#58 Kara Kramer, AeroVironment: A deep dive into the Replicator initiative and future of military UAS

Kara: 0:26

I think the major change we're going to see is probably a rethinking of economy of scale pricing from our commercial partners. I think that a lot of economy of scale pricing for commercial components is on the idea that those really large scale orders come in very few and far between, and I'm not sure that their profit margins are going to hold when they start getting multiple orders at the high end of those economy scales. So I think we may see some pricing innovations come out of the commercial sector. And I think we may also see what I have mentally been referring to is like Kirkland brand options for drone components. Just like you can go to Costco and you can get your Kirkland brand for fill in the blank. I think we may start seeing that in the drone industry as well.

Jim: 1:22

Hey, welcome back to The Vertical Space and our conversation with Kara Kramer, Director of Business Development at AeroVironment. So this is a discussion around the evolving role of UAS in warfare, including in Ukraine. The critical role of the supply chain to ensure we can properly engage in when those wars, and the recent announcement of the U S Replicator Initiative. What it is. Why it happened and what it is intended to achieve. So Kara immediately jumps into the fragility of our UAS supply chain. Something we've talked a lot about over the last couple of years, but she says that with all of the talk and awareness, not much has really been done about it relating to our preparation for UAS in warfare. And speaking of vulnerable supply chains, we discuss how batteries essential to UAS and UAS warfare are often sourced in China. Speaking of vulnerabilities. Then we enter a very cool discussion that the outcome of future wars, as Peter says, may revolve around high volume electronics. And how lethality is coming in, smaller, smaller packages and where the need for secure supply chains becomes perhaps even more important. We discuss the state of the UAS market, particularly defense in UAS and especially around mass. How many drones can you produce and field? How quickly can you scale what's needed to maintain scale? And lastly, how would you rise to meet that demand? Kara discusses, how mass is achieved and how DOD is forecasting orders is the greatest limiting factor and how even large businesses can't invest without effective DOD forecasting requirements. Without the forecast and the requirements that businesses can't and won't justify investments to meet that future demand. And to achieve mass we have to lower the cost and to lower the cost we may have to have an established electronic space and today's BOM or bill material is four to five times higher than equivalent Chinese drones. We discuss the impact of Ukraine on UAS and the impact it's having on our vision of future wars. I really like Luka's question about air superiority. And the role of UAS and that you may never really have air superiority, as long as UAS exists in the battlefield. And we discuss contested logistics, how to get the supplies out to the time and place of need. What a shift from previous conflicts where in future conflicts, like in Ukraine, It's going to be very challenging to have complete air superiority. This is one of my favorite, what I consider to be most relevant parts of the podcast. Then we discuss DOD's Replicator Initiative and what drove its birth, how it surprised industry, how it will leverage unmanned systems to prepare for mass and how it's meant to address the growing threat from China. We discussed the need to move from exquisite group five drones to high volume, high attrition, UAS vehicles. And another great section we discussed startups, listen to what Kara says are their advantages and what she said should be the focus areas for startups. And a really interesting section around counter UAS, the market size, the lack of a real leader and the real demand. Finally listen to what Kara sees as the future of warfare and her advice to you our entrepreneurs. Kara, thank you for joining us for an impressive discussion and to our listeners enjoy our conversation with Kara Kramer as you innovate in The Vertical Space. Kara Kramer is a results driven business development and sales leader, currently serving as the Director of Business Development, at AeroVironment. Kara's journey in the unmanned aerial vehicle space includes pivotal roles at Volansi and Istari where she showcased her ability to drive advancements in drone technology and innovation with the Department of Defense and broader US Government. Her prior experience includes serving in the intelligence community and working in a traditional defense contractors. She is certified as a project management, professional and Shipley trained. And she excels in strategic planning, capture management and execution and analytical writing.

Luka: 5:56

Kara, thank you very much for joining us on the show. We're excited to talk to you today.

Kara: 6:01

And I'm excited to, be here today.

Luka: 6:03

What's the one thing that few in the industry agree with you on?

Kara: 6:07

One thing that few people agree with me on, I'm not sure I have that many original thoughts, but I would say one of the things that I think about way more often than others is the fragility of our, supply chain specifically for UAS, but also other, defense applications. I think about the fact that all of our edge computing comes from one single foundry in Taiwan, all of our NVIDIA chips, and that we, as we're thinking about preparing for the next great power conflict, we haven't thought enough about diversifying away from that, the one, there's one specific boundary in Taiwan. So that's, I think one thing people don't agree with me on is that fixation.

Jim: 6:48

Has it changed at all in the last couple of years, based on the reality of the supply chain

Kara: 6:53

I think COVID woke folks up to how fragile the supply chain can actually be. It was even something as simple as consumers not being able to get toilet paper. I think it was an eye opening experience for folks when they start thinking about supply chains for critical weapon systems that have one, maybe two provider of a part that it will not operate without. I think COVID 19 made it real. But what I haven't seen is, I've seen a lot of discussions around how we're going to make it better, but I haven't seen a whole lot of action on it.

Peter: 7:29

When did you begin to form that view and what keyed you into it first?

Kara: 7:34

So what actually keyed me into it is it was back when I was at a company called Thomson Reuters. so Thomson Reuters is a Canadian data company. they own Reuters News and a whole bunch of other Data sources, you probably have no idea, roll up under them. While I was there, I was doing some work for, the defense department looking at supply chains for GPUs, graphical processing units, and that's when I first realized how many just critical components for weapons systems were coming out of TSMC, which is a foundry in Taiwan. And you'd see fluctuations in the GPU market caused by video game popularity. And then you'd see cryptocurrency would rise, and then that would put a strain on GPUs as well. And then folks in the military could not get what they needed because of a really popular video game. And that's when I started to really realize how fragile this could be and what a risk this is creating for us, especially as we're looking at the future of warfare that is largely focused on that exact geographic region.

Peter: 8:44

Yes. Yes. And what you bring up, really pulls forward some historical lessons in modern warfare. If we look back over the last century, take World War II as an example, like many modern wars, it was ultimately decided by the strength of the respective industrial bases in the countries that were fighting and the U. S. had, I think an advantage going in with the automotive industry that it had already built and the mass production capacity that was throughout the supply chain in the U. S. And if what we're looking at here in this, next iteration of warfare is that the aspects of the industrial base that will be decisive are around, let's call it high volume electronics and the semiconductors that drive them. Then, I don't think that the U. S. has anything resembling leadership in that, I think that a lot of that capacity has, over the last 30 years, really developed in Asia. And so for us to, change that as a country and our industrial base, it's not something that we can just say, hey, we need this and a year later, it shows up. Would you agree with that?

Kara: 9:55

Oh, I would absolutely agree with that. And especially with the rising demand for what folks are calling attritable assets in the battlefield.

Peter: 10:04

Right.

Kara: 10:05

That's only going to put more pressure on the supply chain when you can't cannibalize old systems for parts to keep the new systems in the fight. How will the supply chain keep up with that? How can you price that to be a attritable when there's one specific semiconductor on there that just, you can't get right now.

Peter: 10:25

Yeah, I think we're seeing, lethality show up in smaller and smaller packages in modern warfare and what we're learning from the conflict in Ukraine, and we're seeing, looking ahead, more and more automation being built into weapon systems and certainly the Chinese are developing, what you might call truly autonomous weapon systems. But to whatever degree that you decide to imbue that automation into these systems, it gives anyone the opportunity to really scale it out and have very high volumes of systems on the battlefield. And just the numerical scale of it can be an overwhelming and decisive factor. If that's the way things play out in the future, then, from our standpoint, where are we going to develop the capacity in the manufacturing base to deliver that scale?

Jim: 11:17

So, Kara you're not saying that people necessarily disagree with you on this point, before you answer Peter's question. It's more, people may not be as aware of the vulnerability of the supply chain. And it directly relates to, military use of drones, for example, as Peter's referring to.

Kara: 11:36

Yeah, absolutely. Because it's one of those pieces that folks look at, they look at the drone and they think of that as a commercial part that goes in there as something you can go on your computer and you can order, it just comes. in the mail for you. It's not something you're going to consider, like a critical component until you can't get it or until the price skyrockets because there's such a shortage in what's available. And what we were talking about with the autonomy piece and trying to push autonomy out en masse, our policy dictates that we need to have a human in the loop for anything that's going to be regarding lethality. Which means for a human to be in the loop there needs to be a video feed so they can make that determination. And that video feed is going to require edge processing of some kind. And that's where you're going to hit that, you're going to hit that roadblock every time. But my other truly controversial, people don't agree with me on this, I think that our policy around the human in the loop limitation will only last as far as, the first few days of a peer adversary conflict.

Luka: 12:36

Interesting. play that scenario out for us, Kara, will you?

Kara: 12:39

Well, based on what you can read in the news, you have a pretty good idea that our adversaries are not limited by the same policies around your AI and your lethality decisions. And so you're talking about meeting a peer or near peer adversary out in mass when they're not limited by the same restriction. And you're talking about fielding thousands of autonomous systems at once in swarms? And you need to keep a human in the loop for every single decision that involves a kinetic effect. It just, it's hard to imagine how that's going to scale well, and how we're going to remain committed to that policy, as we engage in, or hopefully never engage in a conflict like that. But if we were to, I don't think it would happen.

Luka: 13:25

If it's in the opening days of the war, where there's only one side in a certain direction you can have a, quote, kill box and instruct the autonomous systems to engage whatever is past a certain boundary, but once the troops start mixing, then this becomes a lot more complicated scenario to, work through.

Kara: 13:44

Yeah, I agree completely. It becomes almost dystopian to think about.

Luka: 13:49

On the supply chain fragility topic, besides the video links, what other specific UAS components do you think are most impacted?

Kara: 13:58

Probably batteries. So I've been in the UAS industry for not as long as most people, but for a while. And one of the hardest pieces to source that doesn't touch China is batteries. And when, especially when you're talking about small, attritable UAS, they're going to be operating off batteries to be likely sourced from China. So as soon as that would be shut off, that would be problematic.

Luka: 14:23

Let's zoom out a little bit and just, share your perspectives on the market. Describe the state of the UAS market today.

Kara: 14:30

Sure, I'd be happy to. So most of my statements are going to be focused more on that defense part of the market, not commercial. So the biggest focus of the market that I'm seeing right now is around mass, is how many can you produce, how quickly can you field that, and a lot of that's driven by the conflicts overseas. So Ukraine is a huge demand signal for systems. It's also a proving ground for new technology, and it's been, a time where you can see innovation happening in real time in a way that we haven't had that ability to do so. And then you're also seeing. You're seeing people, like, the situation in Israel and Gaza, you're seeing our allies going through their reserves, and you're seeing how quickly that can happen. So you're feeling, in the industry, you're feeling a lot of that demand of how quickly could you scale, what would be required to maintain that scale, and some, almost like an excitement, but also a little bit of trepidation around how you would rise to meet that demand. Also seeing a lot of, push towards the smaller systems that have a higher level of endurance. That's a challenge for both physics and power, but that's been a kind of, a rising trend in the drone industry. It's almost as popular now, in my vision, than the eVTOL space that you've seen with the Air force's Agility Prime and all the providers around that.

Luka: 15:55

On the topic of mass, how do you think this is achieved? Where do you see the limiting factor? Is it in the, parts as we discussed just moments ago, or is it in manufacturing processes to accommodate that level of low cost and production at scale?

Kara: 16:12

So in my viewpoint, it boils down to forecasting orders. That's the biggest limfac for the industry rising to meet the challenge of mass is that there's a lot of discussion around how we will achieve mass, what kind of manufacturing facilities we need it. But the truth is that's well within America's wheelhouse to rise to meet that challenge. But even large businesses can't invest in the facilities and start to manufacture at that scale until they have at least a few years of forecasted orders coming in from the government that would allow them to make that investment. And so that creates a catch 22 where, the government may not be ready to put in those orders because what would they do with that mass if they didn't need it and that industry can't prepare at risk because they don't have any certainty on it, and they either have to answer to their investors and their board, or they have to answer to their shareholders about how they're managing that fiduciary responsibility. But it also means we will be in a situation where we'll likely have to try to scale really quickly when the time does need it, unless the government invests in it ahead of time.

Peter: 17:27

So, in your mind, for a country to deliver that type of mass, how important or helpful is it, for that country to already have a domestic consumer electronics industry that is enabling high volume production, of related types of products. Is that really a requirement in order to be able to turn and have the industrial base deliver high volumes of these types of systems?

Kara: 17:57

In my opinion, yes, absolutely, because to, to achieve mass, you have to lower the cost. And a big part of lowering the cost is using as many commercially available parts as possible in your system. And those commercially available parts have to be available to you. You can't have a six month lead time for the electronics that are going to go into your system. Because those lead times build upon themselves. And all of a sudden you have this attritable mass that will be available in the next 12 to 36 months, which potentially is not as helpful as we'd like.

Peter: 18:33

So what do you see as the state of the consumer electronics industrial base in the U. S. and, how far away is it from, being able to support the type of demand in the military space that we're looking at?

Kara: 18:47

I don't know that I would call myself an expert on the consumer electronics industry, domestically, I will say that, generally speaking, in my experience, you end up having to seek out the best performance for the dollar in order to meet your obligation to the government, as well as to the taxpayer. And that, generally speaking, isn't always going to be domestic. Unless there's a regulation that's blocking you and forcing you to go domestic, you will be, in general, trading off performance to stay domestic. And so I think until that gap is closed and the domestic electronics perform the same way, it's going to be, it's going to be a limfac for us.

Peter: 19:29

I've heard, anecdotal accounts of, people who are doing systems integration, to build domestically sourced drone platforms. And they've related to me that to build something with equivalent capability to a Chinese drone, the bill of materials is four to five times more than what that Chinese drone costs. And so if we were to think about domestically building up an industrial base that had the depth and that therefore could be cost competitive, is there a way to do it that bypasses already having a consumer electronics manufacturing base in the country? Is there a way to do it as you talk about, working with allied partners or building that capacity in another fashion?

Kara: 20:18

My theory is that we'd likely have to work with allied partners to get to the point where we would be anywhere close to the cost of Chinese made parts. I mean, there's a reason why you're not buying an iPhone made in California. You wouldn't like that price, and it may not work the same way your previous iPhones did, and even if you could achieve the same performance the price is going to be well past what you would consider reasonable to spend. So, if you have a system, a UAS system, that is completely NDA compliant, meets all the blue list and green list requirements, it's not going to cost anywhere close to your DJI type equivalent, even if the performance is equivalent. And that is the price that the government has to pay right now, and it is one of the, it's one of the stumbling blocks for achieving mass, is that, we've set up a situation where even hundreds of millions of dollars isn't going to get you the same mass that a hundred millions of dollars for another country would.

Peter: 21:21

And, numerically, what do you think of in terms of, being mass? Is it a thousand? Is it 10, 000? Is it a million? and looking at, Ukraine perhaps as an example that gives us some kind of bedrock off of which to think about this, what do you see as the level of mass in these systems that is going to deliver, an advantage on the battlefield?

Kara: 21:44

I love that question. How would I define mass is right up there with how I would define attritable. It's going to depend, largely, and there is no definition that everyone's going to agree to. I think for what we're generally speaking about mass would be in the hundreds. We don't have any systems that I'm aware of that we could do in the thousands or ten thousands, or at least it wouldn't come from, one provider because of the cost would just be really prohibitive to do that. And in Ukraine, you're able to achieve mass with hundreds, but you're also facing a high degree of attrition. Which is to be expected in a conflict. And so part of, the math is just keeping the water at the same line as when you started, even if there's a leak at the bottom of the cup.

Luka: 22:32

So, Kara, one of your earlier comments where you were saying that there's difficulty in forecasting demand. I mean, even in light of the kinds of attrition that we're hearing is happening in Ukraine and how little, arsenal the West, especially in Europe, seems to be having right now. Even in light of that, there is, you're saying, uncertainty or unwillingness to forecast demand with some certainty.

Kara: 22:57

Absolutely. There absolutely is that. Because there is uncertainty around the continuity of the funding being an even flow. So, in order to be prepared to build a stockpile, that would be an investment the government has to make. Companies themselves generally do not stockpile systems at all. They're just going to have exactly as much as what's ordered and any spares associated. They're not going to have anything extra that would be laying around unless the government instructed them to do it.

Jim: 23:29

Kara, we're just coming off a podcast talking about eVTOLs with Dr. Manning and Dr. Bourdain, and we've been talking about autonomy with eVTOLs and AAM. Set the stage for us a little bit of what's driving the demand for mass what's happening with Ukraine that is different than we saw a year ago, let's say. And then second, how is this translating what's going on with Gaza right now?

Kara: 23:53

I love that question, and I would say that from my viewpoint, what's driving the demand for mass is actually coming out of the Indo Pacom area more than anything. that's where that drive is coming from. Indo Pacom is going to be your Asia Pacific region of the world, and that region is defined by this, what is affectionately called a tyranny of distance. Meaning you aren't going to be able to have a central base, you're not going to be able to quickly resupply, you're not going to have runways necessarily, and there is just going to be a significant amount of inescapable maritime factors in whatever you have going on. So a lot of that focus on mass is looking at that tyranny of distance and imagining that you're across this great, vast expanse and you're also in an area where you maybe do not have traditional communication means available to you, the navigation would be limited, but you still need to conduct operations.

Jim: 24:53

Given that we have the problems we have today in meeting the demand, were we anticipating this a year or two ago? Has Ukraine changed our view at all? Has what's gone in Gaza changed? Or is it still an Asian focus and Ukraine has had little impact?

Kara: 25:08

I think Ukraine's been hugely impactful for understanding how important unmanned systems will be in the current and the coming conflicts. I've heard folks refer to Ukraine as the drone war, where it's the first war where we're having drones versus drones happening in the battlefield. We saw lots of drone operations happening in Afghanistan and Iraq, but it was normally just we were using drones, and we weren't seeing folks using them against us in the same way we are in Ukraine. In Ukraine, you're seeing Russia using loitering, munitions. You're seeing Ukrainians use loitering, munitions, and you're seeing that signal jamming going back and forth and then the Ukrainians are having to adapt on the fly to, to be able to still operate and keep their assets in the air.

Luka: 25:58

What's been the biggest lesson learned from the war in Ukraine and how drones are used there for you personally, Kara?

Kara: 26:05

I think the biggest lessons learned. It's probably the importance of having more drone operators in these militaries is that Ukraine has done a great job on ramping up on having their training catch up. But that's been one of the things that they've had to catch up on is having enough people who can operate the drones because the U. S. can drop off a Connex box full of them. But if they don't know how to operate it, then it's not going to be useful to them. So I think having that training tail be ahead of conflicts is probably one of the biggest lessons learned.

Peter: 26:41

What are the types of drones that the Ukrainians have had the most success with or that are in the most numerous use on the part of the Ukrainians?

Kara: 26:50

I don't know that I can answer that definitively. I think most of it is going to be in that sensitive information category. to plug AeroEnvironment, I would say that they've been having a lot of luck using the Switchblades in the engagements. It's one of the unmanned systems that you're going to see referred to often in publications. And that's because the loitering munitions are pretty ideal for this type of conflict because they can stay up in the air for up to 25 minutes. And then they have that kinetic impact as well that it's providing, like, close air support without needing actual close air support in the battlefield.

Luka: 27:28

One thing that the war in Ukraine highlighted from the get go is the need for air superiority which has been absent and therefore resulted in the kind of trench warfare that we're seeing. Now, it seems like that concept is extending to the realm of drones as well. So it seems like going forward, especially in these kinds of operational scenarios, there's no true air superiority if you also cannot protect the skies from drones. So how do you think air superiority will be achieved in a world where a few hundred dollar drones can be sent up, en masse, and disrupt, lines, make everything visible. There's no safe haven anymore. You can't maneuver with the kinds of vehicles that you're used to maneuvering because you'll be picked up very easily by a surveillance drone that's just, saturating the front lines. How does air superiority get achieved in a world that looks like that?

Kara: 28:29

I think air superiority is going to end up looking almost like an arms race between UAS and counter UAS. Meaning, I think that you're going to see a prevalence of unmanned systems making a real impact in a conflict, and then you're going to see a meteoric rise of a specific counter UAS technology that is then neutralizing that. And then you're going to see the UAS innovation catch up and figure out a way to operate around that. So you're going to see a ping pong back and forth between counter UAS, and UAS, capabilities. I don't think you'll ever achieve full air dominance in the battlefield as long as there are unmanned systems. There's always going to be one, that's either, smaller, flies lower, flies higher, you fill in the blank. They're always going to get some through. It's more going to be about trying to achieve dominance versus, like, absolute conquest.

Jim: 29:31

Peter today, sent us an article by Ian Lovett from the Wall Street Journal that talked about the impact of drones on even logistics, as you were, mentioning Kara. I mean, it's amazing to think that the, the combatants in Ukraine can't even be bringing forward supplies in the vehicles they traditionally brought them forward with because of the use of drones. And they can pick up on the different vehicles and the, I mean, you talk about air superiority, the impact that drones has even on the supply chain and the devastating effect it can be if you don't have a secure supply chain or logistical tail, that's amazing, what are your perspectives on that? Are you surprised by it?

Kara: 30:13

Oh, I'm not surprised at all. In the DoD, it's commonly just referred to as contested logistics, right? And that's a huge pain point. It's how are you going to get the supplies out to the time and place of need. Because we can't send the warfighter out and think that we can't resupply them. And the thought of not being able to do that, I think is a paradigm shift for our military. In our past conflicts, we've not had points in time traditionally, there's always going to be exceptions. We haven't had points in time where we can't get supplies out to the warfighter. And we're preparing for a conflict where it may be very challenging to do that. And we may have to use alternative methods for it. And that's where another use case for UAS is providing contested logistics of having an unmanned system bring forward MREs, bring forward water, bring forward ammunition to a place that we can't get a vehicle or a manned aircraft.

Jim: 31:12

Because the combatant drone knocked out your supply chains.

Kara: 31:17

Exactly. And having an unmanned system do contested logistics means that if it went down, all you're losing are the supplies on it. You're not losing any human life. So that's going to be, I think, really critical in future fights.

Peter: 31:31

What this points me towards is, in this game of one upmanship between UAS and counter UAS, it seems that mass itself can play a big role at each iteration of that game, where, someone will choose to counter the other system by simply producing, huge scale numbers of their system. And especially as we move towards systems that have less and less human involvement. the ability to do that scale up becomes even more and more feasible. So, it points towards an inevitability, number one, of moving humans out of the loop in these systems. whether people are comfortable with it or not. One side or the other is going to go in that direction. And it also points towards something decisive in the battle being a high volume production capability to produce things throughout the war effort and not just prior to the war. Because as we're observing, these are really rapidly evolving technologies. They change throughout the conflict and thus they don't have a really long shelf life. So it really points towards cheap, high scale, immediate production capability as one of the ingredients going into this conflict that it helps either side play this type of a game.

Kara: 32:53

And that cheap, quick aspect of it, I think, is a challenge for our military. Because when you think cheap and good, you're going to have a really hard time finding something that's NDA compliant. Because that's going to push you more towards the drones you can buy at Walmart, right? But there's always going to be American innovation. They don't all have to be small aerial systems. We've seen some really exciting innovations coming out of the Navy's Task Force 59, where they want to run demos on a shoestring budget. And they're just using a commercial boat and they just modified it to be unmanned, an unmanned surface vessel. You have even older drones that are fielded program of records that's just a software update to push those to be fully autonomous. So we aren't limited by new purchases only. And everything doesn't have to be the quintessential small quadcopter, I think a lot of it's going to involve thinking about something from a different angle to get to that true mass that we're looking for.

Peter: 33:57

It really does require new thinking because it is, in some ways at odds with the ways that we've developed and procured military hardware in recent decades, where we've opted for more lethal, more expensive systems that we perhaps possess in fewer numbers than the previous generation. And other types of munitions we've been able to stockpile over long periods of time. For instance, 155 millimeter shells, you can stockpile those for 30 years and still employ them with effectiveness in the battlefield. But if the munitions, if the expendable high scale items that you bring into the conflict have this degree of intelligence and behavior built into them, they have a shorter shelf life. And so those two factors are both changing as we look at, the lessons learned from the war in Ukraine, and as we look ahead to a future conflict. It's really bringing home the deep implications of this for what we emphasize in future procurement.

Luka: 35:03

And, the Boneyard in Davies Monthan comes to mind as well.

Peter: 35:07

Yeah.

Luka: 35:07

For repurposing some of that. Kara, what are you hearing from defense customers? What are things that they care about the most? You mentioned the Switchblade, but can you peel that onion a couple layers and talk about the specific capabilities? Is it the robustness to jamming? Is it GPS denied navigation? Is it autonomous features?

Kara: 35:28

So in true DoD fashion, it's going to be, they want all of it. That's generally what I hear from the customers is they want something that has a long endurance. It can go up in the air for a while. They want something that has crystal clear ISR. They want something that can operate in a GPS denied or contested environment. And they want it really cheap. That's generally what they want. But you get to pick just a few of those characteristics. I'm also seeing a demand for things that can be passively placed as well. So systems that don't need to be handled as often and they can be, left in place for use later. I'm also seeing a demand for systems that operate off a common ground control station. And so instead of a warfighter having to have multiple apps in order to control systems, it's being able to have a more single, point of contact for controlling systems. And when you start thinking, everyone loves the word swarm. When you start thinking about swarms, it's how on earth would a single operator control multiple systems, especially if they all come from different providers, which likely they should. That's likely because you want folks that are really good at what they do. You don't want one company making every single drone on the battlefield. So we need those to all be able to work together in a single interface that the warfighter can interact with.

Luka: 36:57

Are you talking about the, I don't know what the acronym is, RAC2 or SCI initiatives in the Army, or is it something else that you're referring to?

Kara: 37:05

So it's just broader in the idea that even if you took it away from the DoD and you looked at something like Homeland Security and Customs and Border Patrol, they're using well over 10 different providers for drones at the border. And so those have to have a commonality for use, because you can't have every single officer be trained on every single type of drone, and the interface can't be completely different. So just a broader, interoperability versus a specific initiative.

Luka: 37:37

So, Kara, how do you see the status of the counter UAS capabilities in the battlefield? And what is the source for the massive attrition that we're seeing in Ukraine?

Kara: 37:46

I think the status of the counter UAS is that we need more soldier borne options is that we can't have counter UAS that's tied to a specific location. And I think we're not seeing attrition solely from counter UAS in Ukraine. I think we're also seeing it through your other options like system failure or kinetics from the counterparts are taking them down, but for counter UAS, I think that the market's going to see a really intense focus on pushing innovation in that area, and that innovation is going to probably not get a break from that push for a while because they're going to need to keep pace with what's coming out of the UAS market.

Peter: 38:30

Do you see UAS as having the edge over counter UAS currently?

Kara: 38:35

I do. I do because I think a lot of counter UAS has been focused on a small, very small drone swarm. They haven't been focusing on larger drones as often that I've seen, unless it's just not available out in the news. And so there aren't going to be as many things they can take down from a counter UAS standpoint that are going to take down like a Group 3. You're going to have to resort back to traditional military means of taking down an aircraft, which is likely going to require a cost that's multitudes higher than the cost of that airframe. And we're seeing that in Ukraine as well, where Russia's putting up systems that are, really cheap, probably wouldn't even fly five more missions after that, but it costs 50, 000 to bring it down. Because there isn't going to be a counter UAS method to bring them down, other than ammunition.

Jim: 39:35

If Ukraine is losing 10, 000 drones a month, how is it losing them?

Kara: 39:39

It's going to be losing a lot of them either from counter UAS, from the adversary, or it's gonna be losing them. So one of the things that they count in that are gonna be things like loitering munitions are gonna count, but that loss is actually very intentional. It's not meant to come back. So anything that's a kamikaze drone, that will be counted.

Luka: 39:57

If a lot of the demand is coming from the military use of drones, where the path to market is a lot quicker, what do you think is the impact on the commercial market. And specifically here I'm thinking about creating these attritable systems with components that don't require the kind of robustness that you would want to see in a drone that's used in a commercial, use case. So if most industry resources are funneled into a world where you don't need that level of robustness, what's the impact on the commercial technology development?

Kara: 40:34

So assuming that the regulatory environment catches up, it should lower the barrier to entry for commercial customers to get into UAS to replace things that they're using, maybe, even like manned systems for right now. Things like agricultural use cases, where you need a low cost way to crop dust, but you need to crop dust once a year. There probably isn't any reason that you would need a really high level system to do that. So, having the defense lead the innovation, and push industry to innovate around that attritable mass will likely make it easier for commercial customers to enter into the UAS market.

Luka: 41:14

All right, Kara, so let's talk about the Replicator initiative. Can you describe for the audience what we know about it? What information is still missing?

Kara: 41:24

Replicator caught most folks, I think it's safe to say everybody, off guard when the Deputy Secretary of Defense Hicks announced it in early August, and she announced it to the press that we were going to do this initiative. And that's where she introduced the name Replicator, that was going to leverage unmanned systems to bring mass and prepare for upcoming conflicts. After that press release, there's been just a lot of confusion in industry around what does this mean exactly? What's going to be their acquisition method for doing this? Is there going to be an RFP? Where is that going to come out of? And what we know today is that a lot of the coordination for industry and government is coming through the Defense Innovation Unit or DIU, and that we have moved to the point where we believe that there's going to be tranches for Replicator. And we know that tranche one is what they're focused on first, but beyond that, we've had nothing really official from the government providing firm guidance to industry on what to expect coming forward. I think the number one thing folks aren't sure about is where the money is coming from. We know that Hicks has said that this isn't a new program. So Replicator is not a new program of record. It's an initiative. Also not clear is whether or not it's accelerating current and funded ongoing efforts by the DoD or if it's starting new. So this is one of those times where there's a lot of information trading happening in industry. There's a lot of engagement with the government and trying to put the puzzle pieces together on what this means so that we can be in a position to meet the demand if and when it comes.

Jim: 43:13

Kara, tell our audience if you could just, what drove the need for Replicator and really what is it, why did, secretary Hicks feel it was so important?

Kara: 43:22

So Replicator is about bringing this mass into the environment. And I know that sounds really high level, but we're talking about all domain attributable autonomous systems, which has a confusing acronym. If you're familiar with other DoD acronyms like A2AD, this is ADA2, that all domain attributable autonomous systems. They've been fairly forthright saying that the reason for Replicator is to meet the growing threat of China. And that's been the motivation around it. What we've learned since then is that we aren't just talking about unmanned systems that are in the air. We're talking about unmanned surface vessels. We're talking about unmanned underwater vessels. So we're going to be covering down on all of those domains.

Luka: 44:09

You mentioned tranches. What do we know about the plan to roll out the tranches, and what's Tranche One?

Kara: 44:14

So we know that the tranches were something that the government, they had an internal committee, and they reached out to the services and to the combatant commands and asked for recommendations on what should be included in that first tranche. We know that those recommendations were then given, We believe that they've done a vote on that. Hicks released press towards the end of last week saying that she's made her decisions and she's going to be presenting them to Congress. So, our best guess is that she'll do that in the next week or two, and then after she gets congressional approval on that plan for Tranche 1 that it will be announced and communication with industry will happen then. There hasn't been any commercial solutions openings or RFPs. There have been a few RFIs, which are requests for information and it's not binding that have come out related to Replicator, but we haven't seen anything related to tranche one come out through official government channels. It's actually all been coming through the press. The

Luka: 45:20

What's the chatter in the industry?

Kara: 45:22

Chatter in the industry is mostly focused on trying to figure out who's on the list for Tranche One to be honest, and trying to figure out how much funding they're planning on. They're planning on doing what's called reprogramming funds. So that would be potentially tied to the 24 budget. So there's a lot of what I like to call business development math going around trying to figure out Tranch One. So figuring out, hey, is my company on the list? Does it say what thing that we make is on that list? Great. So we know they're going to reprogram funds and we know that the 24 budget will likely hit on x date which means the money would be available on y date so that we can inform our leadership on what our next steps are going to be. And that's what every company who is anywhere close to being on Tranche One is doing right now.

Peter: 46:13

And are we correct to understand that most of the companies that will be on Tranche 1 are, companies that are on an existing program of record with DoD?

Kara: 46:24

I'd actually, nobody knows for sure. The idea is that they're all currently engaged with the DoD. They may not be engaged in a program of record though. So I think it would be unlikely that it's going to be any companies that are not currently doing business with the Department of Defense. But I haven't heard anything that's going to limit it to current program of record.

Jim: 46:45

If you are a betting person, who are the top five firms that you're would say are gonna be part of the program?

Kara: 46:50

I would say, Aeroenvironment, Anduril and then I would have to Google some unmanned surface vessel and unmanned undersea vessel company names, because I don't even know there're any. And I would pick, three of those, and that's what I would include.

Jim: 47:05

Well, given you mentioned AeroVironment. why are you so confident and what would be their role do you think?

Kara: 47:10

I think I'm so confident because I know how pivotal the Switchblade 600's been in Ukraine. And I know that DIU has been including AeroVironment in some of the early discussions around Replicator.

Luka: 47:24

So what do we know about the requirements that the Replicator is going after? And is it all Group 1 and Group 2 vehicles? Is there any intuition about the kinds of capabilities or the types of vehicles, at least in the air domain?

Kara: 47:39

I think in the air domain, that focus is going to be on, just to go back to that all domain, attritable autonomy. So what's going to be able to be autonomous in that all domain. And when I think all domain, I'm really thinking about back to that Pacific theater. So what's going to work when GPS doesn't, what's going to work when you're in the water, what's going to work when it's been days and you haven't been activated yet. So there haven't been any formal requirements for Replicator released to industry. So a lot of it's going to be around the press that was released and some of the industry events that have happened. The DIU is going to do a Replicator industry summit either this month or next, they haven't announced it yet. At that point, the hope is that some of those requirements will be released to industry. What we've been told is that Tranche 1 is going to be a way for them to experiment and learn on how Replicator should be. Because in the name itself, there should be a process that is able to be replicated. We aren't just producing systems for the sake of it. We've done that before. that's not too innovative. This is more about the DoD itself having a process that it can replicate on how it can step outside of its traditional acquisition boundaries and achieve mass when needed and creating that replicated process they can pass on as needed.

Luka: 49:08

We talked earlier about the industry's lack of certainty about forecasting demand and therefore investing in manufacturing and technology. Has Replicator changed that a little bit or to what extent has it, how has the industry responded back in August versus in the months that followed?

Kara: 49:28

I have seen some press from some drone startups saying that they're opening new manufacturing facilities to be better positioned for Replicator. But for most of the industry, we're in a wait and see. We need to get the requirements. We need to get the timing. And we need to get the actual order from the government that's what we need to be prepared. But that's just basic economics, right? Where any company isn't going to produce more of something until they're sure that it's been ordered.

Luka: 49:59

Interesting. I mean, just looking at the macro. Situation and the direction that the world is headed towards. it does look like it'll be increased instability. And the need for production capability and fielding of these autonomous attritable systems is only going to grow in importance. So, I get the argument of not investing without firm orders, but there's a balance to that. At some point you have to be investing so that you stay relevant and so that you stay ahead of this wave that you can respond to in short notice. How do the major players in the industry think about this balance? How do you think about it?

Kara: 50:37

I think that balance is one of those checkpoints that at an established industry, you're checking in constantly on the forecast. You're checking in on how things are looking month to month. Because you want to be able to ramp up manufacturing, but you also have to maintain quality. So you're balancing a lot of factors when you're looking at it. And most of the established defense industrial base, they are manufacturing at a fairly high level already. They are pushing out what's needed. And it is always the question of, well, what if that quadrupled? What would you do then? And the answer is, new manufacturing facilities, hiring additional people, and all of that takes time, especially when you're talking about manufacturing things like munitions. You can't just, throw that together in a couple weeks and get it going. There's a lot of regulations and certifications that need to happen before that can get going. I think that it's possible we may see some government investment in the manufacturing capability for weapon systems from the government, similar to the, CHIPS Act that came out. But if you look at the CHIPS Act, it takes a lot of time for that to flow down to the industry as well. So I think it's one of those we need to just prepare for.

Peter: 51:52

You said the defense industrial complex is supplying at the demanded rate so far, or say that again so I make sure I have that right. And my question that's tied to it is, how do you think about that in the context of the current order backlogs for existing missile systems, which we're reading about in the press right now? But please say that again.

Kara: 52:13

So I think the defense industrial base in general is producing at the quantity as required by their contracts. So a lot of that demand signal is going to come from their contractual requirements. Things like lead times, they're usually built into the expectations in their contract, and so Peter, you brought up missile system delays, there will be times where they're going to be untenable delays and delivery. And the more complex the system you're delivering, the more likely you're probably going to hit some of those. But for your smaller group one UAS, you're likely not going to hit those kind of delays. And so those are going to be able to be produced relatively easily, as needed, depending on that demand signal and contractual requirements.

Peter: 53:02

Do you think that there's a logical conclusion that comes out of this? That, some of the future systems that get designed, the people designing them will put certain constraints on it that avoid very complex handbuilt components or exotic materials that, by avoiding those, would allow them to ramp production rapidly in the event of a big change in demand due to a conflict. Is that something that's being discussed that's being pursued as a theory now or not?

Kara: 53:34

I think I see that trend in industry. I'm seeing the trend to move away from the exquisite. But I'm not seeing that demand signal in government solicitation documents. And that's really where it ultimately needs to come from. Because if the exquisite one off system is what wins, that's what industry will, create. Because there's going to be payoffs for using commercially available parts. And those payoffs will likely come in performance. And so the end user has to accept that, where if you want something, let's say you need a solar powered high altitude drone, if you're willing to accept that solar, high altitude drone has commercial solar panels that were not, designed and engineered for that drone, what you're likely doing is you have less payload. Or you've had to change the design in a way to account for the commercial solar panels. So if the end users and the customers, if they accept those trade offs, you're going to see even more of it in industry because it's what makes sense. And it's what allows us to have shorter lead times. There's nobody in U.S. industry who wants to tell a customer that it's going to take 180 days to send you what you ordered.

Peter: 54:53

Right, that ability to rapidly ramp up production might become one of the requirements of the system design.

Kara: 55:00

Yeah, absolutely. But I think even more so than saying rapidly ramp up production, because you're always going to have companies that are going to put their finger in the air and say, well, what about additive manufacturing to create my exquisite part that I developed for this one particular air system? You actually will likely need to see a more explicit emphasis on using commercially sourced parts.

Luka: 55:23

Kara what do you think is the advantage of startups in this environment, especially with respect to those kinds of entities being more long term looking in terms of capital allocation and planning.

Kara: 55:36

I think startups have a huge role to play in this because startups bring a couple advantages. The first being focus. A good startup is focused on a particular subset of a problem, and large companies, they're never going to be focused on one small piece of anything. They're focused on a whole family of systems, a family of products. So startups can bring that focus, but they're also going to bring investment, which gives them freedom to experiment. And you're going to get a lot of innovation from that, that is going to bring advantage to this challenge.

Jim: 56:15

So if you had an audience of innovators, well, actually, you do have an audience of innovators, you said, listen, this is a great environment for startups. And these are the three things I would focus on. What would they be?

Kara: 56:26

So the three things I would focus on if I was in a startup right now would be Underwater Unmanned Vehicles, Surface Unmanned Vehicles, and whatever is the next generation of counter UAS. There's a huge proliferation of companies that do USVs and UUVs. In my viewpoint, and maybe folks can send me emails and tell me I'm wrong later, which I'd love to hear, there isn't a clear leader. There's no Anduril or Palantir of USVs at this point. And there needs to be one. There needs to be that company that's not just pushing the envelope, but leading the pack. And for counter UAS, you have some of the larger defense startups like Epirus that have a really exciting product. But, like all good startups, they've been really focused on one subsection of it, and there's a lot of space left that needs that American startup innovation concentrated focus.

Jim: 57:24

And that's a pretty good size industry. If I remember correctly, it's today, maybe a couple billion, but it's supposed to go to 10 plus billion in the next couple of years. So it's a good size, realizable market for a startup to get involved with. And you're saying it's not a crowded space, counter UAS.

Kara: 57:40

I think it is, but I think there's not a lot of sticky in that space. Because if you had to name a company that is in counter UAS, I would challenge you to name one off the top of your head that wasn't Epirus so I think that there's a lot of room left to rise above the level that folks are at now, and proving out maybe a different way of thinking about counter UAS.

Peter: 58:02

I think there have been a lot of attempts in Counter UAS, but the results have been, middling. It feels like there, there really is a fundamental breakthrough and approach that's required to give Counter UAS the upper hand over UAS, and we're still looking for that.

Kara: 58:18

I believe that it'll come out of the startup community when it does arrive.

Luka: 58:22

Kara, where do you think the innovation is needed more in counter UAS, on the detection piece or the mitigation?

Kara: 58:29

Mitigation and also the delivery of that mitigation. So, another Catch 22 is that the best way to deliver a kind of UAS payload would be by UAS. And so, how are you going to get the mitigation to the time and place of need because you may not have the range to do it from the ground.

Luka: 58:51

Interesting. Back to the Replicator, why do you think the announcement was done in a way that it was, with such levels of ambiguity?

Kara: 59:00

Well, I can tell you that, my joke is that it's the whole thing is a psychological operation, either against our own defense industrial base or against the Chinese. We're all going to spend a lot of calories trying to figure out what's going on. But it was probably something as simple as, sometimes in bureaucracies, the only way to get something done is to say it publicly. And so it may be a way of making innovation happen is by forcing it by telling the press we're going to do it.

Luka: 59:30

That's a very interesting theory. So if it was the former, what is it about the existing military industrial base that needs to be shaken up?

Kara: 59:39

I think shaking up on the idea of a low cost system is that an announcement like Replicator makes even the most established large businesses think about, how can I make it cheaper? Let's go back to the CAD designs. Let's really think through what can we drop? What can we modify? How cheap could we make this? Because they want to be ready to talk to the government about how they could meet the mission. And so it is a forcing mechanism where, in general, you are not trying to think about how to rip out everything out of your system to make it as cheap as possible is not a common thought exercise.

Luka: 1:00:20

So if that is the end goal, and especially if this is the end goal for the 18 to 24 month timeframe as initially communicated, what's on the critical path to achieving this in terms of technology or processes or anything else for that matter.

Kara: 1:00:35

In all honesty, the biggest piece on the critical path is gonna be clear announcements and communication with industry so that industry can start working to meet the intent of what we're doing with the Tranche One of Replicator. And then also clarity on what the Tranche Two and Tranche Three however high those numbers go. It's what's the vision there? Because sometimes if it's something that's going to maybe push the envelope further than we're doing right now, R& D doesn't happen overnight. And industry has the capacity to invest in it, but you need a heads up, you need to be that trusted mission partner and sit shoulder to shoulder with the government and see what they're trying to achieve, what's the overall concept of operations that we're doing here, and that's going to be the critical path. The more that's shown to industry, the more that we'll be prepared to meet the challenge.

Luka: 1:01:26

And so let's say that, the industry day for the Replicator happens this month and there is clarity in the volumes and let's say the DoD decides that we want to be able to manufacture in 24 months from now, tens of thousands of group one and group two UAS systems. Is that realistic? What is the realistic path of achieving that goal look like?

Kara: 1:01:51

Well, I don't know if tens of thousands is realistic, but hundreds or even low thousands is absolutely realistic. And once that's clear, the individual industry partners will make a plan and start working to make sure that either investments need to be made, a reprioritization of resources needs to happen. And we'll all start marching towards the goal of being able to do that. I think right now, when we're in that ambiguity and haze of not being entirely sure, I think this is probably the hardest part. This phase, I think, is going to be harder than actually delivering on the goals. Because we aren't able to do anything with the amount of information we have right now.

Luka: 1:02:37

So do you see a need for innovation and entirely new technology development that needs to be executed on in order to be able to ramp up to these levels? And I'm thinking novel manufacturing processes, cheaper infrastructure, or perhaps, certain elements of the supply chain of the industrial base that requires new R& D, new technology development, or is it a matter of just having a line of sight to capital and scaling whatever existing technology?

Kara: 1:03:07

I think innovation is absolutely going to be required for the later tranches. What we've heard about Tranche One is that it's going to be about systems that are already in production, or are about to be in production. So the anticipation there isn't that we'll need to change anything about what we're making. It's more about being ready to make more of them. But for the later tranches, innovation is absolutely, I think, going to be required. And even for the current first tranche, there's a lot of room for innovation around how things are manufactured, how supply chains work, and how supply chains are also managed. Because a big part of being able to supply mass is also maintaining mass. And so we'll need to look to innovation to be able to do that better than, is currently done.

Luka: 1:04:01

What's your intuition about tranche 2? What will that look like?

Kara: 1:04:05

My intuition is that it will likely focus on what I like to refer to as enablers. So when you, when you start thinking through having, let's say 3000 drones, then you start to wonder, okay, I just delivered these to fill in the blank Army customer. Now, how are they going to actually employ that mass? How are they going to, train for it? How are they going to do the command and control for it when they're actually using it? And a lot of those are going to come from what I call enablers. And so you're going to see things that are less attritable, but maybe still autonomous that work in concert with the mass to enable the mission to actually happen. That's my gut for Tranche 2. It may be a later Tranche than that. And I also think, contested logistics is going to be a focus of one of the Tranches as well.

Jim: 1:04:58

Oh, yeah. Before we wrap up with the podcast, I wanted to ask a quick question. I mean, at the end of the day, a lot of innovation comes on the commercial side because of defense spending. Let's say we implement Replicator in the next year or so. What major change on the commercial side will occur because of Replicator?

Kara: 1:05:16

I think the major change we're going to see is probably a rethinking of economy of scale pricing from our commercial partners. I think that a lot of economy of scale pricing for commercial components is on the idea that those really large scale orders come in very few and far between, and I'm not sure that their profit margins are going to hold when they start getting multiple orders at the high end of those economy scales. So I think we may see some pricing innovations come out of the commercial sector. And I think we may also see what I have mentally been referring to is like Kirkland brand options for drone components. Just like you can go to Costco and you can get your Kirkland brand for fill in the blank. I think we may start seeing that in the drone industry as well.

Jim: 1:06:10

So, arguably it'll drive prices down. The US commercial drone companies, will they be negatively affected by this?

Kara: 1:06:17

I think that until those Kirkland brand options are available, there may be some scarcity in the market, or there may be a difficulty at meeting your price objective given to you by the government. But eventually, where there is demand there's gonna be market

Jim: 1:06:33

Arguably at a lower price because of the

Kara: 1:06:36

for the volume

Jim: 1:06:36

driving down costs.

Peter: 1:06:38

So in line with that, do you see the evolution of some kind of mil spec drones being designed and then bid out to different manufacturers to produce at scale?

Kara: 1:06:50

I think that's the only way you would be able to achieve the kind of mass we're talking about and then sustain it. If you weren't able to have large manufacturing plants or gigafactories that were producing drones at scale for multiple providers, It's hard to imagine how you're gonna meet that demand.

Peter: 1:07:10

That's interesting. It's a big shift in how we think about drones.

Kara: 1:07:14

Yeah, it's pushing them to the same kind of idea that we're thinking about for, like, cars.

Jim: 1:07:21

Well then, do you want to revise your answer about who would be the top, who would be the companies that would most benefit from Replicator? I mean, is it going to be some of the big commercial drone companies? OEMs?

Kara: 1:07:32

Yeah, I think it will be with the big commercial drone OEMs, and I think it's gonna be some of the defense tech startups as well. I think you may see some eventual consolidation there as maybe some new start startups come up through the Replicator program as well.

Luka: 1:07:48

Kara what is the most difficult and important question that the UAS industry needs to answer?

Kara: 1:07:54

Most important and the most difficult or either or.

Luka: 1:07:56

Either or.

Kara: 1:07:57

I think the question is simple. It's, are you ready? That's the question for the UAS industries. Are you ready for the, change that would come if the conflict we've been talking about actually becomes real. Have you thought through what that would be and are you ready?

Luka: 1:08:12

That's a good one.

Jim: 1:08:13

That'll blow your mind.

Luka: 1:08:14

Especially not really knowing what the requirement is.

Jim: 1:08:17

Right.

Luka: 1:08:18

Great. So we have, a few more minutes to wrap it up. Kara, anything else that we should have asked before we move into some of our closing questions?

Kara: 1:08:26

No, I can't think of anything. I feel like we've covered it pretty detailed.

Luka: 1:08:30

What do you think the world of UAS, counter UAS enabling systems, et cetera on the defense side looks like in let's say five years from now, and then fast forward even further to 10 years.

Kara: 1:08:41

I think five years and beyond, we'll be looking at a market that's moved away from the exquisite group five drone systems. And we're looking at this proliferation of options available that will be at a much different price point than what we've seen and able to operate with a higher degree of autonomy than we've seen in the past. And I think for Counter UAS, we'll see a rise in optionality in that market for how we can counter these systems and secure key places like our bases in forward locations.

Luka: 1:09:19

What about even longer term, 10 years? What does the battlefield look like?

Kara: 1:09:23

Oh, I think it looks like a Terminator 2 style hellscape of war being done fully autonomously by systems with no humans involved. I don't know if you want to put that one on the podcast.

Luka: 1:09:36

Seems

Kara: 1:09:37

I've been spending too much time with chat GPT, but yeah.

Peter: 1:09:40

Comes fast. I could see that. I'd believe it.

Kara: 1:09:42

Yeah, I think once we get a taste of taking humans out of the loop in warfare, that it's a slippery slope to warfare no longer involving humans, but only dollar signs. I say slippery slope like it's a bad thing. The idea of having warfare be just about who has the most money on resources and not actually hurting people. It's actually doesn't sound like the worst thing to me.

Peter: 1:10:06

No, that's the inevitability of it that I referenced earlier. It's for that reason.

Jim: 1:10:11

You've been part of a lot of startups. What advice would you give to our entrepreneurial leaders?

Kara: 1:10:15

To maintain focus. Remember the problem set, the challenge for why you founded and don't let the very tempting shiny objects take you down paths that take you away from that initial focus, because you can't do everything, but you can do something really well.

Luka: 1:10:34

So we talked about a lot of things. We talked about the state of the UAS market with a specific focus on defense and then how drones are being used in the ongoing war in Ukraine. We talked about the Replicator program. What do you see as some of the most common misconceptions when it comes to this industry?

Kara: 1:10:51

I think one of the common misconceptions, and I definitely fall into this trap myself, is forgetting that other countries have good drones too. And that it's not an area where we have pure dominance. Ukraine has definitely shown us that there are systems that are coming out of other countries that are performing really well on the battlefield and are giving Ukraine an edge and they're cheaper and they have a great deal of capability. So I think one of the things that's important to keep in mind is that we aren't the only game out there for this and that's a good thing to keep in mind because it keeps you sharp and it keeps you focused on making our capabilities even better.

Luka: 1:11:34

Great point.

Jim: 1:11:35

Kara, I gotta tell you, I am so impressed with how you've handled these questions and you get to the point, you're brief, and you're so knowledgeable. I'm very impressed. thank you for joining us.

Kara: 1:11:47

This was my first podcast, so thank you guys for taking me along this journey.

Jim: 1:11:50

And you do it like it's your hundredth.

Luka: 1:11:52

Really great discussion. Yes, Kara. Thank you so much.

Peter: 1:11:55

It really was.

Kara: 1:11:56

I appreciate it. Thank you guys. I love the questions, by the way. They're great questions.