Neros Raises $250M Series C at $2.5B to Build 1 Million Drones a Year

Soren Monroe-Anderson, Co-Founder & CEO of Neros Technologies, joins Sourcery from the company’s new 250,000-square-foot factory in Torrance following its $250 million Series C at a $2.5 billion post-money valuation. The round, led by Sequoia and American Strategic Technology Fund, comes as Neros expands from its core Archer FPV platform into multiple product lines, including Archer AI and Bandit, its counter-UAS interceptor. Neros is also fresh off a $500 million Army IDIQ and is building toward the capacity to manufacture one million drones annually. Soren explains why modern warfare is increasingly being shaped by low-cost drones, why America fell so far behind China in drone and electronics manufacturing, and what it actually takes to “de-China-fy” a defense supply chain. Neros has pushed critical components including boards, chips, motors and magnets outside China, but Soren argues complete independence is far harder when Chinese suppliers still dominate some raw materials and precursor chemicals. We also discuss Neros’ transition from a single-product company to a multi-product defense manufacturer, the rise of interceptor drones, autonomous capabilities that can operate through communications loss, sovereign manufacturing for U. S. allies, and why Soren wants Neros to become the “Toyota of defense manufacturing.” Soren Monroe-Anderson: https://x.com/soren_ma Molly O’Shea: https://x.com/MollySOShea Sourcery: ⁠https://x.com/sourceryy 𝐄𝐏𝐈𝐒𝐎𝐃𝐄 𝐋𝐈𝐍𝐊 YouTube: ⁠ https://youtu.be/hW2NrKYnCkUhttps://youtu.be/a8sFzL-E948 𝐒𝐏𝐎𝐍𝐒𝐎𝐑𝐒 • Brex https://brex.com/sourcery—The modern finance platform, combining the world’s smartest corporate card with integrated expense management, banking, bill pay, & travel. https://brex.com/sourcery • Turing https://turing.com/sourcery—Turing delivers top-tier talent, data, and tools to help AI labs improve model performance—and enables enterprises to turn those models into powerful, production-ready systems. https://turing.com/sourcery • VCX https://fundrise.com/vcx—VCX is the public ticker for private tech, allowing investors of all sizes to invest in venture capital. View The Portfolio at http://GetVCX.com http://getvcx.com • Deel https://www.deel.com/sourcery—Deel is the global people platform that helps startups hire, manage, pay, and equip anyone, anywhere. Trusted by more than 35,000 fast-growing companies, Deel is the people platform that just works, so teams can scale without the chaos. Visit: https://www.deel.com/sourcery • Public http://public.com/sourcery–Investing platform Public just launched Generated Assets https://public.com/generated-asset, which lets you turn any idea into an investable index with AI. With Generated Assets, you can build, backtest, refine, and invest in any thesis with AI. Gone are the days of one-size-fits-all ETFs. https://public.com/sourcery Follow Sourcery for the latest updates! https://www.sourcery.vc https://www.sourcery.vc/ Disclosure Paid Endorsement. Brokerage services by Open to the Public Investing Inc, member FINRA & SIPC. Advisory services by Public Advisors LLC, SEC-registered adviser. Crypto trading provided by Zero Hash LLC, licensed by the NYSDFS. Generated Assets is an interactive analysis tool by Public Advisors. Output is for informational purposes only and is not an investment recommendation or advice. See disclosures at public.com/disclosures/ga. Matched funds must remain in your account for at least 5 years. Match rate and other terms are subject to change at any time. 𝐓𝐈𝐌𝐄𝐒𝐓𝐀𝐌𝐏𝐒 (00:00) Soren Monroe-Anderson, Co-Founder & CEO at Neros Technologies (01:02) Neros just raised $250M at a $2.5B valuation (04:25) Inside the Army's $500M drone contract (08:05) The Interceptor drones taking over the battlefield (12:55) Is it even possible to build a drone without China? (19:55) The biggest BS claims in defense tech right now (22:58) Neros’s growth to over 250 employees (25:29) The Talent bottleneck slowing down American manufacturing (29:43) The biggest myth about re-industrializing America (35:52) What actually happens on a modern battlefield? (37:41) How Starlink is changing drone warfare (40:41) Soren’s learnings from Kelly Johnson

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Molly O'Shea?

  Thank you for having us in your 250,000 square foot facility. Is that why you raised $250 million?

• 0:08Speaker 01

  There is a lot of 250 going on. The 250th anniversary of America, 250 million, 250,000 square feet. It's all coming together. We sized this facility to be able to do a million drones a year eventually. The way America got left behind was not caring about consumer electronics manufacturing being done domestically. China has been the biggest beneficiary because they've been supplying both sides of the war, probably making tens of millions of drones per year easily, maybe in the hundreds of millions. We were the first company to have an FPV drone on the Blue UAS list, meaning the Department of War could actually just purchase and use it without having to go through a bunch of crazy approvals. That meant that we had gone and de-Chinafied our core components.

• 0:47Molly O'Shea?

  What is the biggest BS in the market right now?

• 1:00Molly O'Shea?

  Soren, welcome to Sorcery.

• 1:02Speaker 01

  Thank you for having me.

• 1:03Molly O'Shea?

  Congratulations on the big announcement. What happened?

• 1:06Speaker 01

  Yeah, so we just announced our Series C fundraise, 250 million at 2.5 billion post. So it's a great milestone. You're going to enable us to do a lot more and continue on production expansion, all the good stuff that we've been talking about. I always say fundraising isn't the goal, but it is a tool. And I think this is a great milestone for the company.

• 1:32Molly O'Shea?

  Well, thank you for having us in your 250,000 square foot facility. This is huge. Is that why you raised $250 million?

• 1:40Speaker 01

  There is a lot of 250 going on. It's the 250th anniversary of America, 250 million, 250,000 square feet. It's all coming together. But really, we sized this facility to be able to do a million drones a year eventually. So we think like there's a threshold where Neros is contributing to really like being strategic, having a strategic impact for the country. And we think that is around a million a year. And America should have the capability to have factories that can make millions of drones per year, because that's what modern conflict demands. So that's what we've set our sights on. And when we were picking this building late last year, we were really just looking for

• 2:23Speaker 01

  something that would give us a ton of room to grow and also do vertical integration, start doing component manufacturing in-house. And yeah, just expand production of the Archer product, but also new products as well.

• 2:39Molly O'Shea?

  What was this process for funding like and who was involved?

• 2:43Speaker 01

  The round was led by Sequoia and ASTF with a bunch of great partners, including Interlogos, Valor Equity Partners, Allen & Company, Thiel Capital, Spark Capital, Mantis, and Dillon Field. It was honestly very quick because it was insiders and preempted, which is kind of the theme of our last rounds. And these are just partners that we've worked with a ton already and really enjoy working with and appreciate the partnership. There are some new folks jumping on board as well. I will probably forget everyone, but like Valor Equity Partners is participating as well as Spark. So some really like fantastic new investors that we're adding around the table.

• 3:27Speaker 01

  But in many ways, it's, you know, running it back.

• 3:32Molly O'Shea?

  Sean is incredibly involved with the El Segundo crew. Now you've expanded to Torrance. But what is it like working with Sean?

• 3:40Speaker 01

  Sean's amazing. I think he was so far ahead of the curve on hard tech in general. I mean, it really like is a true passion for him, where, you know, a lot of VCs have kind of jumped on the hype train recently. But when I met Sean three years ago, even before he invested in Neros, you know, he was explaining to me his thesis of hard tech and why it's so important to invest in manufacturing and how, you know, manufacturing has left America, but we need to bring it back. And all of these things that are really, really popular ideas now, like Sean was way ahead of the curve on. And he's just been a fantastic partner. So it's great to be doing another round with him.

• 4:22Molly O'Shea?

  You're also fresh off of a $500 million IDIQ.

• 4:25Speaker 01

  Yep.

• 4:26Molly O'Shea?

  So what was the process for that like?

• 4:28Speaker 01

  Yeah, so that was really last year when we, last year, we knew that our biggest goal as a company was to win the Army program. So this is the PBAS, Purpose Built Attributable System Program. And really like the first program of record for FPV drones in America. So really big deal. We knew it was coming down the pipe for about a year and we put a ton of effort into building new sizes of drones, building a new ground station, just like getting everything ready to perform well there. And then this was last summer when we had the fly off. We ended up getting selected. They selected two other companies as well, but we were the only ones to really deliver in a meaningful way.

• 5:09Speaker 01

  And we've, I think, shown to the program office that we are a great partner and we do scale production and we do deliver. And these systems are now getting fielded across the Army and having a lot of success. So I think that was the biggest motivation for them to go forward with this IDIQ and really enable them to continue helping Neros scale and, you know, enable the partnership of getting FPV drones across the Army.

• 5:36Molly O'Shea?

  So let's talk about the state of modern conflict, because this has clearly evolved tremendously in a short amount of years, especially with the Ukraine war. So let's start there. So what is the current state of the Ukraine war? How is that evolving?

• 5:51Speaker 01

  Yeah, so over the last year or so, one of the things that's happened is the distances have gotten much longer. So when you think about the frontline, at this point, it is a relatively static position. And the width of the frontline, really this like no man zone is expanding. This is driven by the use of drones and the fact that now anything that is visible from the air that moves in that zone is going to be immediately attacked and eliminated. And drones have been getting larger and going further distances. And so that zone is now like 30 kilometers wide, when it used to be a few kilometers wide.

• 6:34Speaker 01

  This is driving Ukrainian drones, FPVs, to get bigger. We've also seen the use of fiber optic drones that are immune to jamming as that has really increased in frequency. And then recently, Ukraine has been running a very successful mid-strike campaign where they're actually using drones to strike 150, 200 kilometers past the frontline and take out the logistics routes, all the Russian logistics routes. And this has been in the works for the past nine or so months, but really like successful in the past three months.

• 7:13Speaker 01

  And it's really proof how like, and something that I like to explain to people is FPV drones are one example of where low-cost drone technology is reshaping warfare. It's sort of like the first really big example. But this is going to happen in many different types of drones and different types of defense capabilities. And so now you have these incredibly effective mid-strike drones, you have the deep-strike drones. Ukraine has also been striking Russia with deep-strike drones and hitting the Moscow region a lot more frequently recently. So these are all, I think, good indicators to look at. It's like low-cost drone warfare is going to be across all ranges, all sizes, and we have to figure out how to produce these things at scale.

• 7:58Speaker 01

  And that is really where I think the country is lacking right now.

• 8:02Molly O'Shea?

  Could you explain what's actually on the battlefield right now, like a little bit more in detail? Because I know that you're also with this fundraise going into multi-products. So how does that fit and what's currently on the battlefield?

• 8:13Speaker 01

  Yeah, so, you know, FPVs are still used a lot and our Ukraine office is constantly supporting military units that are using our drone. But another, another big advancement in the last year or so has been the use of interceptor drones as well. Because you have so many deep-strike drones and larger drones coming over from the other side, now the goal is to take those drones out of the sky. And everyone, like since the start of the war, is talking about drone-on-drone warfare. Now that's really coming true, where like 90% of the deep-strike Shahed drones that Russia is using are getting taken out of the sky before they can even hit a target.

• 8:55Speaker 01

  So one of the things that we have recently started showing is the development of our interceptor product, the Bandit. And it is really driven off the fact that, one, we see that this is effective in Ukraine and we intend to be deploying Bandit in Ukraine before the end of the year. But we're also, we've seen the massive capability gap for America in the Middle East. Shahed drones, Iranian Shahed drones, have taken out billions of dollars of infrastructure and other weapon systems in the Middle East and, you know, against US forces. And so there's a very clear just lack of low-cost intercept capability.

• 9:37Speaker 01

  And that's another area that we're looking to solve. So, you know, we could spend so much time talking about the details of the different systems on the battlefield. I think the biggest takeaway is that so many of the problem areas or capabilities are getting addressed by these low-cost unmanned systems. And the key is to be able to iterate on them really rapidly. This is what Ukraine does extremely well, is they, they see what is working and not working right now, and they do very, very quick iterations. And that's how they've gotten to be so successful with the use of drones. And America needs to learn that lesson as well as the lesson of scale. And, you know, Ukraine is estimated to use 7 million FPV drones this year.

• 10:22Speaker 01

  So that goes back to my point of like scaling production, getting to the million scale is absolutely critical.

• 10:28Molly O'Shea?

  I mean, let's talk about where those are coming from. So how many drones does China produce a year? How many drones do other geographies produce a year? And how did America get left behind so bad?

• 10:42Speaker 01

  Yeah, so China is supplying drones and components to both sides, so to Ukraine and to Russia. And they have by far the strongest drone and just electronics industrial base.

• 10:58Speaker 01

  The way America got left behind was not caring about consumer electronics manufacturing being done domestically. So as with many areas of manufacturing, we have just offshored for the last 30 years, really optimized for the short-term profit margin and let that manufacturing be done somewhere else. And that somewhere else is primarily China. And so the national security implication of this was not really well understood, especially until drones started becoming such an important part of the battlefield and a modern arsenal. Because what goes into one of these is it looks much more similar to what goes into

• 11:40Speaker 01

  your laptop, your iPhone, any other consumer electronics product versus a traditional weapon system. And so that was something we identified early on was like, to be able to scale drone production, we're going to have to go quite deep into the supply chain. We're going to have to design our own components, build our own components. And today, everyone in the defense startup ecosystem is struggling with suppliers that are not set up for volume, not set up for scale, or lower-cost systems. But yeah, China has been the biggest beneficiary because they've been supplying both sides of the war and probably making, I mean, tens of millions of drones per year easily, maybe in the hundreds of millions. And so that's

• 12:23Speaker 01

  the, you know, a split between like, these types of FPV systems that are usually put together from components from different companies, or full-up drones like what DJI makes, which, you know, they make the best consumer drones in the world, but they also make the most commonly used reconnaissance drones for the battlefield. Like, Ukraine and Russia are using Mavic's, Matris's, all these DJI products that are incredibly well-engineered and produced at huge scale.

• 12:51Molly O'Shea?

  I've heard you talk about this a couple of times on other podcasts, but how do you effectively de-Chinify the supply chain? Is it possible to produce one of these without any components from China?

• 13:05Speaker 01

  So I think it really just depends on how far you're going down the stack. We've tried to go quite far, and we think further than anywhere else, where like, you can look at our boards, you can look at all of the chips that go onto our boards, those will not have ever touched China. Our motors are made outside of China, the material that goes into the magnets are outside of China, the magnet production is outside of China. We've gone way further than pretty much every other drone company in America. But I would be, I would be lying to you if I said, nothing in our supply chain relies on China. Because the truth of the matter is, if you go down far enough, you will find places where China is the main supplier. It might be raw materials, it might be chemicals for the process. Like,

• 13:49Speaker 01

  as an example, printed circuit boards, they use precursor materials, the manufacturing uses precursor materials that is completely dominated by China. So even if you go to one of these board shops in America that specializes in, you know, ITAR, Exquisite, like, they could be making the printed circuit boards for the F-35, I would, I would be almost certain they're using precursor chemicals that come from China. So it's a, it's a massive problem. It's not something that Neos alone can solve overnight. But we can be very diligent in like, the core critical components that are very specific to our system, and hopefully also give more demand for things like non-Chinese batteries, or non-Chinese thermal cameras.

• 14:33Speaker 01

  These are areas that like, we in the drone industry can contribute to, but probably not solve on our own. And it's a national effort.

• 14:39Molly O'Shea?

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• 15:20Molly O'Shea?

  runs on Brex, so I can spend time on building and not busy work. It's time to get Brex AF. Learn more at brex.com/sorcery. That's B-R-E-X dot com slash S-O-U-R-C-E-R-Y. Bye. Turing is training the next generation of AI with tasks that require real expertise and real-world judgment. That's why companies like Nvidia, Anthropic, Salesforce, and Gemini partner with Turing. Turing builds realistic reinforcement learning environments and data systems based on real operational traces, the kind of infrastructure Frontier Labs

• 15:59Molly O'Shea?

  need to train superintelligence. Visit turing.com/sourcery. What do you think about China selling to both sides? How do you think about that as a company?

• 16:11Speaker 01

  I mean, I think, like, it's a, it's a morally corrupt approach, although it would also be far worse for Ukraine if they didn't have access to Chinese components. So I don't think it really, the only really influence it has on our thinking is just knowing that China is getting all of the learnings and all of the advantage of scaled production. And we already knew how far ahead they were with DJI. Like, they just have by far the best technology. But in FPV systems in particular, they're also making so much of the componentry, and just getting constant feedback from both Ukrainian and Russian FPV companies. Like,

• 16:55Speaker 01

  you know, what do we need to do differently? Okay, here it is, two weeks later. Like, that is what the Chinese industrial base is extremely good at. So they have just so much knowledge collected now as well.

• 17:04Molly O'Shea?

  You've become the leader. Emil Michael at the Reagan National Defense Forum, I think it was like, last December, even called you out in our interview. So, this was really interesting. So Emil Michael said, everyone talks about Anduril and Palateer and SpaceX. There are three companies that in the last 10 years have broken into the defense sector to challenge Lockheed Martin, Northrop Grumman, and older primes. And his job is to create five more companies that work in the department and bring new capabilities. And he said he's excited about everything from Planet Labs, Neros, that's you, and Hadrian, and a couple more. So what do you think about that and your positioning? What is the real differentiator between you and other drone companies that are out there?

• 17:48Speaker 01

  So I think what Neros has been able to do really well is move very, very quickly to real scale. So we talk about it all the time. You know, our number one goal as a company is scaling production. But I think it really just comes down to, like, we can back up what we claim. So many drone companies are out there claiming that they have X production capacity, and, you know, maybe doing well on demos, and then getting orders, and then just falling flat on their face when they come to actually have to deliver those drones. I think we've done this, one, just by, like, it has been built into our ethos as a company

• 18:29Speaker 01

  from day one. I think we started at the right time to realize how important this is, and build the core team around this idea. You know, we started the company in 2023, and so the scale of what was happening, like, scale of drones in Ukraine was already apparent. We went to Ukraine right after we started the company, and we saw production of tens of thousands of drones happening per month. And we said, okay, we need to, we need to do this for America, and we need to do it on a secure supply chain. So like, we were the first company to have an FPV drone on the Blue UAS list, meaning the Department of War could actually just purchase and use it without having to go through a bunch of

• 19:08Speaker 01

  crazy approvals. That meant that we had gone and de-Chinified our core components. And then we've also just been the fastest to scale and delivered the quickest on every single program. So like, you can look at the results from the Drone Dominance Program, which is a top-down, Hegseth said, we need drone dominance, we're going to start, you know, we're going to hold these competitions, and then we're going to purchase drones. And part of it will be your measure on how quickly you deliver. When we got the order after the gauntlet, we had already built pretty much all of the drones, and just shipped them out. And then we were so far ahead of everybody in delivery, and we intend to keep doing that. Because we've just taken the manufacturing side and the supply chain side super seriously.

• 19:52Molly O'Shea?

  What is the biggest BS in the market right now?

• 19:55Speaker 01

  I think, one, it's, it's companies that are claiming production capacity that has never actually been proven. To claim a production capacity, in my opinion, you need to have done it, like, many times over. You know, if you say, we can make 1,000 drones a week, you should have done that many times consistently to actually make that claim. And then I think it's really, like, these companies that are building capabilities that demo really well and fall apart in the battlefield. So a lot of people like to talk about swarming, as an example, and throw, you know, 10, 100 drones swarming together and going and hitting

• 20:37Speaker 01

  a target, it's all happening on ranges with GPS, which is not a real thing in the battlefield. And a lot of companies are demoing stuff that just does not actually hold up in realistic conditions.

• 20:48Molly O'Shea?

  Why have so many American firms left Ukraine?

• 20:51Speaker 01

  So I think that the general trend has been, when the war started, a lot of companies, their products were sent over, or they proactively decided to go over to Ukraine and see how their stuff would do. I think most of that-

• 21:08Molly O'Shea?

  What is the process like when you get there? What is the whole process like?

• 21:13Speaker 01

  Well, it totally depends. Like, if you are a more, like, traditional weapons manufacturer and your products are included in an aid package, like, my understanding is you don't really have much insight or control over what happens. It just sort of gets shipped out by the US government. And that's not, it's harder for you to be directly involved. Our approach was just go to Ukraine ourself with the stuff and then meet the people face to face and literally hand it to them so that then we could get that direct feedback. I think a lot of companies tried to go over or had their stuff sent over, and then the first time around, it didn't work. And then instead of persisting and saying, "Okay, well, we're going to fix the stuff that didn't work and try again and try again," just ended up walking away.

• 21:59Speaker 01

  And to me, that's really disappointing. Like, I think a lot of companies, unfortunately, would rather develop on a test range in California and then just sort of put their head in the sand when the thing doesn't work in the battlefield.

• 22:14Molly O'Shea?

  What is the point of that?

• 22:16Speaker 01

  It's a good question, but it's a clear trend I've observed.

• 22:20Molly O'Shea?

  Is that, like, that's really a trend?

• 22:22Speaker 01

  Yeah, totally. I mean, there's plenty of companies-

• 22:26Molly O'Shea?

  That's not just, like, competitive shit talk?

• 22:28Speaker 01

  No, no, I think, like, there's-

• 22:32Speaker 01

  and there's very few defense tech startups that have a meaningful amount of equipment deployed in Ukraine. Like, you can just go down the list and see. So I think there's, like, motivation to even do it at all. If you do it, do you stick with it?

• 22:47Speaker 01

  Those things seem like harder- seems like it's harder for people to clear those hurdles than I would have expected.

• 22:55Molly O'Shea?

  So, I guess, to come back to you, what breaks as you scale up?

• 23:00Speaker 01

  Yeah, we've been growing really fast this year. We started at, started 2026 at less than 100 employees. We're more than 250 now, and we're growing rapidly. So, a lot of shifts within how the team needs to operate. Like, when you're under 100 people, you just have a bunch of really smart, high-agency people kind of just working on one thing. Stuff just kind of works. Like, you don't have to put a ton of effort into, like, management style and like how communication flows across the company. And these things that are much more like- much more important when you start to grow. And I think that's one thing that I've been learning a lot as we've grown a ton in the last, like, six months

• 23:45Speaker 01

  is got to be a lot more intentional with how do you maintain the hiring bar? How do you screen for culture fit when people are coming in? How do you make sure everything is communicated effectively across the company?

• 23:57Molly O'Shea?

  How do you find spies?

• 23:59Speaker 01

  How do you find spies? Yeah, insider threat protection, real. So, there's a lot of complications that come with scaling. And one of the things you mentioned was that we're really going from single product to multi-product. And one of the questions is how do we do that effectively? Because it's way more clear, how do you structure your, all your teams when your whole engineering team is just split by department but working on one product? When you need to support multiple different product lines, it starts to become a little bit fuzzier. And I've talked to a bunch of founders about this who've done it, you know, over and over again. And they all say, "No, it's just chaos. No matter what you do, it's just chaos." Like, you'll just keep changing it. It'll keep sucking, but you've just got to keep changing it and you'll figure it, you know, maybe figure it out eventually.

• 24:44Speaker 01

  But, yeah.

• 24:46Molly O'Shea?

  Okay, well, we walked around, and it does seem like you have a humming culture here. There's a gym. There's a nice outdoor area with a sauna. It's almost too nice.

• 24:56Speaker 01

  Well, we figured, like, you know, we're going to shove everyone into this big industrial box and make everyone work out on the floor and, you know, work super hard, but hopefully give some nice amenities along with it. I think that's a pretty, like, pretty good approach.

• 25:11Molly O'Shea?

  So, as you scale out, the team itself and the products, what are the roles that you're hiring for those? And how do you construct those different teams?

• 25:19Speaker 01

  Yeah, I mean, right now, we're hiring across every engineering discipline.

• 25:26Molly O'Shea?

  Is it hard to hire?

• 25:28Speaker 01

  It is, yeah.

• 25:28Molly O'Shea?

  What's the process?

• 25:29Speaker 01

  I mean, I think, like, what I've seen is every high-growth startup has the same problem, and especially LA hardware companies. It's just the number of great hardware engineers that can be, like, responsible engineer level on a system or a subsystem and, you know, really just be a needle mover, like, very limited number of those people in the world. And so, the job is to make a company that is attractive for top talent and like a place where people want to come and prove that they are that. And so, I'd say that's where our, like, biggest push on recruiting is right now, is finding those top 1% hardware engineers. And one of the reasons I say I mentioned the responsible engineer thing is, like,

• 26:15Speaker 01

  you need more, you need more and more as you go to multi-product, right? Like, historically, we've had a responsible engineer on Archer and then on various components, but total, it's probably less than 10 REs across the whole system. But as we're going to new product lines, then you suddenly need to have both, like, platform-level and component-level REs across many different projects. And so, suddenly, like, the demand for people who can take on that level of responsibility and deliver is much higher.

• 26:48Molly O'Shea?

  We've been noticing a very strong trend in all of our interviews, whether it's AppLovin, this company called Fall, we were just at Palo Alto Networks, like, all various, very different companies. And this expands pretty much every interview with high-growth companies. There, and this is what Fall called "super ICs." Like, people who are all really capable individual contributors. AppLovin looks for the same thing. All their engineers should also be able to make business decisions in some way or another.

• 27:19Speaker 01

  Yep.

• 27:20Molly O'Shea?

  And so, it's like, do you think that the proliferation of AI is just increasing this, like, extremely efficient type of talent density?

• 27:29Speaker 01

  I think it's, I mean, my perspective is AI just, like, 10x's whatever the person already is, which means you don't want everyone to have AI if they're, like, not really smart in how they direct it, right? And so, you've got to be more, actually, more careful in who is getting 10xed. But for the people who are- I think it's less applicable in hardware engineering, unfortunately, right now. Like, every software engineer should be using AI and producing far more code, right? But the same thing does not exist for hardware engineering yet. So, I don't think we're seeing it as much, but in the future, like, it'll have the same, the same effect.

• 28:12Molly O'Shea?

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• 28:57Molly O'Shea?

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• 29:41Molly O'Shea?

  What do you think the biggest misconceptions are with reindustrialization?

• 29:47Speaker 01

  Well, I think for us, it's like the we're not trying to re-industrialize. We're trying to industrialize something that never existed in America, pretty much. Like electronics and drones specifically just never existed in America. So the re-industrialize is applicable to things like, you know, forgings, like the stuff that America was really good at in these big factories in the Midwest.

• 30:17Speaker 01

  Sure, we need to bring that back, I agree. But there's actually so much new industry that didn't exist in the first place. And it's not, I think the misconception is not look back to history, but actually look forward and realize how do we do this better than what China is doing today? China figured out how to do everything from America and then improved on it. They iterated really quickly and they made a better system. And America needs to take our ingenuity and make a better system for things like drones.

• 30:47Molly O'Shea?

  And you guys are also going to be expanding into new geographies and creating a sovereign manufacturing?

• 30:52Speaker 01

  Yep, so we've been really just responding to demand in the sense that we're having a lot of conversations with allies and hearing that they want our products, but they want them produced domestically. And this is something that is actually very aligned with our vision of Neros over time. Like we want to be, I say we want to be the Toyota of defense manufacturing, where instead of being like a current prime, where we're very exquisite and siloed, we're very, you know, we're making these very accessible systems and we're ubiquitous across allies. And I think that's actually extremely pro-America, because we get to enable our allies,

• 31:33Speaker 01

  we get to really like project power without having to put American boots on the grounds in these places. And so we believe, you know, this is very much an allied effort and a lot of our supply chain is coming from allied countries. It's impossible to do everything domestically. And so we want to bring that even further by standing up manufacturing capacity in other countries.

• 31:58Molly O'Shea?

  What kind of playbook are you using for that?

• 32:01Speaker 01

  I don't think the playbook exists. I think it's like we've, it's a bit of a scary problem, because right now, our factory benefits so much from the engineers sitting right next to the production line. And we have to essentially figure out how to productize the production line itself and have it run without just constant sustaining engineering. I think recently, the production org has gotten far better at this, or they've been much less reliant on the engineering team to keep things worrying on a daily basis. But then we need to have someone who owns like, they can't be the person who runs production here, but they also need to have basically all the context of how production here works

• 32:45Speaker 01

  and then go be able to do it in other places. So it's a very hard problem. I don't know if there is a playbook for it.

• 32:50Molly O'Shea?

  Well, I guess what's interesting is like, what are the biggest challenges you have right now in developing these drones out? Like what are you trying to constantly solve for? I'm sure there's new and evolving issues every time you release them, because there's new tactics and new types of jamming and that kind of thing.

• 33:09Speaker 01

  Yep, so it's quite a hard balance to be able to iterate quickly and produce at scale, because you just have much longer lead times when you start getting up to these higher numbers. And then if you realize you need to change something, like say we wanted to change the design of our radio. Well, we've probably already had 30,000 of those boards fabbed and waiting for assembly. And so like then you're just eating all of that obsolescence cost. So that is a challenge, but it's something we still try to do, is the quick iteration based on the feedback we're getting from users. We just have to be a little bit more measured in how we roll it out now.

• 33:52Speaker 01

  So we've started going to this block system where, so this is Archer Block 2. Block 3 is going to be really a ground-up redesign of the entire system. But there will likely be smaller iterations that make it into Block 2 while we're working on that longer-term redesign. So really think about it like, smaller rotations that get rolled in quickly, combined with long-term technical progress, that's how we make bigger leaps. I think this is an advantage we have compared to the situation that a lot of Ukrainian companies are in, where they're extremely good at the rapid iteration, but they don't have as much of an ability to pull back and do the long-term, like really deep technical innovation that just requires longer timelines.

• 34:35Speaker 01

  Like they're extremely innovative, but they just don't have the longer timelines. So we're trying to kind of, we're trying to do both. Do the quick iteration, also have people who can focus for a longer period and build, you know, Block 3, which is a fully redesigned system.

• 34:48Molly O'Shea?

  Do you have to constantly travel and see how testing is done and how they're actually being used? Like what is the process there?

• 34:56Speaker 01

  Yeah, I mean, it helps a lot that we have an office in Ukraine. So we have folks on the ground all the time. And then, of course, we have a team that is dedicated to working with our US customers and all of our customers, where we're either, we're training them, we're going to exercises with them. We are bringing them new products to try out, to give us feedback on.

• 35:21Speaker 01

  It's really helpful going to their exercises to understand how like, for example, US forces are using drones differently than how Ukraine is using drones, because we fight differently. We're not expecting to fight a trench war. We specialize in maneuver warfare. And so the way our system needs to be and be used is different. That's something we've had to learn by just like really close interaction and collaboration with the actual soldiers.

• 35:49Molly O'Shea?

  I just thought of something funny, but I was listening to like a ton of podcasts before this and someone like thought that the drones go into a battlefield. I won't name who this was, but someone thought that like both sides go into a empty battlefield and like fight each other there. Can you explain what actually happens?

• 36:08Speaker 01

  Yeah, I mean, the frontline is just this like constant, I mean, it's a never-ending. There is no fresh start, right? Like the frontline has evolved since this, in Ukraine at least, you know, since the start of the full-scale invasion. And it's changed shape, but it is a constant area where new things are just being tried and, you know, new drones are being thrown in. And we're starting to see more of that drone-on-drone warfare, but there's no like clear-cut rules of the battlefield. I think that's one of the things that we've seen, especially with systems that went over and failed.

• 36:48Speaker 01

  I think it was a lot of the systems that are, in theory, supposed to be easier to use or more autonomous. But then they like met these edge conditions that exist in the battlefield and then just broke. And so like we've talked about this in how we think about our drones and how, you know, this one here is manually piloted. It's not autonomous and that's by design. It gives extreme control and precision to the operator and it's very anti-fragile. Like you can throw this out of a helicopter and start flying it and it doesn't care and it'll work. And you can fly it into jamming, like it's an extremely robust system. And I think the battlefield is just so full of edge cases

• 37:29Speaker 01

  that it's really difficult to make like one perfect thing that can just autonomously complete a mission. And I think some people have that idea of what it, what it looks like.

• 37:38Molly O'Shea?

  As jamming evolves, how do you see Starlink and space-based communications affect that?

• 37:44Speaker 01

  Starlink has been a, it's another trend in Ukraine where there's a lot more Starlink-controlled drones. There's still the limitation where you can't use Starlink into Russian territory. So drones that are trying to deep-strike into Russia are not using Starlink. But it's been, it has been a huge, a huge boost for drones working in these contested environments. Starlink is generally really robust against jamming. It's kind of unique though, because often space-based comms, like your satellite is so far away that your signal strength is relatively low and it's actually very easy to jam.

• 38:24Speaker 01

  This is why GPS is so frequently jammed and really hard to do anything against it, because just the signal you're getting from the satellite is so weak compared to a jammer sitting on the ground. Starlink, through a bunch of very, very cool technologies, has sort of gotten around that limitation and been a big unlock. And I think it'll continue to be a big unlock, especially when you're, instead of wanting to control a drone, like me sitting at a ground station, launching the drone from there, having the operator be kind of anywhere in the world and then controlling systems, even if they're shorter-range systems, you can control them through the ground station that is connected to Starlink or some other comms.

• 39:06Speaker 01

  So I think that will be a use case that is expanded upon in the future.

• 39:11Molly O'Shea?

  This was a question I asked Sironik, but how do you deal with completing missions when communication goes down, but they might still be active? Do they still complete the mission? How do you, how do you deal with loss of communication?

• 39:25Speaker 01

  Yeah, so with this drone, if it gets jammed, then that's kind of game over, because this one is an autonomous. But we're also announcing Archer AI, which does have autonomous capability. One of those things is terminal guidance, where basically jamming is usually the strongest on top of valuable targets. And so it just gets exponentially harder. If you're an operator, if the operator is sitting 10 kilometers away, as you try to get within hundreds of meters of the target, the strength of the jamming is just so high compared to your communications link. So that's where a lot of drones fail. So with Archer AI, we are introducing the terminal guidance feature, where once the pilot has selected the target and the drone has a lock on it,

• 40:10Speaker 01

  it doesn't need input anymore. So even if radio comms get cut, it will continue in and hit the target. We'll be expanding on that feature set and trying to build more and more useful autonomy that does allow for better mission success in contested environments and, you know, when comms are totally lost. But usually it's actually a gradient where, you know, comms might be spotty and you need something to kind of get you through a rough patch or get you right through the end of the mission.

• 40:38Molly O'Shea?

  Okay, so we're about to go head out to the factory floor and see what's up. But before we go out there, this is a final question, this is a partner question. So our partner is Brex, they're all about performance, spending smarter, moving faster. I like to take this question in a personal bend. This could be really interesting for you because it could go one of two ways. You're among a very small group that ended up in El Segundo and all of a sudden all have billion-dollar companies and raised hundreds of millions of dollars, which is insane. So maybe this is the answer. I don't know, I'm putting words into your mouth. But I like to ask people, who are some people that keep you motivated? How do you challenge yourself? What are the kind of inspiration that gets you going?

• 41:20Molly O'Shea?

  Like, you're really traveling very far, so who are those people for you?

• 41:24Speaker 01

  Yeah, it's a good question. I think... So one of my biggest motivators, starting near us, was the Skunk Works book and the story of Kelly Johnson and Ben Rich, how they built just such an incredible program that had such a huge impact on national security. And they... One of the things that's cool about that book is that they have such different leadership styles, but both were highly effective. And generally, what Skunk Works is able to accomplish is just so inspiring. And it's like a... It is a tale of a relatively small group of people who are insanely motivated,

• 42:04Speaker 01

  that worked extremely hard, and did something that had just huge impact for the country. I'd say today, like, I... You mentioned the group here in El Segundo or South Bay in LA. That is a big part of it for me. Like, you know, to pick one of many, Isaiah, Isaiah from Valor, like, he has been absolutely crushing it. I don't know anyone who works harder than Isaiah, and I don't know anyone who has had such an incredible journey from like, you know, where he's come from and all the people who doubted him when he started Valor, to now just like crushing all of the competition. It's so inspiring.

• 42:46Speaker 01

  And so I think we've benefited from having this crazy density of great companies and great founders. We can bounce ideas off of each other. We can, you know, it's competitive too. Like, if you see your buddy going faster, then you're like, okay, I need to step it up. And like, these guys, they proved that it's possible. So I think, you know, historic, maybe Skunk Works, maybe Kelly Johnson. Today, it's like this group that exists in this amazing community.

• 43:16Molly O'Shea?

  We joked about this before, but if you wanted to be successful, you could have put an angel check into everybody who was on the bus.

• 43:22Speaker 01

  Yeah, the Gundo bus. It's like the best pre-seed, seed portfolio of all time.

• 43:29Molly O'Shea?

  Amazing. Well, Soren, thank you so much.

• 43:31Speaker 01

  Thank you.

• 43:32Molly O'Shea?

  Hey, it's Molly. If you enjoy our interviews, check out our newsletter, sorcery.vc, where we deliver a once-a-week top deals and tech headlines email, and also go deeper on our podcast interviews. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple, or wherever you listen. Link in description to sign up.