Neros Technologies raises $250M as Sequoia triples down and production hits 1,200 drones per week

Speaker 2: Yeah. Thank you so much for coming on the show. We'll talk

Speaker 5: to Have you

Speaker 2: a good one. Bye. Let me tell you about Figma. Agents meet the canvas. Your AI agents can now create and modify your Figma files with design system context. Go check it out. Up next, we're going back to back again. Shaun Maguire is doing deals left and right. He said, I want an entire Gundot. I want every

Speaker 1: Kushner of deep tech. Yeah. But

Speaker 2: we got Shaun Maguire and Soren Monroe-Anderson from Niros.

Speaker 1: Great

Speaker 2: to see How you guys doing?

Speaker 7: Have a

Speaker 9: lot of money.

Speaker 1: Yeah. It's great. Job's finished.

Speaker 2: Take us through the deal. What happened?

Speaker 8: Yeah. I mean, overall this year has been super super strong. We've been growing like crazy, building the team, producing a lot more drones. We're up to about 1,200 a week in terms of production output. So things are going really really well there. And we've also started expanding into multiple product lines. So we just started talking publicly about Bandit, which is our interceptor drone. And really this round is, fuel on the fire to go expand to to new verticals and make bigger investments into the the core technology behind the platform. So, you know, core business doing extremely well, and now we're ready to take some some big swings.

Speaker 2: How much did you raise?

Speaker 8: We raised 250,000,000.

Speaker 1: Let's go. Alright.

Speaker 5: My most is This is the Yeah.

Speaker 9: Third round we've either led or co led in this company. Yeah.

Speaker 2: You were early.

Speaker 9: We've led the seed. There was a pre seed led by Ian Rountree from Cantos. Gotta give him a

Speaker 10: shout out. Nice. Yeah.

Speaker 9: He connected me with Soren back in the day. But then we also Sequoia co led the b and co led the c. Mhmm. And so that is I say that's max conviction, boys. That's that's up there.

Speaker 1: Really cool. Thing I'm most interested in for you, Soren, is like how is the American supply chain developing? How much are you guys having to take on yourself versus are there are there companies coming out of the woodwork hitting you up saying, hey, I can make this, I can make that, and you're and you're

Speaker 2: rumors of an American drone motor company because those were in really short supply. But walk us through what's going on on the supply chain side. Where are there green shoots? Where are there where where where are you issuing like a call for new startups?

Speaker 8: Yeah. It definitely depends on what part of the supply chain, and it's pretty varied across. So we have taken the overall strategy of designing our core components in house. We really specialize in the electronics design. So this is things like the radios and the flight computers.

Speaker 10: Mhmm.

Speaker 8: So when we're going and figuring out how to build these at scale, we're going directly to the chip companies, we're going to many different board houses. We get a lot of control down at the granular level of the subcomponents and the materials going into these parts. We do a similar thing with motors where like, we are sourcing neodymium, non Chinese neodymium, where we have a, place where we can get that processed outside of China, and then we're also working with multiple motor companies, including one of the American motor companies that has started up recently. So I think because drones are getting so much attention, there are some really capable companies, you know, like like West Mag is one of the the motor companies that's making fantastic progress. We benefit from that, but we also know that we need to control our own destiny in many of these areas. So we are going very vertical in our design and our manufacturing. And the intent is to be multiple, like, sourced have multiple sources for all of these critical things.

Speaker 1: Problem number one feels like you're on the path, which is as a country, we need to figure out a way to make a ton of these as fast as possible. Second is maybe, like, capability factor and how do you basically push the form factor forward. Sometime between when the last time you were on and now, I saw a video of a drone where effectively the whole body of the drone was spinning and it almost made it invisible, and it was very very scary looking. It feels like there's a lot that can be done on the form factor side. How important is that to the company right now versus just problem solving problem number one?

Speaker 8: Yeah. I mean, we're constantly iterating on form factor for Archer, basically figuring out ways that it can be a better product for the soldiers. These are really granular things. Like, for example, you know, every time they train with it, they find this one little like plastic part breaks and so then, no, you need to go and figure out how to change that plastic part. That's a really really specific example, but it's we get a lot of advantage by having now tens of thousands of drones deployed and constantly doing that iteration with the the end users. But in terms of overall form factor, the the biggest thing I would look at right now is Bandit, is our interceptor. So it is pretty much all of the same components from Archer, but in a new airframe with a different payload. It's designed for maximum speed versus, really, like, range with a with a heavy payload, and it's designed to go and chase down other drones. It's a great example of how we've built this ecosystem of these core components that we can produce at scale with a secure supply chain and now we're applying all of that to a new form factor and we're able to go and, you know, chase down shotheads with it, which is something that we cannot do with the the current product line today.

Speaker 2: Wow. Can you explain, like m five, sort of the the the buyer here and and how the how the drone procurement process will change over the next few years because drones don't you think like Air Force, they fly, but I'm sure the Navy needs drones. I'm sure the Army needs drones. Recently, Space Force was built up and that makes very that that makes a lot of sense for where space is. But you could see selling to the coast guard, selling to different branches of military even Are

Speaker 9: you saying we need drone force? We definitely maybe.

Speaker 2: Maybe that's the solution. But but I can imagine like the Navy SEALs needing something different than other Navy servicemen. And so how diverse will your customer base be within the armed forces, within the Department of War? How does it break down currently? Is there one buyer and then they do deployment and repurposing? Or are you actually interfacing with smaller segments of the armed forces?

Speaker 8: Yeah. It's a great question. So today, we sell to every service branch of the US military, but the army and the marine corps are the largest volume customers.

Speaker 9: Okay.

Speaker 8: Navy and Air Force have less of a, you know, a large quantity demand, at least for Archer Sure. Because Archer is really designed for maneuver forces, you know, striking targets within a 20 kilometer radius. And and that's really the the specialty of the Army and the Marine Corps. However, with with Bandit, you know, the counter UAS system, that is, I think, very applicable to the Air Force with protecting air bases as one example. But we design all of our products to be useful in many different domains, and the, you know, in our business development team, they are broken down by service, but not by product. And so we really want our the folks who are interfacing day to day with the customers. So this is our BD team and our mission success team. We want them to be really intimately familiar with the customer's needs and focusing on, you know, what does that specific service want so we can deliver them the best product.

Speaker 2: How are you thinking about lessons from

Speaker 9: the Let me, John. Let me just add Please. To that. Yeah. So, you know, you talked about a bunch of the American Department of War customers. Sure. This has also already started international sales. Yep. So so, like, obviously, these products are needed all over the world. Yeah. And then with this next product, Bandit, the interceptor product, you get into like, we need to defend pretty much all critical infrastructure. And with the Iran war, especially what happened in The Gulf Yeah. It's it's not just gonna be government customers. I think that if you're building a data center refinery.

Speaker 2: You're gonna

Speaker 9: have to buy interceptors, you know, like and you'll do it in cooperation with your government. But maybe the dollars will come from, you know, whoever owns the oil rig, Exxon, or anyone. And just this this problem is so big and it's gone it's, like, already going beyond the traditional just Department of War procurement cycle, and we're seeing it just extremely strongly at nears with their demand.

Speaker 2: Mhmm. Lessons from the f 35 program, some really amazing technology, also tensions between different branches for different features that might have delayed, might have caused cost overruns. There's a bunch of different ways you can tell the story of the F-thirty five. But are you leaning more into modularity than another company might? Are you trying to are there benefits and trade offs of modularity at your current scale? Or is there something where you're thinking, okay, down the line, we'll need different products, So let's set things up now to be prepared for when that comes.

Speaker 8: Yeah. That's exactly right, actually. And we've started really trying to instill this in the engineering team which is breaking down our systems by, you know, the logical component and subcomponent level, and thinking about what is going to transfer to the next product

Speaker 2: Mhmm.

Speaker 8: And being really smart about what every interface between components looks like. Niros, our theory of victory is building a component ecosystem, and making it so every new product is is utilizing that. And so we just build this flywheel. You know, a lot of companies have done this really well with software. Niras is trying to do this with with hardware as well. And that that is very clear as we're developing Bandit that we're able to reuse so much of the componentry. I will say that modularity is generally hard for mass manufacturing. Like, you can take parts of a design, but actually having individual components is is generally harder for making a really mass manufactured product. But it is something that our customers demand, especially with components like radios. We've just seen that you have to be able to switch out your comms quickly. And as we redesign this next generation of the drone, we're doing a a full ground up redesign from what you see today. Mhmm. And that is gonna be in service, partially in service of modularity, but also setting the requirement to be manufacturable at a million per year. So those things are somewhat at tension with each other, but we have to we have to figure out the right line in between.

Speaker 2: Shaun, it's How many? Oh. Oh. It's your third investment of this company. You have a ton of capital. Are you in terms of your defense tech investing arc, are you in growth investor mindset now? Are you going to be Do you expect to do fewer seed checks, really early stage companies, and focus on growth stage, board seats, figuring out the public markets, doing later stage deals? Or is there still an opportunity for early stage defense tech in your mind?

Speaker 9: Yeah. I mean, many people will disagree with me on this, but I am personally more in the growth mindset now. I think there are these moment in time, you know, these why nows that happen that an opportunity for the first movers to go and just, like, build companies that could not have existed prior, and the Ukraine war was that for a lot of defense tech. And so, like, the companies that were started immediately then or right before and are actually delivering value, you know, abroad in some of these active theaters, Like, they're just in a different level than the ones just getting started now. And I I personally think it's gonna be hard to catch up for a lot of these. I do think there are you know, like, let's say there are 10 very successful defense tech companies started in this decade or so. My guess is seven of them have already been started. We know the names.

Speaker 2: Yeah.

Speaker 9: Maybe there's opportunity for, like, two or three more.

Speaker 2: Yeah.

Speaker 9: So I I I am open minded and paying attention to the space, but, like, it's it's more active on the growth side. Yeah. And I gotta say on that, Niros is still today a deeply underappreciated company. Like, $2,500,000,000 valuation, that's cool and great. These guys, their revenue is growing at an insane clip, actually very efficiently from a financial perspective, which is very rare for a hardware company. They are actually, like, having profound impact in theater right now in multiple places.

Speaker 10: Mhmm.

Speaker 9: And it's just like that caliber of company is very, very rare. There's maybe another couple companies

Speaker 2: Yeah.

Speaker 9: In that, you know, group, but this company kicks ass.

Speaker 2: I love it. Great great

Speaker 1: way to sum it up. Last question I have. How meaningful is drone racing as a pipeline for talent? Mhmm. Like, are there people that that I'm sure I'm sure you you have plenty of attention from from that world given, you know, the meteoric rise of Niros. Yeah. Is like the what what the IMO medalists are to Scott Wood. Is that is that what drone racing is for Niros?

Speaker 8: A little bit. Yeah. Basically, our whole flight test team is, like, insanely good drone pilots, and we're we've actually started going to the biggest drone racing events, just to be there, have a presence, and, like, show people that there is something that they can come and work on that is actually a real career. Like drone racing is not much of a career, at least for for the majority of people who partake in it. And honestly, I just wish it was bigger because it is such a fantastic source of of talent. So my my theory is that over time as military FPV is really growing, it'll eventually mean that the the hobbyist FPV world will will come along with it, and we'll see more more very, very cool racing events happening.

Speaker 9: I just gotta add one more pipeline, which is, you know, now that these guys are doing very, very real deployments, they have a pipeline of former special forces operators joining the company. And I mean, for me, as, like, an American that used to work in in that world as a civilian, makes me very, very proud. So the drone racing, you know, is where Soren comes from, but it's really incredible to see these guys hiring a bunch of ex mill guys

Speaker 2: as well. Yeah. There was the story of Palantir. A lot of like used it and they're like, let me go work for this company. They did very well for them.

Speaker 8: We have had that happen multiple times. I'm sure. That is that is saying something good.

Speaker 2: Yeah. Are you the best drone racer at Niros currently employed? Or have you hired somebody better? What percentile are you if there's a company outing?

Speaker 8: Oh, man. I I I'm definitely not the best and I'm probably not even the second best. I have not flown very much in a That's

Speaker 9: long because he's old at 23 and his skills are exponentially Yeah.

Speaker 8: It's like Formula One. Yeah. I'm I'm I'm washed at this point. Unc. Unc mode. Levi Levi's our our lead flight test pilot. He runs the whole flight test team and he was a professional pilot before. He's like the Wow. Most naturally talented pilot I've ever seen. He's he's probably the best at the company.

Speaker 5: That's awesome.

Speaker 8: He also flies for a living, so it helps.

Speaker 2: Yeah. There you go. That does sound.

Speaker 9: And for those of you that don't know, Soren was the world champion, you know, drone racer in multi GP.

Speaker 2: I've I've I've watched him in person. Ben over there on our team came and filmed you in the park in El Segundo. And it was one of the craziest things I've ever seen. Because I I've I've seen a DJI drone sort of, like, take off and sort of, you know, like, float away. Maybe it goes a little quick and Soren puts on this headset and is just whipping around this tree going as fast as he can. Was a crazy video. It was a

Speaker 7: lot of fun.

Speaker 2: Thank you so much for coming on the show.

Speaker 1: Great to see you guys.

Speaker 2: Great to see you.

Speaker 7: Amazing progress.

Speaker 2: We'll talk to soon. Goodbye. Let me tell you about Railway. Railway is the all in one intelligent cloud provider. Use your favorite agent to deploy web app servers databases and more while Railway automatically takes care of scale, monitoring and security.