00:57:28 · Ty Morse, Chris Power
[00:57:28] S0: What is your way of cost accounting? [00:57:31] S1: It's nothing fancy. It's just that like very few growth funds or venture capital funds can accurately understand a manufacturing balance sheet, and how we think about it, which is very different. Not like we're making up our own accounting rules, but we do we do think about it very act... It's a first principles way of thinking about where costs are in manufacturing where they aren't, and it's correct. But, you know, you're tapping a venture market that's used to investing in product companies like and or SaaS companies like Databricks, both of which carry almost no CapEx. And manufacturing accounting and GAAP accounting and revenue recognition is extremely different than any other business model. And it's not that invent... Venture investors are dumb. It's just that they've never seen it before. So you have to be better than their LPs at being so accurate about your numbers and how you present them and how you think it through. They can trust you enough to over time outsource outsource their critical thinking on that domain to you, which is a big leap. But now when we explain that we're gonna scorecard a business unit like x, it's largely understood that we've thought it through in the level of detail that if it was a public company, anyone will look at it and go like, actually that's not inventive, but that is the correct way to outside in think about this company. Very high bar, but that's the only way to do it.
00:59:08 · Ty Morse
[00:59:08] S0: When you think about the imagine competitive advantages or like vectors, and each one, you know, it could be like you get a smaller lead time or like better financing options and stuff for customers, or you might be able to get raise capital cheaper or on a different timeline than other competitors. If you think about like your competitive advantages in this business and the other ones that could exist, but you've decided like these are not the vectors that we're gonna optimize for, what are those?
00:59:35 · Chris Power
[00:59:35] S1: So I'll say two things, is lower cost of capital or large quantum some capital are a derivative of being better at executing than anybody else. I don't think there are actually good fundraisers or bad fundraisers. There are better storytellers. But I think people that actually end up with large amounts of capital have better businesses. In terms of the things to not optimise for, and one of the things that I was wrong about is speed. So we started off with the theory that... So there there are there are two markets in American manufacturing very broadly, at least on the technical side. And one is print, no print. And our good friend Jim Belozic runs an incredible no print business, and there's nothing wrong with it. It's amazing. Were always in the print business. Technology's harder. It's higher compliance. And we picked our first customer, which is a very large rocket company with the theory that they're the toughest customer. And if we built a thing they were vaguely happy with, we could sell them the primes. Which is a pretty standard design venture pattern. Anyway it turns out that when we expanded to other customers, you know, the theory being that there were many other growth companies and they would pay for speed at this complexity, high tolerance print level. Anyway, turns out that two things were wrong. Thing number one that was wrong was there were no other companies in that rocket company of any sort of scale, at least at that time. So there were no other startup customers. And that everyone else's business model, they didn't care about speed at all. And this particular rocket company I think is best summed at is they're the only space or defense prime that can convert speed to value. So now there's there's an outer limit to this statement, which is like you can't be slow, but the engineering or manufacturing cost and complexity of being everyone else is at twelve weeks and you're at eight and you're cheaper versus you're at two and everyone's at twelve weeks is orders of magnitude. So most of the market just doesn't value speed. The market very much values flexibility, scale, total program cost, a lot of other things, but that that was one thing I got wrong in the early days that we pivoted into. When you
01:02:08 · Ty Morse, Chris Power
[01:02:08] S0: think about the government side, one of the main inputs to having the contract in two years is having people that trust you today. [01:02:16] S1: Yes. [01:02:16] S0: How did you learn to build the relationships where the government wants you to win and is like incentivized for you to win?
01:02:23 · Chris Power
[01:02:23] S1: I will tell you how we build trust, but it is an inverse of what you just said. Because what you just said was we want government contract, therefore, would wanna build trust. And I have found in my personal relationships, venture investors, certainly the government, certainly large enterprise customers, that if you are serious about the mission and you are serious about creating value, the first thing you should do is create value and then be so trusted that people come to you with your hardest problems, that if you design a solution that can credibly execute them, you will receive a contract, instead of trying to fake trust or credibility in order to win a contract. The tactical answer is we spent two and a half years telling the government in Biden one, we're not ready to tackle any of these problems, but here is our advice on how we think you should think about policy and manufacturing to the point of near frustration. And it was real because we could've probably won contracts earlier but there was no way we were even close to the line of execution or scale. There's a lot of stuff that had to be worked out. Right? And I think when you do that honestly, not as a sales tactic because people do this as a shucks, we're not really ready for this. Know? If you do it honestly, you build so much credibility over the time that when you do say we are ready for this, people do trust you. And equally we have built a reputation of saying no to many contracts because we don't think they're gonna create value to the customer. And that is I think a slow way to build a billion dollar company, but it is a very fast way to build a $100,000,000,000 company. Like, do you wanna go on a date and kiss the girl by like acting like you're rich and taking photos with your Porsche on TikTok, or you're looking for a wife. And we are just the type of people that we're not happy to wait, but we are honest actors. And by being honest and execution driven, you build credibility versus I want credibility and therefore I'm like marketing to credibility.
01:04:54 · Ty Morse
[01:04:54] S0: One of the things I really like about you is I think you have like a slightly different world view than most people that I've met. And I'd almost like to use a metaphor, which is, like, imagine someone starts a company defense and they're like, we are going to have contracts next year. And you, knowing what you know, are like, well, there's just no way that you're not gonna have contracts before twenty months or, like, thirty six months. But people kind of believe that because they just don't know. Sure. What are the biggest areas where conventional wisdom in your experience is just completely wrong and you figured out some unknown truth?