This Week in Startups - Next Unicorns: Manufacturing pharma drugs in space with Varda’s Delian Asparouhov | E1793

Starting point is 00:00:00 You look at all of the trends, whether it's like U.S. foreign investment into China, the percentage of iPhone components that are built in China. You know, it's sort of the number of machine shops that can actually build ammunition or can build spacecraft. The United States is only increasing. All of these trend lines are on the, you know, sort of right direction. I think the biggest fear is if China invades Taiwan in 2025, will those trend lines have quite caught up to where they need to be. So I do think we have this like, you know, four to five year gap where the United States could be potentially relatively weak. But, you know, I'm fucking, I love this country. and I'm so stoked. Pretty great country still.

Starting point is 00:00:31 Yeah. Some people are declined. Turns out still the best. Still the best. Still the best. Going to be the best for the next century. And I'm going to make sure that that's the case. This week in startups is brought to you by Vanta.

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Starting point is 00:01:17 A business is only as strong as its people and every hire matters. Post your first job for free at LinkedIn.com slash unicorn. All right, everybody. Welcome back to this week and startups. Really excited to have our guest back on the program. He was on last week talking about LK99, and he is the co-founder and president of Varda Delian-Aspirohab is back with us. And are you still a partner at Founders Fund, or did you relinquish that?

Starting point is 00:01:43 Are you a venture partner? What's your status with Founders Fund then if you're starting a company? Yeah, still an investment partner. We at this point have almost half the team that are both investment partners and, you know, building companies. And so it's a thing that we actually, you know, are leaning into and is literally in the name, right? You know, founders fund. We want to be a fund filled with founders, basically. So, yeah, we still actively investing.

Starting point is 00:02:06 So Keith Rabeauts starts companies. Trey Stevens with Anderall. Yeah, Trace. We're doing that, yeah. Okay. Ryan Peterson, obviously, you know, somewhat different than that he started the company before joining, but he is still quite actively involved at Flexport. And he actually recently did an interview with Bloomberg or CNBC where he talked about how actually

Starting point is 00:02:22 joining Founders Fund remodivated him to, like, work even harder. you know, at Flexport. So he's been, you know, sort of picking that up. Peter always has, you know, sort of some, you know, project going for a while. He was pretty involved in a handful of biotex. I think he's still doing that. And then one more of our partners, I don't know if I can quite reveal it yet. But anyways, he's got an incubation, you know, going that hopefully will be announced soon.

Starting point is 00:02:41 Although there's not that many. Singerman's got to run the fund. He's running the fund, right? Brian, to run the fund. Yeah, yeah. Exactly, exactly. So somebody's got to stay at the office and make sure that, like, the LPs are satisfied. But that's a very interesting approach because it's not, it's not exactly like the studio

Starting point is 00:02:55 model because you'll invest in stuff like I saw Neurrelink this week. You guys led the investment or last week you got announced. But it's not a studio like science. Atomic or Sutterhill or science. What's different about this model? What does this model work and the other ones don't seem to work? Obviously, some of the studio models work quite well. Obviously, like Mike Spicer with Sutterhill and Snowflake, you know, is not exactly the worst. That one worked. Yeah, that one worked. Yeah, that one worked. And I would say obviously Atomic like Hymns is, you know, I haven't checked the latest stock price, but I think it's like a $4 billion, you know, company. So Jack Abraham, I think has managed to prove the model, you know, working. I would say our model is unique and distinctly different in that I wouldn't say it's unique and distinctly different in that. I wouldn't say it's unique and distinctly different. We're only going to be doing it when there's like a handful of things that are true. One, when this company basically like wouldn't exist. And I typically say at Founders Fund, it's not, it's not in our practice. We're only going to be doing it when there's like a handful of things that are true. One, when this company basically like wouldn't exist. if not for us starting it. Like, there's not just, like, an available investment.

Starting point is 00:03:55 You'll never see us, like, incubate, like, a grocery delivery company, given that obviously, there's, like, a million companies basically doing that. Last minute, convenience store delivery. How's that going to work out? Exactly, exactly. Versus, like, I would argue, like, Poundeer, Andrel, Varda, open store, like, all these companies are companies that would not exist in their current forms, if not, basically, for, like, the incubating partner.

Starting point is 00:04:13 And typically, it being in an industry that, you know, sort of partner wants to, you know, absolutely dominate. And so, you know, Trey, you know, basically has absolutely domination on anything defense tech related. I'd like to think that Varda has allowed me to, would be a really strong investor in aerospace. Keith, obviously, he has tons of fields that he's very strong in as an investor, but even most are more so than before consumer and e-commerce. He's obviously very deep and close to the metal on, and he's made a handful of, you know, sort of related

Starting point is 00:04:35 investments due to his experience at Open Store. And so I think a part of what makes it work is we don't try to do it super regularly. And we actually don't have a whole lot of infrastructure. Like, if you look at, you know, something like Atomic, they have a lot of infrastructure to help basically, you know, spin up these incubations. If you want to do an incubation of founders fund, like, you are your own support. Like, you know, good freaking luck. And so it's such a bar quite high. So there's not some marketing team that's going to sit down with you and be like, hey, we got your brand.

Starting point is 00:04:57 Here's your choices. Or here's your HR department. We've got 10 candidates for your management team. You're on your own. You're on your own. You've got to be highly motivated to go do it. That's why I think we've got a pretty decent hit rate. Like if you look at some of these other studio models, their hit rate is actually a lot

Starting point is 00:05:12 lower than our incubations. And part of it was like the bar for us is so, so high to actually bother. My take on these is like everybody has ideas. But the motivation. to see them through and to give up a decade of your life, which is what it takes, is the rare commodity in the world. So, yeah, you can come up with an idea of what you want to do in space or, you know, real estate or defense tech.

Starting point is 00:05:38 But are you willing to put in 60, 70, 80 hours a week for 500 weeks? Yes, or not. And have a second job on top of that, too. Like, you still need to be delivering returns to LPs on top of it. I mean, I saw it with, you know, my best aide Friedberg, who, you know, was doing this kind of model. And I think getting a management team in place, like you can get these things started. You can come up with great ideas, but finding great management is the other problem. I know John Borthwick did it in New York with Beta Works, and then Mike Jones and Peter Famm did it

Starting point is 00:06:08 with science. And, you know, because you can hit something, you can think it's a good model, right, because you hit a couple of hits wins. But in our business, you're going to hit wins, right? You can hit singles doubles on some regular basis and sometimes home runs, rarely grand slams. But I think that model's broken because the rare commodity is somebody willing to give up a decade of their life. I think that's, you know, the rarest commodity in the world is somebody with the motivation to go at least 10 years. And most people, I mean, they can't go 10 weeks. I think a part of what makes our model work is like I mentioned, it's so little support from the broader team that it sets that bar really high. So it's like, are you really willing to give up basically all this opportunity cost if you could keep investing from this phenomenal platform founders for make great investments?

Starting point is 00:06:48 You better be willing to, like, you know, give up, you know, a lot of your time, you know, working from that platform to instead basically build this company, which sets a high bar. And I think relative to most of the incubation models, at least I've seen, we are far less punitive to the, like, founding CEO, the person that is like their day to day than a lot of these other models. So you are actually able to recruit this like world class, basically like founding town, like punitive how, like, in terms of how much equity they get? Yeah, exactly, exactly.

Starting point is 00:07:12 In terms of like how much ownership basically founders fund demand. So, like, there's a reason why like, you know, Matt Schib, the like CEO of Anderrell is willing to work at like a Founders Fund incubation, he owns just as much as a Vanderl as like, you know, a lot of other top CEOs own after their first four or five, you know, sort of six rounds. And a part of that is in some ways, like, because you sort of get that founders fund capital early on, you kind of typically skip the equivalent of like a sort of pre-seed or seed financing, most of our incubations basically like, you know, jump into the world effectively with a series A. So just 10, 10 million or something to get off the ground, basically.

Starting point is 00:07:43 Yeah, maybe the last handful of incubation is basically like open store, Varda and all had like roughly $10 million like seed rounds. But, you know, they're effectively the equivalent of like what a normal founder would have to go through is like, you know, pre-seed seed to, you know, eventually raise that series. I'm excited for what Palmer's building and give him my reverse. I realize when I brought up, you know, the name I was like, let me shift over to a match. Everybody thinks like we got some crazy beef, you know, like, I was like Palmer. All I said was like, you shouldn't pay people to post, you know, like, it's just a bad idea. It's going to blow up in your face and like, you're.

Starting point is 00:08:17 employees and your family are going to take the brunt of it when you get fired. And you did get fired. So like, what's the big deal here? But he took it very personal. I don't know. No comment. No comment. I wish him all the best. And I think it's great that actually, it's a really interesting part of our start our discussion here before we get to Varda. Like, Silicon Valley's been anti-supporting the military. Like people at Google were like, no, we don't want to do anything with the military. We don't want to sell services. Like, how do you think you're safe, in California here to pursue self-driving cars, search engines, ad networks.

Starting point is 00:08:52 It's because there's a military here keeping peace on the goddamn planet, which has multiple hot zones if you're not paying attention. Maybe you can talk about that decision-making process to get into defense tech if you were involved in it at all and your thoughts on Silicon Valley's aversion for a period of time here. It seems like we're breaking through it to support the military. Yeah, but if you look at like the 2016, 17, 18 time period, there were a number of these like tier one venture capital firms that have now invested in defense that at the time literally in their LPAs basically listed defense is effectively one of the three major sins. It was, you know,

Starting point is 00:09:25 effectively gambling, porn and defense were the three things that they basically promised their LPs. Don't forget drugs. Yeah, exactly. And drugs. Psychedel. I guess those four. Yeah. Uh, which, you know, people are shifting their tune on psychedelics, you know, psychedelics, you know, as well. Obviously, I can't claim, you know, founder's one was very pro defense tech. Obviously, even before I joined back in 2004, obviously Peter Thiel, Incubated Palantier, you know, Tray Stevens with, you know, Anderrol. And at least in the aerospace, sector, it's a sector relative to, you know, let's say Fang that is like this like hyperwoke anti-defense, you know, sort of mindset, at least within aerospace. By default, you know, since the 60s, all of aerospace has always had to collaborate with defense, given that like, you know, rockets and ICBMs don't look that that different from one another. And so I think there's some except that even in large companies like SpaceX that you would argue should start to feel like the culture of Fang, given how large the corporation is. Even there, there's significant amount of comfort of like, look at the end of the day, we do sometimes launch, you know, Starlink's, but we also sometimes

Starting point is 00:10:13 launch Air Force Navy, you know, Space Force, you know, sort of type satellite. So I think it's less of a, you know, sort of thing in the Los Angeles Defense aerospace type community to, you know, have this like strong aversion to it, given that you basically can't work in this field without some level of collaboration with defense. And yeah, obviously founders fund was very early to this trend, you know, in 2004, obviously doubled down in 2016. And then Varda definitely would not be where it is today, if not for standing on the shoulders of those two giants and that, you know, our ability to go from like founding date to $60 million air force contract and, effectively exactly two years was definitely only possible for having the guidance of folks like

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Starting point is 00:12:10 that are really hard. And the commitment level, it's kind of nice that this, I don't know if you were here for most of it. I'm not even sure how old you are or how long you've been at Founders Fund, but, you know,

Starting point is 00:12:22 like this weird entitlement diversion that happened during Web 2 and into the Google, Facebook, you know, campus kind of culture. I'm kind of glad it's over. I'm kind of glad that we're back to austerity

Starting point is 00:12:34 and grind and, you know, just more focus and less people and less accruedment and nonsense. Yeah, my Silicon Valley career started roughly like summer 2012. I was actually one of the early Android engineer interns over at, you know, sort of square. And so you could definitely still see the remnants in some ways of like the 2009, obviously,

Starting point is 00:12:53 like, you know, depression. Obviously, it didn't hit tech nearly as hard as it hit like the sort of general economy. But it was interesting to, you know, I spent my first, like, call it like nine years, 10 years of my career was inside the heart of Silicon Valley. And for those nine or 10 years, it only consistently amped up. And especially, I think really took off in 2016, we're like, I think there was something about Silicon Valley where because Trump was president, it felt this need to go like hyper left as like a reaction basically to the president to show that the United States was not, you know,

Starting point is 00:13:18 sort of representative of Trump. And I find that some of the entitledness and like they, you know, sort of interest in bringing politics to the office being somewhat related to that and that really accelerating in, you know, so 2016. I agree. Yeah. I mean, it was a depression for us, the stock market. I think the NASDAQ went from 5,000 to 1600 post-great financial crisis. And yeah, there was like austerity measures. And if you hired somebody, you wanted to be really thoughtful. about hiring these two people because you didn't know if you had to lay one or two of them off a year later because the next shoe was going to drop in the economy. So yeah, there was a certain fitness. And I agree with you, 2016, you know, I think a lot of people thought Trump was an existential threat. And,

Starting point is 00:13:52 you know, and I believe he is. I mean, we can all differ in that. But I think he would have overturned the election. Absolutely. And I think he would do it again. I think he's like got no morals and would absolutely do that. So I think while the reaction was wrong, I think people probably nailed it. Like, hey, this guy's got a little bit of an existential threat here. And he did. did throw people off their game where they just had this, I guess, free cycles to be distracted. I think Brian Armstrong's putting his foot down, which I just, I saw Paul Graham tweeted about and I retweeted it. It was a pretty brave thing to do two and a half years ago to say, you know what?

Starting point is 00:14:27 I know you're going to cancel me, but, fuck it. We're here to like change the financial system for the better. The end. If you want to talk about anything else, like, please do it on your own time, but not here. I thought that was pretty brave of them at the time. What are your thoughts on sort of culture wars and keeping everybody focused and then we'll get into what Varda does? Yeah, I mean, for a while we had this like, you know, saying I found this one, which is, you know, we wanted to invest in companies where they explicitly said, you know, bring yourself to work but not your whole self. Exactly.

Starting point is 00:14:54 There's things that are just not appropriate to be like, you know, brought up to at the office. And I think it's something that we've like pretty practically screened for. In some ways, it's like, you know, what we've talked about online or obviously, you know, Peter with, you know, Trump in 2016 and some ways like filtered out, a set of entrepreneurs that even thought that way very early. on. And so I think in some ways, relative to, you know, most of the folks in Silicon Valley, we haven't had to deal with this problem as much, you know, in our portfolio in that the, you know, sort of founders that choose to work with Founders Fund are predisposed to, you know, some level of, you know, being extremely aligned with, you know, Brian Armstrong. And so, you know, they sometimes can also use this as a bit of an excuse, too, which is like, oh, well,

Starting point is 00:15:29 we can't do X, Y, or Z initiative because, like, you know, Founders Fund is on our board. And, like, obviously, like, they're going to vomit all over that. But, you know, it's really, like, the CEO just doesn't want to do it. But, you know, it's a good cover. Yeah. Exactly. Our board member doesn't want us to do, you know, some diversity and equity thing or some ESG thing or, you know, some, yeah. And now all that's being unraveled and people are getting sued. I don't know if you saw this last week. It's good to have you on the show because you like to talk about stuff. You're like an underrated guest.

Starting point is 00:15:56 I don't know if you saw last week, but a venture firm that's specializing in investing in black female entrepreneurs is being sued by the same person who did the Supreme Court. court lawsuit saying, hey, we've got three women, one's Asian, two or white, who, you know, got turned down for funding from your firm. This is, you know, racist and this is discriminatory. And that's where, like, all of this identity politics leads eventually as to everybody feeling bad and nobody, you know, gets out unscathed. Yeah, I mean, I think obviously the like, you know, state, like, you know, UC Berkeley type funded things, like it's, you know, inexcusable, you know, for them to be doing any type of racial discrimination. As you get into like smaller and smaller settings, right?

Starting point is 00:16:41 Like at some point, it's like, you know, if you have a college club that is like the like, you know, you know, immigrants from Ghana or something like that that are at MIT, like they should absolutely be allowed to have a club that is only immigrants from Ghana. So I think it's like, you know, it depends on how much like public funding is related to it. But at the same time, even if you're a private institution, it's like that group that was like the bakery that refused to obviously, you know, sort of say to, you know, gay members. There they were allowed due to religious freedoms. But like, you know, this group with VC isn't allowed to do race.

Starting point is 00:17:07 because of like affirmative action. So to me, at like a large scale when it's like, you know, publicly funded institutions, the, you know, sort of,

Starting point is 00:17:13 uh, you know, affirmative action to me is a no brader that it's like, you know, sort of purely racist as you get to sort of smaller and smaller institutions, there have a little bit hard of time, like sort of like,

Starting point is 00:17:20 why is this black funded group not allowed to only fund black entrepreneurs, but like the like bakery is allowed to deny gay people. You know, to me, it's like, kind of feel like they're one of the same. I guess is like one's allowed under religious freedom, but the other one's not allowed due to affirmative action.

Starting point is 00:17:35 So that's one where like I actually think I probably bend a little bit differently than, you know, other, you know, people that are maybe on lies out of the camp, but yeah. I was with you just for, hey, you know, we're so behind in the venture industry in some folks getting funded. And, hey, here's a group of black women who raised the fund to go do this. And now they're getting penalized right now. It's like, oh, no good ego is unpunished. But I also understand the counter argument, which is it's got to be a bummer to be an Asian woman, pitch them and then be tall, you know, and then have in the back of your mind, like, is it because I'm Asian that I didn't get this opportunity. And it's kind of a bummer. Anyway, I think what it really shows is like there's

Starting point is 00:18:11 not a consistent set of like legislative policies where it's like I might have particular opinions on them. But I do generally agree there should be like legislated. They should not be like based off of opinions given how like touchy these subjects are. And so I think the real thing is like, you know, turns out maybe like affirmative action was too extreme, but maybe zero is also too extreme. Maybe there needs to be something, yeah, halfway in between. Yeah. And anyway, it seems like all these discussions, we've lost what was always a great thing in Silicon Valley, which is first principal thinking, logic, you know, really great debate, creativity and finding new solutions to problems, but it is what it is. Tell me about Varden how you came up with the idea and how you

Starting point is 00:18:47 got it off the ground and convinced your partners at Founders Fund to, you know, give you the check to start this. Yeah, trying to convince your general partners that you want to, you know, quit, you know, 50% of your job and still get paid the same cash and carry is definitely not a trivial argument to make. But yeah, I've been thinking to do it. Pretty good deal if you can do it. You better be convincing them that you're going to be bringing in even more carry than before. Yeah. But I've been thinking about this idea for almost a decade.

Starting point is 00:19:14 My original fascination with this sparked around the 2009 through 11 time frame where the first handful of both international space station studies were being done around in space manufacturing and Google released this Lunar X Prize. If you remember it back in the day with Peter Diamandis, that actually had a subcomponent of it that was in space manufacturing related. And I think part of why it really, you know, clicked for me was I'd always noticed that in human history, any time of you saw any type of permanent human settlement happening, it was always due to the sort of economic, you know, incentive. The example

Starting point is 00:19:42 that I like to provide, which has some, you know, potentially moral undertones that aren't always perfect, but I think it's a good example, which is, if you look at in the 1400s, the Portuguese empire and the Chinese empire, they both basically came up with naval technologies around the same time. The Chinese Empire took this approach of basically massive boats, sent them to Africa, you know, captured some like, you know, elephants and giraffes, things like that, brought them back to the emperor's prizes versus the Portuguese took the approach of make very small ships, set up a trading post on like the northern coast of Africa and then basically like work their way down. And as they actually created economic activity, established net new trading posts. And if you

Starting point is 00:20:12 fast forward basically over the course of the next hundred years, the Chinese basically shut down their armada because they're like this provides no economic value for us. We're getting some like, you know, fun elephants and drafts, but like nothing consistent. So we're shutting this down. The Portuguese basically had an evil empire that were ruled the entire world. And so I kind of think of space the same way where it's like you can't just build these big rockets and pretty like rockets and like rockets and like go capture the dolphins and the giraffes. We actually need to basically set up these trading posts that are, you know, economic activity. And we've done a decent job of that so far with like Starlink and Planet Labs, basically, internet, you know, from the satellites and taking photos of the Earth

Starting point is 00:20:41 from satellites. But neither of those really are any type of, let's say, you know, atoms-based, you know, economy. It's all just bits passing back and forth via radio waves. And to me, the very first natural next step, as much as I'm really excited by things like asteroid mining or lunar ice mining or lunar bases, the real natural next step was taking this work from the international space station of manufacturing things very near Earth in low Earth orbit and then bringing them back down just because it's like the simplest supply chain. You basically can take things from Earth, get them into lower Earth orbit for pretty cheap, and then bring them back. And there being economic value in that. And so I thought that that was basically the way to make humanity more or more likely to actually

Starting point is 00:21:14 be a permanent multi-planetary species because you've got to establish that trading post. Then that's what makes the next trading post available. So that eventually you have permanent settlement on Mars. And so I kind of put the idea on the shelf, you know, a handful of times throughout the years. And then finally in Q4, 2019, I was working at Founder's, Fund and a SpaceX rocket had basically launched and landed four times in a row. And that to me was basically the marker of, hey, the economics of this like, you know, business model that I've been thinking about for the past decade finally makes sense, where up until then, you know, everything was basically NASA sponsored on the International Space Station. It only made sense for the government

Starting point is 00:21:43 to do because it was highly expensive, not possible to commercialize. But now Elon was launching and landing rocks all time. Now is basically ready to be commercialized. So I spent basically, you know, two quarters, Q419, Q1,20, basically actually originally exploring this as an investment thesis. I, you know, was thinking it would be a lot easier to invest in and like go build a company. Again, tons of opportunity costs and PTSD that come out of building a company. But, you know, after six months, basically realized that all of the various groups that I, you know, sort of met with that were working on this, either were just like too academic and didn't know how to bring a product to market, didn't have the appropriate ambition, didn't have the appropriate

Starting point is 00:22:12 sort of spacecraft skill set. And then, you know, end of Q 120, COVID hits. Peter Thiel basically tells everybody at the firm, like, stop investing for six months. I lost my mind for the first little while because like, what the hell do I do? I basically don't have a job. I'm getting paid a high salary, which is, you know, the equivalent of, you know, the seventh level of hell for me. and so, you know, ended up, you know, going on this, like, walk with Keith one day, and his, you know, feedback was like, hey, figure out how to make yourself productive. Building a company is probably the right way to do it. And so, you know, ultimately, I ended up realizing that the one thing that I'd ever want to build is this thesis that I've been thinking about, you know, for the past decade.

Starting point is 00:22:40 So that was basically, you know, some summer 2020, put together the early founding team, went around to the general partners at the firm and basically said, hey, I think this is an idea that's very promising. I don't think it'll exist in the world if we don't incubated ourselves. And I think this is something that will make me actually a better investor because is the moral authority that I'll have for having built this type of company and the deal flow access that I'll get in anything aerospace deep tech related will basically offset and a decrease in IRA from not spending as much time. And I think generally that's played out. I think both my deployment on the investor side has improved since starting Varda and then I think also VARDA has gone

Starting point is 00:23:12 pretty damn well over the past two and a half years. So what is the first commodity going to be at the trading post, I guess, if we're going to use this analogy or what we're, what's your short list of items, provisions, things that will be built in this, you know, trading post or a laboratory. I don't know what you prefer to refer to what you're going to put up there as. Yeah, the first one for the next five to seven years is just going to be pharmaceuticals. Ultimately, if you look at pharmaceuticals, they're the sort of highest revenue and highest margin physical product. And especially for space right now, the biggest limiter is basically just like how much mass you can move up and down from orbit. So, you know, there's a ton of different products

Starting point is 00:23:53 that we pursued on the International Space Station, but pharmaceuticals is the only one where if you bring back 40 kilograms of it, you can actually, you know, make 50 plus million dollars of revenue, you know, off that, which can, you know, justify the costs of basically operating the trading post. And thankfully, on the International Space Station is where pharmaceuticals have been the most proven out. So probably the most blockbuster case study was Merck took their biggest drug, Ketra, it has $25 billion a year revenue for them. They were basically able to show that in the microgravity of space, they were able to make a new form of that drug where rather than having to come into a clinic every day for one to four hours of an intravenous strip. They can instead basically send you

Starting point is 00:24:25 home with two weeks of syringes and you just come get those replenished at a pharmacy. So now you can basically just inject yourself at home and not have to have a, you know, go into an IV clinic or have a nurse basically monitoring you. And the amount of drug you have to make up there for that $25 billion revenue fits within our sort of current capsule. And what was really exciting was the chief scientist at, you know, or some of the chief scientist, but the most senior scientist at Merck that worked on the International Space Station on this study, the first two and a half years of the company basically like, you know, wouldn't, you know, get back to us and, you know, It didn't seem that interested in what we were up to.

Starting point is 00:24:51 I think finally, as he started to realize that it was, you know, sort of coming to life and we were actually going to be flying. He actually finally got back to us about a week or two before our first launch. This was about two months ago. And then we actually had a CNN article come out on the day of the launch. And he provided a very complimentary quote about us. So this is the very senior scientist of Merck, you know, Paul Reichart. They basically said something along the lines of, yeah, the ISAS was a great place to be doing research, but was really limited by cost and cadence because it's, you know, run by the government. Florida is bringing something to the market that is, like, you know, very appealing to, you know, what we do at Merck.

Starting point is 00:25:18 And so, yeah, we're basically going to be a pharmaceutical company that happens to have, you know, our manufacturing in space for the next five to seven years. I aspire to one day have this trading post do more than just drugs, but drugs are probably the only thing that makes sense for the next decade. And it's because manufacturing them in space is better in some way or different? Think of it as like a bioreactor that has a new knobs. If you think of like your bioreactor that sits in any lab, it has a bunch of knobs that have been, you know, well tuned over the past decade, everything from like, you know, mixing rate to what temperature. you want at it to what chemicals you put it on there. And imagine like we're just bringing a new bioreactor to the market that has a new knob that nobody else has access to, which is basically gravity. And it turns out gravity is one of these like most important, you know, sort of, you know,

Starting point is 00:26:00 factors in the equation that determines how various chemical reactions actually form. And sometimes it's good. Sometimes it makes the drug better. Sometimes it's worse. Just like sometimes if you overheat a drug, it makes it worse. How much research has been actually done on this process? Is this like, you know, we've done a thousand experiments or 10 experiments over the last couple of decades of, you know, being in space? I'd say, think on the order of like, you know, there's probably been like 100 experiments that have been done, but the ones that are actually sort of interesting, you know, datasets probably closer to like 20 or so.

Starting point is 00:26:30 So it's definitely a nascent field. A lot of, you know, VARTA's job is to take what is now this nascent field and take it from more basic science to something that is like a repeatable process that can be applied to manufacturing. And so that's a lot of what we work on, you know, sort of day to day. now that we've basically, you know, done this first mission where we proved we can operate the trading post. Now a lot of it has showed that we can do this very consistently and show that this isn't just like science and us guessing how this knob can be applied, but more here

Starting point is 00:26:56 a particular problem sets that this knob is applicable to and we can consistently basically solve that problem on behalf of our customers every single time we go up there. And so that's sort of the next call, like two to three years of the company is, you know, taking it from one-off operation to farmer customer has problem, Varda solves problem, and we do that all the time. All right, everybody. Stephen Estes is a principal at CLA. Clifton, Larson, Allen. This is a professional service provider that specializes in CPA, tax consulting and wealth advisory. Welcome to the program, Stephen. Thank you for having me. So you specialize in VC-backed, high-growth startups. You know, in those first year or two, you don't have revenue sometimes. Then revenue starts to kick in.

Starting point is 00:27:35 What's the standard operating procedure for getting information to your investors and to your board and shareholders. Yeah, so I think it's imperative that companies know their numbers and also understand what it is that the investors are looking to see. And that's, you know, if anybody's ever watched an episode of Shark Tank and see Mr. Wonderful, and if you don't know your numbers, it's a very quick conversation. So having a CFO on board that not only knows the industry as far as, you know, SaaS and how to, you know, recognize revenue and things like that, but also has a lot of experience putting together pitch decks that knows the various metrics that the board's looking to see. I think that's pretty imperative to being successful in raising your next round and continuing to grow.

Starting point is 00:28:18 Get started right now at cLA connect.com slash tech. Let them know your boy, Jake Howell sent you. CLA connect.com slash tech to get started right now. And so the customer, at least at the onset, is going to be either the government who wants to subsidize some of this stuff because they have a vested interest. and grants or pharmaceutical companies. Those are the two customers. Yeah, so we have some DoD customers around basically like our space infrastructure that we build.

Starting point is 00:28:47 So it turns out when we bring the drugs back, we bring this back in this side, this reentry vehicle that basically flies through a very similar regime as hypersonic boost glide missiles. So the DoD is interested in basically utilizing us as effectively think of it as like a next generation wind tunnel where, you know, whether you're the Wright brothers or you're building a Boeing 747, basically what you're trying to do is, you know, test out your basically vehicle. systems. We do that same thing in this reentry capsule where we basically stick on a new wing shape, we stick on a new navigation sensor and basically bring that back and allow them to test the system before having to put it onto the eventual basically, you know, sort of missile system.

Starting point is 00:29:21 So yeah, we have a couple of sort of DOD grants. There is some, you know, sort of government interest around the, you know, pharmaceutical side, but definitely less so than, you know, DOD. And then mostly, yeah, it's like top 20 biopharma, effectively some midstage biopharma that we're engaging with as well. And, you know, hopefully the first handful of those contracts we can announce between, you know, now and the end of the year. And our first mission we just did about a month and a half ago. Second mission will be beginning of next year. That second mission will be the first time that rather than basically flying in-house,

Starting point is 00:29:45 basically, demonstration pharmaceutical ingredient will basically be flying a customer's pharmaceutical product. And you're using some combination of SpaceX and Rocket Lab to get cargo into space? Talk about a little bit about how you get cargo into space. Because this business wouldn't exist if you didn't have the ability to do that affordably, yeah? Yeah. You know, even, you know, I think a lot of people think, oh, man, it changed so much the last decade. Even like two, three years ago of artist business model, you know, wasn't, you know,

Starting point is 00:30:13 really particularly possible in that, you know, SpaceX has recently launched what's known as like the transporter series of rockets where basically, rather than having to book a whole rocket yourself, you can now instead basically book an individual slot, like the equivalent of, you know, sort of Uber ride. And they make it pretty flexible of like, if you miss your ride, it's fine to like, rebook and go on to, you know, sort of the next one that's like three or four months later. And so now, rather than before, rockets were like, oh, my God, if I miss my ride,

Starting point is 00:30:35 it's like a $50 million penalty. Now it's like a $200,000 penalty. And so that's changed over the last three or four years. So basically, SpaceX is the one that basically gets us up there. And then for these first four demonstration missions, rather than having to build a satellite, basically, platform. So think of it in some ways like the like, I don't know, cement foundation of the trading post. Rather than us having to build that cement foundation, we can instead just focus on the factory that goes on that cement foundation and buy the foundation from others. And that foundation has the solar panel, the battery, the primary radio, basically everything that you see in a standard satellite, they basically provide for us. It's a shipping container-ish, right? Yeah. Exactly. Exactly. And then we just focus on the inside of the

Starting point is 00:31:13 shipping container that is just like, here's the actual pharma manufacturing and that little reentry pod. So is that what Rocket Labs is building? Yeah. So we build the pharmaceutical factory and the like reentry pod. You know, Rocket Lab, let's say, builds the like shipping container. And then SpaceX builds the actual cargo ship that that shipping container basically goes on. And thankfully, we don't have to build the cargo ship or the shipping container is where you do that. would have to raise like a billion plus dollars to, you know, get our first thing to market, you know, rather than, you know, today we've raised 54 million dollars and we've been able to get to our first flight to market.

Starting point is 00:31:42 It's incredible that all of these companies now are working together and that it's becoming sort of reminds me of when cloud computing started to come together and, you know, YouTube and Dropbox were like, huh, do we have to build our own server farms or not? And I guess we could use this S3 thing and Dropbox went from like, you know, having their own racks, then to being on the cloud, then deciding they were going to do their own racks, and oh, my God, they blew a billion dollars, some crazy number building out racks, and then, like, God, we should have probably stayed on the cloud because it was so much. This is becoming now, like, a bit of an ecosystem with multiple platform players, huh? Yeah, I always describe as, like, you know, as somebody

Starting point is 00:32:21 who's obviously been obsessed with the early days of the internet and the 2007 through 10 era of the internet, when you saw things like AWS and Azure come online, that's basically where we are in, like, you know, the sort of the space economy where, you know, SpaceX and Rocket Lab in these groups are the equivalent of like AWS coming online and think about it to sort of how many net new business models that enabled where like Uber never had to think about like, you know, server, you know, sort of scale up and, you know, what that meant. They could instead focus just on like their front end application and like acquiring drivers. It's sort of the equivalent where like, man, if I had to be like focusing on building rockets

Starting point is 00:32:50 and building satellites, no way when I've made the amount of progress, no way when I have these like, you know, DOD contracts. And it ends up being a huge win-win on both sides. AWS is both a massive business. Uber is a, you know, would have been more massive if they didn't, you know, kick out Travis, but it's still a pretty massive business. It would be twice as big. Yeah, exactly.

Starting point is 00:33:06 And both, you know, Varda gets to be a massive business over time and the infrastructure that we rely upon also will build up to be massive businesses. All right. All right. You're listening to the next unicorns, right? That's table stakes. Well, if you want to start on the path to becoming a unicorn yourself, you're going to need to find and hire great candidates.

Starting point is 00:33:23 And how do you do that? LinkedIn. Of course, you're on LinkedIn. I'm on LinkedIn. Over 900 million users now. The March to a billion continues for the amazing team over at LinkedIn. then you can attract both the passive and the active job seekers. And all you have to do is put that purple hiring ring on your profile.

Starting point is 00:33:39 Then you post some interesting content. When they see that purple hiring ring, it says, whoa, wait a second. I know that founder. I know that CEO. I know that VC. Well, they're hiring. Let me click and check it out. And then all of a sudden you start getting this great inbound, right?

Starting point is 00:33:51 We love LinkedIn. I mean, I've gotten some of the most amazing people. In fact, I just got a new personal assistant because things are going so well. And I've got the new accelerator that we have coming in. in San Mateo, and I need somebody to help me run that and set it all up. And I said, you know what, I need to have an executive assistant again. So we found somebody amazing on LinkedIn, of course. And so here's your call to action. LinkedIn jobs helps you find qualified candidates. You want to talk to fast. Post your job for free at LinkedIn.com slash unicorn. That's right. LinkedIn.com

Starting point is 00:34:21 slash unicorn to post your first job for free. In terms of conditions apply, because LinkedIn is so generous. It's pretty fascinating that this has all come together. You know, like you said, very suddenly the last couple of years, the pay-low costs have come down so dramatically that, you know, if it keeps coming down like that, it's kind of what happened with storage. The idea, the main reason why video did not become popular on the internet was if you had a popular video, the reward was your website shut down because you were paying for, you know, the, you know, transmit and you would have a cap. And anytime somebody put a video online and it got popular, virality as a concept couldn't exist for videos because the server would turn off. And somebody would

Starting point is 00:35:10 be like, yeah, I got to wait till next month. Come back on the first when my data resets with my hosting company. And that was really, I think YouTube's big innovation was there. Like, you know what, let's not charge people to store it or to transmit it. And I remember at that moment in time, it was such a crazy concept that you could put a video up for free, and it didn't matter how many people viewed it. You never got a bill. Yeah. You never got a bill.

Starting point is 00:35:34 And people were just like, wait, what's the catch? And the catch was they had just done a model that said, hey, if this goes down X percent a year and, you know, advertising comes online at, you know, we grow advertising by X percent, we're good. It's all going to work out. It was actually like one of the blitz scaling concepts that really did work because you had this kind of morals, law, you know, I don't know what the Morris law for storage is. It's a little bit slower, but it was quite accretive to the business model. So what's hard about this business now for you? It seems like you're on a pretty good pace, but what do you need to prove in order for this

Starting point is 00:36:15 business to become a sustainable long-term business? Like what's the goal here in the midterm? Yeah, I want to make a quick touch on your like Moore's Law Point, which is, you know, if you've look at, you know, in the early internet days, whether it's like, you know, compute, you know, transmission, storage, many of those things saw, you know, you know, sort of exponential, if not, you know, multi-exponential, basically, you know, decreases, you know, in, in costs every time. That's why you had things like the Moore's Law. In launch costs, I think there are some set of aerospace entrepreneurs that have been a little naive on how quickly things are actually going to continue to decrease. And a part of it is like, there's not really a clear competitor

Starting point is 00:36:50 to SpaceX. So, you know, even if, you know, Elon gets Starship online, he's not going to immediately flow through all that, you know, basically cost benefit to every single aerospace company. He's going to capture a lot of those profits himself because he's going to be incentivized to you. And there's not any clear competition coming online. It's been basically eight years now since a Falcon 9 landed for the first time. Nobody else has landed a rocket in the last eight years. It's not obvious who's going to be landing a rocket basically like in the next eight years. And so, you know, we're definitely at least at Varda living in a world where we expect sort of of cost to flatline for the next, you know, call four, five, six years until, you know,

Starting point is 00:37:20 some really, you know, competent, you know, sort of players come online or Elon for some reason. then the good of his heart decides to start, you know, decreasing prices for some reason. But I don't think they'll happen anytime soon. I don't know if you've been inside the starship. Like, it is a massive payload. Like, that's going to be the game changer of all game changers. The amount of people and products and satellites, you can include in that thing is insane. If it works.

Starting point is 00:37:46 But if you can charge people $200 million for it, is he going to really, like, you know, give that up and instead charge them $20 million? Like, I think he'll just, like, charge $200 million. and maybe he'll decrease a little bit to test like the demand elasticity, but I don't think he's going to drop at 10x. Is there more demand? Is there more demand than they have capacity? That's what's like somewhat non-obvious. And I think, you know, it is what, you know, SpaceX is constantly going through

Starting point is 00:38:05 where they kind of need to forward predict what that demand is going to look like, given that they can't on a dime, turn around basically like supply. And so, you know, if I were in Gwynne Schawell or Elon's shoes and you were like, hey, I had, you know, sort of Starship Online today, is my immediate reaction going to be, let me like 10x decrease the cost to see if that actually 20 X is the demand. I don't think so. I think what you'll see is like they basically just swap it in for Falcon 9 launches originally keep the price point the same. And then maybe they tweak the prices a little bit down and sort of use that to test demand. And they'll probably just figure out where the efficient frontier is and they'll probably keep it there for a long time until they basically actually face a real pricing competition or the efficient frontier shifts over time. But anyway, I have a mom that's an economist. So maybe this is me getting too much into like, you know, supply demand curves and obsessing over them. Well, I mean, you have supply demand and then you have induced demand. And yes, this is, I think, one of the great magical things about innovation and entrepreneurship. In the early days of Uber, you know, Bill Gurley was building models and everybody's building

Starting point is 00:39:00 models and like, how do you conceptualize what the market size is, the total addressable market and nobody really, you know, the very obvious way to do this, we look at the number of cabs, look at the number of shifts, look at the number of rides, how many medallions. But, you know, what Bill Gurley did to his credit was he looked at public transportation, He looked at rental cars. He looked at, you know, all number of gypsy cabs and just other modes of transportation, bikes, whatever, walking. And when you could get a cheap ride and you had Uber pool or lift line, other things, it actually induced people to go out more in L.A. That was the weirdest thing was L.A. just boomed.

Starting point is 00:39:42 And it was like, why is L.A. booming? It's like, oh, people are staying home because they can't have a drink when they're out because you have to drive. and now it's unlocked all the drinking and driving people who, you know, were scared of drinking and driving. So I think there's going to be something that could happen where they could induce more people to put more stuff in space. No, I definitely think it's possible. It's definitely always hard to predict. And yeah, I mean, this, you know, Bill guy sounds pretty smart. It's a bummer that, you know, maybe he wasn't so smart when he decided to fire Travis, but, you know, not my style of being an investor at least. But I guess to get back to your original question of, you know,

Starting point is 00:40:14 sort of what do we need to be successful? I definitely, you know, subscribe to, you know, you know, sort of Peter and Keith's philosophy, which is you'd be basically burning down the number one risk of the company any one time. The first risk by far was just like, can you even make a trading post? Like, nobody really believed that when I first pitched the company. Even some of the customers that had done a ton of great work on the ISS didn't really believe in us because they were like, you know, the ISS is so complex, difficult. The ride down is so difficult, are you going to be able to do it? We've largely proven that out. We've still got to bring our rancheon capsule back, hopefully, you know, later this month or, you know, early September. But once we prove that,

Starting point is 00:40:42 sort of the next step is what I was alluding to a bit earlier, which is we now need to be able to show pharmaceutical customers consistently that we're basically able to solve a particular, you know, sort of problem that they're having. And so that's a lot of what our team is focused on now is basically, now that we've got that cement foundation we've built, improving basically that like factory's capabilities and just showing more consistently through our own internal research and study, hey, here are the like, you know, types of problems that are, you know, sort of factory can solve and we can actually kind of help predict for you. So don't have to just like, you know, guess when you send it up there, we can actually tell you, hey, based off of some, you know, studies, that we've done on the ground, your drug is the exact type of drug where we can go shift it from something that, you know, is only stable at minus 30 degrees Celsius and required a cold chains and now we can make it room temperature stable so I can decrease your delivery cost to patients by like 100x. And so it's actually way cheaper to just go do this and stuff in space, you know, rather than like constantly maintain these cold chains. So that I would say is like step two is consistently, you know, sort of problem, you know, is to solve problems. Step three is basically going to be, okay, now that we've shown that we can solve those problems,

Starting point is 00:41:38 scale and integrate into their supply chain. So like, let's say a farmer customer comes to me, is Adele. My thing is, you know, sort of not room temperature stable. Can you fix it for me? We go fix it for them. Then their next response is going to be great. Can you now go do this every single quarter? And I need 50 kilograms and I need to approve by the FDA and you can never be late. Otherwise, my patients die. And then it's like, okay, that's like the next problem. And then the fourth one is now go do that at like, you know, really strong unit economic. So it's step one, trading post. Step two, trading post that solves problem. Step three, trading post that solves problems and does it regularly with FDA approval and brings it back.

Starting point is 00:42:10 And step four, unit economics. Yeah. So each one of those has its own set of unique issues. And yeah, each of those milestones, the good news is some of those milestones will unlock funding. Other ones will unlock revenue. I think these pharma companies have so much money that for them, you only have so many cycles. So if you only have, you know, whatever six, you know, dances on your dance card, you know,

Starting point is 00:42:37 and they fill up, I would think there's be quite a rush of pharma companies wanting to get on the dance card, yeah? Yeah, and I think one thing that people don't appreciate in the pharma world is the way they do business development deals has changed a lot over the last 10 years, especially in terms of how they approach early stage technology companies, in that they're much more willing to actually treat you as an equity partner effectively in the drug, so you actually get to participate in the upside. So if you're familiar with companies like Ginkgo Biowworks or Auberks or Aalera or Halozim, all

Starting point is 00:43:05 those companies, like, you know, for example, Ginko Byworks just today actually announced a like $480 million deal with Merck where basically Merck is coming to them with a set of problems that Ginko Byworks' technology can solve. They're both getting paid some amount up front for it. But if Ginko also succeeds, Ginko actually gets a percentage of the like, you know, downstream revenues. Yeah. And so there have been much more willing to basically, you know, allow these early stage technology companies to participate in that upside. And most importantly, the public markets and private investors have been willing to basically future value or like, you know, value the future discounted cash flows of those, like, equity portions that the early state

Starting point is 00:43:40 technology company has. So even in that, like, phase two, where Varda is just like showing pharma companies that can solve their problems, the pharma companies are actually willing to put some amount of their equity in their drug up front. Now, that drug still is three, four, five years coming to the market. We still have to do those future phases for Varda, but I can then go to private investors and public investors and actually show, hey, I basically have, it's not equity in in that world. It's called like royalties, effectively, but you can think of it as like equity in the drug. And they're actually willing to value that just as they're willing to value basically like top line revenue. And there's even companies that specialize just in the trading of these

Starting point is 00:44:11 equities of drugs. So there's a publicly traded company called royalty pharma where they don't do any drug development. All they act as is basically like a market maker between people that have like earlier stage, basically equity drugs and like later stage ones. I think like what Card is trying to do and like the startup marketplace provide liquidity. There's literally the equivalent of that of drugs where you can like trade your late stage drug like equity and be like, hey, at this point, it's pretty late stage, it's pretty like guaranteed. So I want to like, you know, take some off the top. It's like secondary for drugs. Yeah. Exactly. So like Varda will actually build up basically this like equity portfolio of the various drugs that we work on. And who do you want as a co-founder of a company that's

Starting point is 00:44:45 building up equity portfolios and a bunch of drugs and needs to think about liquidity. Turns out having a venture capitalist as a co-founder is very, you know, sort of helpful in that. Well, you'll know when to trim some of those positions. And, you know, I was literally having this, I'm raising our fourth venture fund and was having this discussion with some LPs. And we're like, We have an accelerator and we invest in companies pre-accelerator. We have a pre-accelerator with Found a University. We're investing in them before they are even incorporated and we give them money to incorporate. All those kind of things is very interesting when you can start liquidating a position.

Starting point is 00:45:17 If you're investing at $1 to $5 million in startups that are just incorporating, yeah, you can liquidate at $250, $500 million a billion and start to lock in really great returns. And you can do the same thing here. It reminds me of Todd Phillips. he directed The Joker. He said, I made enough off the hangover films. He's a really cool guy. I've met him a couple times.

Starting point is 00:45:39 And he said, just give me a big piece of the back end for the Joker. And you're like, you're crazy, like low budget, Joaquin Phoenix, like Scorsese taxi driver, you know, experiment. Sure, thing makes a billion dollars. He made $100 million as a director. Your director doesn't get paid $100 million, unless you're Spielberg and you have some crazy back end or you're Tarantino. And I think that this is a billion.

Starting point is 00:46:01 very wise thing to do is to align interest. I think it's like part of why so much, so many businesses right now are broken is that they just don't have alignment between the people doing the work and creation. SAG actors and writers are not getting shares in Netflix and Google or YouTube or Amazon or Disney. They're getting like some Hacomimi royalties that don't exist anymore, some upfront payment. If you want them align, give them, give them RSUs and Disney. Like, the end. Like, I don't understand why people can't understand this model. It's been perfected in Silicon Valley.

Starting point is 00:46:37 Everybody rose in the right direction to make the stock price go up. And I think in some ways, like, it was Silicon Valley that got the pharmaceutical industry comfortable with this model. Like, if you look at sort of pre-Ginkgo BioWorks and Peru, this was not a model that people were comfortable with. They were only ever comfortable with like, you want to partner with me on my drug, great, I pay you a million bucks. You do my work for me.

Starting point is 00:46:56 You solve my problem. Get the hell out of here, basically. You're not involved in like the, you know, winning of this. And so thankfully, again, Varda gets to sit on the shoulder of giants, both on the defense side with like, you know, groups like, you know, and real. But then also on like the biotech side where like Varda's business model would absolutely not work, if not for the past 10 years of maturity of this ecosystem. Again, to the point where not only do you have the concept of like equity in drug, but now it's so mature that you even have the concept of like

Starting point is 00:47:18 liquidity marketplaces for like the equity, you know, embrace drugs. What are your thoughts on, I think, the government's engagement with the startup community right now? You obviously are coming to this as a neophyte, but you've watched SpaceX, you watch Andrel, now you've got your own company in here. What's it like to get these grants? I saw you got like a $2 million grant for the heat shields or something and, you know, it looks like blocking and tackling, singles and doubles. What's it like to get those contracts to kind of get into the rhythm of solving problems for the government, them reaching out to you, building those relationships. How does it all work? Yeah, I mean, I always like to describe if, you know, people think that like enterprise sales is tricky. Think of just

Starting point is 00:47:58 selling to the largest enterprise in the entire world, which is the U.S. government. Sales cycles are long, tons of different approvals, like, you know, and they very much so to try to decouple the person that, like, you know, gets to make the recommendation of decision is the completely different person, the person that has the purse, so many layers of review. But on the flip side, like, once you get into it, the largest enterprise is also the best customer ever in the world because they basically almost never turn and they consistently, if you're providing basically value to them, will basically like, you know, grow your share of wallet, you know, over time. And so, you know, we're really grateful to be on contract with NASA for

Starting point is 00:48:28 the first time with that $2 million grant. We also got that $60 million basically program with the Air Force, both of which we expect to basically continue to grow over time and act as a really great way for us to offset rather than having developed this trading post entirely off of venture private dollars, which I think probably would have been an impossible feat, being able to do this in conjunction with some of these government agencies where along the way, parts of the trading post we just slightly modified to make it really valuable for some government use cases is something we're very, you know, sort of happy to do. And so it's definitely non-trivial. And I think we got lucky in a variety ways. One was, you know, being incubated at Founders Fund and having Foltz like Trey, you know, sort of,

Starting point is 00:48:59 mentors through this process. Two was, you know, our original head of BD, now Sierra, Eric Lasker that joined us very early on, just had the exact perfect experience. He was at Stripe for four years. He actually sold the Trump and the Hillary campaigns onto Stripe back in the day day in the day. So it was just like first sales into the government. Then was head of Ziplin's company, if you know, the drone one, basically sold a 10 million dollar like U.S. Marine Corps contract for them. And he was literally basically with Varda on day one, you know, with us. And so I think having that type of talent with Tray's mentorship from day one. is what allowed us to actually capture this opportunity.

Starting point is 00:49:27 And there's definitely a part of it that is also like luck, where it's like, you know, this trading post had the whatever you want to call it, the return boat, the return capsule that was attached to it. And in the midst of us building this, you know, sort of return capsule, the Chinese basically launched a missile that kind of looks like that return capsule. And so all of a sudden in the airport, you know, started reaching out to the world to figure out who's building in this technology sphere. Vardo is basically the only company building this.

Starting point is 00:49:47 Because if you think about it, there's not really any reason to bring things back from space. Like Starlink and Planet, they just send their photos down via, you know, internet radios. why would they bring anything back? We're basically the only ones that need to. Yeah, they let it burn up, right? They're just like, let it burn up. Versus who cares?

Starting point is 00:50:02 If our drugs are replaceable. We don't, doesn't really work. Like, we got to bring the drugs not burnt up. And so we in some ways got really lucky. The only return trips are humans, right? I think. Exactly, exactly. And with the humans on board, you're definitely not sticking some funky like air force

Starting point is 00:50:15 experiments on the outside. And then all of a sudden, like, you know, you lose your armstrong because, you know, you wanted to do an Air Force experiment. Yeah, no. And your thoughts on the relationship? that's, you know, building more here at home. We have the Chips Act. We're realizing we had a little bit of a dependency on China with stupid stuff like PPE, but also important stuff like drugs. And we're kind of onshoreing now or trying to reduce dependencies, build factories here,

Starting point is 00:50:41 you know, build batteries here, process minerals here. What's your experience been? Because you're, you have essentially a factory, you're building, and you're going to be building more. What's it like to manufacture in the United States? And is there this temptation? to manufacture in other places that are cheaper, or is the savings not all that much? When you pencil this all out, what does it look like to build Varda in America versus building it in Vietnam, China, India, et cetera? Because of the fact that we're a defense contractor and the type of hardware that we're building, we actually, what's known as like ITAR controlled, which effectively means everything that goes

Starting point is 00:51:18 inside of a VARTA factory or gets put inside of anywhere of vehicles, effectively has to be manufactured inside of the United States, which definitely, you know, provide some level, you know, of constraints, but, you know, offers a lot of, you know, creativity. I've definitely been, you know, very inspired to, you know, watch over the last three or four years. Obviously, it's very unfortunate that some of the things that motivated, you know, some of those changing United States were obviously, you know, things like the war in, you know, Ukraine or some of China's, you know, acts in Taiwan. But at the same time, it's been really great to see both the shift in Silicon Valley and people recognizing that, you know, maybe venture returns should be aiming for long-tail outcomes. And if you look at some of the

Starting point is 00:51:48 most valuable companies in the world, like Tesla, Nvidia, and Apple, they clearly are pretty comfortable with, you know, building with atoms and building, you know, sort of hardware products. It's been great to see both Silicon Valley really embrace that. But then, you know, also, you know, Capitol Hill really aggressively, you know, sort of embrace that. And so, yeah, I think, you know, it obviously is something that the United States needs to work on. There's things that we obviously, we haven't, you know, fully, you know, reshored. But if you look at all of the trends, whether it's like, you know, US foreign investment into China, the percentage of iPhone components that are built in China, you know, the per, you know, sort of the number of machine shops that can

Starting point is 00:52:19 actually build ammunition or can build spacecraft. The United States is only increasing. All of these trend lines are on the, you know, sort of right direction. I think the biggest fear is, you know, if China invades Taiwan in 2025, will those trend lines have quite caught up to where they need to be. So I do think we have this like, you know, four to five year gap where the United States could be potentially relatively weak. But, you know, I love this country and I'm so stoked that. Pretty great country still. Yeah. Turns out still the best. It turns out still the best. It's going to be best for the next century, and I'm going to make sure that that's the case. It's very easy in this country to look at the challenges, and our political system is, you know, it's designed to be convoluted

Starting point is 00:53:01 and break and to slow things down and red tape and all this stuff. It's really great to have a dictatorship sometimes when you want to build bullet trains. But then sometimes a dictator's like, you know what, I don't like entrepreneurs. So, fuck it, no more entrepreneurs. And entrepreneurs can't work in, I don't know, video games and they can't work in education anymore, which basically what Xi Jinping did. He took an entire sector. Totally. You know what?

Starting point is 00:53:25 Education, I guess, yeah, maybe that's not patriotic. So, yeah, all the education companies are now owned by the government. Bye. And this guy's, you know, who's running this Alibaba, he's more popular than I am. How about he goes and learns to paint in Hong Kong? Like, they literally killed the goose that laid all these golden eggs. entrepreneurship. They had an entrepreneurial community in an authoritarian country. They figured it out for a brief moment in time, 20 years, maybe 15. And then Xi Jinping's like, you know what, let's blow it up.

Starting point is 00:54:00 Dictators are going to dictate. They just do this pretty regularly. They blow themselves up. And sometimes things around them. You worried about the China relationship? How worried are you about it? Do you think we're on a track here that is irreversible? Or do you think there's some way to reverse it? I've been trying to talk to smart people about this. You know, my intuition is that, you know, unfortunately irrespective of what the United States does, when you have an authoritarian regime that it's past its peak population, its peak economic growth, its peak, you know, sort of, let's say, handle on certain technologies, potentially even ahead of the United States. Like if there were certain areas around like hypersonics or quantum compute or AI where for a brief period

Starting point is 00:54:38 of time, it seemed like maybe the Chinese were accelerating away from this, all of those have completely reversed direction where it's one of these things where it's like, you know, you can only like, make the analogy to World War II where it's like a dictator shape may be good for the first year or 18 months, but like a Democratic Republic is always going to win out in a long term because when it decides to declare an emergency, its entire populace can go after, you know, a very aggressive approach with a lot more, you know, sort of energy because they're doing it out of freedom, not because out of, you know, sort of fear. And I think you're sort of seeing that same thing play out here where America is waking up out of this like, you know, sort of 20 year, you know,

Starting point is 00:55:08 feigned end of history stupor. But when it's coming out of that super, it's coming out with an extreme immigration where, you know, you'll see that across all these categories that China, you know, sort of thought it was ahead on, we're going to rapidly surpass them. And then I think, unfortunately, when you're this, like, you know, dying empire that, you know, thought that they were sort of re-architecting themselves out of this 150-year embarrassment or century of embarrassment, and they're realizing they're not going to be able to, they're going to strike out. I think it's like, no matter what we do, no matter how much we try and deter them, you know, Xi Jinping before the time that he dies, absolutely is going to, you know, sort of, you know, use his military power

Starting point is 00:55:38 just because he doesn't feel like he has any other way to, you know, sort of show that he is powerful, right? He can no longer show it with population growth. You can't show with economic growth. I mean, how can Russia show they're powerful? It's like, invade a country or make Germany dependent on us, right? And I think that's the hard lesson. I actually heard your first episode with Jacob Hillberg. Oh, yeah.

Starting point is 00:55:59 Of the security podcast you did, and I've had him on this program. Why I say I think? And he called it. He knew they had all these headwinds. And everybody was thinking China's going to run away with it. But he's like, you know, population. And it's very hard to innovate when you don't. We talked about it at the start of this discussion.

Starting point is 00:56:17 Like the problem with the factory model of startups is who's going to run the startup for 10 years and give up their life for 10 or 20 years. And in China, I don't think entrepreneurs want to keep their head down. They don't want to go to re-education camp. They don't want to have their head chopped off. They want to be a tall poppy. And that's the problem. Who's going to run their. AI company with the doggedness of Greg and, you know, Sam Allman, right?

Starting point is 00:56:43 Who's going to run their incubator like Gary Tan, right, or Paul Graham? Like, they just don't have people who are going to care or want to put themselves out there. If they had an LLM by now, they would have announced it. You know what I mean? Like, they are clearly years and years behind, and I don't think they're going to be catching up in that world anytime soon. All right. Listen, you're amazing.

Starting point is 00:57:04 Thanks for doing this work. It's great to have you on the program. twice in two weeks. Well, I mean, and then now with the LK-99 thing, people are starting to say like, okay, I guess it's a different phenomenon than super connectivity. What are you thinking? You know, I still think it's one of the things where it's just like too early to tell. Obviously, this is Chinese paper that has come out that is, you know, starting to refute

Starting point is 00:57:25 that some of the things that you're saying around the, you know, superconductivity is actually just, you know, impurity phenomenon. I still think, you know, what I'll say is I don't know, you know, steal Andrews Thunder, but we have this sample that's, you know, out at, you know, U.S. and we're not exactly seeing what the Chinese, you know, are claiming to see. And I think it's just that, you know, these samples are really hard to prepare. And it's still a little bit more like shake and big chemistry. And I don't think that you can claim that you've perfectly figured this thing out.

Starting point is 00:57:50 So I think my point being, I think there's still a lot more work to be done. I don't think we can count it out of the fight anytime soon. Well, and let's keep building everybody. Let's keep experimenting. Keep America as awesome and amazing as it is. Entrepreneurship solves all problems. Man in the arena speech, yada, yada. Appreciate you doing this hard work.

Starting point is 00:58:07 We'll see you all next time on this week in service. Bye-bye. Next up, Jason is joined by Argyle CEO, Merritt Thatcher, to discuss her startup, an AR-software platform that helps construction project managers make fewer mistakes. Stick with us. All right, everybody, welcome back to this week in startups. Augmented reality has got a very interesting history, and it's been a technology that was going to be here every year and change everything.

Starting point is 00:58:39 the last 10 years. Same with virtual reality. That was going to be here for the last 30 years. And we've been looking and looking, studying the space. And when I say we, the venture capital community, and we have found very, very few applications for virtual reality. You have some people playing games, but let's be honest, if you asked a hundred of your friends who play video games,

Starting point is 00:58:59 how many played a VR game in the last month, it would probably be zero, maybe one. And then you look at augmented reality. and let's face it, most people don't have an AR headset. They're super expensive, they're in limited supply. That being said, when you think about what could work, enterprise applications seem like the easiest layup. Why?

Starting point is 00:59:26 Well, because training in the real world and doing complex things in the real world, like let's say surgery or building a building or a home, these are things where you have a lot at stake. And when there's a lot at stake, you can charge more money. When you can charge more money, a startup can become more viable, right? So sometimes commercial applications are what we see first in an emerging category. I've been obsessed. I think AR is going to be the winner in this category or mixed reality.

Starting point is 00:59:55 And so we made a bet at our incubator on a company called Argyle. And the CEO and co-founder is Merritt Thatcher, and she's here with us today. to show us what she's built. Thanks for having us. Yeah. Now, we met because we do a project called Founder University, and we have two versions of it. One's a two-day version,

Starting point is 01:00:18 and then the other one is a 12-week course. People have heard me talk about it before, but I believe you came to the two-day course, yeah? I've done both, actually. I've been in the entire launch funnel and can speak highly to all of your products. So started at the two-day, and it was advertised at that time,

Starting point is 01:00:35 a women's only one. Yeah, it was. Absolutely fantastic. And then I signed up for the 12-week course. And then we got into the accelerator. Oh, great. And I get to talk to you here. Perfect.

Starting point is 01:00:48 And so we'd love to meet new founders. We do those founding university two days. We don't see enough female founders. And so we started the women's founding university just as a way to show the market that we are serious about meeting more female founders. And boy, has that changed everything in terms of the number of female founders that we are lucky enough to. invest in. Just not to make this about gender, but when you see something like Founder University for Women, did that spark anything in you or make you think anything about our firm?

Starting point is 01:01:20 It made an impact for me. I think a lot of times, like when you go to a space that you're really trying to learn about, I'm not trying to posture. I'm trying to absorb as much information as possible. And so being in a space with other women who we tend to approach learning in that way has been super impactful. And then I've had the opportunity through the accelerator to be competitive. And so it's just a different, a different world. But the initial approach and having that space to learn, especially when I was a new founder, is just incredible.

Starting point is 01:01:52 Awesome. And when you say compete, people don't know this. But at our accelerator every week, we ask the investors who come to the accelerator to tell us their top three companies and why. And so there are seven companies, which means each time an investor does that, four people don't get ranked. And knowing what I know about founders, even getting silver or bronze, that could annoy a founder as much as not even getting a medal as it were. Speak to what that did, that friendly competition or a dogged competition. I don't know how you look at it in the accelerator to your performance or the performance of the class.

Starting point is 01:02:33 your mind. Gosh, so essential. The first, you're right, like, silver was not good enough. I think my very first week, I got maybe one investor who was interested and ranked me sort of in the three tiers. And every week after that, I think I got number one, number two, but always ranked. And I did get really passionate about practicing the craft, recording myself, doing literally everything you've just always suggested it before, but making it my damn job. Yeah. I mean, presenting your company in a way that appeals to investors and gets them to take a second meeting and they understand your vision and they understand why this could be a $100 million a year revenue business. That's a skill. That is not just something that is innate in any of us. It's something you can refine

Starting point is 01:03:22 and refine it you did. We also add up all the points week after week. So how did you do at the end of the you know, cohort. And you were in Launch Accelerators 27th cohort, which is finished. That's right. I, I cleaned up. And I say that with some humility

Starting point is 01:03:41 because my class was awesome, Jason. Yeah. But yeah, I won the weekly and I won that event. And then... The cohort. Okay. Overall.

Starting point is 01:03:51 All right. Well, congratulations on that. Thank you. Now that means essentially nothing. Now you must go compete and get customers who actually love. of your product. So let's talk a little bit about what you're using ARR for. And you heard my little

Starting point is 01:04:06 preamble there. But tell us what Argyle is doing. Sure. We help construction go faster and make fewer F-ups using their existing building information models and visualizing them on the job site. So sort of in our space in construction, this has been obvious. We're making 3D models. Let's just put them on the site in AR. But the devil has been in the details. And in getting this to be something that's user-friendly and reliable and shows up where it's supposed to has been a huge challenge. So that's what we focused on. And so AR glasses, you heard me talk about this. I mean, since the time we invested in your company, Apple Vision Pro has come out.

Starting point is 01:04:49 But what platform did you build these headsets on? Because we've been playing with AR a lot with our phones, right? You can take out your phone and it will put digital objects into the screen, what kind of a... Is there a subcategory for what they call that type of AR? I kind of call that like tablet-based AR or like, I call it AR window.

Starting point is 01:05:11 Ah, so... Air window, I like that. The ones that I was building on initially was HoloLens and HoloLens too, which is this device. It's clear. It's got this little flip top. Microsoft's HoloLens, yeah. Microsoft's device. And then in the last year, we've begun using the magically.

Starting point is 01:05:25 This is also clear glass. It's a little more difficult to tell that it is. and this is where I got really excited. All I did is port the app that had been running on iOS and on the HoloLens to this device. And because my app was constrained by performance, my fog of war increased

Starting point is 01:05:45 and I could see so much more of the building than I had before because the performance on this computer is stellar. It's a fast computer. Now, describe the magically because this is a company that we've wondered in Silicon Valley if it would ever release a product,

Starting point is 01:06:04 there was talk of it maybe being the next there or no product ever released. So you must be one of the first people using it, yeah? I think that's unfair. I mean, yes, billions invested, but this is the product. It is released and they have a factory. They're building this tip to toe.

Starting point is 01:06:21 We got to see, I got to go check out the factory where they're building the optics, all in-house in Fort Lauderdale. And, yeah, I mean, let's see, three-ish billion invested, and they've released this incredible product that's friendly on my eyes that works on a bright day on a construction site that is just really speedy and rendering these incredibly huge models. Does it attach to like a computer that goes on your belt or something? Like, what does it have to attach to? Does it attach to a laptop? So this is the compute pack.

Starting point is 01:06:55 Ah. So it looks like a puck. It looks like a hockey puck. Yeah. A little hockey puck. Yeah. They wanted to make it a little smaller than what a CD changer would look like. So that's about that size.

Starting point is 01:07:04 And it can clip to your belt or I just have this. I call this purse version. Oh, MERS version. Yeah. The MERS version. And then this just expands and goes over your headset like that. I put it under my helmet hard hard hat. And it tends to work really well.

Starting point is 01:07:20 This, you actually had to have clips, the HoloLens Microsoft device. You had to have clips or specialty attachments with like trim. So it's been nice to have commercially available headsets and use those. And we're also really excited about getting it the tablet version just as user-friendly as this fully immersive, six-off headset version. So let's take a look at a video because a video is worth a billion words. And here's a video of a construction site. Now, most people are listening.

Starting point is 01:07:48 So we'll sportscast us if you're not watching, go to YouTube.com and type in this week in startups and you'll find this. But we're looking at a series of homes, it looks like, and we're seeing the architectural drawings. What are we seeing here? So this is a resort in Lincoln City, and they own this skinny little lot between their two hotels. And their job was to convince the investors that, yes, we can build a food service building, a pool, and another hotel building. So this is what we did in augmented reality. We placed the models of this architectural and et cetera onto the site. I did a quick alignment here before filming. And as you peek in, it just tracks everywhere you go to render the models that are for the

Starting point is 01:08:31 correct spot. Got it. So this is going to turn into a food service building. You can order your IPA here with your jackets. So this is a remodeling of an existing building. This part is right here. We can fast forward it a little bit. But as we get to the pool here, do, do, do, do.

Starting point is 01:08:50 do. Yeah. And we turn around. They're actually going to be building an entirely new hotel. Got it. Back there to the east. Oh, that we see it. Yes, of course.

Starting point is 01:09:00 Amazing. The question is, can this fit on the site? Yes, it could. Ah, so the purpose here by the architects, the construction, the developer, who uses this product? Who do you sell into? So we sell this from the design all the way to installation and quality assurance. This is obviously earlier in the process.

Starting point is 01:09:19 this is the design phase. This is an architectural design build firm called O'Brien. Got it. So you sell to them and say, hey, if you want to show your customers and your clients, what this would look like before you have to build on site, this will help close the CL,

Starting point is 01:09:37 close a deal, maybe get investors excited, or just help you work with your client to understand their needs better. That's the kind of the pitch. That's for the pitch for the early folks. But we have a video of people using this for, the installation process on site in the detail. So this is a video from our friends at Miller Electric, and they're actually putting up lights. So those are the images of the lights, and you actually

Starting point is 01:10:02 set those up by marking up the floor. The way they did this in the past was bringing out their 2D blueprints, measuring out every location, and then setting up lasers to do this process. So what we're seeing here is, in yellow on the floor, is a bunch of lines. of where the lights are going to be. And they're just marking the floor of where to put the studs or something. You basically got it correct. Yeah, they're going to shine up the lasers to where they need to do those installations. Got it.

Starting point is 01:10:31 Much faster this way, much more fishing. So in the past, what we're seeing here is they're walking around just a cement floor, but they're seeing objects, essentially like CAD drawings. It looks like the original Star Wars game where you're fighting with Tie Fighters or whatever and blowing up the Dead Star. But it looks like the Death Star, you know, plans when you see them in Star Wars, you know, beautiful cat drawings with line drawings and they can pick where each of those lights are going to be. And I guess the fidelity here and the

Starting point is 01:11:01 chance of making a mistake go way down. So is that the sales pitch? You can go faster and make less mistakes, both of those. Precisely it. We help construction go faster with fewer F-ups. Oh, okay. So I nailed the pitch to the construction side of the house. So the construction side of the house. When they make mistakes, it's costly. Time and probably materials and the cost of the individuals who have to come back on site. And there could be costs that could be like, you know, structural, which would be could even risk people's lives, I suppose. So those are two sales there. One is before this building is built. The other is while you're building it. how much extra work is it to do this on both sides?

Starting point is 01:11:52 Because I know that these CAD drawings are being made anyway. And so if it took, I don't know, a thousand hours for this architect to make these plans for the new food service building in the hotel, or maybe 10,000, I don't know, maybe 10,000 hours. I don't know how long it takes to make something like that. A thousand, two thousand? You know, I couldn't say on that.

Starting point is 01:12:12 I'm going to pick a thousand hours. Okay, we're going to pick a thousand. How much time is it take all those CAD drawings in that work. I'm not sure what CAD program they use is the standard these days. AutoCad, I don't know. Revit and Navis works.

Starting point is 01:12:24 Both of them are Autodesk solutions is what we're using. So Autodesk has multiple solutions. They spend a thousand hours on that. How much time does it take to port that and put it into Argyle so you get these benefits? Literally minutes. Just done with a plugin.

Starting point is 01:12:38 It's self-served. So every time there's an update, they can simply click it into Argyle. And in that process, they get a lot of control over how that's going to render on their end. So lots of choices. And so what do you mean by control of how it's going to render?

Starting point is 01:12:54 Explain that. Right. So you mentioned that we had sort of a Star Wars. I like to say Tron look. Yeah. I think it's a compliment. That's very much our wireframe rendering style to maximize the visibility on a job site. You do not want big structures occluding your view, walls or floors, blocking holes in the floor.

Starting point is 01:13:15 It could be incredibly dangerous. So we are rendering only the edges. Now, of course, we had some folks say, well, I really would love to see these overhead HVAC systems with a little bit more detail. I'd like to see the surfaces. So the aesthetics. Correct.

Starting point is 01:13:29 They can change how this renders in AR. And with a device like the magically, we get a lot more processing power into what that can do. We can get more realistic type of rendering. We can simply render more. We're not constrained. So if I'm some lunatic CEO who's building an incubator, and wants to have a gorgeous looking building.

Starting point is 01:13:49 But I want to see, you know, this type of flooring. I want to see what it looks like when they epoxy it. I want to see what rugs look like. I want to see what the ceiling looks like with different treatments. You could actually make this a design consultation and let people see high fidelity. But when you're doing construction, you just want to see what is important so you don't fall through a hole on the floor. Correct. And we really did focus this for the construction.

Starting point is 01:14:13 We think there's a lot of great virtual reality applications for. the design side. Where Argyle comes in has been views, where views have been important. Like, I see a gorgeous view behind you. We have winery builders who they put their folks on the job site and give them a view, and they have an imagination of what it's going to look like. But when the walls get installed, that view has shrunk. And this is giving them an actual perception so that they're not making that mistake,

Starting point is 01:14:41 which is actually a structural design mistake. You can't go back on Jason. You can't just cut a bigger hole, unfortunately. Right. So I'm making some beautiful hotel and I decided I want to have certain windows. And I think you're going to see this incredible vineyard. You're going to be able to see the waterfall and the deer and the sunset. And maybe you're going to see one of those things. And then it's time to talk about bigger windows, floor to ceiling windows, a different solution. So this idea to not have regret in the design phase comes in. Absolutely.

Starting point is 01:15:10 I don't want you to reveal if you're using the Apple goggles. What do they call? them? What is Apple calling there? Apple Vision Pro. So just to be clear here, I'm not asking you if you're using them, but I would like to know your first impression of them, because certainly you're monitoring this. I assume you went to Apple's demo day or something and people on your team have seen them, but again, I'm not asking you if you're building for it. What are your first impressions? Because you started with the Microsoft, you went to the magically, and then you saw the specs on this thing. It's pretty darned impressive, I think. It is. For our part, we're, because we're more focused on the construction side of the house,

Starting point is 01:15:53 our standards and safety say you have to have clear glasses. So I'm not sure we'll have the Vision Pro and its current iteration on a job site, but definitely in the design process. And in terms of just how Apple leads the way in terms of interaction, that's what I'm excited to see, because they're going to set standards and I'm not going to have to figure this out by ourselves, because Apple's going to be setting nice interaction standards. Got it. Yeah. So how you, you click, how you swipe, how you pinch, how you zoom. Right now in AR, there's no standard is what you're telling us.

Starting point is 01:16:24 Each platform has its own sort of toolkits. That's true. And to the extent that they've tried to make them multi-platform, there's been some disappointment in that. So there tends to be a little bit of rework as you move to each platform. Ah, what a disaster. I know. So how does one, you know, get this brand new product into market?

Starting point is 01:16:45 How many years have you been working on? I know we've been involved for a year with your company. How many years have you had it in market? And how does one go to a customer, even an ideal customer, and convince them to do a new behavior with a new technology? And what have those discussions been like? Do you convert one out of 10 people to become paying customers? Do you convert, you know, one out of 10?

Starting point is 01:17:11 Is the market ready for this? You know? Yes. The market is absolutely ready. for this right now. They're in pain and that's been the main driver. Tons of industrial construction's been coming up and that is a particularly complex type. Today we showed commercial examples. We can't show our industrial examples, but we're talking semiconductor facilities with layers on layers on layers of pipe and electrical and just so much going on that without

Starting point is 01:17:38 visualization, they're making huge, huge errors. So the market's absolutely ready for ARR. are and the demographics are changing such that we see really 3D gaming natives like myself who just kind of expect our data to be where it should be. It seems obvious to us that BIM should be on the job site, BIM being building information models, that we should have the best reference on site. And Argyle has enabled that. It was a long road.

Starting point is 01:18:09 So to that point, we've been thinking about this pretty much since the HoloLens 1 in 2016, when I first saw a really early prototype that, you know, I think if you're just somebody looking on the internet might look exactly the same as Argyle today. The difference is today it's an application that anyone with these models can use. And that road took about three years. We put it into market January 20, 22 about. Yeah. Had a couple of false starts. And I think what launch and the accelerator were really helpful with was helping us focus on. on that sales and revenue.

Starting point is 01:18:47 I mean, I'm such a perfectionist on the product side that first-time founder, it was so good to get a push to be like, no, sell something you're not ready to. And your customers will tell you what's wrong with it. You know, perfection will inhibit your progress, right? And so if you are unwilling to put out your product when it's not perfect, then you're not going to get customer feedback, which means that you have a hard of time making it perfect, right? because you're...

Starting point is 01:19:15 Now, Apple, you know, listen, they're the last one to release their goggles and AR goggles. And so they do have an argument there for, you know, there is a school of thought of make it perfect.

Starting point is 01:19:28 But even if you watch this time, they announced it with it not being available for sale. Yeah. And there was a big internal brouhaha. Should we wait until this thing is more like sunglasses and you don't need this battery pack

Starting point is 01:19:39 on the side and it's less than $3,000. So, you know, they even had a change of heart. with this one. And they didn't do that in the past. They always waited, waited, waited. So you got to get the product out there. And we've learned so much more by doing that. And I'm starting to meet what we call those, the superhuman standards of product market fit where when my product breaks, you know, it's a beta, they call me up and they're like, oh, I was using it today. And I need it. And oh, my God, oh my God, oh my God, they're using it. They're using it. They need it. And it's gone from this nice to have to a need to have. And I couldn't be more thrilled. That is an incredible side. You're talking, of course, about Roel's superhuman, the email client, and in his product market fit machine and his philosophy,

Starting point is 01:20:21 which, you know, he's standing on the shoulders of a couple of other folks who have concepts around that. Yeah, it is a great experience when people are using your product, you change something, they're like, hey, I need this to work. Yeah. Super motivating for a team. This is why small teams are best in the first year or two of a company, because if you add the sales and marketing function,

Starting point is 01:20:43 before the product is got some level of product market fit, well, then you're just burning money, and it's kind of depressing because you spend $100,000 marketing something that people don't need or that doesn't solve a problem for them. But you knew this was solving problems for people. And then marketing for you is what? Just emailing people and sending them a video link and saying, here's what we can do for you, and then they call you back?

Starting point is 01:21:06 Kind of, yeah. We do some cold outreach. We get a lot of inbound. When people see our videos, we do have a distinct visual style, we are showing, you know, real value on a job site. So every time I post something on LinkedIn, it seems like it goes nuts and I get lots of shares and that's been very exciting. And then after that, it's about do you have a device?

Starting point is 01:21:27 So currently, biggest bottleneck, Jason, is getting them with the best device. So it's all about getting it on these iPads because just about everyone at construction site has an iPad in their pocket. Well, that's a nice stepping stone because if they use the iPad, they get value from it. People have always said putting a mask on, putting covering your face, it's a socially awkward thing to do. So maybe some old people are a little bit reticent. But if they use the iPad first, old people love iPads. Gen Xers and Boomers.

Starting point is 01:21:58 Boomers are sending email on their iPads. I don't know how they do that, but they're typing on that keyboard on the giant screen. Yeah. All caps, grandparents love it. Sent for my iPad. That's their jam. They love playing Sudoku, whatever the heck these old people are doing. but that'll be like their stepping stone.

Starting point is 01:22:14 And then I loved your point that young people who play video games kind of expect this, right? They expect to be able to interact this way. So now that you're finally here, you know, it's going to be great for them. How do you charge for this? What's the business model, you know, briefly? It's SaaS. So we license the software. It's bring your own device.

Starting point is 01:22:36 We recommend the Magic Leap at this point. And it's 600 if they want to pay. month to month or 6,000 for the year per device. We see sites who just have one. They'll take it around to a few of their favorite projects. And then we have some sites where they have several and they're using it daily to get the work done on a big site. So it's just kind of scales to the size of a project. Fantastic.

Starting point is 01:23:01 Okay. So let's do a live demo. Yeah. Logan. So CEO co-founder Logan's here. He's going to be wearing the Magic Leap and showing us a little bit of the interaction. So you asked earlier, how does the content get in here? So this is an example of a file.

Starting point is 01:23:16 This is a Revit file. And I think our structural friends made this. Anyway, there's an Argyle button at the top of their ribbon. They just click that whole file into AR. All right. And this is the same file. Okay, Dr. Brown, show us the flux capacitor. Here it is.

Starting point is 01:23:36 I mean, you literally look like, you should wear a lab coat with your white shirt. you look like Christopher Lloyd in back to the future. If you're not watching this right now, you're missing out. He's got a great shirt on. All right, Logan, here we go. Dr. Brown. All right, Logan's in. We're going.

Starting point is 01:23:51 We don't need cars. Logan's in Benson High School right now. This is a model. Logan, go to the model tab, actually. So around Logan is the wireframe of all these various trades models. And trades, I'm talking, there's a plumbing model here, an electrical model. You got your HVAC systems. and all of these different models came together in Argyle,

Starting point is 01:24:14 and they're all clicked on. Logan, if you arrow button down, you can see that he's also got different categories of the model on. You might want to turn off plumbing and get it out of your way so you can have a better view of electrical, for example. Got it. There goes plumbing. Oh, goodbye.

Starting point is 01:24:29 So underneath that are our alignment tools for the end user. Here is where somebody might set a fine anchor if they needed to set an alignment from scratch. What's a fine anchor? I don't know if it is. Pull up an anchor, Logan. That little widget will help you set anchors as you go. So let's say you walk 50 feet.

Starting point is 01:24:52 These devices inherently may understand that to be 51 feet or 48 feet. So you need to set some corrective anchor and you need to have a way of doing that. And this is how we do it in Argyle. Got it. What Argyle then does, it's patented alignment technology, is saving that and creating a nice spatial map So that when one of these anchors breaks, Jason, which of course it will, we're going to pour concrete. We're going to bust the wall. We're going to move pallets of materials.

Starting point is 01:25:17 When those anchors break, the other anchors make up for it. So we're not here. This is the Argyle tiny dev office, but in the model, we're in the Benson High School. So this is not a true overlay of a real site. Right. But we're just kind of looking at the UI here. It's amazing. So you get all these great layers like you might.

Starting point is 01:25:40 in Photoshop and you just turn them on and off to see what you want to see. Now, if you're the electrical person, you might want to turn everything off and just see your electrical, make sure you understand it. But if you're plumbing and you're coming in after electrical, hey, maybe you're leaving the electrical on so you don't have the plumbing run into the electrical by accident. Oh my goodness. And HVAC, they're always getting in people's way. You got to put, you got to put them in there first, those mechanical systems. There's some other functionalities here. You can change the rendering style. There's a cool little measuring tape. But, yeah, let us know if you've got questions. This is, this is about it. One of the things I do like best about

Starting point is 01:26:15 this is it's not just a visualization. You actually get the metadata included in this. So if Logan were to click on one of those mechanical systems, he can see that, oh, that's exhaust. You know, oh, this is a supplier. So for somebody coming to the site who was, let's say I was an investor in the company or I'm part of the architectural group, but I don't do the plumbing or whatever, I can actually go through here and learn about this stuff without having to annoy people. Absolutely. And I think my generation wants to answer our own questions, and this gets us a lot closer and a lot further along.

Starting point is 01:26:51 Got it. Amazing. How many people on the team now? How many full-time people are full-time equivalents? About four full-time equivalents on the team today. Excellent. So you are a nascent startup figuring this out and really got great product velocity. So when people ask me how we pick companies, we like build their founders.

Starting point is 01:27:08 We like product velocity, and we like a deep understanding of the customers. And so, and world class design. So if you look at the startup, you're seeing world class design. You're seeing product, you know, builder founders, amazing, and real customer focus here with great product velocity. The product keeps getting better. So just congratulations on everything. It's just great to see how much progress you're making.

Starting point is 01:27:34 Thank you. Thanks for seeing it early. And that really encouraged us. Well, it's great to be in our position to meet founders when they're conceiving in these products and make that first bet. Thanks, Logan. Thanks, Dr. Brown. You've got to get him a lab coat with Logan on it. It's pretty great.

Starting point is 01:27:54 So what's next for the company? Obviously, you know, building out the company, you're going to hire a bunch of people and then, you know, move from these beta customers. I guess you have beta customers right now. they're still paying though, right? Yeah. We have paying customers, so that's great. Yeah. Yeah.

Starting point is 01:28:11 So right now we're starting, how construction purchases technologies, they'll start it on a project or two. And then the buzz will get around and then people will want to bring that to their next project. So I'm hoping to land and expand lots of different construction companies in the United States. And we're also getting international interest right now. So we definitely need a team to support all this. So maybe grounding an opportunity would describe. your startup? Oh, it's a horrible time.

Starting point is 01:28:40 I mean, this is very important, I think, in terms of founder advice, which you will get plenty of, but you got to nail those first couple of customers, so they will become reference customers, lighthouse customers. You've really got to be careful that they don't get disappointed, and then you have that, you know,

Starting point is 01:28:56 that negative problem when you take on too much work. I did hear you say going after more complex buildings, those people have a more acute need for this. So, am I correct that your ideal customer profile might be, you know, like a Tesla battery factory or a chip manufacturing factory or a data center, something where there's a lot more infrastructure than in my house or, you know, a hotel. Correct. You know, yeah, that's the people who have the most

Starting point is 01:29:26 pain and the most people on site who are putting these headsets on. So that's to me telling me that this is the tightest, fastest group. People homeowners love it. but it's a different sort of. Feels like a vitamin to homeowners and people building, you know, non-commercial properties, but it feels like a pain killer. If you're building a data center and you've got not just H-FAC, but you've got like serious H-FAC and flooding equipment and raised floors,

Starting point is 01:29:55 and then whatever those systems are that pulled all the oxygen out in case of a fire, I forgot what they were called. Oh, yeah. Yeah. I don't remember either, but. Super dangerous because if a person gets left in there, all the oxygen gets, pulled out of the room, you suffocate. So they have like a big alarm system to make sure nobody's in

Starting point is 01:30:09 there when they, when they have those systems go off. Do you get to tour some of those? Back in the day, you know, when I was an IT guy 30 years ago, we had data centers and I used to put servers in racks back in the day. Yeah. But that's a, that that has become quite a science and the scale of them is otherworldly. I mean, you're talking about tens of thousands of servers. And when I was doing it, we were putting in dozens of servers, you know, 100 or 200 servers was considered, whoa, you know, 10 racks with 10 servers in each was, you know, very rare to see that size of a footprint. It didn't really exist before the web and before big data, before people started storing stuff

Starting point is 01:30:47 in the cloud. And you had these big data lakes of photos or transactions and stuff like that. All I can say is I'm so glad for the cloud, Jason. I don't have any server setups here. It's so nice. Perfect. All right, listen, continued success. And we'll see you all next time on This Week in Startups.

Starting point is 01:31:03 Bye-bye.

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