Rebuild Manufacturing raises $2.1B from JPMorgan and General Catalyst to reverse US deindustrialization

Speaker 2: cofounder and CEO of Rebuild. Miles, how are you doing? There he Welcome to the show. I'm well. Thank you so much for taking the time. It's an honor and a privilege to have you here today. This might be a gongbreaker. This is one of the biggest fundraisers we've had in a while. We're very excited to be joined by you. But why don't you kick it off with an introduction on yourself and the company?

Speaker 8: Sure. I'm Miles Arnaud. I'm the CEO of Rebuild. We didn't pick the great name Maple Bear. I'm feeling bad about that now. Yeah. Maple Bear is good. Yeah. It's not too it's not too late to change the name of your entity to some obscure sort of lore related to the company. We could re... Rebuild DBA maple bear. You could use butter goat or something like this. We could pick some food animal combination. Yeah. Anyway, Rebuild was was founded in 2020 to try and help reverse the extensive deindustrialization that's gone on in this country for the last forty years. You had a a guest on from Warp Sciences a couple of days ago. We talked a lot about this. This whole offshoring that took place over many decades has really destroyed our industrial base. It's negatively affected our national security posture, and it's removed a lot of great jobs. So we built a business over that time. We're about 2,000 people now across 15 facilities that can engineer and build complex products with startups typically or more established companies that have a new kind of hard tech and bring them to market and build them here. That's amazing. Amazing. Can you guys What were you doing prior to 2020? I did industrial turnarounds in private equity for about fifteen or twenty years. Thank So you for your service.

Speaker 2: I was hoping.

Speaker 1: We're we're we're this sort of an inside joke. We're the the Strongest supporters? Strongest supporters the private equity industry. But was part of that some amount of guilt? Like, did you contribute to the offshoring? Then you were like, hey, this is bad, and I gotta kinda It's

Speaker 8: a great question, Jordan. Usually, I was brought in after the offshoring had happened, and they were trying to figure out how to save these companies. Right? So what happens when you offshore production is you make some extra money for a while, but then you very quickly lose the ability to design the product effectively. And also very often your subcontract manufacturer, particularly if they're in China, will often use that intellectual property to develop products that compete with you. So after one or two cycles, as you know, in private equity, the companies often move from one shop to another to another. After a few cycles of that, usually you're facing a pretty difficult situation. Very cool. And so what's been the what's been the strategy? It sounds like you've been buying, not just building yourself. But also incubating. Yeah. There's a lot going on. That's right. Yeah. So to start, we bought 13 different businesses so that we had a very broad set of engineering capabilities because that's the core and likewise in production. So we can build metallics, composites, electronic systems, large scale assemblies, etcetera. And then we started to also instantiate businesses on our own. We built a battery business, a drone product business, number of other businesses in the aerospace and robotics areas particularly. And so, yes, we have a a multipronged strategy because frankly, there's a lot of work to do and we need to do it in many ways if we're gonna catch up. Right? We don't have four years to do this. Can we double click on drone

Speaker 2: drone manufacturing? I remember a couple years ago hearing from a lot of the defense tech drone companies that they didn't have a... An onshore supplier for small drone motors for little quadrotors. Everything had been offshored. There was one company I found in Washington that had been sort of hollowed out and offshore their manufacturing, and I was sort of loosely pitching, oh, someone should do, like, the American Drone Motor Company of America or something, one of those, startups specifically focused on that. But what have you seen in the drone supply chain that is interesting or tractable or the or the the biggest unsolved problem? Like, what is the state of that supply chain? Because a lot of the actual founders, you know, they they can't exactly go out and say, like, oh, yeah. We're particularly in trouble on this part because they have a business to run.

Speaker 8: It's a great point. So, actually, on the motors, which are called BLDC motors, which are used on these drones, that problem is largely being solved actually in a pretty short period of time. That's great. So it turns out you could import a lot of the machinery, the winding machinery, and so on, And a lot of the machining is quite conventional, and those are not ultra hard products to make. The actual trick there is the rare earth magnets in those motors. Oh, yeah. Today, that is still a very difficult

Speaker 2: supply chain issue. There are a number of companies looking to build that capability in The US, but the motors themselves Yeah. A whole bunch of companies ran into that space, and there's actually some danger there'll be overcapacity. Oh, interesting. Yeah. I remember looking up, like, how a drone motor is made, and it's, I I don't wanna say it's easy, but it's, like, a pretty simple to understand. Like, you wind the wire around the magnet. It spins, and it's something that if you had, like, any degree in engineering, you could sort of, like, work up to with the right machinery. So good to hear. That's gonna be solved.

Speaker 8: Well understood. And the capital needs to get into it are not ultra high. Right? That's great. Now as you get to bigger motors and bigger drones, like group three drones, larger drones, that changes. Mhmm. But the biggest challenge in drones is still that someone like DJI in China can make a group one. This is like a small quadcopter drone, and deliver it in The US for under $2,000, and a typical US made product is more like 5 to $8,000 using US based supply chain, electronics, etcetera. And as you can imagine, in a military context, it's all about affordable mass. So you want the maximum number of drones at the lowest possible price to win. And so that price difference is substantial. We've been developing actually what we call a drone core. Think of it as a platform that others can put various payloads on, whether those are energetics or various sensors or whatnot, that we think we can sell in The US wholesale for about $1,600 So the real radical change there is the development of the production system. How will it be manufactured? And developing that plant at the same time that you're developing the product. Because if you look at a traditional drone, again, even from China, they might have a 100 plus fasteners. And each of those fasteners requires a person or a robot or some kind of automation to make it. So if you can design a product that eliminates, for example, 100 plus of those fasteners, you can dramatically cut the production cost, the production time. That's the kind of thing that we need to do if we're going to compete with not just low labor costs, but everything costs less in China.

Speaker 1: How are you thinking about your supply chain? How much were robotics part of the pitch in 2020? Was that like, was that a core part of the first five years or was that always something that was a bit farther out? Because I'm thinking like, there's one situation where The US ends up and where we do sort of like, reshor manufacturing, but then we don't, we can't make the robots at scale, so then we have a new dependency. We have to... Yeah. And we're, you know, so it feels like both those things, we need to have the manufacturing here, but also we need to make the robots here that will actually do the manufacturing.

Speaker 8: That's true, but I have a little different perspective on robots which may not be that popular, which is that there's a lot of hype around them. And the problem with robots is that they're attacking a pretty small part of the total production cost. It's largely the elimination of direct labor. And actually most of the cost and most of the time involves everything around that, a lot of waste. So the reality is that bringing robots in might take a few percentage points off your total cost at a very high capital expense. You're much better off, excuse me, trying to implement something like Toyota's lean production system to eliminate all the steps along the way that are wasteful, that don't add value to the product. But in The US, we're very techno centric and we like big step change improvements. And so robots are fun, and so we want robots instead of grinding it out and every week just pulling a quarter percent or a half a percent of the cost basis out by getting a little more efficient, which the Japanese, frankly and other cultures are better at. So we need to adopt more of that kind of ongoing bit by bit approach versus, oh, I'm gonna put robots here, get rid of all my labor, and all of a sudden I've solved my problems. That won't happen. Yeah. Yeah. No. It's very American to be like, well, we have this one trick that's gonna solve all of our problems. Yeah. AI will fix everything. AI is gonna solve all problems. Right? I like the way that sounds.

Speaker 2: Yeah. Alright. Take me through the Slate Auto story, the partnership, how that how that fits together with the company, and is there a plan to do more of those type of projects? It's a fascinating

Speaker 8: product and company that's very exciting, but interesting to see how you interface with it. Yeah. So Slate started as part of Rebuild and then spun out and Okay. Independently funded since that time. And they're developing a sub $25,000 electric pickup truck. Yeah. An interesting contrast to the motorcycle example you were talking about, the real value of the product there is not that it's electric versus ice. It's that it's cost effective. Yep. And there are a lot of people today who can't afford a new vehicle or even a reasonably well performing used vehicle. The average new car in America just hit over $50,000.

Speaker 2: I I was reading that today. It's... People are stretching out the payment plans to ten, twelve years for a new car.

Speaker 8: There's so much opportunity for for the lower end right now for sure. And so that's really something really cool. Go to the the parking lots of factories or burrito shops or whatever it is around the country and look at what people that work in those places have to drive, it's amazing that it makes it back and forth to work. 100%. Yep. So anyway, this business was started to address that problem. And as I mentioned earlier in the context of drones, the real insight that SLAIT has leveraged is they've reduced the vehicle to its minimum sort of function and their plant has been designed to produce one product, one SKU over and over again, much lower capital cost, much more cost effective. And then the product's designed so that you can modify it downstream of production very easily. So for example, each vehicle comes in the same color, slate gray, but you can wrap the whole vehicle in any color almost for $500 Yeah. Which is much more cost effective than typically. And you can modify it, like turn it into an SUV and stuff. There's a whole bunch of an SUV. Bunch of kits that are really... Lots of options. So Rebuild today is a supplier to Slate. We we produce components for part of the vehicle, but it's an independent business that was born of Rebuild and is off doing its thing. And to your point earlier, that's part of our model at Rebuild is to help companies like that, whether we instantiate them or someone else, to reach critical mass.

Speaker 1: Jordan? Very, very cool business.

Speaker 2: Tell us about the fundraise. Tell us about the partnership with, JPMorgan. I was, listening to Jamie Dimon talk about, JPMorgan's $1,500,000,000,000 security and resiliency initiative. This feels adjacent to that, but I'd love to hear about the fundraise. I wanna smash the gong, and then I wanna hear about how JPMorgan interfaces with you.

Speaker 8: Great. Yes. I mean, this this fundraise, which was 2,100,000,000, Boom. It's a good time. I appreciate that. Was was led by both JPMorgan Chase and General Catalyst. That's right. These are two firms that have very long term perspective on their investment horizon. Right? And so Yeah. What we're trying to do, is rebuild industrial capacity here, is a long term play. And so they've been great partners, and their networks are fantastic, and their money is quite green. And so between those two things, we can, I think, build this business to be the multi billion dollar manufacturing company that will hopefully help set an example and encourage many others to participate in the space? Yeah. I was gonna say multi trillion. But

Speaker 2: Yeah. Yes. Many of our board members would go for that too. Just a little longer. Yeah. Yeah. Yeah. Just a little longer. Yeah. No. No. I love it. Love it. It's a great it's a great partnership. Jack McAllister doing so much interesting stuff on the hospital side, getting into reindustrialization now, and they have been previously, and then JPMorgan doing so much more there as well. It's a great partnership. Yeah. And I appreciate you're...

Speaker 1: You you maybe should be more hype seeking just because you guys have pretty... You know, had tremendous results and made incredible progress in a very short period of time. But I appreciate how pragmatic you are and just focus on focus on the basics. And I think it's what we need. So great to meet you, Miles. Thank for coming on. Thank you very much. So much for coming on. Come back on soon. Always welcome. Goodbye. Cheers.