You can build completely new types of defense systems that accomplish the task for way less money or just more effectively. And these things are going to look a lot more like consumer electronics than traditional weapon systems, making much more accessible and high-quantity weapon systems. That is what Nuros is fundamentally trying to do for America and all of our allies. It just requires thinking about the problem differently and trying to 10 or 100x cost reduce from where a traditional defense system is.
Do you think that defense tech startups in general are living up to their promises?
I couldn't help but notice how many plants you have around here.
Yeah, when we were moving in, I just told the team like, go crazy on plants. Um, you know, we have this like very mixed floor where we've got manufacturing right here and then everyone's sitting right next to it. And um, I think it's good, like everyone should feel like they are in a factory, but that doesn't mean they need to feel completely sterile. Um, so I just like adding, you know, some life and some color to the scene here. Um, there's a long way to go though. I've said we need to like triple or quadruple the amount of plants. So I really want to have some like vines coming down on all these poles and wires.
And real plants, not fake.
Okay. There you go. I love that. Um, so I want to start with a story that you've told in the past, uh, that I find quite amusing, which is you strapped a jar of Smucker's strawberry jam to a drone to troll a military jamming team. Tell me about that day. What were you testing and like what happened and a little bit behind why you did that.
Yeah, so we were out in Alaska. Uh, we were doing testing with the Defense Innovation Unit. We were working on a program with them for radios that work in a highly contested environment. So the idea behind all the testing we were doing out there was flying against these jammers that the military had brought out to see if, you know, the radio we developed as part of this program was going to hold up or fail. Um, we had sort of the first day where like we did a little bit of testing and everything looked really positive for us. Um, but we didn't really do anything at range and that's where stuff gets hard. And so, uh, we knew like the next day we were going to be doing that. Um, and we actually were just stopping at Walmart. This was in Fairbanks, Alaska. There's like one place that everyone shops and it's the Walmart and it's gigantic. It is actually the largest Walmart in America for a very long time because it's such a center of Fairbanks. Um, so anyway, we're stopping at Walmart before driving out to the test range and I just had this idea when we were walking around like we should have some type of payload on the drone for the soldiers to see if we were able to get close enough and hover in front of the jammer. And so I just, I don't know, it just came to me as like, all right, let's get a container of jam and strap that as our payload. Um, and then if we do really well, we've jammed the jammer because they'll be able to see it because we're hovering right next to them. It means the jammer didn't work. Yeah. Um, and you know, it ended up, uh, we ended up doing super well on the testing and we were actually able to hover in front of the jamming team as they were trying just like thing after thing after thing to try and take us out and they were never successful. Um, and then they ended up, they had a backpack-mounted jammer and so one of the guys was just like seeing how close he could get to the drone. Um, and so he just, like we were hovering in place and he just walked up to it like literally 10 ft away and then we were on radio with them and so we said like, 'Hey, can you see the payload?' And they were like, 'Yeah, we see the drone as a payload.' We're like, 'No, can you see what the payload is?' And they just like went dead silent. [laughter]
What was, I mean, what was, I mean, clearly they thought they were going to succeed. What, I mean, or maybe I don't know, what was their expectation and like what do you, like how do they react kind of post that test?
I mean, the soldiers weren't super happy, not because they had like been beaten, but because they, you know, this is like the equipment they rely on to protect them in the battlefield and it's not cheap equipment and it was supposed to be relatively new and relatively cutting edge. Um, and then this small, pretty cheap drone came in and just like demolished it. Um, and that's just scary for them to think about like if that was a real-world scenario, that jammer would have done nothing. Um, so it was like, I mean, they were actually, you know, they're both like they thought it was funny and they were kind of excited to see us do well, but they were also upset because that means in the real world like they're not in a good position. And I think counter-UAS is really lagging behind where a lot of UAS capabilities are. I mean, America's sort of overall behind in UAS compared to a lot of other countries, but we're also very behind in counter-UAS, especially the like smaller systems that the soldiers would be carrying on their back or within a small group. So, um, I think that was just like part of the realization after that.
How soon after the company started was this test?
Uh, this was last summer, so a couple years in.
Okay, got it. Got it. So, let's rewind the clock a little bit. Um, you know, your background is in drone racing and you and your co-founder Olaf. So tell me a little bit about how sort of that evolution happened from drone racing into building Nuros.
Yeah, so Olaf and I, both of us, we found FPV drones online when we were really young, like 11, 12 years old. Um, we both got obsessed with it and then just started going to these events. So we met at a MultiGP event in Muncie, Indiana in 2017. Um, and we connected really quickly because we were like the two youngest people there by far and just obsessed with drones. And then we both kind of went off in slightly different directions. I went more into the professional racing side and I did that throughout high school. Um, Olaf got really into electrical engineering, was teaching himself how to build drone components, then worked on radios and consumer electronics. And um, we ended up kind of reconnecting because I had gotten really interested in the startup world and particularly the defense tech world and had been following the buildup before the full-scale invasion of Ukraine. And so when it actually started, um, it was a really meaningful moment and I thought the response from Ukraine's allies and America was pretty disappointing.
Yeah. And I had kind of been thinking about like racing drones applied to defense and I was seeing these companies like Anduril, Shield AI sort of becoming like these hot companies and VCs actually getting interested in the space. But I didn't see anybody taking these like relatively low-cost but very high-performance racing drone systems and really utilizing them in the battlefield. And then the Ukrainians started doing that. And so it was the proof of what I had been thinking about. Um, and really from that point on, like seeing it actually work in the real world, I knew I needed to work on that problem. I didn't quite know like what I was going to do, but it just captured my interest totally. Um, and then I, you know, when I was a professional pilot, basically all of my sponsors were Chinese companies or American companies who made everything in China, right? So I knew the supply chain like where it was at today, how dominant DJI was in sort of the broader consumer drone industry.
But as we continued to learn more, we saw that, you know, Ukraine was figuring out how to assemble a lot of drones and they were figuring out a lot of innovation around drones. Um, but they were not caring about the country of origin on their components. Um, and so that became a really big focus for us from very early on.
In your first kind of meeting with the DoD, like how did that go? Did they, I mean, do they take you seriously? Obviously you guys are young. Um, you guys are fairly young versus like the folks they typically deal with. Like did that play a factor? Uh, how did, I mean, how did that go?
Yeah, there was a mix early on where like there were some more specialized like end-user type people who were already excited about small drones, but overall the trend was like we don't really care. Um, like small quadcopters had never done anything super meaningful for the US military. Um, and they weren't really up to speed on what was happening in Ukraine yet. And so 2023, 2024, not much interest. Um, and it was really like every time we would talk to someone from one of these program offices or the Pentagon, it would be like taking them through the very, very basics of what an FPV drone is and then explaining to them why it's impactful. And then I think that we did a lot of like education of the government when we were starting off and even still today like we see a lot of what's happening in Ukraine very directly because we operate there and then we bring a lot of that knowledge back. Um, but we've seen that totally flip because small drones, I would say over the course of the last 18 months, have become one of the highest priorities of the Pentagon. Um, and it's primarily driven by, you know, seeing what's happened in Ukraine. We're just a little bit slow to catch on.
Yeah. What do you owe your early traction to?
I think it was just end-user obsession. Um, we went to Ukraine and because there wasn't that much interest from the Pentagon, we were like, well, we're just going to focus on building a better drone for Ukraine. So, we were just iterating like very quickly based on their feedback and what we thought we could do better in terms of engineering the performance of the drone and making it manufacturable. Um, so by the time we were like in the spot to have an NDA-compliant, you know, Department of War could use it and then at the same time the Department of War wanted to use it, like by the time we were there, we had a really performant product.
And it was informed by end users, you know, for the first year especially, almost all Ukraine, but then we started working with these US end users too and we did a lot more like bottoms-up business development going directly to the units versus top-down trying to convince decision makers, because eventually, you know, the market just convinces.
Yeah. Well, obviously having technology fielded is a huge advantage. But I'm curious like what do you say to like sort of critics that say, you know, the drone technology is well known, it's well understood. How really much can you innovate there? Like how do you push the boundaries of something like a small drone? What do you say to that?
I mean, basically every American drone that went to Ukraine failed.
Like flat on its face. And then almost all those companies just walked away. So the silhouette of every small drone looks relatively similar. Um, does it actually work on the battlefield is a very, very different story across the board. You can also look at the Drone Dominance leaderboard, like it's a public leaderboard of how well people did in these real-world tests. And these tests were honestly way easier than battlefield conditions, but um, you can see how quickly it drops off down to the like, you know, 70s and then there was most of the companies that came and competed, or the majority of the 25, didn't score a passing grade.
Yeah. And so, um, I think like if you're not in the details, it's easy to miss like what makes a small drone performant. Um, but it's very clear that almost every system being made in America isn't actually ready for prime time.
How many, um, I don't know if you know this off the top of your head, but do you know like what percentage or scale of deaths associated with the war in Ukraine were drone-related?
Um, well recently there's pretty good data from Ukraine and the last few months it's been around 90% of casualties on the Russian side are from drones.
And like who is Ukraine, like what technology is Ukraine, I mean clearly it's not a ton of American technology since it's failing more often than not, but like what from your background or your experience has been the most successful piece of technology that Ukraine's using right now?
I would say one of the things that Ukraine does really well, rather than like utilize one specific piece of technology, it's actually the tactics and the creativity. Um, so I think a good example of this is recent, well, I'll give two. So recently, or over the last like year, um, intercepting Shahed drones has become much more successful. And I remember for the last couple years this has been one of the biggest problems and everyone is trying to figure out how can you intercept Shahed drones with something that's not a multi-million-dollar surface-to-air missile. And that problem was unsolved for the majority of the, or the first like three years of the war. Um, and what the Ukrainians figured out is really through a combination of technology and tactics, you can use relatively cheap, basically just like faster FPV drones to go up, chase Shahed drones, and blow them up. There's a whole wide range of things that enables that, right? It's detection in many forms. It's acoustic detectors that are across the entire front line. It's radars that have become much more numerous on the battlefield. It's aggregating all of that data. It is sending that data to distributed air defense teams. It is figuring out that you can make FPV drones go fast enough for long enough to hit a Shahed drone. But like that drone technology has existed for years, but no one was doing this at scale. And now Ukraine is intercepting, it's like 90 plus percent of Shahed drones are getting intercepted by these insanely cheap drones. And so it's not like one specific technology they're leveraging, but it's this creativity to think about the problem differently and then scale it. Um, so I think that's what Ukraine is incredibly good at.
What does that tell you about the future of warfare? Obviously, there's a lot of literature out there, a lot of commentary, but like from your perspective, given you're sort of on the front line of building drone technology and seeing your technology fielded and like exactly what you just mentioned in terms of the drones intercepting the shots, like what does that tell you about where warfare is going?
Yeah, I mean, I think this is both on the offense and defense side. This is a big part of the thesis of Nuros, which is you can build completely new types of defense systems that accomplish the task for way less money or just more effectively. And these things are going to look a lot more like consumer electronics than traditional weapon systems. Um, I think FPVs are just the first like really clear example of this that now like America and our close allies have sort of latched on to, but it's clear that this exists, you know, with counter-UAS and with mid-strike drones and deep-strike drones and maritime. It's like this concept of building things differently and making much more accessible and high-quantity weapon systems, like that is what Nuros is fundamentally trying to do for America and all of our allies. Um, and I think it just requires, you know, thinking about the problem differently and trying to, you know, 10 or 100x cost reduce from where a traditional defense system is.
Yeah. What is the scale of the manufacturing gap right now between like Chinese drone manufacturing capability versus US?
Yeah, I think today China's like easily at 100 million drones a year. Um, I mean they're supplying most of the components to Ukraine and Russia and both sides are going to use about 7 million FPVs this year. Um, plus China has the vast majority of the consumer drone market. Um, so DJI is probably doing, you know, 10, 15 million consumer drones a year or something in that range. And then they have so much industrial capacity for things like consumer electronics that I think 100 million seems like a really safe estimate if they just wanted to turn it on. Um, America is in the hundreds of thousands. Uh, and like there is no company that will domestically build 100,000 drones this year. Nuros is trying to get close. Um,
So this year you want to get to 100,000 or 100,000 run rate?
We'll be over 100,000 run rate by the end of the year. Uh, and we will probably do a little bit less than that in terms of actual output. Um, but it's like, you know, if you're asking about the gap, America versus China today on drone production, it's gigantic. Yeah.
Um, and that's, you know, part of what we're trying to solve. Um, we think we have to have production capacity in the millions, tens of millions for credible deterrence, but we also want to solve the problems smarter. Um, so there's a question of like, do we have to get to the same hundreds of millions per year as China? And I think the answer is not necessarily. Um, but there is a massive gap and we need to address it.
Yeah, I think it's an interesting point, right? Because like realistically, you know, like from, and look, I'm by no means an expert on the manufacturing side, but it's relatively clear to me that in neither of our lifetimes are we going to see us match necessarily manufacturing capabilities of China on like, for example, just using drones as an example. So it feels like we're always going to be chasing like a larger and larger and larger number. Um, but there's probably a point where it actually like, you know, we don't actually need to manufacture as many as them. I mean, do you agree with that?
I agree with your second point, which is I don't think the point isn't to, it's not to like be able to manufacture the exact same amount as China, but I mean, China has built all of this over the last like 30 years. So, we're talking about our lifetimes. I, you know, I hope we'd be able to see that. And like, America can do it way faster. Um, you know, like look at the user terminal, uh, the SpaceX user terminal for Starlink, like that program is, I don't know exactly, like six years old.
And they're doing, I think they're going to do like 5 million roughly this year out of Bastrop, Texas. Um, and so like if you have a really great, like if you execute really, really well, um, you can get into the tens of millions built domestically in a relatively short time span. Yeah.
Um, and so that's like roughly what we're trying to do for drones. Um, but again, like the drones should really be like, the drones are actually better, so you don't need as many. Um, hopefully we're not actually in a war where we're consuming these things at peak rate. And then America has amazing other types of defense systems and these things are a complement, right? Like we're not, our argument is not you don't need the F-35 because you have drones. It is you need both. Yeah.
And that's how you have a strong military.
Yeah. So, this is your new facility, right? 250,000 ft.
So you've mentioned a million drones out of here is what you want eventually.
So I had a chance to walk through the facility before this and I've noticed that a lot of it is still being done by hand. So, tell me a little bit about the process and how are you going to evolve the manufacturing process here because I assume that's not how it's going to be done.
It'll definitely look different for a million. Yeah. So, you know, the rate of the product and the design of the product go hand in hand and we are building what we call our Block 2, Archer Block 2. Um, so it's an evolved version of really the first thing we designed or like the fundamental way that it is built is not different than the prototypes Olaf and I made in our basement. We've done a ton of design for manufacturability since then. Um, but it's not a ground-up redesign to get to a million per year. It's definitely a ground-up redesign. It's thinking from, you know, station times that are minutes to seconds. It's thinking about reducing the number of parts in the design down as much as possible. Designing around automation operations, everything happening from one side. Like there's a lot that goes into hitting the seconds, not minutes, station time that's required for a million per year. Um, so that's really I think like the next gen of the system. Um, but we also today we're getting so much learning out of this product on like where that would fail. I mean, we would not be able to do it trying to go from nothing straight to that because we're understanding our product so much better. We're understanding not just the production requirements but the performance requirements and then that will all feed into the next generation design that allows us to get to a million.
What's surprised you in the process of getting to where we are?
With manufacturing? Yeah. I mean, I think like there's so much that goes into reliably producing even a thousand drones a week. Um, which is, you know, where we're at roughly today. Um, I think people just don't realize like, and these, you know, I think a lot of drone companies or just a lot of companies in the defense tech space sort of claim that they're ready to produce at scale when they're not. Like they haven't proved it. Um, and even if you do a thousand one week, like doing that for just week on, like over and over and over again and then actually verifying that that product is reliable. It's just such a huge, there's so much effort that goes into that sort of like sustained production rate that people kind of calculate their theoretical, oh, we could build this many because our station time is this and they haven't actually proved it. Prove it to be able to get into production and then failing because it's actually really hard. Yeah.
And so a lot of the, you know, a lot of the like IP that Nuros, you know, that is Nuros is like how we build drones, how we test drones, how we design drones for testing, for reliability, for manufacturability. All of the data we've collected as we've built tens of thousands of drones. Um, these are things that you can't just like drop in and replicate.
How many drones have you shipped so far?
Okay. So I mean one of the questions I was getting at which you've started to answer effectively which is like, you know, drones are probably the most overfunded category in defense tech. Uh, how do you think about sort of differentiation and like how much of, like when you look at your competitors, um, where you're like, okay, they don't have certain advantages that you've had so far, like how do you think about sort of the landscape? And a lot of these are well-funded. It's not like, you know, two folks in a garage.
Yeah. Yeah. Yeah. I think people, you know, get ahead of, they get out over their skis on delivery. Like it's really not that hard to put together an FPV drone and go demo it and even get like a contract off of that. Um, it is consistent scaled production that's hard. And I think a lot of people are jumping into the space right now because they, you know, they see that it's hot. They see that there are dollars flowing in from the investor side but also from the government side. There are companies going public that are resulting in maybe some quick exits. Like I think a lot of people are optimizing for short term. Um, and it's genuinely so hard to attract the world-class talent that will build a sustained business and operate well for decades and like continuously be the best performing system and delivering at scale. And I think people just massively underestimate how hard it is or don't care because they're optimizing for like pumping their stock price quickly and then getting out.
What makes that, I mean you've mentioned that before, right? You said that like one of the biggest risks, probably the biggest risk for you is talent. What makes it so hard? Is it being here in LA where obviously talent is extremely constrained because there's so many great businesses here? Is it sort of the specialization of what you're building? Like what makes the talent side so challenging?
Yeah, I think right now there's a lot of people who just don't want to work on defense or don't want to work on kinetic systems, right? Um, so, and that's because they'd rather work at a company where, you know, there's sort of the kill chain is fuzzier where it's like, hey, I know I'm working on this piece of technology and it's used somewhere on the battlefield, but you know, it's not clear to me, so like I'm okay with it.
Yeah. Which I think is flawed logic, right? Like I've heard this from plenty of candidates before, which I completely understand if people don't want to work on defense. If it's not for them, that's honestly completely fine. I think a healthy society is one where a very small percentage of people choose or need to work on defense. But for the people who understand that it's important, they want to work in the space, but they're uncomfortable or they need some level of abstraction between the end weapon system. Um, to me that logic doesn't, I don't get it. Um, it doesn't make a lot of sense because I think you're just sort of making yourself feel better. Um, or it's too uncomfortable to build the most direct thing. Um, but you are contributing.
So how do you, I mean, how do you then solve that? Or is it just one of those things where it's like, you know, people have their belief systems and, you know, it is what it is and, you know, you're going to ultimately just need to find people who are okay with it.
Yeah. I think especially as we become bigger and more visible and we have more of a voice, we can help tell people why defense is important. And I think that's one of the things that has happened a lot in the last few years, both with the war in Ukraine starting and people realizing like this is actually a thing that can still happen. Um, and then defense tech has just gotten a lot more popular and there's a lot more stuff out in the mainstream media but also alternative, like there's a lot of places people can now go on the internet and see defense tech and read about why it's important and see that there are like really cool innovative companies doing it. Um, and so I think the pool is growing. Um, and so it should be like, of course, an individual decision. People decide if they want to work on it or not. Um, hopefully we can convince more people that it is important and they should do it and help grow the pool. Um, and then we picked LA because there are so many great companies to pull from. Like, um, we, I think as the, you know, at this point smaller and fast-growing company, we have the advantage in pulling from the larger companies. Um, and so this is a very good place to build this.
How does your revenue concentration look across the branches now and internationally? Like is it predominantly Ukraine right now? Is it getting diversified? Like how does that look?
Vast majority is Department of War.
So, um, yeah, I mean there was a point in time in the business where Ukraine or drones going to Ukraine was the majority, but at this point that, you know, that swung very heavily towards Department of War. Um, I mean it's pretty like Army and Marine Corps are the service branches that are using the most FPVs and that's kind of reflected. And then Drone Dominance, the Drone Dominance program, um, that's very public like how much they're buying and how much they're paying per drone. Um, so we expect that to be a reasonable portion. Yeah. Um, and then close allies, like we have, this is more on a sort of like forward-looking basis, but um, we do think that international is going to be a pretty significant part of the business.
Yeah. So I want to talk about the ecosystem in general for a second. You've alluded to this briefly a little bit ago, but like do you think that defense tech startups in general are living up to their promises?
That's an interesting one. I think defense tech startups in Ukraine absolutely, or like defense tech startups are the thing that has allowed Ukraine to defend itself as successfully as they have. Um, most people aren't thinking about those companies when they think defense tech ecosystem. Um, they're thinking about like the big names in American defense. I think we're overall, I would say the ecosystem is a little behind on like real-world impact versus dollars that have flowed in. Yeah. Um, but it's really like, it makes me very excited when there are very clear wins for these new companies and I do think that both with investments that have been made in the private sector but also government programs and like DIU programs for example, um, they've spun out a lot of really successful stuff in the last few years. Um, so like a recent headline was the Saronic boat that helped pick up those two helicopter pilots in the Middle East. And, you know, I think that's like on the grand scheme of things a relatively small win. Um, but it's great that it means that technology is actually out in the real world making a difference. And, you know, that came out of a DIU program and it came out of some very high-conviction investors backing that company really strongly. Um, and I think we'll see a lot more of that in the next couple years. So,
I have criticized in the past for how, like, I think some of these companies don't have a ton of stuff actually deployed, or, you know, aren't necessarily measuring themselves in real-world impact, and it's more about, like, valuation or fancy tech demos.
