00:30:53 · Chris Power, Ty Morse
And then I spent a week straight yelling at the president of this company, and told them that I would... If they didn't fix it in the next four weeks, the company would die, which was true. That's not a, you know, bullshit statement. Because the first thing is they didn't realize how bad the problem was and what the impact would be. You know, there's like eight weeks of downtime, and then there's... Eight weeks of downtime kills the revenue curve of the company because it it's like missing a sales quarter in SaaS. Like, suddenly your burn rate quadruples because you got all these salespeople and no ARR. And then force them to fly in 30 engineers from this foreign country and get the whole thing done in four weeks through pure just like, you know, I was gonna headlock these guys. So that's a real operating problem that would have killed the company. There are there are many others. It happens about once a quarter, But it's manufacturing. [00:31:52] S0: This is the game. What's the most recent company killing event? [00:31:57] S1: Nothing nothing in the last three months. But there's one every month. But I I think this is the point, is you're making... You're you're hard rolling sixes every quarter, and there's always a company killing event once a month. Because it's a matter of fact [00:32:12] S0: I recently interviewed Keller from Zipline. Great. And... Yeah. He's great. [00:32:16] S1: By by the way, I I I think Keller is probably the best deep tech CEO. Top five.
00:32:16 · Chris Power, Ty Morse
[00:32:16] S1: By by the way, I I I think Keller is probably the best deep tech CEO. Top five. [00:32:23] S0: I was recently interviewing him, and his entire timeline was basically, you know, like, five years from now or something. He wanted to have a million deliveries a day on his network. And then Uber came in, like, a month before the interview and basically pulled in the entire timeline by two and a half years and said, I'm gonna [00:32:43] S1: take [00:32:43] S0: all of [00:32:44] S1: All your... Yeah. [00:32:44] S0: Year and all your capacity. And this completely radically changed, like, how they are thinking about scaling their business because that's just one customer, and there's gonna be a hell of a lot more in two When and a half you're thinking about not only, like, pulling in timelines, but also resetting your expectations upwards [00:33:01] S1: Yep. [00:33:01] S0: So you go from, like, your projections were, I'm gonna make a billion dollars in revenue three years from now, and suddenly you're, like, actually, I'm gonna make, like, 5,000,000,000 [00:33:08] S1: Yep. [00:33:08] S0: Three years from now, and I need to make a billion next year. With these, like, long lead times on not only being able to, like, buy CapEx, but also get contracts for that. Yeah. How how do you, like, manage that?
00:33:21 · Chris Power
[00:33:21] S1: So so for us, this actually happened. So the, you know, Founders Fund led our series c, I think it was a year ago, and then T. Rowe Price did the c two, we just raised a series d. And the main reason was because every month we were raising the forecast. And it wasn't like a sales thing. It was just like, yeah, we we barely have a federal sales team. They're great, but there's eight of them. And yet there's the the... Yeah. Every quarter, there's 2,000,000,000 more in pipeline, and we're not asking for it. So you got two problems there. You've got a burn rate of talent problem, more Opus engineering to make things more scalable, more forward deployed engineering to build more contracts, but your rate keeps going up like this so you can't you can't plan, and you've got the CapEx problem. So the way we think about it is in aggregate. You know, are we sure that we're gonna close this contract that if we close it, we're gonna need 50 more robotics engineers? No. No one does. Highly competitive bidding processes, competitors of all sides. But we do know that we have a 95% statistical chance across 10 contracts that we're gonna need at least a 100 robotics engineers. So it kinda doesn't matter. So you aggregate everything, and then you then you always go... Like, you... Then you bet into the slope. Because in a fast growing business, you can always stop hiring for a quarter. You can never restart hiring. On the CapEx side, once you've got multiple programs, at least for our business, which is factories as a service, we can start aggregating CapEx and robotics and stuff to shared LEGO bricks and start forward buying them. So you're kind of pulling CapEx from inventory. Now 20% of the CapEx you can't do this because if there's one weird three d printer that this one contract's gonna use, it's not an aggregate. But look, we standardize around FANUC ARMS for everything. Small, medium, large, big, big, In in specific use cases, that is inefficient. At the company level, what it means is that we're buying 300, 200, and a 100, and then our programs and capability engineering teams can pull them and plug them into whatever they need, and you can massively compress risk and timeline. That is actually very hard to execute because you need to take a program to a contract forecast to a simulated... Which which arm are you using.
00:35:52 · Chris Power, Ty Morse
That's not not trivial, but the math is really easy. And scale has this interesting property of making that easy. But the the challenging thing is the lead times to adjust to that. So, you know, what is recruiting? Recruiting is an incredibly strong firewall to make sure that under pressure, no one's gonna hire a C plus engineer. Okay. Let's say we have that. Then it is marketing and outbound sales. If one recruiter can produce four great hires in a highly competitive environment, and it takes ninety days to hire a great recruiter, By the time you understand that you need to double recruiting for next year, your Slack time is six months. Alright. Hire a recruiter ninety days. They... So you have to kind of just bet on scale, and it has this interesting property where it looks like a risk, but it's actually it's actually not. You're never gonna fire people. You're just gonna, like, pause hiring for a month at max and let it catch up. But that was intentional because the properties of all these complicated CapEx and long lead time businesses is everything gets easier the bigger you get. Operating the company gets harder every week because it's complicated, but the risk decisions get much more stomachable the bigger you get. [00:37:13] S0: Sam, when we just talked about this idea of like emergent properties of scale. Yes. And And that... That's real. Yes. [00:37:18] S1: And they're not predictable until you're in it. And then you understand what it actually means.
00:37:18 · Chris Power, Ty Morse
[00:37:18] S1: And they're not predictable until you're in it. And then you understand what it actually means. [00:37:21] S0: I remember this story where this guy wanted to start a, like, machine shop or something, and he wanted to buy, a laser. And he wasn't able to get any financing for this laser, so he had to buy it outright with his own cash. [00:37:33] S1: The gym. [00:37:34] S0: Actually, yeah. And then suddenly, as you kind of scale and you're generating a lot of revenue, lots of people line up to, like, fund it with debt and other Yeah. Mechanisms. How do things kind of shift from 0 in revenue to, like, 1,000 million in revenue on the... Your ability to, like, scale things? [00:37:55] S1: The the operation of the company gets harder, but the fundamentals of the market get far easier. Material suddenly gets cheaper, debt is easier, being at the front of the CapEx queue is easier because you're everyone's biggest customer. Because the market adjusts... Every business wants to grow And if you're the fastest growth engine, the market will correct to you. It's just getting there is very hard. [00:38:23] S0: What have been the biggest things in this business where at the beginning they were just impossibly difficult, and then over the past couple years they've gotten ridiculously simple?
00:38:23 · Ty Morse, Chris Power
[00:38:23] S0: What have been the biggest things in this business where at the beginning they were just impossibly difficult, and then over the past couple years they've gotten ridiculously simple? [00:38:33] S1: Well, like, it used to be setting up a new line of machines was like a fucking hell on wheels. And it is hell on wheels for some of the teams now, especially when we're doing new things, but like, we've got a playbook. You know, it's gonna roll out on some cadence, you know. [00:38:53] S0: Right now you're at something like 725 ish employees and over the next like four months you're going to almost double that. Yeah. I think hire something like 600 people. How do you design the company where it can actually absorb that new influx of hires?