Trae Stephens on Flock Safety, Anduril's IVAS contract win, Arsenal factory, and the Good Quests framework

we'll have to get the founder on uh and uh I think we have Trey now let's bring him in how you doing Trey there he is what's up guys how's it going we're good uh how's your day going can't complain all good so far fantastic we were just talking about the flock safety news uh I checked in with the team it sound like you met the founder very early uh participated in the seed round can you give us a little background on how you met the founder what you think of the company and uh what today means for them yeah uh I mean you know I've spent a lot of time meeting with govtech companies uh selling a local governments is incredibly difficult um I think it's basically just as hard as selling to federal government and except the upside is significantly less uh so from the very beginning I was kind of skeptical um but Garrett won me over he's a incredibly hard charging super talented guy and they figured out how to make the motion work and uh I think this is like kind of a once in a generation opportunity to build uh you know kind of a bth in the law enforcement space Allah axon which is the the company formerly named taser um and just incredibly incredibly impressed with their progress and how quickly they've gone from you know being security for HOAs to being kind of a a state and local law enforcement uh capability so really impressed by the team you remember if they were a hot company when they were coming out of YC was it obvious that they were onto something onto something and and special it feels like a company that would have been under the radar back in 2018 but what was your take back then yeah I mean I wouldn't say that they were under the radar like they've they've gotten you know great rounds done and the team has grown incredibly well so I wouldn't call it under the radar but it also I just meant I just meant at demo day like when they were coming out of YC cuz we were there we were there yesterday and uh you know there's this sense that everybody's got so much energy and excitement and uh if you're just meeting somebody at demo day it's almost impossible to tell if they're really on a crazy trajectory or not yeah I don't I don't think they were like the company that everyone was talking about coming out of demo day doing work in law enforcement was not super trendy at that time it seems to be much more Trinity today than it was then though yeah yeah it is although uh you know we were joking about it used to be Uber for dogs at y now it's Ander for dogs but there it was really was cursor for dogs actually yesterday there was way more AI agent companies than defense tech companies um but overall but honestly let's take a moment to just like applaud Gary tan for what he's done with Y combinator 100% it is it is a completely different Beast uh a single day like crazy what is it like 150 100 something companies uh everybody crammed in there's like cool Hardware being like demoed at I mean it's just like yeah like good job on Gary I mean he's just done an awesome awesome job kind of reinvigorating the brand and bringing something back that that was missing before yeah 100% he's completely flipped it back into founder mode somehow he's really making aggressive changes and just doing what's necessary to keep the momentum going it's 20-year-old company at this point it's got to be you got to have some new blood some new new ideas uh on flock safety uh they've often been called like the paler of local government or the andal of local government is that even the right comparison or just something completely different how do you think about the business and where it goes over the long term well I mean I think it's the the better analogy is probably andal rather than volunteer um there's obviously like a meaningful software component to what it is that flock is doing but um it's also like deploying vertical systems in to end whether it's camera systems or command and control for uh drones for intelligence surveillance and reconnaissance missions um you know they just completed this acquisition of aerodome uh which I think G in this really cool extension into drone operations um so yeah I think I think it's like a a reasonably good analogy um and I think they've they've got a clear shot at picking up a bunch of Market um that you know there there's just not a whole lot of other companies that are you know anywhere near being competitive with them on totally what's the what's the number one reason you pass on companies that want to sell to the government and uh why is it uh distribution yeah no my my uh my chief of staff Ellie UNM and I we we call it a Field of Dreams problem where the founders will come in and they'll say like you know if I build it they will come like that I just have to build a cool product and then everyone's going to show up and throw money at me and with the government it's just not true I would actually argue that it's harder to sell to the government than it is to build a product that's relevant to the government um and so you have to figure out how to make the sales motion work um companies like Flock I I think have they've dug their heals in they figured out like what you have to do at the city council level what you have to do at the chief of police level what you have to do with the you know local populace level from HOAs on up um and they figured out the motion that gives them that superpower uh the re the reality is is like now that they're embedded and they understand the sales motion building out a product Suite that addresses a whole a wide set of problems is going to make it much easier for them to penetrate you know breadth as well as depth um and I think it's that sales the sales part of it is is the one that's hard to figure out now what that means for Founders fund practically speaking in guv is that we tend to want to write more concentrated checks um once you see production usage of a technology working um because it demonstrates that the founder has figured out how to get that those sales done and the products into into usage in the field um there's just so many companies that are great idea factories and maybe cool technology but they they can't quite crack the business development nut yeah how to me that feels like one of the biggest opportunities for Ander roll in the next 5 years is you kind of have all this off-balance sheet sort of R&D spending which is like all these new defense tech companies being funded you know really smart people building cool things uh and then you know they they maybe hit this like distribution wall uh you guys have been acquisitive obviously in the past is that you know going to continue to be you know an important part of the strategy or you do you feel like you're more going to be focused sort of internally going forward I won't say publicly on the technology Bros podcast that we want cool technology companies to fail because they're bad at Business Development okay but yeah uh those do present interesting opportunities for us from an m&a perspective for sure got it yeah uh well let's move on to ivas uh I want to know uh obviously this is a this was a deal like the hollow lens project coming over from Microsoft huge contract um I didn't even know that these contracts could change Hands In This Way um why H how did this deal come about how does it even work I mean obviously there's Prime contractors subcontractors you could imagine a different world where Microsoft just comes to you to kind of you know act as a subcontractor but that's not what happened here so can you break it down and and give us a little bit of overview on the deal and kind of where it goes from here yeah I mean the long history on the uh andral side of things is that obviously when we when Palmer and I started ruminating on this company back in 2017 uh the obvious question that everyone asked us is are you going to build head mounted displays for soldiers that I mean it's just so obvious Palmer is the greatest uh VR designer inventor in world history uh obviously that's the thing that we would probably be focused on right y um but Palmer actually had an interesting answer to this he he would tell people you know the basic science the research that needs to happen from a physics perspective uh is not there yet and of course I could build something but it wouldn't be quite right it would be too heavy or you know the experience wouldn't be real enough it would disconnect people from what they're the operation that they're conducting in the field um and so basically his answer was I don't think it can be done so I'm not going to be the one that that you know Burns a bunch of Cycles doing it now in the meantime Microsoft went out and won this you know tens of billions of dollar program called ivas um and you know people would constantly be asking Palmer like you know what's what's going on with this do you think it's going to work and he's like if I thought it was going to work we would have bid on it and we would we would have the contract that that's obvious um and so it was just kind of one of these moments of waiting to see what happened um and then you know over the last six to nine months we've kind of had this opportunity to go and spend time with the Microsoft team and say you know Palmer feels much more strongly about this now he feels like we can pull it off um there's there's a real opportunity ahead of us the Army is incredibly excited about us coming in to kind of take this over and bring it to the next level um and uh we we jumped at that opportunity and I'm excited to see where it goes in the coming years on the cultural side it feels like of all the big tech companies Microsoft's maybe been the most friendly to working with the military this whole time um do you do you envision like what what does a high functioning Microsoft look like in partnership with a DOD I mean imagine just spreadsheets co-pilot just basic stuff to manage bases and manage workflows is that how they should be plugging in or do you see them playing a different role going forward yeah yeah I mean look Microsoft builds a lot of things that are incredibly important to the defense Enterprise you know like the basically everything in defense runs on Windows just like it does anywhere else in the Enterprise um you know Azure cloud is a is has a a huge presence in the gov Cloud ecosystem um there's you know Microsoft applications that lay across every critical piece of infrastructure that exists um inside of the dod um and they as you said they have been much more willing than the other big Tech compan is to think of themselves as an American company which is incredibly important and also be willing to work with the government on programs where you know there there's potentially even lethality at the end of whatever kill chain they're participating in yeah um and so tons of respect and uh uh for for Microsoft and their their willingness to do that Brad Smith the uh the president there has has been going to the Reagan National Defense Forum for a decade I mean he's he's very embedded in this community um so I do think that there's a role to play um and you know as part of our work on ivas like we are going to continue leveraging IP that they built as part of that program we'll continue to leverage Azure as uh a core Cloud capability as part of the program um and I only wish the other big tech companies were as willing as they are um to to work on these important programs it's great uh let's talk about Arsenal uh obviously the site is selected now but what are the next big steps for you as you build that out I saw some pictures it seems like the first like hanger I don't even know what you call it the big the the big building has been toured uh but what what's coming down the pipe yeah um Arsenal exists uh site selection is over um we're building the factory just south of Columbus Ohio um the first call it 800,000 Square F feet uh is already uh kind of you know there and ready for us to to construct into um the the challenge for for us for the next call it 16 months will be building out the that first building and uh getting product lines stood up so that can start um you know producing at scale um the capabilities that we're being asked to produce which include things like Fury our autonomous Jet Fighter um Barracuda which is a class of cruise missiles lowcost modular cruise missiles um road runners uh which is our reusable Interceptor um and you know right now that those capabilities are being built either at headquarters in limited quantity or at some of our kind of ancillary facilities um and Arsenal is going to be the attempt to bring all of that together together in a in a modular and flexible Factory environment um and I think we'll have that initial capability up and running sometime around June or July of next uh of next year of 2026 what would the timeline be for a legacy defense contractor to stand up a space like Arsenal is it is it would they be planning it you know sort of on like a 10-year time Horizon like we want to get this new facility up in you know 2035 uh how do you guys think about pacing yeah I mean the the thing is is like the old defense industry model is like wait for the contract and then Bild by the hour basically that's that's how it works uh the andal model is spend our own money and build what matters now um and so could they could they do it could they build like Mega scale factories yeah if the government was paying for it and they had some plan for how to eek out you know their same sort of growth and margin structure that they have historically uh Eed out the benefit here is that we're not waiting for the Pentagon to tell us what to build we're not waiting for the US taxpayer to show to fund it um our plan is to bring uh you know private Capital to work to solve some of these important problems um and uh we're just going to build that's that's how how we're going to approach it and um you know we've had a great track record of converting that into into production and you know we have a very willing buyer on the other side of the table right now um and uh and that's kind of that's kind of our short-term plan uh do you feel like you get the respect that we think you deserve in DC now I can imagine in 2017 you know in the early days you go around DC first they maybe ignore you then they sort of will talk to you but don't take you seriously do you feel like you know andal when you're you guys are on the ground in DC that you're uh getting the sort of appreciation from you know the government now obviously you're winning winning contracts but is is the um you know is the average Senator uh take there we go is the is the average Senator you know excited to meet with you guys and uh you know work together uh yeah uh you know we're we're in a great position right now uh obviously we've been around for seven and a half years uh through both Republican and Democratic administrations um you know defense is totally bipartisan it's like the only spending bill that goes with line colors through the through Congress every year um we we don't feel particularly impacted by politics we do feel particularly impacted by um leadership that has a vision for how they want to go into the future and uh lean into these commercial opportunities uh that are going to be much more efficient and deliver capabilities faster than the traditional kind of Exquisite systems driven by requirements process way that the the dod has been running their business for a long time um so you know we've I think we've scaled uh a number of different programs uh really effectively and as a result uh people in DC see us as you know a real company not a startup anymore um and I think that that just gives us additional leverage to go and pick up bigger and bigger contracts um over time let's talk about humanoids uh obviously it's a very trendy space humanoid robotics you probably see every pitch Under the Sun uh some of it feels a little early little demo but at the same time you know Boston Dynamics has been building this stuff for 20 years I remember azmo and there's there's clearly something real here uh how are you feeling about the current environment around humanoid robotics yeah I mean it's a flashy space there's a lot of demos uh you know people are trying to figure out what practical utility looks like there are probably some use cases where humanoids makes a lot of sense there are also a lot of use cases where you can get better bang for the buck with you know systems that don't need to walk around um they can still do some really cool things and um uh you know as with most of these kind of AI companies I think the big question for in the Venture community at least is you know do we or do we not kamakazi round and I think the word kamakazi is a really good way of framing it because it's like maybe you win the war but maybe you're dead and I think you know going out and raising these Mega rounds at massive prices um it kind of reminds me of the self-driving car phenomenon where you had these companies that understandably were Capital intensive and it was like man if it works it's going to be great everybody it's going to make a lot of money the price doesn't really matter um but if it takes too long I mean you're in trouble you just comicazi and uh I think that's kind of what we're looking at for the most part here in the humanoid space as well one thing I've noticed is that it feels like every few months there's a new viral video of Chinese drone light show uh some dragon flying around the sky and everyone immediately comments like this is military capability I feel like people are aware of of like these drone demonstrations that maybe aren't fully ready to change the battlefield but are scary looking and I wonder if the tune around uh humanoid robotics is going to change once you see a thousand of these guys walking down the street marching in tan square or something oh totally I mean if we start seeing humanoid robots like carrying Javelin missiles up mountains or something yeah let's do another podcast and conversation about that yeah but we're not there yet we we'll have to switching uh o over the other other uh other Pond uh do you think that Europe will you know meaningfully sort of uh refocus their industrial base on defense you know we've seen their sort of Auto industry uh really struggle over the last few years particularly uh you know with potentially renewed interest from you know Western Europe and sort of uh you know taking care of their own security uh do you do you see them you know basically meaningfully adapting that sort of Automotive infrastructure into you know defense manufacturing capacity well I wouldn't say that I've seen like Automotive shifting to defense necessarily with the obvious exception of Saab which literally doesn't make cars anymore and they focus on defense but I don't think that had anything to do with this European moment I think it had something to do with sav not running a very good car business but uh but you know one of the things we're going to see I think as there's been this increased push for Europe to spend money on their own defense rather than relying entirely on the United States is that as a percentage of GDP you probably will see a lot more money um in in Europe going to towards defense which I would argue is probably net positive for the for the continent uh and it also reduces the burden the United States to to step up uh and and do kind of more than we believe is our fair share now the downside of that for us businesses is that the more made in America we become the more made in National Prosperity uh the European nations will become and I I think due to the nature of Europe that will end up being pretty fragmented the French government's going to want to buy from French companies the German government's going to want want to buy from German companies and so so forth and so I definitely think that impacts the way that defense should think about expansion into Europe um because you know there there's just going to be this nationalism thread that runs through it um that you just need to be mindful of either from a partnership's perspective or where you're spending your time trying to grow internationally yeah how does that play out in uh the Venture Capital markets obviously you know American defense tech companies don't take VC dollars from China for example but uh do do you think a a a German VC could invest in a French defense tech company and that would be kosher how do you think about that I mean I think they can do that this is mostly about story gelling like they need to connect back to the nationalism the Nationalist agenda in each of these countries and um there are great defense companies in Europe startups in particular um you know you have companies like Quantum systems and in Germany uh uh and Stark Industries which flows out of quantum systems you have Hing um and they each of these companies is going to need to tell a story about why they're German or why they're French or they're Italian or whatever um I don't know exactly how to do that but that that would be a burden that they're going to have to carry makes sense uh can we move on to good quests I want to hear the high level thesis again uh you just had an event around it uh break it down and they have some follow-up questions yeah um back in 2022 uh Marky Wagner uh who's a teal fellow and I like hung out around a campfire late one night and kind of we're we're complaining about what we see people doing in in the tech industry and the the basic conceit of the argument is that you know the Venture Community Venture Capital Community is filled with all these super talented former entrepreneurs or whatever um and they've taken like the route of bige head in Silicon Valley the HBO show where they're just kind of like resting investing just kind of chilling out making lifestyle decisions uh while writing Angel checks um and that feels like a real moral failure uh of of tech uh because the the founders that are operating on God mode um should be focused on the hardest most important quests like if we need to rebuild semiconductor manufacturing the United States I would really like some of these incredibly wealthy incredibly talented people to step in and have an opinion about how that's going to get done um and I but instead that we're like kind of sidelining um or starting like you know easy Enterprise SAS companies or something like that because it's the easiest way to print money and so that's really what good Quest was all about is like have you taken the time you you know Tech operator Tech entrepreneur have you taken the time to evaluate the quest that you're on uh to to discern is it a good one is it a bad one is it too easy is it too hard are are you you know a 18-year-old College Dropout trying to build a Semiconductor Company I don't know maybe that's not the right company for you to build um as your first step out so that's really what the the call was um in the essay and it kind of blew up far more than I expected too yeah yeah it's phenomenal piece uh if you haven't read it you should definitely go check it out but um uh following up on that there's some questions about like in our culture I feel like some of the really really important like the reshoring semiconductor manufacturing we have this tendency that I hear in Tech that only the true top tier Elite can can solve these problems you hear about like oh if we got to save Intel it's got to be Elon stepping in or else no one else can do it and I'm wondering if there's almost like too much cons idation around like we only have a few few Heroes a few hero units on the battlefield and that's honestly taking people are like oh well like you know maybe Elon will get around to it but if he doesn't like I don't want to be I don't want to be run over by him if he changes his mind and decides to go into my industry uh is is there something culturally that we need to change around that and and not putting all our eggs in one basket on these like incredible entrepreneurs who I think really could do amazing things but at a certain point they can only do so many retion that is that's exactly the right question and I think the answer is like of course you don't have to be like that to to do it like uh it's just much easier if you are um I mean you don't have to look any further than space launch to see this it's like the billionaire Space Cowboys yep Elon Bezos Branson it's like it turns out that it's way easier to get a rocket into space if a billionaire is bankrolling your company y um and I don't think every problem looks like that but some of them do and so you know if you're not if you don't have the ability to bank roll and back stop like maybe you should evaluate am I world class like generationally good at fundraising and if the answer is yes go for it yeah there's no reason not to but fundraising is a skill it's not something that's like I think a lot of Founders that have a hard time fundraising tend to say like well the VCS they don't get it it's like yeah okay I'll admit there are sometimes I legitimately don't get it I try not to invest in categories where I legitimately don't get it but many many of the times it's that the VCS will meet with the founder and they'll be like man this person is really bad at pitching and if I feel like they're really bad at telling the story and raising Capital that means that other investors that they're going to need are also going to believe that they're really bad well it's also the it's also the the custom customer employes the customer yeah it's like and so I think a lot of Founders that have trouble need to look like be a little bit more interspective and say do I have the ability to raise the amount of money that's required to pull off this audacious Vision the answer might be no mhm uh yeah following up on that kind of flipping it around there's a lot of industries that have produced a lot of financial return I'm thinking of the gambling companies the only fans companies the uh the kind of get-rich quick crypto schemes um and I and I wonder you know in the best case the free market is a weighing machine for good quests and I would imagine that only good quests should be rewarded financially and yet they don't and so you kind of get into this question of like should we have more regulation should we try and tax or dissuade or ban certain things that fall into like the bad Quest category I don't know if that applies to you know the lazy angel investor but um but maybe for some of the some of the more crazy bad quests um well I would say the lazy angel investor is a moral decision sure like uh sidelining yourself from working on the most important things is not morally neutral yeah like there is a there is a moral judgment that's being made there um you know I often think about this as a as a quad chart where the quadrants are like is good is bad feels good feels bad yep as a society I think we're like maybe too good the feels good is good this is like do stuff it's like healthare child Wellness stuff it's like educ sustainability educ like everyone agrees that these things are good but what that means is that the categories end up being hyper competitive it's like so consensus there's so many companies being built and then we also kind of totally agree on the feels bad is bad it's like yeah murder is bad stealing is bad assault is bad like we should not do those things it's the other diagonal that I think is the most interesting um only fans uh you know gambling I think falls in the feels good is bad camp this is like Society has somehow managed to convince ourselves that uh there's some like freedom of expression or something like that that should be protected and I agree like freedom of speech I'm all for it but that doesn't mean that there's no moral Judgment of like what that's doing to society I actually even put online dating in that category um and the then the other quadrant is the feels bad is good this is what I would like classify as Duty and responsibility so going back to like the flock safety thing that's you know not everyone agrees on law enforcement policy but it turns out that like drugs are bad and uh uh crime is bad and as a society we should be committed to leveraging the government's Monopoly on violence to ensure that people aren't destroying themselves and Society uh in the pursuit of some vain Quest yeah um and and I think that that not enough gets built in that category and that's both a positive because it's an opportunity to build something that's non-competitive and it's also a curse because it means that we have too few people working on the most important things in terms of uh improving the moral backbone of maybe the next Generation uh you've talked a lot about Civil Service how do you see that kind of playing out could that be a a rem to some of this you know responsibility to the to the community to to the country Etc yeah I mean look I I think authoritarian governments are bad in a lot of ways and we should not aspire to be an authoritarian government and yet they have a massive advantage against democratic governments because they can mandatorily conscript their most talented people into working on the societ in on society's greatest problems yep um we don't have that ability I don't I don't want us to have that ability um but man wouldn't it be great if we had some mechanism to get our best and brightest kind of in the way that Israel does to do two years of civil service coming out of high school um I think that would do a couple of things first it would actually like give us the people that we need to execute on National priorities secondly though I think it would expose people to how hard the government is and instead of getting locked into these tribal ideological movements um they would be able to see how difficult it is to get things things done and they would be way more incentivized they would feel way more motivated to actually fix the things that are broken um that would improve our quality of life and our ability to to grow and prosper as a nation how do those uh Hybrid models like Teach for America code for America how do those fit in are those just like stop gaps they don't go far enough or or are they are we on the right path with programs like those I think it's the right path these are these are good programs um notably these are after college I don't know maybe that's the right time to do it maybe it's not um but I I think they're a good step but they they're just not a big enough step um you know I think probably some tiny tiny percentage of graduates from top engineering schools are you even familiar with what code for America is yeah um and it would be great if that was being integrated directly into the government rather than a nonprofit organization that has relationships with governments that's it's just not quite as effective sure you got a last question we got to let him go uh we got one minute I guess extrapolating on the good Quest Concepts I think something that is important for maybe our audience to understand is that good quests aren't just power law companies right it's there's this tendency in Silicon Valley like everybody you know you know is not everybody but many people aspire to be a founder and you know some of the best quests you could go on are like working for an Ander working for a SpaceX things like that but what are what are the other sort of like extrapolate sort of the good Quest Concepts around you know maybe it's starting a you know a new a new church in your community maybe that's like you know uh do you find yourself advising sort of people in your network um around not always aiming for the power law company and saying like hey you can have an extremely meaningful impact uh even at a at a sort of smaller scale that that still is a worthy use of your time yeah I mean being a Founder is is not the only way to be on a good you know I had someone asked me last night actually um if I thought that JRR tolken had a good Quest by writing Lord of the Rings and my answer is absolutely I mean can you think of silly question any bigger deal than like building a world uh is inspires gener Generations long after you're gone um so no I don't think it's about being a Founder I think there are a lot of different good quests I think the real question is this question of like you know every serious country over the course of human history has wanted to turn their young people into executors and builders that are going to that are going to grow and create prosperity and you know pull everyone up along with them right now in the United States we don't really have that anymore for for the first time since I think the 1960s the most aspirational job is being an influencer rather than an astronaut like we should question what we're doing as a society if that's uh if that's what we end up believing is the most aspirational thing to do as a child and you know children are I think the most important in this equation because when we're young everybody aspires to Greatness like every child is thinking like I want to be a musician I want to be an astronaut I want to be like an inventor and then by the time that they go through the college experience they get pooped out on the other end and it's like I'm a McKenzie consultant it's like whoa bro where did you lose your aspiration for greatness like how does that even happen um and I think that's just a serious problem that we need to be thinking about as a as a culture and Society for sure well thanks so much for joining great to uh we'll have to have you back soon thanks so much for all right sounds good cheers