You got to get through all the security scans. But there's just one CISO that you got to work with in the government.

You would have thought that CDAO would have solved this, or would have been able, like, have the agency to solve this through Alpha One and various initiatives that never happened. Instead, what they did was more experimentation, which is what the government's great at. There's almost no infrastructure, so to speak, that's being allocated from that, from actual DoD like the Pentagon, down, in order to enable Gen AI use cases. And so that creates a very different environment for a commercial company trying to operate with the customers compared to the private sector.

Akhil 17:47

Brian, this is an awesome topic. I love that we can dive into a little bit of this. Certainly, many of our companies, at Shield Capital, really, at the application layer right, are looking to do this, and they want democratized easy access to models compute infrastructure so they can focus on the application built with their customer. So two questions for you based upon what you just said. One, what's the ballpark: How many months or years is the government / DoD behind even the most highly regulated commercial space when it comes to some of this, AI, infrastructure, from a maturation standpoint?

Brian 18:24

I would say two to three. I would say they’re still in 2023 kind of land right now, Akhil. I'm not casting stones, but from the ability to procure and the ability to like take action – you know, there are lots of folks with a vision, a lot of folks with, like, deep technical expertise, but their ability to actually get things done, I would say that we're there at least a couple of years behind, if not further. I think that, you know it's going to take Congress, and it's going to take the current administration really focusing on this intensely if they're going to solve it, and it'll probably require legal reforms as well as policy reforms than DoD. We're already seeing some great work being done with the CIO shops around this, but it's the tip of the iceberg. It's going to require a whole lot more work in it to really move at a pace that we haven't seen previously.

Akhil 19:13

Yeah, thanks, Brian. Let's say if you had to take one call or spend $1 to best accelerate the AI infrastructure in the government. What would that go to?

Brian 19:23

It would go somewhere around like something that works really, really well Akhil in the commercial space: application or infrastructure companies like Unstructured working in tandem with hyperscalers in order to rapidly access customers. And so that can that means a few different things. That means one, network access. So for example, with Azure, AWS GCP, we're able to, like execute private offers through their marketplaces and then just deploy our containers easily into customers VPCs. Related to that, we're also able to transact using those marketplace mechanisms very effectively, flipping it around on the customer side, they can access us and other another emerging technologies, really easily. But then they can spin up large clusters and CPUs, GPUs. They have other cloud infrastructure services that are readily available. And so I think, like right now, there's a huge amount of friction and actually capitalizing on the potential of these hyperscalers for transact-ability, for network-ability, data availability, as well as all those other ancillary services that are required around this. And so you've got this, like sports car that you can't really take out of a garage in some ways. And I not really want to go around like heaping praise on hyperscalers, but in this case, they're really have reduced friction in the in the private sector, but it's had almost no impact in the public sector, despite them having marketplaces and these things, they're just not operating in any way, any in remotely the similar manner that they are in the commercial space.

Akhil 21:06

Yep, that totally makes sense. Brian, I know we've been a little critical here of the government space over the last couple of minutes, but obviously all of us here, you, Maggie, me, are in this business too, because the mission matters too, and we're excited by the applications. Can you share maybe a more positive story? What was one deployment on the public sector side, or maybe even a mission critical commercial, commercial side that was really exciting for you that either from a technical aspect or from an impact aspect?

Brian 21:34

Early on? So we were like a three month old company of three months post slide deck, and I was wandering around AUSA trying to make friends, and I bumped in to Nick Frazier from USASOC, and I was chatting about what we were doing, and he's like, I actually have an Army of contractors hard coding pipelines exactly like what your team had to do at Primer as part of your work program. And so can we do some sort of like design partnership and just start working?

And so our open source project, actually, we don't really advertise this. We don't want to have it on the website, but the fingerprints all over that are actually from us being in Slack together with USASOC AI divisions developers on real world use cases, and that open source project now has been downloaded almost 35 million times. It's used in almost every single Gen AI application in government. It's used by 85% of the Fortune 1000 and it was actually built in tandem, sitting side saddle with the folks down at Fort Bragg. And so that was, that was incredibly exciting to see, and to see, like all of the different use cases that folks have built around our open source in government, on the commercial side, we're in some really interesting spaces right now, working with a range of companies from like airlines to finance to biotech pharma.

A really interesting customer that we have is actually Nestle, who's headquartered just there in Northern Virginia, and they are making some huge investments in generative AI and in agentifying their AI stack. And so we are in a really unique position to deliver data to like their agents that are not only helping with an internal knowledge management work, but also creating new products, helping identify market opportunities and new product strategies for them. And so it's really kind of incredible for me to wake up every day and see all the different ways that, like our kind of foundational infrastructure is being used to populate a range of different use cases across these industries.

Akhil 23:59

That’s awesome. Totally awesome, Brian, and awesome to see where you've come, both from those early days and to now, I want to ask one question a little bit on the Nestle point before turning over to Maggie to maybe dive a little bit more into the technical aspects. And that is maybe a broader question, Nestle, how are they thinking about the return on investment with something like this?

Brian 24:17

I would say a common theme what's almost universal among the use cases on the on the private sector side, is that it's almost all productivity focused, right? Because you could focus on driving revenue, or you can focus on being more efficient with cost centers. And so they're doing some really interesting work around procurement and legal. They're doing some really interesting work around research and development and utilizing generative AI to generate to deliver near term returns in those area. That doesn't mean that there aren’t like revenue opportunities. We've seen companies like Writer and Typeface and others leap out to huge, huge valuations by helping accelerate marketing. We’ve got companies like Apollo and others that are using generative AI to help make sellers more more efficient. But I think that the cost centers in these companies are so large that it's not necessarily about laying people off and reducing workforce. It's more about, how can you 2x or 3x your current headcount by allowing them to be a lot more efficient? And maybe hold that OPEX constant as the as the business continues to grow.

And so, that's something that's very similar across there isn't, like, a, really a revenue side, I guess maybe tip of the sphere type stuff and in defense. But we're working with some of the testing centers, for example, that have to that as part of their work, they're responsible for putting together, like, incredibly complex deliverables, packages, to higher ups as they're testing munitions or different aircraft, whatever it might be. And so and those R&D type centers, right? Those are, they're so manual, they're so paper focused, that they're really ripe for disruption with generative AI. And you see a lot of demand coming from that as well.

Maggie 26:21

So Brian, I wanted to turn to talk through like, what does it actually look like to build a generative AI app for a customer like the Department of Defense? You know, let's say I have an amazing RAG app. I've done all my user interviews. People love it. They desperately want it. I want to be able to chat with my documents, and maybe some of that data that I want to be able to chat with is classified. It's going to have to be deployed on classified networks. I guess, my first question on that, what does it actually take to get that data I want to chat with in a state that it can be used by this model? And how do I actually keep that data up to date as the new data is constantly being developed?

Brian 27:07

Yeah, that's, it's really kind of the central question right now, when there's a bunch of different approaches or strategies that you're seeing kind of play out in the space. So, you have companies like us, right where we're selling a piece of infrastructure alongside us. We're doing the normalization, the Extract, Transform, Load of that raw data, and then we're doing a baton pass to a database, typically like a graph or a vector database. And then there's a framework typically utilized to orchestrate between an LLM and that that that data that's in that external memory and that's being continuously updated in order to deliver that that capability. And so in that case, this is invest, like large investments by data teams, usually like data engineering teams as well as cloud infrastructure teams, who want to kind of own each layer of the cake they want to have. They want to own the data they want to own the data structures. They want to own the data storage right and manage that and that's incredibly important to them.

Now another delivery model is one like Ask Sage, like what Nick's done. There is, he's used our open source with some other tooling, taking Weaviate as a vector data database. And then he has done a lot of work around the frameworks for how those LLMs orchestrate with that data in that external knowledge base to deliver value like ATO in a box chat your data, whatever that might be. And so it's almost pre-packaged, and he's done a lot of that layering for you, but you have a lot of adjustability. You can choose which models you can you choose how your data is indexed. There's, there's a lot there, and it's really almost a B2C motion, right, where we're a pure business to business motion. Nick's delivering a really interesting product that's like a B2C motion.

Then you have companies like Legion, formerly known as Yurts, Primer, and a range of others that are going kind of far beyond what Nick's doing in terms of vertically integrating that stack. They may have proprietary chunking strategies, proprietary embedding models. They might be using things like graph RAG. So might be using graph databases alongside alongside vector databases. They may have optimized their retrieval models with their and re rankers with their embedding models, in order to optimize it. A corollary in the commercial space or companies like Contextual which is doing a very similar thing where they're doing a lot of the extreme kind of fine tuning of all the different parameter settings on all of this in order to deliver, like, an incredible, like a very exquisite sort of, like, user experience. But they own the whole box, right?

And so a few different models here on how to engage, and you're seeing the same thing right in the in the commercial space, where you can invest in a vertically integrated stack, and you just buy the box to teams that want to own each layer in the same way that they have, say, with the modern data stack, where they may have bought the ETL/ELT provider, like Fivetran, DBT indexed into like, say, Databricks, snowflake, BigQuery, and then use say Microsoft Power BI on top, and then they have sovereignty over each layer of the cake. And so there's a lot of parallels between kind of how this is playing out today, and then how it played out with structured data over the last five or 10 years.

Maggie 31:01

So once I have all my data set up, all ready to go in whatever database of choice, what models do you have access to on the high side to actually then plug into that data?

Brian 31:17

This is a good question. This is maybe one that you all would have some thoughts on as well. I mean, I think increasingly you're starting to see, like the two big labs have their models somewhat available on secret, like on tipper or on JWICS, right, with Anthropic and Open AI models. Now, how available those are, how much volume and quota, right? It's even a challenge for us and the commercial space to get quota to do what we're doing. And so that's though they may be available. They might just be available for experimentation. And you know, these things are incredibly GPU hungry, and so the size of the clusters that they're running on in each respective network is the hard constraint on throughput right. And then you know how many applications are trying to hit that model right? Creates real scarcity for the ability to not only experiment, but also like put these applications into production.

Maggie 32:17

And then what is the state of compute hardware that's available on the high side for, I guess, both storing this data and these databases as well as actually running these models.

Brian 32:32

It really depends. So there's been there continues to be investments in GPUs, but the there's a big but, and the but is, you have federated networks, right? And so some that may be available to the Navy or might be available to Air Force or to NSA, doesn't necessarily mean it's available for your application. That's for an Army PEO, right? And so the total number is growing, but it's incredibly federated.

But then also comes back to an earlier point they were talking about, which is, like, where's the budget for that coming from? Right? And so is there a CIO shop that's creating budget and allocating it? You know, there, I hear lots of stories about different units or wings that want to go and use it, but then they need to have a minimum commit to a hyper scaler of, say, a million dollars over 12 months for some fixed kind of set of nodes. And so that that's a real friction point, right? And the ability to adopt that doesn't necessarily exist in the commercial sector, just because GPUs are more plentiful, right? And the demands a lot more elastic, or supply is more elastic.

Maggie 33:52

To what extent have you started to see the adoption of actual agents doing some amount of tool use – both within Enterprise and then within the Department of Defense?

Brian 34:06

Enterprise: the last like six months, it's exploded. And so particularly the last 90 days it's absolutely exploded. And so we've seen barriers fall with agent experimentation. We've seen frameworks mature, and then really interesting paradigms, like MCP right begin to proliferate that will make it easier for agent to agent communications and these multi agent systems are mature.

In the defense space, we're seeing desire. We're seeing some experimentation, but it is incredibly constrained compared to what we're seeing in the in the first space, there's a lot of advertising going on, and there's a lot a lot of fostering and positioning going on, but the ability to you. To train and deploy models is mainly being done in sandboxes right now, but they're really interesting use cases, and they hold a lot of promise.

Maggie 35:08

What do you think will be the first couple use cases of agents, in particular, for the Department of Defense?

Brian 35:15

I think a lot of them are going to be extremely boring things right now, right? And so I don't think that's a bad thing at all, because there's a lot of boring bureaucracy that's required in order to enable that giant war fighting machine that is the US military and so things like what Advana was that's been focused on right, passing the audit around, workforce management, things like that. They're just perfect right.

For agents, right now, the sexier things that will probably get the wired articles are probably going to be around rapid mission planning, right. Closing the OODA loop, faster agents. There was a really interesting blog that was written back in, back in February by Nikita, the CEO of Neon that just got acquired by Databricks, and it showed the number of neon databases that were being created each day by agents versus by humans. And you saw this enormous J curve where you saw like 10s of 1000s of these databases being created by agents every day, and that that just accelerating. You see numbers of like lines of code written by with cursor every day. You see that same sort of J curve that's going to enable like if, that's if they do make these tools available and they resource them, you're going to see the pace of innovation around kind of the point into the spear, really, really accelerate. It's going to take data fusion. It's going to take the infrastructure. But it's going to be really, really exciting to see what the folks that are close to these missions are able to come up with these tools in their hands.

Maggie 36:53

So it's going to start with just filling out paperwork and whatnot, and then slowly move closer and closer to the battlefield.

Brian 37:00

Absolutely.

Maggie 37:02

Brian, I'm curious. You've been doing this for a long time. What does it take to build trust with the Department of Defense to get them to trust this technology? You know, particularly if we want to start deploying AI agents that have the ability to use tools that might actually change something in the world?

Brian 37:21

I think that, like a lot of the senior leaders, it's not that they're distrustful necessarily today, it's that what they need to be able to buy is a capability, and that the Department's not really well positioned, and the capital markets aren't really well positioned either to deliver capabilities for them. And so like, let me talk about that for a second. So with contrasting it with, like, the commercial sector we talked about earlier, they'll have some $50, $100, $500 million a year commit with a hyper scaler or multi cloud strategy. They'll allocate resources across dozens of teams. Those teams will effectively build capabilities, right? And they can experiment with them rapidly, and then they can scale those that are successful. In contrast, in the in the defense space, you have that sort of with SBIRs a little bit, and something with, like with these other various kind of funding lines, but none of them are large enough, right, in terms of, like, a critical mass of funding in order to actually demonstrate the capability. And it takes so long over the period of performance of these things to deliver it, that what it does is it incentivizes capital markets to fund like defense tech companies that will package everything up into a bespoke capability, right, that they could then go sell. I think Vannevar did a great job about this. Vannevar’s done this. Companies like Legion, others are doing this as well. And so I think that it's really around packaging up a really tight capability for them to go and fund. That's something that that fits within, like the funding paradigm in DoD, but that isn't really a natural motion in the commercial sector.

Maggie 39:06

Where have you seen glimmers of success within the US government in terms of AI adoption? Are there any groups or initiatives within DoD that are particularly forward leaning?

Brian 39:16

I think most of it these days, at least from where we sit, which is like primarily around natural language data: Army, Air Force, and Special Operations. We're not seeing as much yet from Navy, from Space Force, from the Marine Corps. Within Army, we see a lot of experimentation going on around Linchpin on C5ISR, around various initiatives there in order to data fusion, that's kind of filter on Titan.

On the Air Force side, you have so much technical talent spread across ACC, AMC, AFTC, Air Force Research Labs that what you've ended up with is like a huge amount of experimentation. And from that, they've sort of begun to develop really tight theses around where they think they're going to be able to accrue value and go out and start getting tools that they want.

And then with SOCOM, really around the teams at Fort Bragg around Army Special Operations Center and their AI division. They've been a leader from the beginning on this, at least, to partner with us. And they've, I think, been a leader across the Department of Defense. And Frazier in particular demonstrated incredible technical depth, but also that initiative that you really see and expect with from SOCOM to move quickly and to and to mature quickly and so those are really the kind of three areas that we're seeing the most pull from these days.

Maggie 41:00

What do you think has made those organizations successful, and what can the rest of the DoD and US government learn or take from those initiatives?

Brian 41:10

I think on the SOCOM side, it's you resource, you empower really hard chargers, and you set aggressive goals, right? What they had there, though, was they had compute, they had network, they had data, and they had human capital. And those are, like the four things right that we were talking about earlier that are needed to be successful in the commercial space, and General Braga and and then others, later on, really made it a priority to resource that. And so that created the set the conditions for success.

You've had that to a lesser extent with Air Force, but they've been able, like the enterprising Airmen, have been able to piece that together in really interesting ways across different parts of it.

And then on Army, you see a really a strong mission set there around AI, and really aggressive goals around that, though they have slightly different mission sets and they're buying it and working in different ways. And so I would say the combination of resources at SOCOM deep talent and Air Force, and then you know, mission on the Army side have, at least from where we're sitting, accelerated those three organizations.

Akhil 42:33

Hey, Brian, we all know that at some bottom up level, folks are just going to figure it out, right? Airmen, sailors, soldiers, Marines, Coast Guardsmen, obviously, Space Force too. Your critiques with regards to the scalability and the importance of a top down strategy is still sticking with me. Folks are just figuring out how to get data, compute talent right at the lower levels. And so I wanted to return to this whole idea you were talking about. And specifically, could you talk about one or two key policy changes the DoD needs to make that would better support the scalability of some of these bottom up initiatives?

Brian 43:10

Look, I think that there's been way too much discussion (that's my hot take) on contract vehicles over the last couple of years, and not nearly enough discussion around those factors that you just talked about. So you have these huge companies that are you know, have been intensely lobbying for reforms on acquisition. That's fine. Let's do it. Let's keep let's keep making progress there. That's not going to that's not going to be sufficient though, to take you to where you need to go.

I firmly believe that an organization like CDAO or the CDAOs, for each of these respective organizations, my preference would be centralized, because I'm selfish and I'm in the commercial sector, and I could have one person to sell to who could be responsible for the infrastructure, for the network access, right, for the compute availability, for the model availability, and getting the data into those architectures, as well that mission needs to be solved. And so if it's done at the command level, at the service level, fine, but I think that mission set for CDAO is a valid one despite execution flaws that we've seen over the last few years.

Akhil 44:30

Yep, that totally makes sense, Brian, and to be fair, correct me if I'm wrong, that's not necessarily selfish of you. I think what we're looking also is what is in the interest of the users and the customers trying to build applications, and what I believe is should be the case is they should be spending less time trying to connect things and more time trying to figure out what is the right application and what is the right type of usage with the either compute constraints, whether they're operating on edge or cloud or wherever that they should be focused on, unless I have that wrong.

Brian 45:00

Yeah, absolutely right, absolutely right. I think that, like any day that's spent trying to get a hold of data or trying to marshal compute resources is a day wasted that could have been spent on mission, right? And so that's just friction that needs to be eliminated

Maggie 45:16

Brian, let's say tomorrow Congress decides to appropriate $10 billion or $50 billion or something to CDAO, they call you in to give them advice on how to spend that money. How would you advise them to spend a new large budget?

Brian 45:36

Have more than one or two authorizing officials for ATOs – so that's number one. My advice always is to go hunt for bottlenecks, right? God bless them. But they have like, two people there that can actually like, sign ATOs. Go solve that. Okay, one, two, go make sure that there's GPU availability across all the regions and all the federated networks. That's two. Three, provide an easy way to transact. Tradewinds is not the easy way to transact. Allow marketplaces, consumption based contract vehicles make it as similar as possible to the private sector, and three go make this stuff available for almost nothing to the folks at the ground level that are closest to the mission problems, right, who are in the best possible position to drive that innovation and then scale the hell out of that as quickly as you can right?

Akhil 46:39

I had one follow up question on the agent piece, you mentioned some of the bottlenecks, whether it's MCP or something else. You know, there's some commanders out there that are really excited about that agent to agent future. What to you is the one or two bottlenecks you talked about wanting to drive down bottlenecks. What's the one bottleneck, maybe specific to agentic maturation in government that you think needs to happen and needs to happen and needs to happen fast, or something that the commercial space is already pretty far ahead on?

Brian 47:06

Look, I think MCP client servers are proliferated over the last over the last several months, and that's been great. I think that those by themselves are not enough for these multi agent systems to be successful, I think that it's really well defined and capable APIs coupled with MCPs or other emerging frameworks that enable multi agent systems. I think that that defining those protocols for how these systems are going to talk to each other, this next generation technology is really going to be the linchpin to unlocking, unlocking the efficacy of multi agent systems, and especially multi agent systems coupled with these multi step deep reasoning models.

Maggie 47:51

I was going to ask you know, one word you keep saying, Brian is experimentation. DoD is really good at experimentation. What does it take to actually move beyond experimentation and actually bring this technology to the end user?

Brian 48:08

Yeah, I think this comes back to familiar challenges, right? But if you like, let's take all the GIDE challenges, right? The Global Information Dominant Exercises that were done, you're able to find sandbox network environments, you're able to get sandbox data. You're able to have it for a finite amount of time, and you didn't have to worry about changing people's job titles or re upskilling folks that had been doing manual processes. And so if you want to actually scale these things, right? You need it to be on real networks. So you solve ATO problems. You need to have real data. You need to be able to have someone that's sufficiently invested in this that they're willing to upskill their workforce.

And so in the in the private sector, we've seen really a few phases. We saw a proliferation of proofs of concepts with Gen AI, then a consolidation of those that they were going to go scale. And then everyone thought, Okay, the next phase is actually production wrong? There's actually like this third step here in a four step act that folks didn't really anticipate, which was they needed to go and rethink all their people ops. So what are the job criteria is, what are you actually doing? What are the, what are the processes inside these organizations so that they're actually well positioned to capitalize on these tooling, otherwise you just have a cool app that sits idle and isn't effectively utilized, that requires top down cover, top down pressure, right? And top down resources, if you're going to actually make that happen. And so that's actually a really critical step here is you got to have the data, you got the network, you got to have the models. But you also like these. These are actually humans that are using this. They're using it to accomplish a task, right? And you need to think, do? Deeply at an organizational level with you know how you're actually shaping those job functions and those processes so that you can actually capitalize on that, on these tools.

Maggie 50:11

What are some of the most common mistakes that you've seen startups make when trying to build and deploy AI for the Department of Defense?

Brian 50:19

The most common mistake is to get sucked into abandoning dual use technology. And so it's really, really easy to land some initial contracts and to end up, as you know, a software vendor that has loose, if any, product market fit in the commercial space, but great product market fit within one particular part of one service. Now, there are companies that have done that and done it incredibly well, but they're, I could probably count them on one hand. Like Vannevar is the most recent, right? They've crushed. And so, like a tip of the hat to Vannevar for doing that. That is very, very difficult to replicate for most others. And so I would like the rule of thumb that I tell a lot of the other CEOs that I talked to about doing business in this is like, if you can maintain a single, unified code base for your commercial clients and your and your public sector clients, then you're then you're on the right track. Now, if you're forking it and having to Frankenstein things, then that you should really take pause and think about the scalability, like when the speed and breadth of customers in the in the public sector that you can actually go sell to, versus the good personal space, because public sector is a great place to land. It's a great place to steer a mature business. My opinion, it's an absolutely horrible space to try and scale a venture backed startup.

Maggie 52:02

What would you say is your most controversial hot take about AI and or AI infrastructure?

Brian 52:09

I'm not sure if I have hot takes here, other than I would put myself in the extreme optimist camp around agents and about where, how quickly agents are going to be useful, and so, like, while I'm optimistic about the tech, I'm also worried about what that portends in terms of competition. And I think we should utilize it to drive innovation and drive productivity increases as fast as we can. You could bet that the Chinese are going to be using that as well for offensive purposes. And so I think that this warming that we've had between DC and the Pentagon in particular, and then Silicon Valley like I hope that continues. I hope that deepens, and I hope that that accelerates, because we're going to need to figure this out faster than our adversaries on how to utilize LLMs, coupled with agents right in order to advance mission as fast as we possibly can.

Akhil 53:17

I love that optimism Brian and where the things are headed from an agent to agent collaboration and the AI front, I know you have some pointed critiques, but I know they come from a place where we want to make the ecosystem better and we want to advance against the global competitors. Speaking of global competitors, Brian, where are we vis a vis the PRC and others? Obviously, plenty of news around there about R1, DeepSeek, et cetera, but you're seeing it also, not just from the model stack, but from the infrastructure stack.

Brian 53:47

Look, I think that there was a broad consensus in 2023 and 2024 that we had a fair lead here in the US, that sanctions on GPU availability were effective, and that we were in a pretty good spot. I think that we have a very different view of that here in Q2 2025, now, and that, from a hardware standpoint, the Chinese have effectively circumvented aloneness of the sanctions and are actually building domestically or cultivating domestically, incredibly advanced GPU manufacturing capability.

Second from a software standpoint and model training standpoint, the only thing that we have over the Chinese at this point is momentum, right? It's the speed of innovation. And so I think that it's absolutely critical that we support our labs, or that we support Open AI, that we support Anthropic, Google, Meta and others, and continue to innovate as rapidly as they have. I think that that's the only real advantage that we're going to have. That's going to be potentially durable over time is speed of innovation. And I think that we're focused on the right things right now, which is going to be electricity, really, it's going to be power generation, right as well as making sure that we don't stifle innovation through excessive regulation of these of this industry.

Akhil 55:20

Awesome. Thanks, Brian. Brian, we're coming here to the end, and I want to focus on you and your company a little bit as we close out. Maybe the first ask, what was your biggest surprise, going back to when this was on the drawing board, napkin table, in terms of building unstructured since then and to now?

Brian 55:38

Yeah, I'd say one I'd like to think that I anticipated, but I didn't anticipate ChatGPT launching six months in. So here we were fall of 2022, us just groveling for GitHub stars, and then ChatGPT drops that November, and demand explodes, right? And so from a timing standpoint, it was we were really fortuitous. I'd say on the flip side of that, it was just it was moving so fast during that period of time, like every week it seemed like the technology was changing, and what hasn't really changed, the foundational sort of pieces that you need to normalize all the data, get it in a consistent format. You need to index it in a way that's discoverable by the models. And that there's a lot of art to getting these, these architectures, to work even now in 2025.

Akhil 56:37

Yeah, Thanks, Brian. It's been awesome to see the journey you've been on where is unstructured going from here? What are you looking to do in the next couple months? Who you're trying to bring on in terms of awesome folks? Would love to hear a little bit about where that's headed.

Brian 56:50

I'd say like, especially within the last quarter, quarter and a half, the market has really matured, and so we're receiving a lot of inbound now from Fortune 100, Fortune 500 companies that now are looking at their data, Gen AI data strategy, and looking to normalize. And so we have call it like a couple dozen really challenging and ambitious deployments that we're working on as we speak, that I'm really excited about. And then we're doing a similar thing within the DoD, across the DoD. And so from you know, a talent standpoint, a lot of this comes down to really phenomenal engineers, right, that understand the customers, that are incredibly capable in their respective kind of fields of expertise, and that can move at the pace that innovation is happening today, and so we're looking, you know we're gonna, we expect it to grow significantly over the back half of the this year, and are really excited for what the future pretends. Awesome.

Akhil 57:52

Brian, thanks so much for being with us today. Always great to get your insights and have some conversations and see you be able to do some awesome stuff again, both in the commercial space and in the government space, and we look forward to continuing to see that grow.

In this episode with Autonomous Cyber we cover:

• How generative AI is reshaping the offensive cyber kill chain

• The role the fifth domain plays in modern warfare

• Why augmentation beats automation for cyber operators

• Building trust and feedback loops with national security customers

• What it takes to go from zero to validated product in a sensitive mission space

• And much more

You can listen to the podcast on Spotify, Apple, the Shield Capital website, or right here on Substack.

As always, please let us know your thoughts, and please let us know if you or anyone you know is building at the intersection of national security and commercial technology. And Autonomous Cyber is hiring! Please reach out to their team if you are interested in working in the future of offensive cybersecurity. Tune in next month for our next episode!

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Here is the full episode transcript:

Patrick 00:00

I think, for people in the information security space, or especially offensive cybersecurity, everyone in the world saw LLMs and thought the exact same thing. This is a hack bot. Every InfoSec professional that I know is using LLMs in one way or another, and folks are finding ways to speed up their workflows, finding ways to get to information first, whether that's a vulnerability, whether that's, you know, going to a particular place in the world, the people who are starting to succeed are the ones that are using LLMs. And what we're building at Autonomous Cyber is a platform to do that most effectively.

Maggie 00:38

Welcome to the Mission Matters Podcast, a podcast from Shield Capital where we explore the intersection of technology startups and national security. I'm Maggie Gray, and

Akhil 00:47

I'm Akhil Iyer

Maggie 00:48

And we are your hosts from the investment team at Shield Capital. In this podcast, we discuss the technical challenges of developing and deploying commercial technology to national security customers, as told from the founder’s perspective. In this episode, we're joined by the founders of Autonomous Cyber, a young startup building an AI native platform for the future of cyber operations. Cyberspace is often referred to as the fifth domain of warfare, right up there with land, sea, air and space, and for good reason, it's been a serious tool in the national security toolkit for a while now. For example, take the Stuxnet attack back in 2010 in which hackers were able to disrupt Iran's nuclear centrifuges and inflicted significant damage on Iran's nuclear program. These days, it feels like there's a new headline about a cyber breach almost daily. Just this past September, for instance, Chinese hackers were able to access the communications of senior US officials through what's now known as the Salt Typhoon attack.

Akhil 02:02

The bottom line is that both our everyday lives and modern warfare are deeply tied to digital systems, and those systems are vulnerable. And despite many technological advancements, cyber organizations and operations remain relatively manual. It takes teams of human experts to map out attack paths and defend systems effectively, but now with large language models, especially ones built for reasoning, we're seeing a shift. Since GPT 3.5 came out in late 2022 organizations have been using LLMs for everything from threat detection to automating security operations centers to finding vulnerabilities and even running penetration tests.

Maggie 02:40

Autonomous Cyber CEO, Patrick O'Brien knows this world inside and out. He spent seven years at the National Security Agency, NSA, the government's top Cyber Security Agency, before linking up with his co-founder, former Army officer Bohdan Volyanyuk. They met in business school and teamed up to bring the power of generative AI to cyber operations for the Pentagon and private sector alike. Patrick and Bohdan, thank you so much for joining us. So to start out, can you guys tell us a little bit about the origin story for Autonomous Cyber and little bit about what you guys actually do?

Patrick 03:15

Yeah, Maggie, thanks so much. We're super excited to be here and super excited to be partnering with shield to build this company. So the origin for Autonomous Cyber, the analogy I like to tell is in the Oppenheimer movie. At the beginning of the movie, there's this moment where this paper comes out, but I believe it's like the splitting of the uranium nucleus, and Oppenheimer and Ernest Lawrence basically say every physicist in the world saw that paper and thought the exact same thing. I think for people in the information security space, or especially offensive cybersecurity. Everyone in the world saw LLMs and thought the exact same thing. This is a hack bot. And I think that we saw that back in 2022 when we really started working on this, like pre ChatGPT and all that. But this was a really big opportunity to address some critical USG mission needs in the fifth domain, and have been working on it since.

Bohdan 04:06

Hi Maggie, thank you for having us. My background is not as spooky as Patrick's. Actually originally came to America as immigrant from Ukraine. My dad won a green card through the National Lottery when I was six years old and immigrated myself. My mom over to the US, ended up majoring in mechanical engineering at NC State, and then took a slight detour when I joined the US Army. Did the whole Airborne School, Ranger School jump master thing, deployed Iraq and Syria as infantry officer with 82nd airborne did some non combat work in Europe with NATO. Got out a couple years ago, and very fortunate to get into MIT's two year MBA program where I met Patrick. And MIT has a long history of supporting the national defense mission, and I got sucked right back into it, into this landscape, by being the president of the Defense Tech Club here and running the Technology National Security Conference here, which we're actually attending today and tomorrow. So we're excited about that. And I think a pivotal moment for me was also interning at Vannevar Labs during this time. They had just raised their Series B at this point, and I had the opportunity to, first hand deliver some cutting edge Silicon Valley tech to do the end users, both a state side and abroad. And this really opened my eyes to how, in the wake of companies like Anduril and Vannevar Labs, that there is a pathway for new entrants to enter the defense market to deliver this technology that provides critical mission wins without solely having to compete with primes and huge programs of records immediately.

Maggie 05:25

I remember the first time back in November 2022 when I started playing with ChatGPT. I'm pretty sure I used it to try and create some poetry. I think it helped me maybe with a few of my essays in school. I definitely did not think about using it for penetration testing or any kind of cyber operations. So what was the moment early on when you guys were experimenting with this technology, when you thought yourself okay, like this actually works for this use case?

Patrick 05:53

Yeah, it's funny. I you know, I think for us, it really was right away. I remember, like, we hooked up. I think we were building on top of InstructGPT at the time, something like super, super basic. And we put it on a lab and hacked the box. And I think it was just like a very easy box thing was called fawn, and we just connected to an FTP server, it authenticated and it logged in. Just started with, like a simple prompt of like, hey, go do this. And I think just even from that moment in time, it was just so obvious to us that this was a completely different way of compute working, and that there were going to be opportunities to really change how cyber operations work. So the way we think about cyber operations in the kill chain broadly is we think about, okay, there's vulnerability discovery, exploit development, and then operationalization. And it was just clear to us then that we could build tooling that could, you know, upskill humans and make us more effective at each individual part of that kill chain. And it's something that we've done since then. You know, we reported a couple CVEs back in December, and you know, that's December, so we have have some cool updates since then, too. And you know, I think it's really been validated in the past couple years that that approach works. But, you know, that spark, I think, has been there from the beginning, and it's been really fun to be building on top of this,

Maggie 07:06

For folks who aren't deep in the weeds of penetration testing, which I imagine is probably most of the people listening to this podcast. Can you just tell us, what does penetration testing actually look like? What did it look like before people had tools like Autonomous Cyber, and what's different now?

Patrick 07:25

Yeah, one of the hard things about this industry is that, like, every word means everything, and it means different things to different people. So it's like, even the fact we have, like, cyber is in the company name. But a lot of people who are good at this domain will just like, cringe the fact that even to call it cyber, right, they call it information security. I remember and like, and there's some interesting stuff to talk about here, too, in terms of, like, bridging cultures with especially like US Department of Defense, where, like, I remember at one point someone talked to me about, like, navigating the net. I was like, what are you what are you talking about? So, you know, when we talk about, like, penetration testing, that means a bunch of different things to a bunch of different people and and broadly, that's kind of why we focus on the kill chain. So we talk about, like, okay, for folks who are finding a vulnerability, for folks who are and maybe just like patching that right, like for folks who are trying to do reverse engineering, looking at often compiled programs, for folks who are inside of a network, actually, like doing network operations that maybe they're at a red team somewhere commercially, or trying to get into a network from the outside, maybe doing something that other people would call, like web application security. I mean, there's 1000 names for all this, but by and large, it's just really hard, right? Like we used to say that it's just like cyber is hard, and it's something that requires a very deep skill set in a narrow domain to be actually, effectively good as a penetration tester, whether you're working at XYZ commercial firm or wherever else, you know, for us, I think I really love the quote. You know that the future is already here. It's just not evenly distributed. And you know that that quotes been batted around a lot recently with LLMs, but I think it's it's particularly true in this domain, where every InfoSec professional that I know is using LLMs in one way or another, and folks are finding ways to speed up their workflows, finding ways to get to information first, whether that's a vulnerability, whether that's going to a particular place in the world, the people who are starting to succeed are the ones that are using LLMs, and what we're building at Autonomous Cyber is a platform to do that most effectively. So I think that we're already seeing those changes. I think anyone who's a capture the flag player, which is sort of like a sort of like a gamified sort of cybersecurity competition, I don't think you're performing well in those right now without the aid of LLMs. And so I think that, like, it's already here, it's happening, and we're building a platform to take us to the next step.

Maggie

You guys are building a true dual use technology. How does the US government use your product, and how does that compare to how commercial customers use it?

Bohdan 09:48

Yeah, Maggie, the way for the DoD customer, the way we kind of break down the cyber kill chain is vulnerability research, expert organization and penetration testing, which also can be operationalization, has a lot of other buckets within it, like analysis and like actual red teaming. But the tagline that we're kind of using is force multiply for the cyber warrior. So anywhere within that kill chain that DOD operators, whether they're developers or actual OCO operatives, we are building technology to upskill them and augment them in any facet that we can.

Akhil 10:18

And, Bo, what about the commercial piece to Maggie's point, and we've been discussing this a lot here at Shield Capital, dual use can mean a lot of things to a lot of people. When we think about it, we think about it as how do you leverage both sectors at the right place and time to enhance and build momentum in the types of products you're building? And that might come sequentially, that might come simultaneously, or in some other fashion, curious how that looks like, because I think a lot of folks in this space from the cyber domain are actually looking at it almost purely commercial, in large part, probably because the adoption curve within the enterprise space is probably a little bit faster.

Patrick 10:57

Yeah, Akhil, I mean, so many thoughts on this, right? So I think point number one is that if you just look at our ideal customer profile, that's the offensive cyber security like, it's the offensive cyber professional, wherever they sit in that kill chain. And that individual is actually a very similar person, whether that we're working at, again, I don't want to name a specific commercial firm, because we want to work with all of them, like, whether they're working at specific commercial firm or inside the government. And as we were building this, you know, in various iterations of this company, we've been defense only. We've looked at dual use. We've been back to defense only. And I think that, like, where we really have conviction now about going through that on the dual use side is, like, fundamentally, we're just building for the same end user and the actions they're taking, and the tech is the same. And we've received pressure from, like, other investors, really, that we've talked to to be defense only, and it just doesn't make sense in this domain. It's just you have to do something that truly makes sense for what you're building. And I know that too from being on the inside, like none of the good in this particular domain. That's something that's different about cyber. As the fifth domain, right is, like, none of the good tech is government only, right? Like you it's, it's, it's something that really exists out in the real world, in the commercial world, in a way, it's much more prominently than many of the other domains do, right? So, like, you're not gonna have, I mean, maybe there's one out there, but like, one of our best friends says, like, you're not gonna have a dual use hypersonics company. Like, maybe you are, I don't know. I don't wanna, I don't wanna, like, you know, get into the spat with those people because they have hypersonics. But, you know, it's like cyber though, like information security. It's like so much of the best resources for this, so much of the best customer feedback is out there on the commercial side. So I think that, like, you're really doing a disservice. And I think the tools that are government only are looked at very skeptically by the government customer. So I think that, like, if you're coming at this from, you know, maybe a pure defense tech perspective, a pure hard tech perspective, I understand when people say, oh, you should be defense only. But for us, you know, it's, it's just makes so much more sense, and it has to be, in some ways, commercial first. Like, our feedback loops are so much tighter with our commercial pilots right now, and it's something we really appreciate. And again, like, the reason why we exist as a company is to help the United States succeed in the fifth domain. But we're just getting such good feedback on the commercial side, so it's something for us that I think has really been validated as the correct decision.

Maggie 13:08

When you guys are talking with your customers today, you mentioned these are people that are mostly using command line type tools, mix of experts and non experts. What are the biggest challenges that they are facing today, and how do you guys see Autonomous Cyber fitting in to really address those challenges?

Patrick 13:29

Staffing. It's staffing, right? Like, we know we had a one of the pen testing firms we talked with, they were like, it's a pen testing unit within a larger firm. And they told us, like, hey, we have a team of eight. We wish we had 24 we just can't meet demand, right? So staffing and scale, and it comes back to, like, a multi agents, like, Okay, you have, you can get your junior users who are, like, operating at a higher level faster, right? So they can do more client work. And you can take your expert users and take them and scale them across more clients, right? So I think scale and staffing is the number one thing we hear, and that's mirrored on the defense side as well, but especially on the commercial side, scale and staffing.

Maggie 14:04

What's the biggest aha moment when customers see your product?

Patrick 14:08

You know, we had this one moment where it was small, and I think, you know, this was, this was a year ago now, but basically, we're dealing with 200,000 line code base, and our tool basically triaged immediately. It's like, here's the four places to look, right? And that's that was, I think we got a literal audible Wow from from the customer we were working with at that point. And, you know, save them however much work. I think more of the WoW and aha moments that we're going to get soon are going to be on explainability of what's happening in sort of complex systems. I think the speed with which our model can go in and tell you is like, hey, this function does this. This function does that. Here's how they're all related. Here's where I would look. Again, it comes back to like the future is here. It's just unevenly distributed, even when people are doing very, very complex things in the kill chain that are well beyond what an AI can do today. I. So having the LLM quickly orient you and the LLM with these interfaces that we discussed, having the LLM quickly orient you towards, hey, here's how this function works. Here's the broader role of this. I mean, that saves you 30 minutes from reversing that thing or doing whatever else. So I think that it's a lot of small wows. And I think that's how you win mores,

Maggie 15:21

Patrick, so you keep using this term fifth domain in warfare, and I know that you this is something that you are actually an expert on. So can you just tell us take a step back and tell us a little bit more about the role of the fifth domain in modern conflict, and maybe a little bit about kind of the current state of US government competency in this domain and the challenges that still exist for the US, government and allies.

Patrick 15:44

A lot of the framing on this comes from a talk at Black Hat. I think it's by the Grack. I think it's like in 2018 black hat, Asia or something, where you have this concept of, okay, you have the first domain of land warfare, second domain of sea warfare, third of air, fourth of space, and the fifth, this new dimension is cyber and it's interesting insofar as it intersects with the other dimensions. And what I mean by that is you're going to fail if you try to use analogies of land mass and analogies that work in these these physical domains of land or sea or whatever like. The interesting thing about this domain is that you can pop up in different places. You can pop up at one place in another dimension, and pop up in another place at another dimension. So I think that, like, I think broadly, there's under appreciation for how ubiquitous compute is in our life and networking is in modern life. And I think that if you just go back to like his like, just fundamentals of theory and history of war, it should be completely unsurprising that those fundamentals are going to be absolutely they're going to absolutely determine outcomes of future wars. So I think that for us, the way we think about that is this is an incredibly, incredibly important domain, and it's something where it's as important as air, and it's something that is new, and it's something that's going to play a major, major role in future conflicts for the United States. And that's why we exist as a company, is to make sure that we're well positioned for that.

Bohdan 17:16

Now people are starting to realize just how much of an impact cyber has on the other four domains of warfare, just like Patrick mentioned, there's a great 2020, task and purpose article that talks about how in 2001 90% of SOCOM mission sets were kinetic by 2020, over 60% of SOCOM mission operations are in the information domain. Former SOCOM Commander General, now retired, Richard Clark had a great quote in the article, and he said, We need coders, and that the most important person on the mission is no longer the operator kicking down the door, but the cyber operator who the team has to actually get to the environment so he or she can work their cyber tools into the fight. And that's where the heart of the company lies. It's not just about building a custom solution for a specific cyber unit, but to build tooling so that that Green Beret, or that infantry sergeant, that v tip into cyber who had a six month training course and is now being told, Hey, you have to go deliver a cyber effect. Now it's really about upscaling the broader DoD base that touches cyber and act like the force multiply for that cyber warrior.

Maggie 18:14

I know one of the things that people talk about when thinking about autonomous kinetic weapons is that at some point in the future, we may need to take a human out of the loop, because our adversary is well and in order to actually keep up with the pace of warfare, it needs to be robot versus robot. Do you think that we're headed towards that in the fifth domain?

Patrick 18:34

No, I don't. I think like it just from the like, I'll just put this in the context of like, trying to do a pen test on, like, just entirely on the commercial side. I mean, it's just, it's so, so helpful to be on the loop right now as a human. I think a lot of that, even when we were building on this on top of instruct GPT back in 2022 like we talked about earlier, we're just logging into an FTP server. I mean, all that, it's always been helpful to, you know, get our tool out of loops, to poke it in the right place, to tell it what to look at. I, you know, and we've had this argument with a number of folks, and some big names in the space and big thinkers who disagree with me. But I just don't see how you could. There's another really good Walter Isaacson book is called The Innovators, and it's sort of about the history of compute in the digital age. And part of the argument that Isaacson makes in this book is that human AI teams have always outperformed raw autonomy. And again, I just don't think that fundamental incentive structure, that that concept is going to change as we keep going forward, so our bet as a company is that, you know, human AI teams will outperform AI alone. We'll see if we're right about that.

Akhil 19:49

Hey, Patrick. Let me come back to the very top discussion. Love the Oppenheimer reference. Like Maggie was mentioning, I think we all had this moment. November 2022, You certainly us as a firm. You know, half our firm came from the cyber world. Raj selling his first company to Palo, two networks, Mike, running Symantec. The rest of us looking at the space pretty deeply. And I think all of us had this sense that there was going to be a lot of fear that generate that Gen AI would supercharge cyber attacks. Are we actually seeing that happen? Has it been more hyper vs. reality? Curious on your thoughts?

Patrick 20:26

I mean, I think from our perspective, like, just what we're building, I mean, it's absolutely real, right? Like, I mean, we published those a couple CVEs back in December, and, you know, I think that, like, again, another movie quote for you. Akhil, I just watched, a re-screening of The Matrix recently. And there's a difference between knowing the path and walking the path. And like, that's our role as a company, is to walk the path right and to just be that offensive cyber platform for the offensive cyber professional, whether they sit in government or in a commercial space. And I mean, we use this tool like it works. We're about to, we're about to run a big test, I will say, and have some are anticipating some pretty promising results. And so I think that, like, the types of things, like, it's just so fun working on this problem, because you just see our tech do amazing things every day and just new ways. So I think in the sense of like, has there been X, Y, Z impact from it yet? You know, I'm not sure I'm even best positioned to comment. We had, we had a conversation recently with someone who runs one of the biggest response firms in the world, and that person had some pretty interesting insights. And I think those people will share those insights in time. I can tell you, from our perspective, building these for team USA. They work and they're awesome.

Akhil 21:44

Patrick, two part question. One: does do large language models inherently favor the cyber attacker or the cyber defender? And if the answer to the question is the cyber attacker, will the defenses ever keep up?

Patrick 22:00

I don’t want to say I don't care about the question. We're here to make sure the US government excels in the fifth domain, right? That's our role in this. There's a lot of really smart people who have done really cool companies who are, you know, we met with some of these people are at open AI right now and and we talked, have talked to them, and they're continuing to talk to him like it's there's a lot of folks putting out a lot of smart thoughts on this. I think our role in this whole thing is to be the Ben Buchannan has another book called The New Fire, and he talks about these three groups when dealing with AI, is the Cassandras, who are warning about it, the evangelists, the people who are pushing it forward, and the Warriors. Were the warriors in this one. That's our role. And you know, again, we need some humility about that. We need to understand that it's not all about military applications of this stuff. But, um, our job is to push it forward. So I don't want to say I don't care if it favors attack or defense better or worse, our job is to make us good at it.

Akhil 22:56

No, that's great, Patrick, let me maybe reframe it. What do we do? How do we defend against adversaries, whoever they might be, and their own capabilities? And, you know, how, how worried should we be?

Patrick 23:09

I mean, and there's this other terms, like FUD, like fear, uncertainty and doubt, and like information security, and that's kind of like a theme, especially in cyber podcasts, right? It's like, big thing, be afraid. I mean, I think again for us, I'll give, I'll give basically the same answer is, like, I think that there are other firms. There's a couple firms that I really like that are unifying, like, so part of what we do is, like, unify static and dynamic analysis. We can look at source code, we can interact with the running application. We can combine those two things. But we're not the only ones doing that. There's lots of other firms doing that, especially on the defensive side, there's going to be some new cybersecurity defensive firms that are popping up that are helping us combat this. And a lot of those are actually incumbents that are adopting AI. Our role, though, again, is to make us good at it. So on the commercial side, like, part of that is like we're making our pen testers better, right? So like when we go out and again, we, you know, one of our pilots with XYZ pen testing firm right now, when they're supporting a Fortune 500 American company, it's our tech behind that that's helping those pen testers find vulnerabilities faster than, you know, another country. But I don't want to I think there's a lot of talk in the industry about, like, Oh, this is all defensive, and we're doing things for good. And then there's like, this sly, secondhand thing of, like, quietly, we're also doing offense like we're doing offense like, I just want to That is who we are as a company. That's what we're doing. And I think it's really core to just why we exist and the type of people we hire and recruit as well.

Maggie 24:34

Thanks, Patrick. So I want to shift gears a little bit and dig into a couple questions about how you guys are actually building this technology to understand a little bit more about what exactly Autonomous Cyber is doing that's really different than what other companies or researchers are doing in the industry. So, you know, I've played around with your guy’s product. It's pretty amazing what it's able to do. It really, definitely brought me back to my intro to computer security classes, learning about fuzzing and operating systems and web app security, SQL injections, you know, all that great stuff. So where does the tech work best right now? Are there specific classes of vulnerabilities or types of code bases or operating systems where it's particularly effective? And how are you guys prioritizing what to focus on there?

Patrick 25:22

Yeah, absolutely. Maggie, I love that question. So the short answer is, web application pen testing, right? Our product roadmap is fairly simple in that it's we just move towards classes of technology that these models are good at first, right? So it's like we started with source code only, and just like reviewing source code, looking at it for vulnerabilities, we moved to unifying static and dynamic analysis with source code and then actually interacting with a live web application. Some really cool stuff we're doing right now is black box web app testing, which means web app testing without source that's where we are right now, and that's also somewhat a reflection of the skill set of our team. We, you know, thanks to our partnership with shield, we are about to do some really, really cool stuff. And I'm really excited for basically the stuff we're about to build this year. So it'll be fun.

Maggie 26:13

Patrick, it seems like every other pitch that Akhil and I get these days has something to do with, you know, AI and cyber and the future of cyber operations. What makes your guys tech special and different than what other people are building?

Patrick 26:26

Yeah, Maggie, I appreciate that, and I think there's two answers there, and they're both related to really vision of who we're building for and what we're building. I think one a lot of companies fall in the spectrum between autonomy and augmentation. And companies that are building either defensively or for largely like enterprise people that are selling to CISOs, broadly, they're building things where there's a huge incentive to automate, right whether it's a software development lifecycle integration, whether it's an attack service management tool, a lot of times, like CISOs and these individuals, they want something that's a dashboard. They want something they can see. They can see. They can get system health status and so on. You know, no one that I know that works in InfoSec look as an end user, as a penetration tester. No one's using a tool with a dashboard, right? So I think part of the big thing I say to our product team is like, if we built a dashboard, we've lost our way. We're so so far on the augmentation side, like we're really building for that core end user. And then what that means in practice is there's certain demands that puts in our tool. So number one is interactivity, right? It has to be something that a human can steer, a human can drive, and has, like, a high degree of human interaction, and that comes at the expense of being able to build these autonomy features. And that's how we kind of find our niche of the market. Number two, and this comes back to philosophy and vision. On this is that fundamentally, the most important thing when you're talking about dealing with a system or a program under test is the interface between the large language model and the program under test. You have to find a way, not only, to go from the LLM to the system. That's fairly trivial in some ways. So it's like you have a React agent, where you have, basically, you know, a thought and then a command, and then you issue a command to a tool which interacts with the system. That's that's fine. What's really difficult is representing information back from that system to the LLM in a flexible and sustainable and robust way. That's actually a super, super hard engineering challenge, and it can be something as simple as, like, you know, there's different types of terminals. There's these very stateful terminals where you issue a command, you get something back. But it doesn't always happen that way. Sometimes you can just have a stream of information, and representing a stream back to the LLM is hard. It's really hard on a browser, right? There's like, these open source tools where it's like, Okay, we just hook up an LLM through a browser. But if you want to do sophisticated things in a browser, like representing how a web application has changed back to an LLM, and always giving it the right information and giving it enough information so it doesn't get stuck in loops, but not just dumping, literally filling up the entire context. Was there more than it with some change in the HTML, all that stuff is actually incredibly difficult, and it's something that I think that's the main thing that's holding back progress right now in this field. It's something that we're dealing with, that our good competitors are dealing with as well, and so it's really all about interfaces. It's about how you change, how you exchange information between the LLM and the system under test, and that changes depending on the type of system, whether it's compiled code, whether it's web application source code and so on. So for us, I think we just have this vision that it's a space. I think we're the only ones occupying it right now. Think more will join. But where we're trying to build human augmentation and these interfaces, and that's fundamentally what we're doing at Autonomous Cyber is different than most other folks.

Maggie 29:31

It's been wild to me just how fast new models are coming out and how they seem to be beating benchmarks every other month. Are there any that you've found have been particularly useful for your product, or any that didn't really live up to the hype?

Patrick 29:44

Yeah, I'll say that sort of interesting thing here is, like fine tuning, right? So I think by and large, and this is, this has been many people's experience, so we have, we have a research partnership with lab within the Computer Science and Artificial Intelligence Laboratory at MIT, and I was talking with one of the researchers there. That's. Okay, what are your thoughts? Like, should we fine tune? Should we use a frontier model? And he was like, Dude, no one knows. Like, he's like, no one knows what's better or worse. And like, yeah, there's some stuff you can tell about XYZ specific case. So I think what's been sort of the most surprising for us is just like, how fast, I mean, it's for everyone, right? Just how fast the frontier keeps moving out. And I think every time we try to do something, I think we've been not burned, but I would say, like, we felt the heat of the bitter lesson a few times. The bitter lesson being that, like, general methods overtake specific methods in the long term, and it's just kind of trying to stay balanced on that frontier while not getting too honed in on something specifically. And then, I mean, it's crazy. We're a seed series company, but like, even literally yesterday, we're gonna have to burn down a lot of our code base and build it back up for again, there's a specific standard that's coming out and just all these new tools that have been released. So like, you have to be moving so fast in this space that it's not really so much specific models as it is. Just like, there's so much being built around these models that it's a really fun space to be in, but it's something you have to have your head on a swivel for.

Maggie 30:59

Any thoughts on some of the models coming out of other countries, you know, maybe in particular, maybe in particular, deep seeks are one model.

Patrick 31:05

Well, why that one in particular? Maybe, yeah, I mean, I think I'll call back to Nicole's book here. So This is How They Tell Me the World Ends. And she does a good job of talking about, kind of, like, the culture and history behind a lot of the fifth domain, specifically in America. And there was this idea of, like, no bus or nobody but us. And, you know, Nicole talks about it for a variety of reasons, but that basically was bunk 10 years ago, and it's even more bunk now, right? Like, just the idea that, hey, we should hold up and work on these things in a completely, like, cut off from the world way, and that will sustain some form of advantage. I mean, it's comical. And so I think that, like the again, without tending trending too much into the fear, uncertainty and doubt, like the idea that this is going to be done quietly, privately and disconnected from the world is not it's not a plausible way to get to American advantage in the fifth domain. So my thoughts on some of the models coming out from other countries is, and it's not just the models. I mean, there's there's versions of our product that are built in other countries and advertised. And I think anytime anyone who's seriously worked in national security like it requires a degree of respect for the adversary or target, or whatever you want to call it, and I think that it's really important to be cognizant of their strengths and weak and weaknesses. But let's not just be super arrogant about Oh, we're so great at all this stuff, and no one else is going to be good at it either. It's important to understand, like the support is half respect for the other side too.

Maggie 32:41

How do you guys actually benchmark the performance of your system?

Patrick 32:45

Yeah, it's sort of interesting. So I think, you know, in the early days we were thinking about this of like, okay, we'll try these, hack the box. Will be very easy, easy-medium and so on. Um, you know, we have a, there's another AI company that I like a lot, and we, and we've talked to them, and we're doing something slightly different than them, I believe. And, you know, they have $20 million seed, and they have a really good benchmarking system. I don't think we actually have the capacity to do that. I think for us as a startup, like, we just have to be moving so fast that, like, where we benchmark is on user uplift, right? Like, I'm a huge fan. And like, you know, I think my employers will probably risk me for this, but it's like, build product. Talk to you. Product, talk to the users like, it's just like, it's a Sam Altman phrase, and we just use it all the time. And I think, like, where I benchmark and where I feel about how we're at as a company is what our users are saying to us. So it's like, I think that's really what motivates us and what keeps us moving and what keeps us moving quickly. So we don't have, like, you know, benchmark on, you know, 31 out of 34 ports, figure labs, we are really focused on, like, hey, how do our users value this? Like, what value are they getting out of it? And that's, it's hard to quant, you know, I'm a math guy by trade. It's hard to quantify, and I think it's probably shouldn't be quantified.

Maggie 33:58

Another question I want to ask, sort of on a similar line. How have you seen the challenges of actually deploying this kind of technology differ when working with a DOD customer versus working with a commercial customer?

Patrick 35:16

Yeah, well, Maggie, that comes back exactly to what we're talking about with dual use. It's It was so funny. So we had our first meeting with one of the big four, right? So we're meeting with one of the big four, and we were meeting with a pen testing shop and one of the big four, and literally, the first thing they asked us for was an on prem solution that's like, oh. And so, like, it's it is crazy how similar the needs are and how similar the roadmap is. It is absolutely wild. And again, it comes back to that conviction of dual use is the appropriate strategy for this company. Yeah, it's bizarrely similar. I'll say that. And do these customers that you guys are working at actually have the infrastructure that they need to deploy large language models in this way on what is ultimately sensitive information for them? So all. I'll talk about the commercial side. So sometimes, yeah, and that's actually a big qualifier for us, it's like, Hey, do you have an LS like, for this customer with the big four, right? Like, do they have an LLM that can that they can do on client engagements? And the answer for them is yes. It's not always the case for commercial partners, but usually what it is is like, Okay, we stand up our on prem survivor environment in their cloud, and then point that in an LLM, that they're able, like, if they're on AWS, right, like, pointed at an LLM, that they're able to stand up in AWS. So generally, yes, not always, oftentimes, we're the first, or one of the first uses of LLMs that they have in a particular environment on the commercial side. And I think that that's a really good qualifier for us when we look at the sales process of like, okay, are they ready for this? Do they have an LLM in place? Because, you know, there's other things you would use an LLM for, just like chat bots are super useful, right? And so that tells us, like, okay, they're ready for this.

Maggie 35:52

So one of the things I find pretty interesting about Autonomous Cyber is that not only are you guys building for, you know, maybe the lower level cybersecurity analyst, but you're also building for really expert users, right? Some of these penetration testers have extremely unique skill sets, decades of experience. So how do you guys think about building a product that really serves both of those kinds of use cases?

Patrick 36:17

Yeah, no, Maggie, that's awesome. So we're doing one of our alpha users is a guy who makes his living on bug bounty, which is like, crazy if you know, like, how good these people are to be able to support themselves their families on bug bounty. I mean, it's you have to be good, and you're and you're really betting your income and your skills on that. And so for him, like the model is not super human, or, like, our platform is not super human in the sense of, like, okay, it'll send requests that just don't make sense sometimes, or like it should, a human would realize that there's not a real vulnerability there, because there's some conflicting information in the request. And as the models get better, as we come to GPT five or six or seven or whatever, that's not gonna be the case anymore, but it still is the case today. So our platform is not yet superhuman in the sense of being beyond an expert pen tester. But the way that person uses our platform is so and this is getting into more of our tech. We have what we call multi agent, and I think of it like multi ball and pinball, right? So that person is able to federate basically his methodology across right now, we're just doing it with 10 agents. And so, like, our token costs are pretty I mean, I wouldn't say extreme, like, tokens aren't that expensive, but, like, we're using a lot of tokens, and we have of tokens, and we have 10 of these agents running simultaneously in the background. So and the case the expert user is just, he's using this in a way to just go faster, right? And just find things and get informations about different parts of the system and conduct more involved reconnaissance on the bug bounty programs. He's doing in a faster way. And our goal with him is to reach something that, I think so identify him, if I'd say the exact term he uses, but is to reach this point where, you know, basically the bounties we get are greater than the token costs, and I think we're very, very close to that. And you're going to see a real change in the way bug bounty works this year, because us, and probably some other people, are going to get to that point where you can just point where you can just point these things at bug bounty programs, and it just shakes them out like just, I don't know, pick a metaphor, shaking something out of a tree. So that's the expert side. Is it's multiple runs simultaneously, which, from a UX perspective, is very difficult, very, very hard to do. And it comes back to what I was saying earlier about us being an augmentation company, where being able to expose that information to the user in the right way. When you have 10 agents all running and not just have it be this automated scan, it's a very difficult UX problem and something that, again, it goes, it also goes back to our staffing model, like why we need top, top people? Because you can only do that with top people, which, which our people are, which is awesome on the on the more beginner user. I mean, I think that this is a really cool part of our platform where, because you can interface with this thing through natural language, it offers a really nice bridge to beginner users. So it's something where you have whatever level of expertise you have, but you can talk with our agent about why it did something, why it found something if you want to go to go to a different place, and you can do that all in natural language. So I think that, like the building for both customer sets has been a lot smoother than I think I had anticipated when we started, but I think the combination of the natural language interface and the ability to go multi agent is how we bridge that gap.

Bohdan 39:13

Yeah, I just want to add my two cents in real quick, as the proudly least technical person in the company, as a former infantry guy who recently got into cyber and now I'm using these tools to help find zero days in pen test applications with like, no formal training. We're also right now working potential partnership, deploying this in a training pipeline so to get like, the very like the infantry sergeant that just v tip had their first day, like they're learning that the A to B to C step, and now the culminating exercise looking at like, using, like, advanced AI tools that we built to help them actually conduct the operation. Because these people, like, they don't care about just getting a certification. They care about delivering an effect in an operation. Patrick,

Maggie 39:52

so you said the tech today is not superhuman. What will it take to get to being a. Fully autonomous penetration tester. Or, you know, where do you think the tech will be in five to 10 years?

Patrick 40:04

Yeah, I mean, I think on the commercial side, you know, some companies, some CISOs, want a fully autonomous tester. I I don't think the market's actually there to support that. You know, it's there to an extent. I think the better place to go fully autonomous is a software development lifecycle integration. And I think the companies, I think the companies that are doing that on the defensive side and the commercial side, I think those are going to be the ones that succeed. I think that a lot of the structure of this industry depends on having a human in the loop, and whether that's just communicating results to someone, whether that's, you know, making sure you don't take down prod right, like, there's still, like, there's definitely issues like our tool. The other day, we were doing a bug bounty testing a SQL injection endpoint, and the test query that our agent used was DROP TABLE users, which is not what you want. This is in production. This is not what you want in production for like, a test, it's SQL injection query. So I think that, like, and that's not to say I think, you know, the counter argument to that is like, Oh, these models will get better, and then they can be fully better, and then they can be fully autonomous, like they could be. But would we want them to be? And I think that there's always, I think the much better play, if you're trying to protect your company, is to continue to hire the same people. You're hiring the same firm, same external pen testers, internal testers, if you have them, but just support those people and supercharge those people. And I think it comes back to a lot of our vision as a company is, like all a lot of technology and a lot of the fifth domain really is fundamentally about people and information. And I think that often gets lost in this kind of like cyber, computer, whatever. But, you know, we are building a tool to support people, and I think that a lot of the incentive structure about why people are involved in this in the first place won't change with AI,

Akhil 41:49

Thanks, Patrick. Speaking of the users, I want to come back to the user journey, how the users and their organizations are getting value a year from now and five years from now, what do you want users and the leadership of those organizations that are using Autonomous Cyber to say about how it worked, how it enabled their users or filled gaps in their organization?

Patrick 42:13

Yeah, great question, Akhil. I think the overarch answer for that is we want FUZZ-E to be plugged into every part of the workflow, so that should be the first tab they open Monday morning, whether they're a vulnerability researcher trying to find zero days, trying to string together CVEs for new remote execution, or whether they're actually trying to throw those in a network through an operation. I think the broader like the five year vision is really integrating also a command and control aspect to it, because right now, all these different systems and people are not talking they all want right now, just custom solutions for a very small set of problems that honestly just gather dust, virtual dust, for most the time. So what we want to do is want to bridge that gap, and really it's a communication tool between the end user and the leadership that we want to have. And so the leadership, the mission owners, can plan the missions, can off, can set tasks to different units, and then ultimately control the whole operation.

Akhil 43:07

Thanks. Bohdan, as you've experienced and certainly we know as well, adoption of new technology within the government takes time. It can be slow. You run into things like continuing resolutions. How do you actually get your ultimate users to believe this thing actually works, and then have the advocacy internally and the champions internally to help push it forward when it comes time for budgeting and everything else?

Bohdan 43:35

Yeah. Another great question, Akhil, you are 100% right selling into the DoD is selling into a customer base that does not trust easily. And our customer in particular, trusts outsiders even less than the average. And this is an industry where you have to be in person like you're not going to form any of that trust over zoom or teams. You have to be flying out to meet the customer and the end user as much as possible. You have to sit side by side with them if they actually do their job and understand what they go through, like just sitting in the conference room or a meeting like, that's not going to cut it. When Patrick and I were first starting out, it was really about kind of leveraging other networks that we built in the service and in the national security space. We were taking meetings like anywhere we can get them, in most cases, off base, meeting with anyone that was willing to see a quick demo, or to talk about major pain points and priorities, and from there, it was about aligning our product development to solve a top three urgent need that we found out that they had so to bring it back to like the building trust aspect, the first part you have to do is be committed to the actual mission. It's not about building a specific product, but more about solving a problem that the DoD service member has. Once they start to feel like you both are on the same team and are working together to provide mission wins for the unit, is when the actual great relationship can begin. The second part I say, is actually about delivering service members like especially now get pulled in like hundreds of different directions. We. Different tasks. A lot of them have actually like at this point. Have heard many pitches and have seen many companies come and go trying to sell into their area. You want to be providing actual value from the first time a user gets their hands on your technology. You don't just want to talk about it the entire time, or at least, you want them to be able to see the potential of where you are headed. I'll give an example. I remember when we first released what we would call our MVP to users, uh, last November, one of them said, and I quote, it felt magical when they got to see our technology in action. And the great part is he was directly contributed. Like he was a direct contributor to that state of the product, like just three months prior, when we had our first batch of DoD users be able to, like, try our platform for the first time, his direct feedback influenced the direction we took the product. Our first pre MVP, pre MVP version was completely autonomous, and the first piece of feedback we received from him was it had to be iterative. I need to be able to stop, steer and intervene at any point. And so when we delivered that next iteration with a bunch of modifications and included his feedback, that was not something I think he has ever seen before in his DoD career. And so to kind of tie it all together, it comes down to listening to the customer, what they actually need, plugging into their daily workflows and delivering the capability you promised. If you do that, you're going to win over even the hardest of skeptics in your user base, and they'll come to bat for you when it matters. And ours already have several times already. That's awesome. But, and I think a good broader point of emphasis around the use of any type of sort of automated or AI enabled solution is the human centric. It can be it can be a human in the loop of AI or AI in the loop of a human, but ensuring that there is that ability for human influence and human shaping. Because ultimately, Patrick, to your point, we're talking about users, as you mentioned, and individuals whose workflow we're enabling. And that goes far beyond Autonomous Cyber, but certainly a core component of it.

Akhil 46:21

As we wrap up here last couple questions, guys, biggest surprise building Autonomous Cyber anything you didn't see coming or you would tell yourselves as you were starting this journey.

Bohdan 47:05

So honestly, I think I've been surprised with how fun it's been. Like leaving the military. I know it's kind of a corny answer, but leaving the military, I always assumed that I was destined for another like, bureaucratic position at a large company, and the more exposure I got a startup since leaving active duty, and like, the more I was pulled towards this this world where you just have full freedom to build a product and a team how you see fit. I mean, there's definitely, don't get me wrong, like, long days and nights involved, and there's definitely plenty of stressful times, but I don't think I've actually ever felt like I was working, like we have a great team who I love working with. Everyone is highly motivated on the mission and has full autonomy on how they want to tackle problems. And then there's the customer. And I think the best part of my job is when I get a fly out and see them to showcase product progress, get them hands on the product and receive that direct feedback. I'm lucky to get to work again with some of America's finest and help contribute to the reason that the US and allies stay ahead of adversaries in offensive cyber.

Patrick 47:58

Yeah, I think that's a good answer. I think mine's kind of the same. I think it's the people who have stood up and said, like, I think like, we've heard some versions quote unto like, I will do everything in my power to help you. I think that, like, you know, it's hard to do this. Bo, I think you've traveled what like, I think every week for the past 12 weeks. I think last week, it's just for the purpose of this podcast. Let's say it was a bit of a cluster with a specific thing that was happening. But, you know, I think you had two red eyes, three red eyes that week, and just like a bunch of surprise travel. So I think it's hard to do, but I think that kind of a lot of the allies that we've picked up along the way, there's been a lot of resonance with this mission, in terms of people who are in this space, and it's been a really good and nice surprise to kind of see like, I think, especially again, coming from the national security community, you're in often windowless rooms and these small pockets, but to kind of see how broad based this call is for really being competent in this domain, I think that's been really cool to see, and that's been a really nice surprise about building this.

Akhil 48:54

That’s awesome, Patrick. Let me just turn internally to your own team. First question, Patrick, what's Bohdan’s superpower? And Bohdan. What's Patrick superpower?

Patrick 49:03

I was joking about this yesterday in an event we have, I think that week, I was talking about Bohdan last week. I think, you know, for vets who are looking to transition, I think it's probably the most directly applicable use of infantry skills I've seen in, like, in a job where it's like, I mean, his job is basically just to suffer a lot of ways. I mean, he is on the road, like he's traveling, and I think that like when and he's like, I see but on about as much as I see my spouse. Like, honestly, it's like, you just spend a lot of time with your co-founder. So I think it's just like, it's been really nice to just see someone just like, absolutely grind relentlessly, positively, not freak out and like, I know like, like, I think soft skills are often overrated in a lot of ways, honestly, but Bo like, is just, is the perfect person for this, and I think it's been, it's just been really incredible to work with him on this. So that's, that's the part I would say for that.

Akhil 49:59

Yeah, thanks. Thanks, Patrick. You know, usually us prior infantry officers have a tough time finding use for our intangible skills, Bohdan.

Bohdan 50:08

Glad to know those red eyes are being put to use, and hopefully something will, good will come out of it. But I'd say for Patrick, like, his superpower really is kind of, like the vision and like, that's kind of, I mean, when we first met at business school, he was talking about this like crazy idea he had. And the more and the more and more I talk with him, I'm like, Okay, this is he's not thinking it like next year. He's thinking for the next 5 to 10, years. And you know, one of the taglines that he likes to use is, like, we're building for the coming decade of cyber operations. Like he will see, like, just a napkin architecture or of a workflow. And he'd be like, that's exactly what operation is going to be like for the next 10 years. And so I think for us, like, especially on the engineering side, like, I think the vision that Patrick has when building this company, like, really is not building for like, the short term. It's about building like, sustainable advantage that we will have, like, in the future, not just like with our tech, but like, how we approach the strategy, like, which customer base should we go after it and so on and so forth. So again, I'm really, like, proud to work with him. Like, he's been an awesome like, not just like, you know, co-founder, also a great friend, totally.

Akhil 51:10

Bohdan, Patrick, who else you looking to bring on the team?

Patrick 51:14

I mean, I think in general, we have soft commits from our next five hires right now. I'm, like, a huge believer, and I let like Walter Isaacson is another one my favorite authors. And I think there's a lot of things to not idolize about Steve Jobs, but one thing I definitely took from a Steve Jobs biography is the team that built the Macintosh, and just this, like, small team of absolute A players. And I think that that's our company culture is, I mean, we, everyone says, Oh, we do best of the best. I mean it, we only do best of the best, and we have to based off of how we operate and how we work. Don't find us. We find you. In all instances, that's largely been true so far. So I think in general, folks who have who care about this domain deeply, who just really, really care about this mission, and who have a lot of competence in general, those those hires skew a little older. You know, our youngest hire. He's like our Gen Z person on our team. It's like he does, he does a really good job, but, and he's fantastic. But I think in general, we're looking for people who really care about this, who have experience in this domain and are opinionated. You know, some of our friends, they'll put out, like, job solicitations that they look for low ego people. And that's not true at all. It's like, we definitely look for people with a little bit of ego, and like me and our founding security engineer, like we're definitely getting into it yesterday on our product architecture, and it's like, that's what we want. Like, I want someone who wants to tell me, it's like, Nah, man, that's bunk. And again, I'd probably use another word than bunk. Weren't for this, weren't going out on a public podcast, but, and the same thing true. I think, you know, we're, I think one of the roles, the one of the roles we don't have a soft commit for that we're going to be hiring for soon as someone to really build in a lot of some of the AI feature sets to kind of improve some of our fundamental AI stuff. And like, we're gonna want someone for that role that comes in and tells me what we should be doing, right? So I think in general, people in this domain, people who care a lot, and people who do have a bit of an ego, like people who you know are here for a reason and have an agenda to push. So I think that's who we look for.

Maggie 53:18

Patrick and Bo, what are your guys' most controversial takes about cybersecurity and AI and cyber operations.

Patrick 53:39

Maggie, you're gonna you're get me in trouble. So, I think you can win a war in the fifth domain. That's my most controversial take. I think that the way people talk about this isn't right, stop there, but I think I think you can win a war in the fifth domain. What advice do you guys have for other startups building for the national security community? I think that, like, for me, I think Bo, you probably get the same answer is like, you know, I think definitely had some understanding. You know, was in for a while, went to business school, is thinking about the space for a long time. You know, have known you all a shield for years. And, you know, had many of these conversations. I think I knew the government customer was going to be a difficult customer to sell to, and like, connect the dots, I think I didn't understand how hard that is, even when you have insane enthusiasm from the end user. I think it's been we've had a couple instances so far where we have end users and a shop and like, command up to a certain point that absolutely loves what we're doing, and it's still been hard to really connect the dots on the sale. And I think that, like, I kind of thought that I was like, Oh, you just have like a boat on, and then like boat on takes care of that, and it's fine, and which, in practice, is how it works. But like boat on taking care of that has meant a lot a lot of work on his part. So I think. Think my advice for starts building national security is like, I think it is even harder than people say it is having this vision. Like, I won't name the investor, but there was a specific chunk of a tier one investor who worked in the defense tech they were literally the defense tech investor for a tier one. And when we pitched them, this is, you know, I think a year ago now, they told us no, because they didn't like CYBERCOM as a customer. And like, that's the defense tech component of a tier one. So like, I think the national security spaces is much, much harder even than you think it is. Is what I say, even to people who are insiders. That's my answer.

Bohdan 55:38

Yeah 100% Patrick, I agree. The one thing I do want to add on, though, is that the market is different, but the fundamentals remain the same. Build product, talk to users. Everything else is secondary, and we're talking to users. Make sure that you're actually plugging into the workflows and observing how they actually do their jobs. Again, not just in conference rooms for like meetings with like 30 people. Also, as soon as you're able to afford one, hire a government relations firm. Innovation funds are all well and good at the pre seed, maybe even to the seed stage, but you have to start early in order to align yourself with the POM and the FYDP cycles. The DoD budget operates on three to five year time frames. And if you want to capture significant line items in the 2030 NDAA, you have to start getting before staffers on the Hill today.

Maggie 56:21

Great. Well. Thank you guys so much.

Akhil 56:23

Yeah, it was awesome to be here. Thank you. Thanks so much. This was fun. Thanks guys, bye.

In our very first episode we speak with Alex, Ben, and Isaac, the founders of Distributed Spectrum, a young New York City based startup using ML to provide a comprehensive, real-time view of the radiofrequency (RF) environment.

Akhil and I decided to start this podcast because we really saw a gap in the podcast space: there are lots of podcasts about tech and startups and lots of podcasts about geopolitics and national security, but there are very few podcasts that cover the intersection of the fields. In this podcast we will really dig into the nitty gritty details of building and deploying cutting edge technology for national security customers. We’ll cover everything from technical implementation details (where to get data to train AI models? how to benchmark those models?) to acquisitions processes (what kinds of contracting mechanisms should startups prioritize?) to accreditation processes (what does it take to make it through the ATO process? what is needed to make a hardware system NDAA compliant?), hiring (how can startups hire good engineers with security clearances?), and more. Tune in each month for conversations with founders and government technologists about the opportunities and challenges for startups building cutting edge technology for national security customers.

In our very first episode with Distributed Spectrum we cover:

⚡️ The importance of electronic warfare on the modern battlefield

📈 How to train machine learning (ML) models that understand radio frequency (RF) data (hint: it involves synthetic data pipelines and building deep customer trust)

📊 How to benchmark ML models that understand RF data

🧑‍💻 How to hire a team able to build complex technical products for national security customers

And much more!

You can listen to the podcast on Spotify, YouTube, the Shield Capital website, or right here on Substack.

Subscribed

As always, please let us know your thoughts, and please let us know if you or anyone you know is building at the intersection of national security and commercial technology. Tune in next month for our next episode!

Here is the full episode transcript:

Maggie 00:04

Welcome to the Mission Matters Podcast, a podcast from Shield Capital where we explore the intersection of technology startups and national security. I'm Maggie Gray,

Akhil 00:14

And I'm Akhil Iyer

Maggie 00:15

And we are your hosts from the investment team at Shield Capital. Shield capital is a venture capital firm investing in early stage companies building at the intersection of national security and commercial technology. In this podcast, we discuss the technical challenges of developing and deploying commercial technology to national security customers, as told from the founders perspective. In this episode, we're joined by the founders of Distributed Spectrum, a young New York City based startup using machine learning to provide a comprehensive real time view of the radio frequency or RF environment.

Akhil 01:01

Today, the modern battlefield is more reliant than ever on digital systems, everything from drones to software defined radios to satellites and much more as such, modern service members are more vulnerable than ever before to electronic warfare, in which enemies adversaries are able to use electronic jammers to disrupt communication systems, disable navigation tools, identify positions and so much more.

Maggie 01:23

We’re super excited about what Distributed Spectrum is building. Current DoD systems cost millions and millions of dollars for just a few sensors and require months of training to use. In contrast, Distributed Spectrum systems cost just a few thousand dollars each require only a few minutes of training. In this conversation with the founders, we cover everything from accessing RF data in order to build effective ML models to actually interpret the RF spectrum, how to benchmark those models, the similarities between the tech needed to manage computer vision and radio frequency, how customers have actually responded to using Distributed Spectrums technology and much more. We're joined today by Alex Wolff, Isaac Struhl and Ben Harpe, the founders of Distributed Spectrum. Alex, Isaac, Ben, thank you guys so much for coming on the show.

Alex 02:13

Akil Maggie, thanks so much for having us on. I'm Alex Wulff I'm one of the co-founders and the CEO of Distributed Spectrum.

Ben 02:20

Thanks guys. I'm Ben Harpe. I am one of the co-founders and COO.

Isaac 02:23

Hey. I'm Isaac Struhl, and I'm the CTO.

Maggie 02:26

All right, so I want to start off with an easy question, Alex, Ben and Isaac, can you guys tell us the Distributed Spectrum origin story? Tell us a little about about yourselves. How did the three of you meet and how did three Harvard undergrads get involved in electronic warfare in the first place?

Alex 02:41

Yeah. So to answer your question about our origin story, so Ben, Isaac and myself have been friends since the very beginning of our freshman year at Harvard. Ben and Isaac were fresh in your roommates, and I'm pretty sure Isaac and I met on literally the first day of classes. We had spent a bunch of time all throughout college working on projects together, doing P sets, things like that. And right as we were about to enter our junior year, sorry, our senior year of college, the pandemic hit, and that really gave us an opportunity to, instead of probably graduating online and taking classes online, to say, hey, maybe the time is right for us to take your off from college and actually work on creating a company together, which had always been something we talked about doing. So the original idea behind Distributed Spectrum and what we started the company around came out of just my love of radio waves. I had been experimenting lots of hobbyist technologies for a pretty long time, and really fell in love with the concept of being able to utilize radio waves to communicate and also understand what's going on the radio spectrum. So I had done a few internships at companies like Raytheon, Lockheed Martin earlier on in college, and got exposed to just how kind of expensive but also very performant a lot of these existing electronic warfare and sensor platforms that our military relies on. So really, the core idea behind Distributed Spectrum was to augment some of these capabilities on the battlefield by instead of relying on a very small number of kind of large and expensive platforms, to instead use very performant commodity hardware that was starting to enter the market at the time, to change the paradigm to be to use instead a much larger number of lower cost systems powered by great software.

Isaac 04:22

Yeah. And so the thing to understand is Alex was the radio guru. He had just come off of writing a textbook while he was a junior in college on beginning radio theory, but Ben and I knew that we could use our backgrounds in computer science and statistics and machine learning to solve this really interesting problem, and that's what drew us to it at the beginning, because it was just something that was really interesting to solve awesome.

Maggie 04:42

Alex, could you tell us a little bit about what actually is electronic warfare? I think this is something your average person probably has never heard of, or at least has not heard of until recently, and what makes electronic warfare so relevant today?

Alex 04:57

Yeah, definitely. So we view electronic warfare. As understanding and manipulating the radio spectrum to your advantage outside of the oceans, pretty much anything that's communicating wirelessly is using radio waves to do it, and it's no secret that radio is becoming increasingly more important on the battlefield every day due to the proliferation of unmanned systems. So this presents both a huge opportunity to understand what the adversary is doing based on all these signals and also a threat in that now our own signatures are becoming increasingly greater that the adversary can exploit. So electronic warfare is just growing in importance every day as more and more devices out there starting to use radio waves in order to fulfill their functions.

Akhil 05:38

Isaac, this stuff isn't new, right? Electronic warfare goes back certainly before WWII. But I think in the modern sense of the electromagnetic spectrum, from radio waves to radios, is really WWII on. This stuff is not new yet. The idea of sensing the environment electromagnetically, figuring out how to either decept, deceive, counter and address it is a new so what's what's different today, particularly as you all saw this coming into a space where, again, there had been an extensive literature of use cases, of applications, of technologies. What did you see that was missing here?

Isaac 06:19

Yeah, so there are a couple things. The first thing is that there are so many more devices on the battlefield that are using the wireless radio spectrum to communicate. These devices also might be at low power, and they also might be on for a very short period of time. And so if you want to just sense these devices effectively, you actually need to be close and you need to have sensors everywhere, which means you need lots of devices. And what we've seen in the past is, you know, a small number of very large, expensive devices that required lots of trained operators to effectively get outputs from them. The second thing is that just the concept of operations during the global war on terror looked very, very different. We could fly a plane with a dozen of these trade experts to focus on a single target at a time, and we can't do that anymore because of the sheer number of devices emitting RF. The fundamental way that we that we do sensing, needs to change in the great power competition context.

Ben 07:05

Yeah. And just to expand on the scale of the problem that Isaac is talking about, because I think this is really what has changed. You know, first is the geographic scale. You want to be able to cover the entire Pacific Ocean, there are going to be anomalies popping up, weird things that you're not expecting, the spectrum that you want to know about, and it doesn't make sense to station a large number of really expensive sensors all across Pacific. You just can't really do that. The other thing that's changed is really the skill of the missions. No matter what you're doing, you're going to be affected by the radio spectrum, and so there is this really strong need for anybody, regardless of their mission, regardless of their amount of training, to be able to inform their mission by what's going on in the spectrum, and so that's really the difference that we see now, is that not only do we need sensors everywhere, but everybody needs to be able to understand the outputs of those sensors and how it impacts their mission.

Akhil 07:52

Thanks Ben, that's really helpful, and I think highlights the focus you all have on proliferated systems. How do we get every individual to be a sensor in this low cost, disruptive way to enable broad awareness across electronic support as you think about that and where you have come since the Harvard College dorm rooms to where you are now, can you talk a little bit about how the customer side found this, championed this, and recognize the same vision that you had about the future of electronic support and RF sensing generally in future environments.

Alex 08:29

Yeah, definitely. So pretty early on our one of the focuses that we had was just sitting down and talking to as many customers across the Department of Defense as possible. And that's one thing that was really interesting to us was customers are super willing to sit down, even with a bunch of kids right out of college, and just tell them about some of the problems that they face on a day to day basis. And we heard a lot of really interesting problems that people were facing with regard to the radio spectrum that we actually felt like we could tackle. Honestly, there was a lot of low hanging fruit out there that we heard about simple things like, hey, if my radio stops working, I don't know if it's because of some electrical or mechanical failure, or I'm being jammed, or maybe there's, you know, one person in my unit that can actually operate this expensive signals intelligence gear. But if we don't have them, then we're completely blind in the radio spectrum. So that really became our focus early on, was building capabilities to tackle some of these seemingly simple problems that are, you know, in hindsight, a lot harder to actually solve, but allowed us to give people just a lot of leverage by expanding their ability to conduct their missions, by giving them pretty tactical level situational awareness about things going on in the radio spectrum.

Ben 09:35

That started a really good cycle for us as well, where we were able to learn about these first problems show up and actually provide demonstrations and show that we could, with our pretty inexpensive hardware and with our software, provide much better solutions to these mission sets, and then from there, being able to expand our relationships, meet new potential customers, learn about their problems, and then continue developing our product to be able to tackle a much larger. Set of more complex missions.

Maggie 10:01

So it sounds like there really has been this revolution in the technology with these cheaper, software defined radios, better edge deployable ML systems that you're able to develop. I was wondering, you know, could you tell us about the first time that you really felt like a customer could use your product? You know, first time you saw them and you felt like they loved what you had built for them.

Isaac 10:23

Yeah. So, as Alex mentioned, one of the things that the DOD does really well is let new people understand their problems and develop solutions for them. So we were basically kids out of school, and we were able to embed directly with the customers and see their missions. So one of the first missions that we did was a full mission profile exercise. So we went down and we had a few of our inexpensive sensors scattered around the area, and these customers told us nothing. We didn't know what they were doing, and we certainly didn't know anything about the RF spectrum that they were using. So during that exercise, we were able to use our system to understand the spectrum broadly, but also show these guys what they looked like and what they were doing in real time. And in fact, one of the things we did was we did was we said text messages, text message alerts for them as they were moving around the exercise. And so the reaction was, Oh, wow. Like, this is really possible. You don't have to use super expensive hardware, and you can do it really, really quickly in, you know, real time or near real time. And so the two things that gave this aha moment, or that it was technically feasible, you know, you could actually do this with the systems, but also that we can make the output usable to somebody with no training. Everyone can get an alert and do some action with it. Yeah, exactly.

Ben 11:27

And one thing that we really try and focus on is we're not trying to replace electronic warfare officers and SIGINTers. We believe we can help these people do their jobs a lot better, get much more information more quickly. But then there are all these users who don't have any of that specialty training. And so one fundamental thing that we've just seen a lot is that people need to be able to make decisions on their missions based on data that they just don't have. And so another example is we were deploying sensors with ground based operators, and the training that we gave them was, just take one of our sensors, turn it on, plug it into your ATAK device, and that's it. You're able to start seeing alerts for the types of devices that you care about in real time. And that was also really cool to see just being able to run really minimal training, and seeing users who usually don't get any sort of spectrum information, having that seamlessly incorporated into their missions.

Isaac 12:15

The final thing is, just this simple understanding is something that's been core to us at DS throughout the entire time we've been building we think that everyone needs to understand the RF spectrum for any moderate mission, and so we just want to democratize that information.

Akhil 12:25

Alex, it sounds like there's potentially a lot of users of this, but you kind of have to prioritize, as a young startup, where to focus that effort. How do you think about that?

Alex 12:37

So the field of electronic warfare is obviously pretty broad, and very early on in our company, we spent a lot of time chasing, I would say, lots of different ideas, and we pretty quickly realized that we needed to focus around a few core capabilities that we could actually start bringing to market. A big part of this was deciding to say, hey, we need to build a few prototypes, and we need to think about exactly what missions we're going to try and solve. And those missions that we started to focus on were really around two core central concepts. The first is providing immediate awareness of threats in the radio spectrum to individuals that don't ordinarily have access to it. A big part of rethinking how we fight in modern conflicts is giving any warfighter, regardless of their level of training, awareness of both their own signature, but also immediate awareness of any adversarial activity, and that's one of the kind of key concepts that we decide to focus on. The second was, you know, realizing that we need to empower those that actually do have signals electronic warfare training to do their job a lot more effectively. There's not enough of these individuals out there, and there's a lot of tools that we can actually provide to them to make them be able to do their jobs more effectively. Think things like being able to throw out the 99% of signals out there that they might not care about and allow them to focus in on the 1% of things that actually matter. So that kind of key realization early on, of prioritizing around a few core mission sets was one of the things that really kind of helped us get going?

Ben 14:01

Yeah, exactly. And I think at the beginning, it was really about trying to find those missions where we could really demonstrate that our technical approach works, that we can build trust, that we can get more embedded in, you know, the networks of users who are going to care most about our product. And then as we grow and we have more under our belt, it becomes a lot more focused on long term, more strategic growth in the company. So starting to think about, really, where is the money coming from? Where are the big strategic what are the biggest strategic priorities that are coming and, you know, we think that we can have a pretty general approach to EW and to spectrum awareness that supports a huge variety of missions. But within that, we're at the point now where we have to really start going in the order of where the biggest opportunities going to be for the business.

Isaac 14:39

The final thing I'll add is that there's this marriage that we continuously try to make between business outcomes and product outcomes. So Ben and Alex just talked briefly about the business ones, but from the product perspective, we want to start by solving really, really specific problems for individual warfighters. So for example, being able to put our sensors in Ukraine gives us real, real world data on both. Of what the RF environment looks like, but also how people are actually using these systems to understand the situation around them, and what data is actually useful to them. And that type of feedback lets us iterate really quickly on the product, which ties into our business development activities as well.

Maggie 15:13

I wanted to pull on a few threads there. Ben, you know, you mentioned the importance of gaining trust, the importance of getting visibility the importance of really having a big impact on your customers. You know, one of the things that I found interesting about you all is that you've decided to focus, at least initially, on really the low cost and unclassified work. And I know historically, a lot of electronic warfare development has been pretty secretive, and I know it's something that a lot of startups working with the DoD have to navigate of trying to decide whether to go after classified work, whether to do unclassified work. Obviously, classified work requires hiring people with security clearances, going through all kinds of complex certification processes and much more. So can you tell us a little bit about why you all have decided to stay in the unclassified space so far, and any potential challenges that you have encountered with dealing with these classification issues?

Ben 16:10

Of course. So the first thing I'll say is that at the beginning, we didn't really have a choice. We were starting from school. We didn't have access to classified data or to classified requirements, and so we were forced to focus on how we can solve these problems from an unclassified level, and that's definitely started to change a bit. Now we're going to be able to tie into classified systems and take advantage of classified information. But it was actually really helpful to be forced to think about this from an unclassed level. There's actually a huge amount of value that you can unlock, filtering through, cutting out all the noise in an environment, alerts about the types of transmitters that are in your environment recognizing anomalies that we've never seen before, and it's a very different approach from the old way of having a static, classified signal library that you're directly comparing against. And so it actually means that we can be really flexible to how quickly things are changing the environment and giving people alerts and understandable insights about what's actually important to them.

Alex 17:00

Another point to add is, one of the other things that we're focused on is being able to build systems that we can distribute to partner forces, and in most cases, those do need to operate at the unclass level. So in that case, that actually gives us an advantage. And the last thing I'll add on is, for example, if we are putting sensors out in the environment and leaving them unattended, not having anything classified on them means there's no risk of losing that information, which gives us a lot more flexibility in our employment of our systems.

Akhil 17:26

Curious also, to ask you all are based in New York, not my immediate thought for having a company based there working in this national security space, but I'd imagine there's some actual benefits when it comes to being in New York.

Alex 17:38

So one anecdote that we tell our customers all the time is that New York is actually probably one of the densest signals environments on the planet. We spend a lot of time just walking around the streets of Manhattan with sensors in our backpacks. And one of the really interesting parts about New York is that, you know, on a nice summer day, on any given street corner, there could be 1000s of devices all broadcasting. So being able to have that as our home environment really gives us a lot of confidence that our systems are going to work in very, very congested environments, which is not something that we can just take for granted. One of the other awesome parts about New York is people want to live in New York, so it's been nice to be able to attract awesome engineering talent to live and work in the New York City area.

Isaac 18:16

What's really funny is we often end up going to exercises that try to simulate urban environments or in other urban areas. And those urban environments don't compare to New York at all. Like New York is so, so much more dense with respect to the devices that are out there. And so we'll get to these exercises and be like, Oh, look, a couple dots on the screen. Like, that's all I have to think about. It's just totally, totally different from looking at the outputs of our tests in Central Park or your office. And so the key point is, like when we do this, we have a much cleaner slate to work with, and that makes the performance a lot easier to achieve.

Akhil 18:48

Thanks Isaac, I'd love to dive into this, this concept of ease of use, and the parallel I'll make for those who are technical, is where the computer vision space has come right. 10 years ago, it was you doing a lot of the work yourself. Nowadays, the litany of tools, whether that's you only live once models, has really just proliferated, and the DOD has been a leader when it comes to lowering the barrier of computer vision access for operators. And the joint Artificial Intelligence Center and the work around project Maven is an example of that. What I sense, maybe, is that the way in which the computer vision world, both for national security and commercial, evolved into something that was easier to use, that that might be coming when it comes to the sensing of the electromagnetic spectrum. So my question as Isaac is, is that right? Is that how to view this, this evolution in radio frequency sensing, RF, EW, generally, and where will it be in five years?

Isaac 19:42

Yeah, it's a good analogy. And actually, I think it's even more true for electronic warfare. There are two main factors. I think the first is that the average soldier on the battlefield really needs to have a lot more information than they currently do about what's going on in the spectrum. That's just table stakes for being able to operate effectively in a congested environment. Written against a near peer adversary. They need to know things like if they're being jammed, and they need to know if something's threatening them in their area. The second thing is that we need to enable especially trained people that already have a lot of knowledge of signals to do their job effectively. We think there's always going to need be a need for these people, but now there's too much information for them to process, you know, by themselves, and so software and AI can help them understand things like, Hey, this is an important signal. This is an important anomaly. Fundamentally, this is something to focus your training on and focus your analysis on. With computer vision, I think we saw something similar. There's too much information. AI techniques can get actionable insight out quickly to the people who need them. And so with CV we ask the question, hey, if we can process camera data at the edge, why can't we put cameras everywhere and get their outputs automatically. The same thing is now happening with RF, because we're able to process RF at the edge, and therefore we can say, what happens when we put RF sensors everywhere and make the models good enough to run at the edge. And the key point is that it's possible now, because we can make these edge models good enough, and you can buy a software defined radio for like 30 bucks, I think the key difference is that it is much, much harder to interpret the raw outputs of an RF sensor than it is for a camera. So having software that can do that really difficult interpretation at the edge and just give back human level understanding is much more important for RF than it is for CV. So that's why I think this change is even more of a step change than it was for computer vision.

Maggie 21:19

Yeah, so I'd like to shift gears a little bit and really dive into some questions that I have about the actual technology that you guys are all building. And some of this is related to the question of classification, you know, other kinds of machine learning tasks, like computer vision, which we've talked about in the past, have a lot of easily available open source models. There's also a lot of open source data sets. I mean, obviously all of YouTube is image data. There are all kinds of models, you know, YOLO v3 and others in the computer vision realm. There are also low code, no code, platforms that make it really easy for people to customize other kinds of models. However, at least my assumption is that there are not large open source RF data sets available on GitHub or hugging face for you guys to just train some ML models. And again, I have to imagine there aren't just off the shelf models you guys could easily download and plug in. So I'd be curious to hear, how have you guys gone about training these models. Where have you been able to actually find good data to train them? Are using synthetic data? Is it about customer partnerships? Could you talk a little bit about that?

Ben 22:30

Yeah, you're exactly right. There are no off the shelf models for RF, and so a lot of what we're doing is creating our own custom architectures to be able to understand specifically the RF spectrum. We of course, take advantage of a lot of the research and really successful ideas from modern machine learning to inform how we do this, but we also have that added constraint of having to run inference in real time on our edge sensors. And so there are a lot of challenges and constraints that come from that that mean we really have to be building our own foundational models from scratch. And to your point, the other thing that makes this hard is that it's not like there's some huge existing data set of RF data that we can just download and train against, but an advantage that we have is that, unlike something like computer vision, where it took a lot of research to be able to generate realistic, artificial images, RF is a much more structured problem. You know, we know a lot about the physics that can train these signals, how people might want to modulate and code data in signals. And so we've made a big investment in really good hardware in the loop systems to be able to generate and collect a large amount of very realistic RF data. We can stimulate different combinations of how different signals might interact. We can simulate different noise patterns. And then we can also mix in real data that we've gotten from customers, from exercise, from CAST runs that we've done, and so we're able to have a large but realistic and flexible set of data that we're able to train on. And I think that's what's made us be able to be successful.

Maggie 23:51

Isaac, I wanted to return to a point that you made earlier. So you all have to deploy these models on Compute edge, constrained hardware. You know, there's no AWS or Azure out in the field somewhere. The idea, right is that these are things that a soldier could carry, that you could put on a drone. So I'd be curious to hear, how do you all think about the trade off between performance and model efficiency when building these models? And a related question, how do you actually test and benchmark your model performance? Again, I have to imagine there are no excellent open source benchmarks for you all to work with.

Isaac 24:27

That’s exactly right, so sure. So starting with the compute constraints, again, we're designing this with a particular mission in mind. So the first question is, what hardware can we get away with? Can we use a GPU? Do we have the power available for that? Do we have the size, or can we explicitly not use a GPU? Do we have to specifically use what the customer already has? Or maybe, can we use a server class, GPU? Like all of these questions go into it, and that means that our deployments often end up involving essentially unique hardware. So that requirement is both a blessing and a curse. The blessing is that we can make our approach specific to the two. Deployment. So when we have more compute, we can run bigger models, and when we have less we can do more specific optimizations. The curse is obviously that if we don't structure our model development properly, we might have to build a single custom approach from scratch for every deployment, and we certainly don't want to do that. So I think the key in answering this question is a modular approach, and also developing a, like, really deep understanding of specifically what the customer is trying to do. I think there's like, two main examples of what a customer tries to do. The first example, in you know, ML terms will basically be, I want no false positives. So for example, I want to use this model to tell me when to make a big decision like change my comms plan. And so I want to be really, really sure that I'm seeing the signal. The second thing is, I want no false negatives. So for example, I want to use this model to just triage important information for an analyst downstream. So make sure that we include everything that might be my signal. The key point is that these examples actually let us run much smaller components, because the tasks are a lot more specific, and that makes it easier for us to be flexible to different compute environments. And so the key point is, how do we actually get to this level of specificity, which lets us be flexible, and that is a function of how well we can create these real benchmarks for performance. So we have some lab benchmarks for some of our middle for our bigger models and for the smaller ones that I was talking about. We work really closely with the customers to figure out exactly what they care about and what they don't, so that we can really optimize the performance.

Maggie 26:26

One more related question I know, you guys are not deploying this technology in a vacuum. A lot of your customers have already purchased, you know, maybe millions of dollars worth of legacy hardware that you might actually need to integrate with. Can you share your experience? You know, challenges, surprises of integrating your software with existing DoD hardware vendors?

Alex 26:48

So of course, there's a lot of equipment that's fielded on the battlefield right now that is both very sensitive and performant, but also very expensive, and this equipment is primarily designed to be operated by a trained human at the same time, there is also inexpensive, commercial off the shelf hardware that's primarily designed to be operated by software. So a lot of the work that we have to do with existing department of defense vendors that we collaborate with is work with them to actually build hooks into their systems to allow our software to control it, as opposed to just natively having those hooks for commodity, commercial, off the shelf equipment. As an example, think about a system that's designed to detect and intercept communication signals. Instead of a human slowly tuning that radio at the speed of them being able to understand the information coming out of it, we want to be able to quickly tune that radio at the speed that our software can identify new things popping up in the environment that are interesting. So that's just one of the examples of the ways that we work with some of these existing vendors.

Ben 27:46

Yeah, and of course, we recognize pretty early that a lot of the customers we want to work with have already bought a lot of systems. And so from you know, at the beginning, it's not a great sales pitch to just go in and say, well, you should throw out all of that stuff and just use us. Use us instead. And the scale of the problem is so big, and the systems that are out there are already actually generating a lot of really useful and really important data. So I think the way that we think about this is less as US replacing these systems, but really from the software side, we can add automation, add filtering, add alerting, and really let customers deal with a huge amount of data that's either coming from us or coming from existing systems that they already have.

Akhil 28:23

Thanks for that. Ben, do I have it right then that in a lot of ways, what you are doing from this low end, cheap, commercial software defined is a complement to a lot of the existing systems.

Ben 28:33

Absolutely, that is exactly how we think about it. It just does not make sense to try to replace all the existing hardware. Sometimes all you need is just a software integration. Or maybe what you need is a small edge GPU that's co located with the system and processing its data. Or maybe it's a network of inexpensive sensors that then triggers one really exquisite sensor to go get more high fidelity information. We're also not developing any of the hardware ourselves, the SDRs, the GPUs, so we're going to be able to take advantage of improvements that other people are making to that hardware, and we're also expecting that a lot of these devices are going to end up on the field anyways. So really, the most important thing for us is to enable that the data coming out of all these sensors, regardless of their cost or their size or how they're deployed, we want to make sure that that data is really useful, and we want to make sure that it's understandable to anybody who needs it.

Akhil 29:20

Thanks. Ben, Alex, you talked a little bit about new, novel techniques coming to play here. And I don't think you can find a weekly economist edition that does not, in some way either, every other week talk about the challenges, really, with the pace of change, the pace of evolution, not just in RF and Ew, but across the modern battlefield, it reminds us, Maggie and me here at Shield, investing in the cybersecurity domain, a domain where inherently, there's a ton of new energy and new startups, because there is an adversary. There's an adversary that is constantly changing, improving, manipulating, influencing and shaping what the. X vulnerabilities are as you think about how you mature and stay ahead of that and stay at pace with the evolution happening, whether that's now, whether that's in the future, how do you think about that, both in terms of the software you're trying to deploy, as well as the underlying hardware, which, as you know better than I do, is increasingly constrained because of some of our supply chain issues.

Alex 30:21

Yeah, you're bringing up a very interesting shift that's happening right now, and I think it speaks to a few separate points. So the adversary exploiting vulnerabilities in a system that you deploy and adapting their techniques is pretty much inevitable, and we're seeing that right now on the ground in Ukraine. If you ship an electronic warfare system to Ukraine with a fixed and pretty brittle library of signals, it's going to become obsolete in literally a matter of days, which is something, again, we're witnessing right now. So any software that you end up shipping is going to need to have some ability to adapt and change based on the environment as the environment adapts and change. And that's one thing that we've been focused on is being able to make a system that not only can understand what's going on, but also have some ability to respond to changes in the environment. And the second piece of it is, you know, we know we're not going to be able to get everything perfect the first time, so having some ability to actually deliver updates to the software the systems that have already been fielded is also pretty critical, and it's also been something that we've been focused on. The second piece here that I also want to highlight is just the ability of making a system that's incredibly easy to use. If we can give people a flexible set of tools that they can use to accomplish their mission more effectively, it's pretty hard to circumvent human ingenuity. So one of the things that allows us and our customers to be successful is giving them access to systems that can just do very, very simple tasks and then do them well, to allow them to adapt to conditions as they change.

Maggie 31:48

So it really sounds like you all are going after a really complicated problem that you're trying to solve. It requires deep domain expertise in software and hardware in government, go to market. How have you all thought about building out your team to have different areas of expertise in order to make Distributed Spectrum a success?

Ben 32:11

It has definitely been a challenging team to hire for. As you said, there are a lot of very particular skill sets that we're looking for that really are not very common. So, I mean, there is a pretty small overlap between the people who are, like, really deep RF signals experts and people who are really strong ML engineers. And so when we started, the main focus was really about setting the technical back, one for the company, for the things that we really thought were going to be important going forward. You know, we have really scalable and repeatable access to data. We have a really strong and reliable embedded system that's running on all of our sensors, we can make a lot of progress on fundamental research on just generally, how to use AI to understand the spectrum. And so being able to find engineers who have been really critical to that success that we've had so far, we knew that it was impossible to find people with every single precise piece of experience that would be relevant to us, but we were able to find people who really understood the vision, who had enough experience to be really flexible to a wide number of technical ideas, while still being able to operate in an environment with a ton of uncertainty. And I think that changes a lot more as the company scales. When there were five or six of us, everybody has to do a bit of everything, and that's still very much true right now, where we are at 14 people and beyond, but we do have a lot more freedom to be able to add new people with very particular pieces of experience that we know we need to solve particular problems that we know about, to work on this particular mission with a particular custom customer that is, you know, I think both how we're thinking about scaling the team in terms of, you know, keeping that generalist mindset of being able to be very flexible, but also focusing on the specific value that we know We need to add to customers.

Isaac 33:41

I completely agree with that. I think the main thing I'll add with respect to Team construction is that the difficulty of this problem and the interestingness of the solution is what has really led to what our engineering team looks like. So right now, we're vast majority engineers, and I expect that we'll stay that way for the foreseeable future, just because the things that working on really like fundamental problems in signal processing and machine learning and stuff like that. And so, you know, we really need to make sure that we are solving these in a novel way. And so that's like, been informing how we make these hires on all of our engineering teams.

Akhil 34:10

Guys, you've been at this a couple years, made some great progress, both on the technical side and getting users really involved and championing some of the work you have. What's been the biggest surprise?

Alex 34:21

So, yeah, I talked about this before, but I think, you know, one of the most surprising things to us, especially early on, was just the willingness of end users in the Department of Defense to sit down with us and share some of their problems and capability gaps. And these early touch points were so critical early on in shaping our thinking about how electronic warfare should be actually conducted. So I just think there's something so valuable about providing environments for individuals with no preconceived notions or prior biases about the way that things should be done, to speak directly to end users in a setting that's free of filtering and free of basically things that just reduce the quality of that information. And it goes deeper. And just having conversations too, but, you know, providing access to military bases and training exercises to see how some of these things are actually conducted on a day to day basis. And this is just, you know, incredibly critical to fostering innovation, developing novel solutions is something that the Department of Defense needs to keep encouraging.

Isaac 35:16

Yeah, and I think this is changing now, but when we were at school, nobody was doing it. I mean, when we talked about solving problems for the DoD or the intelligence community, the reaction we universally heard was, Are you crazy? That's impossible. Go do something else. You know, you won't be able to get any information. It's impossible to sell. Nobody will talk to you. And as Alex mentioned, we really haven't found that to be true at all. And yeah, like, one of the best parts about our jobs is that we get to go to customers and see their tech and see how they operate, and we get to be the ones to help make it better. I mean, it's awesome. I think this is, this is clearly changing. Now we've seen, you know, lots of defense startups and successful offices like the diu and others actually proving to us that the DoD is open for business. But, yeah, when we started, we got tons of advice about how this would be impossible. And then so far, we've seen this not and that we can build a product effective. Product effectively in this space.

Akhil 36:04

That's awesome to hear Isaac, and great to hear, particularly from the types of customers willing to champion and willing to accelerate your technology forward. I'm sure, though, that there are still some challenges. What's the one that stands out to you from the time you were in the dorm room together in Boston to now?

Isaac 36:19

Yeah, it's funny. It's funny. It's actually something that's pretty similar to my previous answer. But really, just getting the baseline knowledge to be able to speak DOD and communicate with people is something that we feel like we're continuing to evolve, but was actually really, really hard to do. And you know, when you first start, you hear tons of acronyms and you look them up and you start to vaguely understand them, but it's really more about the unique perspectives and the deep training that everyone gets throughout their entire careers at the DoD that leads them to think the way that they do and make decisions the way that they do. And very often, there are really good reasons for everything that's being done, and it's really hard to understand that context when you're coming into a new conversation. So for example, you know, the sheer number of program offices and people and jobs and roles and things like that is something that's hard to get rate not because you can't look up what their function is online, or look up what they're working on, because it's actually hard to understand exactly what led them to this point and how the culture knowledge and the system works influences the outcomes. And that's something that we've invested obviously, a lot of time in learning, and something that happens just as you do this more and more, but it's still very much a barrier and something that I think is starting to be broken down, but it's still definitely a challenge for us.

Alex 37:20

One challenge that I'll add on to that is, you know, we talked about how people are willing to talk to you, but going from the step of actually finding somebody who's willing to talk to you to put you on contract is a completely different story. And that was definitely, you know, a roadblock for us early on, and it's been a roadblock for lots of young companies, is being able to cross that first milestone of actually getting your first paying customer and getting your first, you know, paid system out the door, and that is, you know, that's obviously something that comes with the time, but once you get there, the road gets a little bit easier. And, you know, demonstrating that past performance is important.

Akhil 37:53

That's awesome. Alex, yeah, aligning the user with the buyer and the one with the wallet is huge. And you guys have navigated that really well over the past couple years, and look forward to seeing what's to come. Ben, last question to you, what's been most rewarding?

Ben 38:08

Yeah, we talked about this earlier, but it's really just being able to feel like we're actually having a strong understanding of the mission need and that we're actually having an impact on. So you know, those moments that we were talking about earlier around seeing people use and get value out of the system that we've built is really exciting and really rewarding. The other thing that I think is personally particularly rewarding for me is that I think I have pretty strong technical opinions about, you know, what is a good way to solve these problems in the RF spectrum, how we should be approaching these problems. And so one thing that's been fun is we're often met with a lot of skepticism around, well, this is the way I've been doing RF for 40 years. Why would we change it? Or, you know, I don't trust AI, because it's going to hallucinate. I don't want that to be involved in how I understand the spectrum. And so with this strong understanding of the mission, being able to show very concrete examples of, okay, well, for this thing that is really important for you to do using a software defined system, using machine learning, lets you achieve this outcome that was previously impossible. And so showing people that and seeing their response is really rewarding. Like, you know, you can just see, okay, I know this is going to be useful. This is going to actually have a difference on people's missions. And I think that justifies, not only the ideas we've had, but, you know, the way the work that we've actually done.

Maggie 39:16

It's awesome to hear that you are really able to see the value of what you're building in customers hands. So our very last question for you guys to close out this episode, what advice do you all have for other founders looking to build a startup in the national security space?

Alex 39:33

So one point that I would start with is one of the key prerequisites to having people kind of willing to take a chance on you, willing to trust that you can actually solve their problems is having something physical to show them, until we had a real prototype that we could actually put in front of people and have them sit down and actually use it. It was actually pretty slow going for us, and we didn't necessarily make as much progress as we wanted to, simply because we had all these ideas in our head, but we had never actually spent the time to sit down and go through and say. So okay, to actually solve this person's mission, here's the product that we need to build, and let's just get a rough prototype out the door to actually do that. And I think we were just a bit overwhelmed by the total amount of things that we could actually do. So having something physical to put in front of a customer is just the first thing to show them and iterate on is extremely important, and it's something that's just extremely necessary to doing business with the Department of Defense.

Ben 40:22

One other thing that's really stuck out to me is just the value of doing things in person. In general, I think that pretty much, no matter what you're doing if you're building a startup, if you're trying to learn about your customers, I think that having in person interactions is so important. Our entire team is five days a week in our office in New York, and that's been really critical for us. But the real mission learning and particularly building trust. I really think that only happens in person, and particularly in the national security space. The value of just meeting people in person, sitting down with them, really spending time to get to know them, you just can't do any of that over zoom Carl over a teams call. And so really, I'd say for getting started, it is really not only about just talking to as many people as possible, but trying to do as much of it in person as you can.

Isaac 40:59

One final thing I'll say is that I think there's a tendency, and certainly I feel this in myself. A lot of you know, young founders who see a system that clearly has some problems and say, Well, I can just rip this apart, and I have a much better solution, and people are going to love it, and this is the way to do it. And then, you know, they want to be visionary leaders. And I, I totally think there is a time and a place for that, but I think one of the most useful things that we've done is try to deeply understand, for example, why we're hearing some pushback, or why we're hearing some frustration, or why we're hearing about how a system works in a certain way, even if we think that system itself is crazy. You know, it's no secret that lots of that the DOD has lots of bureaucratic challenges, and that contributes to how to do, you know, sales to DOD. But there's a reason that a lot of these systems got built this way, and there's a reason that a lot of the programs exist the way that they do. So, you know, being able to adapt and fit into those, even if your goal is to ultimately make something much, much better than that, is something that you really need to be able to understand to get your company off the ground. So I would say, you know, pretty much everyone that we've met has great intentions and has clearly defined roles and jobs. And I don't think we've met really, anybody in the DoD who's been out to screw us right, like they've been really honest about what they want and what they want to create, and so being able to listen to that honestly and be able to help out with their with their missions in an honest way has been really, really useful to us.

Akhil 42:09

Isaac, I love that part, and I think really aligns with what Maggie and me work on a daily basis, and that's technology that has a an important mission, a mission that matters. Ben. Isaac, Alex, awesome, chatting with you all today, excited for what this year has to offer in terms of building and scaling this idea and this vision around the future of electromagnetic sensing and RF sensing broadly. Really look forward to seeing what's to come.