Ondas Holdings CEO Eric Brock Interview Rail Networks, Optimus Drones & Palantir Partnership & More

Nantuckets on mine, it's from the island that I live on.

Yes, that's very good. Please.

All right. Great. Well, I'll start with an introduction I guess. So my background is I like to say I'm a trained accountant, which I'll come back to. I spent some time as an investment banker. When I say that, I worked at Bear Stearns, I always have to say may she rest in peace, because Bear was a great place and an amazing, at least successful investment bank, but of course in the crisis in 2008-2009 it didn't make it through. But incredible experience there. And then I spent even a longer time, the bulk of my career actually as an investor. So I was on the other side of the table. I was on your side of the table. I was a founder of an investment firm out of Boston called Cloud Capital. So that's what I bring to the table. I've got an accounting background, finance, economics, and kind of have a macro orientation as well. At the same time, I've been doing this now at Ondas Holdings for eight years. I'm the founder of Ondas Holdings. As we get into the business, you'll learn more about or I'm sure we'll talk a lot more about the businesses underneath the holding company. And we've got some incredible leadership there. But I've kind of architected the strategy at this Holdings and been doing it now for eight years. So I guess the reason I'm introducing that, Jamie, is for a long time I was new to the CEO role, in many ways an unlikely CEO. But I think I can say that now I'm a veteran, a corporate veteran. So that's that. I mean I guess I'd also add that in my seat today I take my responsibilities as a CEO very seriously. If you're asking me who I am, I make a commitment to our customers and our partners, and of course that extends to employees and especially investors, to work extremely hard on their behalf, to be totally committed to delivering. I've got a long-term focus on that endeavor. Again, we've been at it eight years and we're starting to see things come together really nicely and we'll talk about that. But in my seat, I really want people to understand, and it's helped us a lot, that I'm only going to win if you win. And again, it's customers, partners, employees, and especially investors. I think that commitment and my really, I intend to demonstrate our integrity, of me and my team, I think has been really important.

It's a good question and I sort of thought a lot about it. I was very deliberate as I considered using these social media channels. And at the end of the day, I do believe very strongly that communication and transparency are important. I've also say along the growth of my professional curve or life that the world has changed. So going back to when I was running the hedge fund, there was a sort of a code that investors were, I would say, overly discreet. You could never be in a newspaper, you could never have promotion, and that was just sort of the way everyone thought was supposed to work. But today things are different and I really think it is for the better. And I also say that's particularly true for a mission-driven company like Ondas. We want to be very clear and transparent and communicate what we're trying to achieve. And I think there's huge benefits to our company and all the folks connected to us. So for me, Twitter and LinkedIn are huge enablers of that. They're platforms to communicate and against the vision. It's also the ability to demonstrate our progress. And I'll also add a lot of the communications you see, and I spent a lot of time on your side of the table. So investors are always thinking whatever the CEO says or what the company does, it's always about them. But it's not. We're also communicating to customers, partners, employees, even competitors. We're making messages and so we're there. And the other side again is I think transparency and accountability are essential. That's the way we build trust. So we're very transparent. We're telling you what we're going to do. We're going to tell you why we're doing it. And then of course, we're going to go execute against that. It's not always going to work. But I think the investors, you buy a lot of goodwill if they know what you're trying to achieve. And I think that's something you're going to continue to see us do very deliberately.

Yeah. So, I guess I will tell you that I do believe I've had amazing training. I'm fortunate to have amazing training along the way to get to this point. And I do think the experiences that I've had are very valuable. And I'll be fairly candid. Probably much more valuable than I realized when I started or took on the role at Ondas Holdings. Because when you're in my last job and I did this for a long time as an investor and you're managing a portfolio and if you make a mistake, we had 100, sometimes 150 positions in our portfolio. If you make a mistake you can just sort of change it tomorrow, like the mistake goes away, you sell. I have one bet, right, and it's a concentrated bet. That's what I wanted, but it comes, we don't have that option. It has to work and we work extremely hard every day to advance the ball. But getting back to experiences, accounting is the language of business and it's a really important skill to support decision making. So for young people, and I do get a chance to talk to a lot of folks kind of moving through their school years from high school or college and beyond. And I always talk to them about developing some technical skills and accounting is one you can't go wrong with. On the banking side, I learned a lot. I was in corporate finance and leverage finance group actually at Bear Stearns. So that's a fancy way for high yield or we used to call junk bonds. But really what I did is I learned in capital markets and I learned how companies are built. And actually not just companies, industries.

So for example when I was at Bear in the 90s and really getting interested in the banking side, we had a massive investment cycle in the telecom industry. We were building fiber, we were building wireless systems, towers, etc. and was really essentially building the backbone of the internet. Similarly I saw a consolidation cycle that we had a bunch of banks, they were kind of regional and mega-regional banks, and we saw consolidation. And then built this massive banking system and I saw how that scale driven through consolidation increased returns but at the same time it had a hugely, and this can be debated, but that consolidation of the banking sector created scale. It also allowed for our credit infrastructure, which is an important mechanism around the investment economy and driving growth. It's infrastructure and whether it's the telecom build that I discussed or the consolidation of banks, this is infrastructure that supports economic activity and ultimately prosperity. So I'm going to come back to a point here Jamie. And then going through my journey as an investor, I saw a lot of macro cycles but I was particularly interested in technology cycles. So we saw the PC industry boom, there was a new technology that added so much value. Social media, ride sharing with Uber, smartphone, the cloud. These are all incredible cycles and from there I learned. And as a leader when I go to Ondas I think about what we want to do. And in those cycles that I discuss, I see a lot of parallels with the drone sector. And I have these mental models. So I'll leave it at that, but these are experiences and you see them reflect in what we're trying to achieve at Ondas. But I would tell you, I'll give your listeners some homework, is sort of think about what a mental model is. Because they can be very powerful for investors and thinking about what they're backing and where they want to devote their energies and investments.

Yeah, great question. So I'll say that I've been fortunate, extremely fortunate to work with people who have high integrity and really that's foundational. And perhaps I may have been able to self-select them as mentors. I find that, I'm just kind of thinking through this question with you Jamie, is that the harder you work and the smarter you work, the more valuable you are in an organization, things tend to work better. So it goes both ways. But getting back to sort of the leaders and the mentors, when you know with that integrity, you can build a lot of trust. And that can also permeate through an organization. So I'll also add that I believe in flat organizations where employees are empowered to execute and those who are proven capable, you want to give them as many opportunities as you can. I dislike bureaucracy. I don't want to put limits on anybody. So for example, if somebody has a job and they're supposed to do A, B, and C, and they're doing that at a high level, then they say, 'Oh, I'd like to do this over here to support the firm.' You give them that opportunity all day long. And I think it might have been Steve Jobs who said the world belongs to the doers. And that's what I've found in my life. Be a doer. Find the doers, empower the doers, and some really great things can happen. So that's kind of where I think about some of the more important lessons.

I think it's hugely important. And I love what you're doing here, Jamie, on a personal level and how you're engaging with the community. But it's hugely, I am a pro-growth guy. I think that's obvious. And I think about growth on many dimensions. Of course, financial is really important. But it's not just financial. I think the fundamentals around growth and investing extend to personal life, professional life, even society as a whole. So and you can't have progress on any of these dimensions if you don't invest. You invest in yourself, invest in your career, invest in your savings. So I think if you think about this topic, I'll give you maybe a few things to think about. And first, just emphasize that investment and savings are tied together very tightly. And in fact savings comes first. You can't invest without savings. So I would say, again drawing on my experiences, live prudently but also plan for your professional future in a way you can generate income because income feeds savings, what feeds investment, and of course investment feeds returns and growth and wealth. So I'd also say that again for new folks who are sort of thinking at a young age, how do you do this? How do you build wealth through investing? I want to emphasize you should be diversified. Limit your speculation. Investing is serious. You want to be long-term greedy. It's not gambling, right? People ask me if, or I'll just share, have conversations like, 'Do you like to go to Vegas? You like blackjack, whatever.' And the answer I always give is not really. It's fun to go, but I do take risks. You can't, investing is about risk and it should come with its reward if you did do it the right way. But when you go into the stock market, the odds are in your favor. So that's where you want to take your risks and there's so many opportunities as an investor to build a diversified portfolio. You want to do that. You want to limit your speculation. And so I'll add one more thing. And I don't know who we can attribute this quote to. But this is another homework assignment. Someone once said that compounding was the eighth wonder of the world. I think it was attributed to Einstein but maybe it's a truism that a lot of wise people have found out. But I think your audience should try to understand what that means and never forget it. The most important thing about investing is the savings, putting it to work, and then letting it work. And every year when you're compounding your returns, powerful things could happen. So the earlier you start, if you do the math, the much further ahead you're going to be later on in life when you want to realize the rewards of all your efforts.

Good. Yeah. But no, I think people have to learn the hard way, Jamie. But everyone learns, you learn some way or another.

Sure. And I see the commentary a lot and of course I'm always open to feedback. That's really critical. And I welcome it. But when you think about capital plans, fundraising, investment strategies, growth plans, you need to really be thoughtful and assess the situation and really the decisions that I have to make with the situation and the facts ahead of us. So no CEO wants to dilute their investors. But as you point out, not all capital raises are dilutive. In fact, there would be no investment if that were the case. If you're just diluting, then the capital markets would collapse, they wouldn't function, we wouldn't have them. So what that means is firms that raise capital from sophisticated investors have convinced those investors that they can deploy that capital at returns and grow a company. So if you look at what we've been able to do over the last couple of months, we've really transformed the business. We had struggled for a long time with timelines and of course getting that business going. But as we've demonstrated growth and validated, we've been able to clean our balance sheet. The sins of the past, if you will, our timeline slipping, the really hard work to get to platform adoption, revenue growth was difficult. So we had a balance sheet that we had to fix. So the convertible note was finished. We became investable by institutions. Because I think that's something that your investors as retail and individuals need to think about is as companies like ours who are emerging and we're looking for a 5-10 year growth cycle, it's really important that when you're moving from that micro and small cap, you want your company to become a midcap, of course, because that means there's appreciation and we have to attract institutional investors to do that. So you got to think about, okay, they raise capital, are they going to deploy that at higher returns than their cost of capital? And if that's the case, that's accretion. So I think you can see in the market the way it's reacted to both of our capital fundraisings, one in early June and then of course in July. We've put the business in a fantastic place and we really have, and we've articulated a growth plan which is core growth and strategic growth. And that's being backed by institutional investors who are very smart. They see the opportunity. They want to back a leader and I think we've been given the ball. So that's some context around dilution versus accretion. I think we've done a really, I'm very happy with the position we have in the capital and I am very confident we can deploy this for the benefit of the investors.

Now your question had another element. It was the emotion or sort of how do you handle this as a CEO. And I will say that you do not want your CEO to be emotional. Of course I have a feeling about it, we are humans at the same time. I have a job to do and the decisions we make around capital investment, business strategies, etc., they're really clinical. We study them, we bring experts, and we are always going to do the right thing for the business. Right thing for the business, period. And that's not hard. That's a fundamental. So I've been now the CEO of a company for good five-plus years on the NASDAQ. I can assure you that the CEO seat is a hot one. It's really fascinating. Everyone has an opinion. You learn really quickly that you can't make everyone happy. So I welcome the feedback. It's really important to get that because it's part of our decision-making. But I do know that we can't make everyone happy all the time. So that's not an objective of mine. I'm just going to do the right thing. I'm going to build the transparency and the trust and I think in most situations we're going to do a good job. It is a partnership with the investor. So the feedback's important.

Can I add, Jamie, it's a great point and I think it's worth sharing some more perspective for retail investors. And of course we have been very active and we're putting the business together and we're really making a concerted effort to be transparent and tell you exactly what we're doing. And of course there's so much going on. We have a lot of announcements. A lot of times retail investors, because this isn't necessarily your day job, you have to earn an income, support your families, yourselves, and you're not the institutional investor who is 24/7 sort of looking at Ondas and a bunch of companies and is professionally trained in this. So you don't have the contacts always and maybe even access to the information that's not just Ondas specific but in our industry etc. So we tend to see investors who say oh there was news and they extrapolate, they say okay it's like everything that happens is sort of like the most important thing that's just in their investment. And I guess what I say is, firstly everything we say is not directed to investors. There's other people that we're communicating, customers, partners, regulators, employees, even competitors. And then secondly when you're digesting it you need to think about, okay, this is what the company, whether it's Ondas or not, this is what they're sharing with you. This is the latest event. What does that mean not for tomorrow? What does that mean for 12 months out, 24 months out? Because that's how a company's valued. If we're demonstrating progress and people are excited and think that we're validating or even increasing the growth that we're going to have, that's going to get reflected in the stock price today. But you have to have an assessment about is that strengthening the company and making our investment better. It's not just, hey, is this stock going to go up because they issued a press release. That's always hard to know.

Yeah, it is a lot. It is a lot. You're right. And there's a lot of change. In fact, by design and our plan, there's going to be more. We are executing a strategy to drive growth and scale and we believe it's an imperative. The defense and security market globally is transforming, it has to transform, and we want to be a leader. We have that opportunity, we have to make the most of it. So we're going to execute the plan. And that, as you're pointing out, does introduce new challenges not just for the firm but for me personally in terms of how I lead, where I focus my energies. I think this may be ironic, but as we grow and get bigger, we're going to get more resources. In fact, we've already seen that. And that's of course financial. So we're going to be a stronger company. We're going to have more heft. We're going to have a faster path to profitability, which is critically important. But we're also adding management talent. So again, it's ironic or maybe counterintuitive. But my job actually becomes easier because we have deeper and more experienced leadership team. I become more scalable for the teams that execute. We're more diversified. We have more things that can go right. So I think this is all very positive for investors. So I'm going to continue to of course set the direction for the firm. I do that from bottoms up. Advice everywhere. These decisions, it really is clinical as I described. But I got folks like, and there's a bunch of them. You see us adding to our advisory board, but I'll highlight Oshri Lugasi joined our leadership team and we had a strong team. He just made us stronger. And that's of course he's the co-CEO of our Ondas Autonomous Systems. He brings incredible experience. I mean, it's been for me powerful. Because I can just build around that team. So anyway, I think it's going to be a lot easier for me in a lot of ways to lead a thriving, well-capitalized business as compared to all the struggles we had to get to this point from making that transition from developing this incredible technology to maturing it now to having it adopted in the field and delivering it. So that doesn't mean I rest at all. You're going to still see me 24/7. It just actually gives me the opportunity to build more because the markets are massive that we're addressing. They really are. So we're just going to go for it and I think it's exciting.

It feels awesome and I think it signals that we're a very serious company with serious capabilities and poised to lead. So you're right, James Acuna does join Ondas to do some really interesting important work. We've got a lot of potential here but if we're not credible, if we haven't established our bona fides in terms of developing technology that's critical, serving really important customers, all these defense, security companies, public safety organizations are really, really important. We're providing them critical platform technologies and services. So I think it's just that simple. You see the advisory board, it's exceptional. James, he's the latest to join. And we've got more folks. We're going to be building this really globally. So you're going to see some more talent here in the United States come on to support us. And also in Europe. And it really takes a coalition because of what we're doing. And this gets me back to maybe some of the imperatives and I'll highlight the United States but you're seeing this all day long in Europe and elsewhere. We need to mature our security. It's defense, it's homeland security, it's the protection of critical infrastructure. We need to mature the capabilities that the Ondas's of the world bring. And to do that you need to put the right people in place to sort of identify the leaders, make sure investors know who's funding the right companies, make sure the customers and our partners know. Rather than working with a hundred drone companies, you spin your wheels and nothing happens. You got to concentrate, really funnel down to who's going to lead. Because we don't have time to waste. Technology is mature. The demand's here, the markets are now mature. We got to sort of, now this is a transition to growth and the people we put around this are going to be critical.

And Jamie, I want to add this. Ondas, like the folks who are coming in, whether they're coming in to work with us as partners, advisors, employees, the companies that we are acquiring joining our platform, we are creating massive opportunity for those folks. They're going to come in, they have extreme talent, they have capabilities, expertise, and we're providing a platform for them to realize all the value that they're creating. And it's always about creating win-win. And again, it is imperative.

Yeah. So this is a really important point. Do we have skin in the game? And I'll say if you think about the employees, our insider ownership is probably higher than you think. And it points to our holding company structure and the way we built the business. So the holding company by design only has a handful of employees. We want our talent, we want our expense to be building the business, not accumulating a lot of people in a holding company. And the way the SEC rules are, the folks who report their holdings are named executive officers and the folks underneath are not. So secondly, building these businesses has taken a lot of time and energy. There's massive sweat equity. But I also say the timelines have hurt the employees. So along the way we have raised capital and ownership stakes have become lower. But we have provided incentive compensation and it's really important for not just me and them but for our investors to have people incentivized the right way. So we're doing that and I feel good about it. If I could talk about it on a personal level, I do have, my percentage ownership is low. I want to give you some context. So getting back to what I said at the outset, I only want to win here if everybody wins. And that was, I think it's going to be critical to our success. So I have made some personal sacrifices and I've made them willingly and happily because I think it's the right thing to do. So every share I have, I bought with my own money. So I've made many investments in Ondas. But I've got zero restricted stock grants. So no shares have been given to me. I've had zero stock options. I've even had zero cash bonuses and that's been hard. So I've been doing this for eight years. But again I was making that on the long term and really felt it was important to deliver and then be rewarded. Because investors will be very happy if we're delivering to make sure that we're incented and rewarded for that. So I've invested millions of dollars and been paid very little. But so what I'm telling you is I have massive skin in the game. Our team has massive skin in the game. You're likely, as we're sort of transitioning here and I do believe we are in an upcycle, you'll see my ownership go up because I will get an equity compensation program. But we're going to do it in a very shareholder-friendly way.

I think it's everything. Most, it is everything. I don't want to place any limits. But at the same time we have to, what we'll talk about I think priorities. But we want it all and I think it's important for us to leverage all the operating expenses, that operating leverage you talk about, the investments in technology and capabilities. And then when we're investing to bring a broader portfolio through the strategic growth and acquisition program, we don't want to limit ourselves. At the very core I want Ondas to be an important defense and security company and I want us to have a global footprint. That's how we're going to be successful. And that's going to be hugely beneficial to investors. I believe, and we can have folks in my seat can have really intelligent debates about this, but I do believe you want to define your opportunity set as broadly as possible. Because the scale and the need to localize is really important, and we'll probably touch on that. We are mission-driven. And what we're doing again is really important, delivering the autonomous systems, the physical AI as we've described. These capabilities we're doing this at scale. So we've really got, as this transition, I feel like we've been given the ball from investors. We've been given a mandate. We asked for the mandate. We had an investor day in early July and we laid it out. Said listen, this is our core plan, this is where we see opportunity to provide scale and invest and grow a big and important company. And investors have backed that. And that is extremely powerful. We're going to, and so we have the mandate. If we don't execute it, the mandate is going to go and it's going to go to someone else. So you're going to see us very stridently do it. I'll also add that, well, just at its core, what does that mean for you as an investor? We are going to be a super fast grower. We're committed to that. It's really important for us to become what I call self-funding, profitable as soon as possible. And then we can generate profits, then we reinvest for growth. In my old seat or your seat, we call that compounding. Remember I said earlier, compounding. What does that mean? That's also true for companies. If you can generate profits and then reinvest those profits at high returns, the rewards to investors are really significant. So I see us getting to that point. Now we have a lot of work to do. There's nothing going to be given to us. We have to earn it every day. We have to earn it from all corners, including our investors. But if we execute this, I think we're going to be rewarded with a high valuation and ultimately that's going to be really, really good for all of us.

Yeah. Yeah. A lot. So it's debatable who's more active between the two of you.

Yeah. So, I guess similar to the last question, I don't think we have to make a choice. And perhaps that gets back, it's not either or. It can be and, and that gets back to my experience. I think on your side of the table, people underestimate what's possible. And if you grow up in the corporate world, there's some structure, there's a lot of reasons for structure. So if you do this, then you do that, then you do that, then you do that, and this is what happens. If you can do that, then that's great. At the same time we are in a dynamic market. We are in massive TAMs. We've scratched the surface. Technology is mature, regulations are supportive, policy supportive. There's huge value. The technology stack has been completed. So we can sort of now we can scale. These are S-curve markets and I again, I know, I understand what's possible. So you can have exponential outcomes here. So it's both and in fact the reason it's both is going to make us more successful. So you can think of us as delivering solutions to customers and partners, by the way, that are technology platforms. So we have technology platforms. You saw we announced the acquisition of Aperio Motion. We're layering those ground robots, those unmanned ground vehicles, UGVs, into our portfolio. They're autonomous. You're going to see a lot of synergy going to market, maybe some integration, and we'll tell that story over time. But again, these are technology platforms that's sort of like the entry point into the business or into the industry. If you don't have a technology platform, you get nothing. However, when we layer these technology platforms on an operating platform, which is Ondas Holdings, that's when we get real scale. One platform, I'll tell you it this way, Jamie. If there's a hundred drones, we can't have a hundred drone companies because that means we have a hundred sales forces, a hundred executive teams, a hundred regulatory, a hundred supply chain for, it just doesn't work. So we're a platform company delivering technology platform solutions.

All right, cool. So I think the macro for Ondas and the markets we're in is incredibly strong and I think it's one more time. So what that means is budgets, even if there's constraints around economic weakness, which may or may not happen, that doesn't change the fact that we're moving towards more and more automation, robotics, physical AI. And also again whether the economy is weak or not, we have these policy tailwinds. The Trump executive orders are really a great example. Regulations are accelerating and increasingly supportive and the value of what we're doing is off the charts. And I've seen this time and time again, the technology investment cycle, that S-curve, will dominate the economic cycle. So I don't know, go back and I think this is true, if we had that real serious economic event in 2008-2009, that was really a credit and financial crisis. The cloud, the ride sharing, the social media, that all went up into the right and it was barely a blip. So for me in my seat in terms of risks, and I'm always considering where our challenges are, I don't worry about the macro. What I do worry about is our ability to scale, to build that operating platform out. And it's really about our, in that vein, it's about our internal performance. How fast can Ondas strengthen its go-to-market capabilities? That's the only limiter on our growth in my opinion.

So, yeah, go back there. These are the mental models.