Interview with Droneshield CEO Oleg Vornik
00:00So we get a lot of feedback from Ukrainians that in addition to saving their lives,it actually gives them a lot of that psychological confidence because you think about it.Like for us, that buzzing and annoying buzzing sound from a drone is just a bit of a nuisance.For them, it's full-on trauma because you hear that thing like it's going to kill you.That was Oleg Vornick, CEO of Drone Shield, an Australian-based defense company that specializes in counter-drone technology.I'm Motleyful producer Mac Rear.Motley Fool co-founder and CEO Tom Gardner talked with Vornick about that technology and about the business of Drone Shield.Hello, fools.
00:49Very excited for this time together with the CEO of Drone Shield, an Australian company in the counter drone solutions business.And the CEO Oleg, Oleg, thank you so much for being here, Oleg.Thanks for having me.And we also have Bigi Al from the Motley Fool who's going to be guiding us through some of the technical questions we're going to ask.But I think Oleg, what we want to do to start this time together is just maybe a one or two cents description of the business,because we're going to be going through the hardware and software solutions in a bit.But just sort of a quick overview and then the history.We know you were founded in 2014.
01:22I'm kind of curious what the first year was like in a business that nobody was likely making any significant purchases from in the first 12 months.So I'd love to hear just a one or two line overview and then a little bit of the history of the company.DroneShule makes hardware and software that detects and takes down drones.It uses completely soft approach, so there's no physical harm to the drones or, in fact, any surrounding environment.So modalities are like the radio frequency and radar as a camera is to detect,and then mostly smart jamming to take the drones down.In terms of our first year in the business, so the company was started by two American scientists,and they had the idea back from the Boston Marathon, which had terrorist attacks,
02:08couple years early before the business started, that as any technology evolving, drone technologywas going to rapidly evolve. And back then, drones would, you know, fly 30 yards, smashagainst the nearest building, and that'll be the end of it. You couldn't really do much nefariousactivity with it. But they had the vision that as drone technology was going to, all the bad guyswould eventually start using it effectively. As we, of course, saw subsequent in Ukraine andin other places. The first year was very much just a garage company until they had a conversationwith a New York based fund manager who agreed to give them some seed money in exchange for twoconditions. One, the listing on the Australian Stock Exchange as a means of raising more money for
02:54more growth for the business. And secondly, to have somebody commercial to come in and run thebusiness and they knew me from previous experiences. I was a banker at the time and looked atto do something more productive in my life.And so they gave me a call and introduced me to the two foundersand the rest was history.Now let's talk about the product suite of the business.You mentioned that this is non-kinetic.These aren't hard kill devices that are taking down drones,
03:20but maybe just sort of a little bit of the overviewas to why there is a demand now and why that demand is halfmilitary and intelligence and half civilian opportunityout there for the business.So maybe we start with the hardware,and then you can talk a little bit about the sideoffer and subscription. So first series, de Mangbussau was in 2018 where Houthis were attackingSaudi oil facilities using small drones. Now, why small drones? That's the only effective
03:47way of attacking that they had. So Saudis were scrambling to find effective counterdron systems,and there were our first multi-million dollar customer. And then, of course, Ukraine happened at thatpoint where we are supplying poles with our systems and polls turn around and donated some ofthem to the Ukrainians. So we had early experience in protecting against the Russian dronesattacking Ukraine and that drove Ukrainians to ask for more of our systems and we've deliveredhundreds of our systems to Ukraine since then. The technology uses a combination of differenttypes of approaches. So you have radio frequency, which is essentially listening for the connectionbetween the drone and the controller. And the connection is not just the control,
04:34telling the drone what to do. Often the drone wants to report back where it is, the telemetry,and also the video feed from the drone, and we can listen to that traffic both ways.And then on the flip side, when you're defeating, you're looking to severe that traffic bothways and also the connection to the satellite. So when often people think about autonomousdrones, what they're really thinking is the drone controlled by the satellite, as opposed toby a human, and we severe that connection to the satellite as well. Now, the,best way to deal with drones is a layered approach. So when you introduce a radar, a radar is like amotion detector in the sky, anything that moves will get picked up. Raiders stand alone have their own
05:16issues in a sense that other flying objects like birds or even moving trees often get picked up.Raders have evolved as technology to detect large, shiny, reflective objects like airplaneshigh up in the sky where there is no other object that can be confusing, that looks like an airplane.but a small plastic object that doesn't really give much reflection, which is what radar relies on,then means that raiders have a lot of difficulty by themselves, and often you need to havecustomized radars that are specifically formulated for tracking drones.So you take your radar, you take your radio frequency sensor, and then you can add a camerato it as well.
05:54So a camera does that final visual confirmation, and camera has been developed to track humans and vehiclesfor decades, but it's actually quite difficult to use a camera to detect an object flying 100miles an hour against complex background, like weaving in and out of buildings, trees,and so on. So you're looking for specialized software behind each of these modalities,RF rating camera to accurately fuse it together into a single track or tracking multiple dronesat the same time. And that's the beauty of the smart command and control system. And thenon the defeat side, apart from jamming, you can do other things.Like, I'm not a big fan of bullets or lasers, not so much because of, you know, being
06:38anti-war or whatnot, but, I mean, war is a terrible thing.But simply because those are very narrow applications, unless you are in a open warfare,like, say, for example, you're on a stadium or you are protecting military base withinthe US, you can't really just get a gun out and start shooting, right?You're not allowed to.So you're restricted to more passive methods like jammy.or we quite like interceptor drones.So we don't make our own planes
07:03who people make great intercepted drones,but you can integrate thatinto your command and control systemthat sends out the good droneand basically either Rams or captures the bad drone.The old adage goes,it isn't what you say,it's how you say it,
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08:12a single customer example, a situation, a circumstance where somebody is using both the hardwareand the software in a military setting and in a civilian setting? So you can take an actual one.You probably may not want to name names or anything, but yeah, what's a specific example of both?product we sell is called RF Patrol, which is a body worn drone detector. It looks a bit like aradio, sort of couple pounds, a kilo in weight. So we got hundreds of these now deployed in Ukraine,and a lot of soldiers wear them. So what it does is that if you're a Ukrainian soldier in a trenchor inside the building and the device goes off and you were about to pop your head up above thetrench or maybe come out of the building, you're like, oh no, no, no, I got to stay where I am and
08:56wait for the Russian drone to go away. Because a lot of these drones,are kind of just scavenging around looking for humans and then just go for a collisionand have a bit of explosive on them to basically kill a person.So that gives you that sense of psychological confidence that you can come out of your coverand not have an enemy drone kind of smash right into you because if a drone sees you,it's kind of too late, like the thing is moving so quickly that is going to fall you whereveryou go.So we get a lot of feedback from Ukrainians that in addition to saving their lives, it actually
09:29gives them a lot of that psychological confidence because you think about it. Like for us,that buzzing, annoying buzzing sound from a drone is just a bit of a nuisance. For them,it's full on trauma because you hear that thing like it's going to kill you. So that's theone application for one of our devices. In a civilian setting, infrastructure probablybe a good example. So you think about a data center. So we, for example, are seeing when peopleare building data centers, you have enemy drones. No, I want to say. I'm going to say,enemy. You have drones flying around. This is all in a domestic setting, like in the middle of the US,basically spying on how the data center is laid out. Now, who is behind it? That's the thing about
10:10drones. You never really know. It could be Chinese industrial spies. It could be just curiousonlookers. It could be potential terrorists. You don't know. So first of all, you see a lot ofdrones flying around when the data center is being built. So you see a bit of a blueprint of thedesign. And then once it's built, what data center is often experiencing and they haveproducts like our drone Century X are put on the roof is a drone can attempt to land on the roofof a data center and use the proximity, the wireless networks around the data center,to hack into it and do a cyber attack or steal data.And so our device would basically alert the security of the data center that there's a drone
10:53coming, drone land on the roof, and so the security can basically apprehend the pilotand grab the drone and so.In the winter of 2000,I was invited to give a speech at West Point,which was a wonderful experience.And afterwards, there were a collection of,well, we had sort of an after-dinner group.And a lieutenant colonel turned to me and said,
11:13I often ask in those situations,what can I ask you that's on the vergeof what you're not allowed to talk about,but actually makes it on the side that you can.It's like one of my favorite questionsto ask somebody in the State Department.And this would be November 2000.And he said,
11:28increasing risk of an attack on American soil.So that was nine months before 9-11.So I don't know what intelligence they had or why he would suggest that, but I've neverforgotten that.When I was listening to a recent presentation of yours, you were talking about the risingrisk that there will be a drone attack.I don't think you may not have made specific reference to US, but let's just say a drone attackin on US soil in a civilian setting that would cause a big wake up to the need for counter
11:58drone solutions in non-military settings.So maybe you could talk about what you think the risk is there.What would be the environment?Would it be an open-air stadium?Or, you know, who should be using Drones Shield products right now in civilian settingsthat isn't yet?So we talk about a Dron 9-11 type event.And I think it's remarkable.
12:18It hasn't happened.And I really hope it never does, but probability is that it would.So you think about any sort of crowd gathering, which you mention a stadium.so that'll be an obvious one, especially open-air stadiums.They don't have a roof, so a drone can easily come in,or otherwise, even with a closed roof,a drone can be smuggled inside the facility,or even an aircraft.
12:41So engines of airplanes have been designed to withstand bird strikes,but not drone strikes.I remember I was at a seminar with an FAA representative,and she was telling a story how FAA used to test,Rolls-Roy's engines. So Rolls-Royce obviously makes engines for a lot of airplanes. And they used totest for bird strikes by throwing frozen chickens into the Rolls-Roy's engines and just see whathappens. And then FAA decided to do the same with drones and they go to Rolls-Royce, are you okay forus to throw some drones into the engines? And Rolls-Royce is like, no, absolutely not. You're just
13:17going to blow out the engine. Just think about it. You're taking a metal parts object withlithium and batteries in it and throwing into an engine with really fine tolerances. It's not thesame as flesh and bone or frozen chicken. So since then there have been all these studies thatbasically show not just the engine, but damage to the fuselage, cracking of the shield of the plane.Now, an airplane is not that easy to take down. So often you have multiple engines, so if youburn out one, there's still others. Even if you burn out all of the engines, the airplaneusually has an opportunity to just glide down. So it's not a trivial thing, butit is a significant danger to aircraft, which is why today if a drone is sighted along the
14:00perimeter and obviously take off an approach path at an airport, so the ends of runwaysare the most dangerous because if a drone is just hanging around there, soon or later,it's going to get ingested into the engine of an aircraft taking off or landing.Very difficult to detect these things, right?Like if you're just relying on your eyesight, on a clear day, you know, why drone against the white cloud?Like, good luck.like that. That's why you need dedicated drone detection equipment, not just the takedown.In the stadium context, there are multiple permutations. The most obvious one is somebody just
14:31strapping a piece of explosive to a drone flying into a stadium and detonating it thereor alternatively, and you're probably going to be wondering what is Olegating for breakfast,thinking of all these nightmare scenarios. But even putting a bit of washing powder onto a droneand spraying it and people being concerned in anthrax, so panic, stampede.or even in fact taking a biological agent, and thankfully we never seen anything like it,but it's entirely possible in spraying a city with it.So today you can buy a heavy capacity drone that people use to spray crops that have somethinglike a 50 pound capacity.
15:09Now, that's a lot if you're using it for a biological agent, and basically like a spray,a big chunk of the city.So permutations are significant, and from a terrorist point of view, the attraction isyou will probably not get caught because it's not like you're doing it in person right there.You're just flying a drone from a remote location.You can be a long, long distance away and nothing really pointing at you.So I think it's a miracle honesty that we never seen anything like this and I think it's a matter of time.To add to, you know, you mentioned data centers a while ago and that was actually surprised
15:42for me during my research about your company.and it seems like anything that's being cyber-attacked is a target surface for drones as well.Some examples are energy places, you know, like power plants or nuclear plants especiallybecause there has been hacks or attempts of hacking in those places.Oil and gas fields was also a surprise for me.Yeah, do you mind chatting more about, you know, about those scenarios?And the other thing they ever want to point out to is that it really goes beyond military or militarylike, there's a lot of civilian applications with this.
16:17So we say that the civilian market is as large and in time may even be larger thanthe military market.It's just that the military has been more proactive in deploying counter drone solutions.And even now, the military penetration in terms of counter drone, we say, sub 5%.The civilian market for counterdron is probably zero, close to zero penetration.The energy infrastructure generally is highly flammable, right?You think about these oil and gas wells, the transport infrastructure.So it doesn't take much for a drone to create a meaningful incident, explosion, that kind of environment.
16:53And then you have things like prisons.So prisons have developed to be very good at stopping people from the ground up, delivering contraband.But they are really not very good at stopping people delivering drugs, weapons, cigarettes,escape kits, Amazon style to prison windows.And in fact, I was actually quite surprised didn't get more recognition that I did.There was an incident in Italy a couple years ago of somebody actually delivering a handgun to an inmate using a drone.Absolutely insane, right?And even today, prisons just really have no way to stop any of this.
17:34While counter drone allows you not just to track it in real time, but also often to tell you where the pilot is,so you can send security and the rest of the piloting drone.Some of the best lessons don't come from a classroom.They come from experience.On the power of advice, a new podcast series from Capital Group,you'll hear from CEOs, investors, and founders about how they built careers,took risks, and reinvented themselves.If you're starting your own journey,
18:01this is the kind of advice you won't want to miss.Available wherever you get your podcast,published by Capital Client Group, Inc.Oleg, you can provide some rapid-fire answers to these last couple questions and we can wind up.First is, what defense companies large or small in the public markets do admire?Palantir.The growth has been insane.I think Palanty has really shown how you can move away from traditional defense primes and move into the new gen and defense technologies.
18:28Have you ever thought about or run a product demo where the drone fireworks show is put on anda drone shield takes all those drones down one by one?or all at once. No comment. Okay. You might have a no comment on this one also. I mean,given the work that you're doing, like, what is your personal safety risk? I know I shouldn't evenask that question, but do you think about that? Are you concerned about that in the world,given the levels of conflict, the military conflict that exists today or whatever? That wouldbe the same for anyone in the defense company leadership position. Well, I got put on the Russiangovernment sanctions list. It's actually being declared enemy of the state by Putin.
19:08as part of our involvement in Ukraine. It's a large list. It's not that exclusive, but it's stilla worry. I'm not really that concerned with it in Australia, but when you travel to placesthat have meaningful Russian community presence, like London, for example, and like some ofEurope or Middle East, it is a worry. And you have to think about essentially opportunisticversus dedicated type contact. I mean, my view is that if a tier one government like Russia,if they want to take you out, there's zero I can do. They will. But what I can do is to reduceopportunity for an opportunistic engagement. So, like, when you travel, you don't put yourmorning breakfast on Instagram in real time, revealing your location. You just have to be sensible
19:53about how you live your life. Thank you. And the final question is, could you share one or twoprinciples of your leadership style, how you administer, guide, encourage, and challenge the leadersof your company that have led to such great growth rates, great financial performance,a high rate of R&D, R&D reinvestment and innovation, and the 300 plus engineers you have workingfor you and having them inspired by the possibilities.Just one or two of your principles.Well, first, I recommend Ben Horowitz's book, Hard Thing, About Hard Things.I think that encapsulates a lot of my principles.
20:27But generally, you just work hard and people observe you and they're trying to do the same,assuming they're the right kind of people.Oleg Vornick, the CEO of Drone Shield, has been an early winning investment for us.at the Motley Fool. But we're in for five plus years, almost certainly, and we're lookingforward to following along your business success, the innovations that you drive, and what we can learnabout the category you're in, the world that we're living in, and how to invest better. So thank youso much for this time. And Begee, thank you as well. Pleasure. As always, people on the programmay have interest in the stocks they talk about, and the Motley Fool may have formal recommendations
21:03for against. So don't buy yourself stock space solely on what you hear. All personal finance contentfollows Motley Fool editorial standards and is not approved by advertisers.Advertisements are sponsored content and provided for informational purposes only.To see our full advertising disclosure, please check out our show notes.For the Motley Full Money team, I'm Matt Greer.Thanks for listening, and we will see you tomorrow.
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