Prodacity: Hacking the Defense Industrial Base

[Music] all right guys we're going to rock and roll I got to leave you a backstory here I think you'll appreciate this we're all about agile and iterating and pivoting I'll tell you if anyone looked at the program or the really cool app uh from rise8 originally this was supposed to be a conversation with my friend Joy Shannen Berger about replicator um she works for the deputy secretary of defense many of you have also worked for bosses like that and you know that we are at the whim of uh the global circumstances and uh the weather the weather and the Pentagon shifted and as you could see Joy is not on stage so I had a huddle with Brian when this happened and I was like man this is a bummer like not going to happen but then I thought you know what is is that the is that the rise eight spirit is that is that the attit ude that we bring is that the vibe that Brian gives out I was like no so like we are we are going to overcome and I started texting the smartest people that I knew about this and uh they were awesome that they showed up so we put this panel together in the last four hours for you guys and yeah that's right that's right I'm I'm pretty proud of that in fact I'm so proud that I might just end the panel here because the fact that we even showed up seems to me could be the high point for me um but then you wouldn't get to hear from three of the smartest people in this town on the issue of the defense industry and so we're going to broaden out a little bit from replicator and talk more about the defense industrial base today's theme as you know is hacking and so we're going to talk about how to hack the defense industrial base because as each of you knows uh it doesn't matter how amazing your product is it doesn't matter how incredible your code is you need a contract to actually deliver it and get it in the hands of a war fighter and so understanding how to make money in this industry and how this industry works is as important as everything else we're going to talk about today um and tomorrow and and you guys talked about yesterday so I've brought with me some incredible people my colleague Tom Kenny at Google he's head of AI and digital transformation he's also uh a reserve Army General he sent me a video of him jumping out of a plane this past weekend not a general colonel colonel he is going to be a general very soon he still gets to jump out of plane it's probably better to be a colonel in general um anyway so so Tom is going talking about that um we have my dear friend Lauren baduli you probably all have heard her before she runs the building the base podcast with Hondo Gertz she um is managing director I believe at Beacon Global strategies she is also on the board of Silicon Valley defense group with me incredible perspective to bring on the startup space the private Equity space the big primes the subs the whole the whole business and then we have my friend Kelly BMS who is from uh Oliver Wyman also supporting the full range of all the industry players everything from m&a and Corp Dev to go to market strategy and everything else and so the four of us up here are going to talk a little bit about the way the defense industrial base is evolving to meet the challenge and opportunity of all of the new software capability that we talk about here at pacity um and I would say that there's been so much excitement in the last few years about how this industry is evolving but we also have had an equal amount of ink spelled on all of the agonizing way in which this industry is failing to evolve so that's where we're going to start we're going to on the line starting with you Kelly would you say last 5 years are we uh trending in the right direction fixing all the problems closing all the gaps or would you say we are more still stuck on our old ways not changing fast enough to meet the need what do you think we're trending up trending down totally solved it's all fixed yeah it's 100% no I think we're we're trending the right way and I I mean I think you know uh replicator not being the sole Focus but autonomy is a really good example of of the customer and Industry coming together to really try to use as many tools in the toolkit as possible everything from customer-driven tools like software acquisition strategy to the primes getting behind transforming their franchises to work with startups and small businesses to bring software on board um so I think you know there's a lot of creativity around the tools I don't think we've seen perfect case studies of super rapid transition and as agile as we'd like but I think um yeah overall there's a lot more flexibility that we're starting to see okay when I think the past fivey year kind of Benchmark as as your question I think about just the changes we saw in a post noden world where you had to try to convince the Tech Community to do work with the National Security Community there really wasn't this trust in transparency between the two um I'd say we have just totally overcome that issue um companies are signing up very eager to support the warf fighter support the National Security Community um but I'm I'm not as positive when it comes to are we actually there yet in terms of making it work for both parties right is it a productive relationship between the two I think we have um work to overcome there and I think Partnerships within the dib will be an important way to do that teaming working together so that's why I'm particularly excited about this topic today um but I can't help to when I did the five years it 2018 which was when Maven um and Google pulled out and we've since seen the roll out of Google public sector so I think that's kind of a significant Benchmark too to that changing appetite or eagerness to uh serve and partner within the Department of Defense what a difference five years makes yes yeah it's pretty incredible not to mention Co and all the challenges that preent pres presented within those five years but certainly progress but more more to be made sure I'd agree with progress and I'd agree with acceleration but acceleration like anything is a mathematical measurement of the speed at which you're traversing across a distance and there's a difference between accelerating with the McLaren and accelerating with a mini Countryman and I think we're still accelerating at a mini Countryman space there's definite forward momentum but where we really need to go is we need to get to that exponential level of growth because we're spending so much time catching up especially when you consider our ability to build and to develop in the US compared to some of our adversaries and how they're not beholden to as many of the policies and the regulations and the overhead and the oversight that we are here and that's where there's a a huge opportunity for hacking the industrial base is not necessarily just hacking how do we do better digital twinning so that we can develop Hardware faster how do we do better our t& on software with artificial intelligence but it's to your point earlier how do we connect the dots between industry and government so that we speak the same language and we're both incentivized to accelerate faster and and Tom's comments make me want to make one more Point here which is within the past five years I think we've seen that ramp up in interest but we've also in the past year seen a lot of companies pull out like there's not the business case to be made that it's working too so um I I think that's kind of significant for this conversation where um improbable for example is a company that dissolved their defense focused business I've seen a lot of commercial F tech companies pull out of the federal market so that I think is a red flag for this issue it is and one that gets a lot less of the sort of triumphalist attention about how everything's blowing up so I mean so when you are Consulting with um companies like improbable or others and they're contemplating pulling out of the business what are some of the things that their executives are talking about with you um and what's the advice that you're giving them just the the business model that these Venture backed companies face just does not align with the way we do business in the defense industrial base or the dod I see investors in in the audience I see a lot of tech companies um these are businesses that have to meet numbers that have to show their investors value and um I I think they're stretching as far as they can in many cases um but have to be really smart about where they're spending their time in terms of advice given to companies I think that there has been this push on just meet with as many people as possible and it's really not meetings that are going to move the needle or just engagement it's knowing budgets knowing your customer understanding those use cases and being really smart about where you're spending your time so as a consultant um my job is not just to set up meetings with you but it's to use your time really wisely so there's that impact on Burn rate that you can be proud to show your investors and also just an Unapologetic focus on Revenue the Partnerships are key here but these are still businesses and to survive you have to focus on real growth and and revenue and so to measure success in that way and there's a really important part of the revenue piece right but there is a lot of enamorment about dual use technology right we can sell this in the commercial space we can sell it in the event space anyone who's built a dual use technology company realizes how difficult that is to manage almost two completely different workforces to be able to develop that technology and when you're talking about Revenue when you think about dual use technology and you think about venture capital investment private Equity investment revenue is not a cber contract because that is not ongoing Revenue when you talk about Mr and ARR monthly recurring revenue and annual recurring Revenue a cber is not were recurring Revenue the contracts with the government that are either embedded in a pdo's fep or that are some sort of recurring licensing agreement that's what helps a company who's young who's building some great technology scale not these individual one-off contracts that are there and that becomes in my mind one of the things I hear a lot from companies that also want to work with Google who are the smaller companies are like we're looking to find ways to ease traction into the federal government because we're spending all this time in all this energy with all these different peos all these different meetings they're having all these different CIO CTO level folks and it's really expensive for them to drive that market penetration into all of the federal sector the big States Global governments around the world so one of the things I'm hearing is sort of this idea that for a while there was sort of like casting a wide net approach and now it seems like you're evolving more into like companies have to focus and we have more of a spear fishing approach saying we're going to go after product Market fit with the specific idea peo and and really being able to drive that but your point Tom the threshold of knowledge and awareness of the market is way higher than if you're pursuing the sort of generic dual use thesis um and so that raises this question of what is the barrier to entry for a company that wants to be dual use I we've advised companies one of the hats I wear is same kind of goto Market advising for capital G which is one of one of Google Go's Venture Capital arms is you got to expect that it's going to be between 3 and4 million in 2 years to break into the defense Market before you have the accreditations the authority to operate you've hired the BD leaders andever and you know when I talking to the CEO and the CFO and they're like that's the that's the price of admission that's not the price of Victory that's just to get on the field then they're really asking themselves well what exactly is you know the juice worth of squeeze what exactly is the benefit of being in that market on the flip side it's a 40 billion dollar Tam and it's a stable market so we're seeing all of these shocks and ups and downs and we're thinking themselves well actually for a do use company it could be incredible hedge um but you're just not going to see the same sort of Market leverage and you're not going to have the multiples that the VCS are looking for so question for you Kelly is like again you specifically do go to market strategy for some of these players and I'd like to ask you the counterintuitive question everyone expects me to ask you what should the go to market strategy for the startups be but I want to ask you the opposite if if you're a prime or an SI and you're looking at all the technology goodness and all the original Ip and all that entrepreneurial energy in the room today what advice do you give them about how they should go to market in this new landscape yeah I think we're starting to see a world in which the primes and the traditional defense industrial base are realizing that the value of commercial software can be instrumental to keeping their franchises sold and I think this is a super productive and valuable realization and so I think about like Boeing um touting its Fighters and its tanker aircraft as key test beds for abms C2 software and Edge nodes like this is great value for Boeing they get to extend their franchises help keep keep their uh platform sold add value create upgrade opportunities highly valuable for the startups and the other players who want to bring that software to Market so I think you know thinking about this as not a zero some game which is kind of you know typical tagline but what can you how can you use this energy this Innovation to extend your franchises we look at the kind of locki paler um Dev SEC Ops model for egis and bringing U modern software to Naval Combat systems like I think we're starting to see this play out not just in kind of the typical you know commercial dual use software place but the really hardcore defense Missions at the edge if we can get the primes to really focus their energy on frankly what's in it for their franchises which absorb you know the vast majority of the dod budget and until we have those incentives align I don't think we're going to see a lot of uh commercial software penetration so let me pull that through a little bit more so I think there's always a lot of jokes to be made about the sort of Frenemies of of the the big primes and and the new entrance but I think we've really seen kind of a bifurcation of of two different schools of thought one is is like we definitely see that there is a new class of I would say not dual use but defense Tech committed to the market and they want to be insurgents upstarts unicorns I mean we're talking about Andel and similar to Andel right and they look at the primes that you just mentioned as the dinosaurs they want to slay right they want to go after them disrupt their business put them out of business and then on the flip side we also see a bunch of companies that are saying you know our best path to get into a program of record is through an integrator and we would love to be you know on the on the bill materials with these partners and that's good money contracts and those companies are saying hey you don't want to deal with the complexity of selling a DOD let me do that for you let me make that easy for you let me be the impedance mismatch you know solution for you and I think you go back to that you know Point pre five years ago the primes would just look at these companies like we just want to acire or acquire them or worse like buy them out because they're competitive with us and just mothball their IP so we don't have to deal with it right so do you believe the prime s the CEOs you take them at their word that this is a whole new world for them and that they want to bring this technology in and be a good partner and let them share the profits and the revenue and those things are saying or do you think that actually it's Justified to be as cynical as we always have been I think if it hits evaluation criteria and if it creates you know recurring upgrades and spiral opportunities where the primes get us lives of the pie we're starting to see it I also think the customer has a real role here so we're starting to see more and more um kind of uh cers seated work within the Navy and the Air Force being mandated as uh software inserted onto Prime platforms and I think that's really um kind of a tool in the toolkit that we need to see more of that creates that forced you know transition path we're still the Primacy integrator again it benefits their franchises but the customer creates kind of a you know a clear uh transition Outlet let me pivot you Tom because you used to be the chief digital AI officer of Socom so you've been a customer I have so let me ask you that customer facing question right so you want to get the best stuff for your teams and you've got to be asking yourselves what is the design of the right contract or the right competition to try to get to that what you're to get to that like it's actually very difficult I experienced this when I was in government it's actually very difficult sometimes to get to the kinds of startups that we want to be able to get to um it's just a lot easier to get to you know an extens deoy AB Allen uh or or easier to you know s or go to the ones you always know so like what are the things that you learned about as a customer how to get the outcomes that you want that's a great segue because when you said I was going to ask you the opposite of that question I thought you were going to ask how do you as a leader inside of government Market yourself to the industrial base because that's that's my answer to you for this question which was we knew some of the things we really wanted to Target and we wanted to find those companies that really really wanted to work with us and contextually and maybe this is a little bit of an oversimplification but we ended up finding two different areas when we would look at some of the requirements that we would put out little our requirements they were very straightforward they were like a product road map that you'd see in a SAS company and that's where I I did my bread and butter long before Socom was in SAS companies building them growing them and selling them and by doing it that way you're not creating this overhead of I want to make sure that this particular technology is for hoo because I'm going to do rbl and my ppb for my Doos that I need for Jinx right nobody understands any of that and how many of and how many of those are coming out so for us the the opportunity that we took and general Richard Clark was the commander at the time and bought all in on it was simplify the message of the problem you're trying to solve don't tell me the solution that you want to bring brain I'm going to tell you the problem I want to solve and that was really really helpful because for for me inside of government it was easier when I had a team of folks like the deputy commander and the vice Commander these are three star Admirals and Generals who've cut their teeth in Special Operations they don't know their elbow from their pinky inside of SAS technology but when you had folks that could talk in a way that they were addressing the problem it was a better communication piece and the reason I think this is important is because in the industrial base too often you get the one Stars the two stars they make the transition out of DOD they were a senior executive in government and that's the language they know how to speak and that's the language that they speak but they don't necessarily understand the side of technology and the problem that it solves they know how to make the introduction to the door and say the right acronyms so as we think about this the marketing aspect to simplify to what the problem is we're trying to solve to ER eradicate all of the government lingo speak inside of documentation and emails that you're sending you're going to open up to A Whole New World of people that are going to be looking at this and saying I recognize this problem I can help solve this problem I don't understand all the Nuance but I can help solve this problem and you create an entirely New Field of players that want to come in to support the problems you're trying to solve there any things that youve seen or any of you have seen about an example of a government office putting out a contract that was designed to incentivize teaming the only thing I see it is analogous is in the world of small business they have the mentor protoge program I would love to see something that like rhymes with the mentor prote program but is not for small business it's actually for Venture back companies that want to become big successful companies or companies like you said the franchises that are big already but it seems to me like there's a match to be made there to bring those worlds together what do you think the industrial policy of the department should be to make those matches so I mean something that comes to mind is the Army's Titan sensor to Shooter program where I think as I understand it it's very intentionally supposed to create a digital sensor to Shooter architecture with Fusion AI targeting Al algorithms other apps plugged in and I think that the criteria itself pluses up teaming um use of small business partners so I I I mean I think you can get very tactical in the context of specific programs um you can also really incentivize you know open architectures where and and I think we're starting to see this more and more where the mosa architecture itself is starting to be weighed in the evaluation criteria much higher than any given performance spec than kind of recurring price uh schedule having sort of the teaming architecture if not the actual you know uh specific Partnerships a key part of the evaluation criteria seems to be a mechanism I'm seeing more that's a that's a that's a takeaway I know we have our our visual recorder here I would say uh you know hacking from hacking to dib hacking the evaluation criteria you think is is a lever that we need to pull more of okay that's actionable I like that it's the number one lever it's the number one lever okay that's even better um what else any ideas from you and Lauren Tom I think the incentives for Partnerships right now are largely around Optics and showing this united front but I have not seen as concrete of uh incentives on the contract side yet that have worked um there are some examples I think that the Jake tried um that maybe didn't work out as planned but I'd say largely the appetite from the traditional defense industrial base is to show their customer look we have these Partnerships we're we're pulling in these folks but if they have the contract it's hard to share the the pie if you don't have to yes and that's one of the things that that I've seen and observed as well is that when they win the contract you know they plan out 100% utilization of all those dollars and the people and it doesn't really leave that window um you know to maneuver which is what was sort of promised I think but I don't think it is the reality that we see so so this idea of embedding new technology incrementally year on year into the programs of record that way I just don't think that we're seeing it the way it was promised to us and it's a disincentive in many ways it's a disincentive for companies with the often time owner reporting and management responsibilities for doing this and to your point these budgets are set in for one year or two years or three years to really get to a point if we want to really hack the defense industrial base one of the things that we need to be able to do inside of government is fail we cannot fail startups across the globe fail constantly right my first startup failed before it became a success my second startup failed before it became a customer success both times there was an idea and this is what I'm going after and six months into it it was like yeah that ain't going to work I got a pivot and I need to do this but we are disincentivized to change anything inside of this long process I remember talking with the group and we were talking about the ppbe process in the Department of Defense and how rigid that is and I I worked with them for a few months kind gave them some ideas and some ways to think and I talked to them about an Infinity Cycle right you build a little bit you try a little bit you test a little bit you learn you feed it back in you build a little bit more you test you try you feedback it just is a constant iterative motion of agility to create fantastic outcomes and I was so excited to get the last brief from the group and I thought that it was it all resonated and they showed me the ppb and in the lower corner of the e was this tiny little infinity loop over here I was like yeah I was going to say that like when I hear PBB and Infinity Cycle I have a much more negative connotation uh it does feel like an Infinity but like more of sopian than that um so where well I would just mention since PBB has come up two or three times now there is a planning programming budgeting and execution commission that is put out their inter room report their final report is coming I do believe that it is really important that they hear from folks like this audience so it is worth I think reaching out to them you can just find them just Google it uh but they are they are still taking ideas for a few more weeks and I just don't see a world in which we hack the defense industrial base if we don't also hack the resource allocation process absolutely um one of the reasons for that is that um we now have I think over the last 5 to 10 years created as many or more Innovation formations than we need to do the intake like we have enough workes and name it right the issue is they're all broke right they add up to less than 1% of the Department's budget less than 5% of the R&D budget if diu gets a billion dollars it'll help but how do you hack the dib when you have enough agents that are supposed to look for Tech injection but they don't actually have the capacity and the resources to spin in the resourcing is probably the number one limiting factor that I've seen and we and we've got to your point a lot of innovation cells and I would agree with you we have way more innovation El than we need because of what they're actually able to develop there there's one group inside the dod that I'm very familiar with and they were all excited about releasing this app and they released this app after a year of development and from a user experience perspective from a from a person who's done this for 30 years it it was just not a product anybody would ever invest in not a product anybody would really pay for but it was laed as this is an amazing amazing feat that we were a able to create this and for those of us from industry we're looking at this saying in two weeks and maybe another week of testing I could have created the same thing for you this is not Innovation this is on the job training this is OJT and there's there's value in that there's value in OJT there's value in having super smart folks inside of the government who understand how this works but let's not call it Innovation let's call it what it is which is upskilling of the people that are the subject matter experts who can then speak to the companies that have this great technology help support the resourcing and allocation process and drive Innovation that way because there are companies that are spending millions of dollars in really fantastic Innovative Technologies six kids who are 24 years old and their whole life was in the armor core are not going to create some magical Innovation from technology it's going to require this real connection this hacking between this to make Innovation happen and not just iteration and that's a big difference for me I don't but I don't mind the upscaling because the limiting factor for the new entrance is the sophistication of the customers yes so you know whatever it takes to get a smarter savier buyer of software in a department as is a price I'm willing to pay but let me let me pivot away from this thread and pull something else so we talked about the Innovation organizations and we talked about the peos that have the bulk of the buying power but there's another element out there which is the combat and commands and I think one of the things that we've seen is a real pivot um of uh autonomy resources focus and political influence towards C- comps I think will rer saw that with sco and pivoted to that and tried to you know Drive Innovation by using their their money um and I think we're seeing that and now we've had really with ukom and indopacom you know the new battle labs are opening I think there's a question of are we going to start to see cocoms look a little bit more like procurement arms for the present and near-term future fight and Lauren I'm wondering like our our customers come to you saying like is it worth it for me to try to sell into ccoms they don't have the technically they don't have the authorities but they're actually seeming to get stuff done I'm glad you brought that up because I think the cocoms are doing a lot of work to try to get Tech tested in theater which is really valuable for these companies um that are trying to build for war fighter needs um and it it's fascinating if you talk to the cooms and reference diu programs for example there's just such disconnect where there's interest in the field to do things like predictive maintenance diu has had programs five years ago focused on this and there was never any transfer of tech or um kind of successful connections between the two I think they have to figure out how to have that procurement arm ultimately for it to be worthwhile but things like task force 59 at s um are a good example of closer Partnerships like those that you were talking about um that can lead to successes there were some successful contracts as a service Focus out of task force 59 for example I think s drone is an interesting one to look at um but but I do think that the the ccoms need to be a central Focus point for tech companies looking to do this if they can generate the demand signals there and hopeful that the buying so will follow so takeaway being you need to you need to have a a pull through you need to have someone creating a demand signal ccoms are good for that yes good for access to users maybe good for testing but maybe not production scale yeah okay I haven't seen good examples if you have a good Nuance Kelly what yeah I I think they create um a real an environment to prototype some of these capabilities in a real you know operational fashion so I look at like defense of Guam and the urgency around integrated missile defense so connecting um our armies ibcs with navy CC and so on through software connectivity and having a real kind of operational deployment use case and a sense of urgency it's still going to be driven by the peos a lot of the technolog is going to come through the labs but a what's our real world deployment of some of these you know software driven capabilities I think we're going to start to see that with the joint fires Network coming out of IND paycom for long range targeting and ISR but I don't see them as buyers but I think I see them as almost the the first prototype of deployment first prototype of deployment got it so we've talked about a dozen different parts of DOD now let's talk about the elephant in the room Congress right they have a huge role to play in shaping industrial based policy for all kinds of reasons that have nothing to do with technology and nothing to do with capability although occasionally they take an interest in either one um what do you think the reform agenda for congress should be they're liquored up on great power competition they want to make a difference there's more commissions every year um they want to be helpful what do you think would be helpful for hacking the defense industrial base say flexible funding just back to the issues you talked about in terms of resourcing comes to mind for me and obviously the chips Act is a good example of you know industrial policies back there's more of an appetite now to I think from the industry side to explore policy matters should we do that on a broader area of Technologies to really heavily invest in um our manufacturing capabilities at home and R&D but those are a couple things that come to mind for me I think that ties in well with the previous conversation about the cooms too Socom is the only one that has acquisition Authority and if you want to look at good examples of where you able to take a young company with a great technology and roll it out to a force that can test it on the battlefield constantly that's a great example but sencom doesn't have that indcom ukom afom no one else has that acquisition Authority so when you think about reform imagine what you could do if you were were actually hacking if you were saying I have this problem in Eastern Europe and you come I need this capability and whether it's coming from 18th Airborne Corps or whether it's coming from a Socom support team or whether it's coming from the Air Force as a service level shouldn't really matter that ability for ukom to be able to innovate and iterate in their field of operations could be huge because the reality is we all know this fighting in Eastern Europe is going to be completely different than fighting in the South China Sea and so this idea that the Navy is going to have the same requirements in Eastern Europe as they are in the South China Sea is not the case nor the Air Force nor the Army because they're very very different fights but if you empower the cocoms with the ability to have this acquisition Authority doesn't have to be massive it doesn't have to replicate what the services are already doing but imagine the Innovation that you could do if you look at what 18th Airborne Corps was able to do in Eastern Europe after the invasion of Ukraine with some of the smartest people on the planet including my friend Jared Summers he was the CTO and CDO of Exxon Mobile and went to become a senior executive for 18th Airborne Corps as their CTO and when they went over there brought all of this commercial experience to just go fast and he still ran into all kinds of roadblocks but imagine if ukom could have said we want to be able to invest and hack quickly and iterate very quickly because this Dynamic has changing so fast what a fantastic place to be able to try new things and to iterate quickly mhm so great question so I think one of the things that is a a criticism of the new entrance right is that they uh are very focused on pushing the frontier but as we heard Bill Plant say very famously about the situation in Ukraine they don't necessarily think as much about sustainment and when I look at the conflict you were describing in Ukraine it is very much now almost like a battle of attrition and the defense production act issues that we're seeing with the industrial base is much more about how do we generate the supply of Munitions that we need or how do we deal with all the parts issues that we're seeing for Readiness all the all the crimes are struggling with all these kinds of production issues and supply chain issues um so here's a question like is part of hacking the defense industrial base to try to get some of the startups to focus their energy and attention on these issues that are very different than the SAS questions and the data and AI questions they've been asked to and it be like what does the 2st century of Defense industrial manufacturing look like I'm looking at you Kelly I feel like this is your whouse a little bit yeah I think that's exactly right and I think we're already starting to see it I think there's like six solid rocket motor startups that are looking at second third sources around srms we're starting to see it with Advanced composite manufacturing I think chips are a good example yeah I think and I think this is kind of a really um a a good kind of intersection of where Congress and OSD can play a role of where do we really need to onshore multiple sources of capability and create an enduring demand signal for some of these capex heavy IND Industries where industry is really afraid of investing now and facing a cliff we look at artillery Munitions weapons okay I can ramp up production for the next three years and then what's going to happen with all of that those facilities and that equipment in five years when there isn't that enduring demand so I I'm almost honestly scared by the influx of startups in some of these capex heavy Industries because I don't know what's going to happen to them and I I kind of expect to see just industrial based consolidation down the line but I think this is a really good role for you know a DOD wide and OSD lever to be focused so building on that let me ask you Lauren you know these capex heavy things that really lend themselves to the Venture Capital we've mostly been talking about these kind of venture capital backed models um we've seen uh office of strategic Capital come on the scene the latest of the new sort of innovation children to be born um what do you think about debt or what do you think about private Equity playing more of a role here and it not being just so much VC money yeah my take on osc is at the end of the day if DOD can focus on being a good customer that's really going to help with the issues we're talking about today um but as the VC World faces an uncertain economic Outlook or broader financing I'd say um to have a DOD solution here is pretty smart to to leverage Tech I think Congress obviously plays an important role here so we'll have to see how well funded it will be if if that's the case at all um but I I I'm I think it's great to DOD get creative in this sense but at the end of the day if you can focus on being a good customer that'll solve a lot of these problems uh in my mind private Equity has a bit of a challenge in the space too because a lot of private Equity is based on Leverage whereas venture capital is based on growth and Innovation and building right and a lot of pees will bring a bunch of companies together for economy of scale but it's still more of a leverage play than it is an investment play and if we're talking about for one year or two years or three years I've got this manufacturing capability for this specific fight that's really really hard to do a long-term Financial projection for how this company is going to be valued in three to four to five years down the road it's almost as if in that particular case more Strategic investment more diu investment the capability for the defense department to be able to over trying to think of the word that I'm looking for but overinvestment and aircraft parts that they can sell for 30 years they're not going to invest in a drone that they're going to build for two years that's a trable that when the fight is over there's no longer an opportunity in a market so it becomes really really difficult exactly right well we are at time I we could have gone on a lot longer not bad for a group of people that didn't know they were going to be on stage until a few hours ago um Tom Lauren Kelly I cannot thank you enough um I'm so glad we got to put these issues on the table to be part of pacity Brian thanks for the opportunity thank you all for coming and I'm sure we'll see you during the [Applause] break

2024-02-07 22:09

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