Speaker 1: Steve Baxter, Welcome to straight Talk, mate. Thanks for having
Speaker 1: me make so me asking you on the show has
Speaker 1: actually come off the back of you and I having
Speaker 1: a really interesting conversation, well maybe a month ago, a
Speaker 1: few weeks there anyway now about the defense sector and
Speaker 1: all that encapsulates lots of things, investors, technology, you know,
Speaker 1: defense capabilities, asking all the big questions about Australian and
Speaker 1: the rest of the world. But before I get into that,
Speaker 1: I wouldn't mind just having a little bit of a
Speaker 1: dig into your background, like as to you growing up,
Speaker 1: et cetera. You know where you grew up and what
Speaker 1: type person, because I noticed in the brief you spend
Speaker 1: a bit of time growing up with a guy called
Speaker 1: Bevern Slattery as a maid of mine and similar sort
Speaker 1: of entrepreneurial flare as you Bevan. He does school together.
Speaker 2: Mums are best friends? Are they my mum's past? But yeah,
Speaker 2: they were best friends. How do you describe that they
Speaker 2: are best friends? Yeah, we'll go with yeah, yeah.
Speaker 1: Your prawd coueens leading for a start.
Speaker 2: Yeah. I was born in clond Curry actually and then
Speaker 2: grew up in Emerald. My dad was in Queensland rail
Speaker 2: he went. Where the next promotion was, I suppose so
Speaker 2: Curry Emerald, Rockampton. Out of thirty six cousins armies and uncles,
Speaker 2: I'm the only one not born in Rockhampton. So it's
Speaker 2: a bit of a regional que the Central Queens. They
Speaker 2: have family, to say the least. And I was born
Speaker 2: in clon Curra. All amazing places.
Speaker 1: And you joined the army at at a young age.
Speaker 1: Sure that's a pretty outher thing, mind you. I guess
Speaker 1: up that way. Though there is army. There are army
Speaker 1: towns like towns, etcetera.
Speaker 2: There are, but that's not really impacting on that, to
Speaker 2: be honest. So that was a scheme at the time
Speaker 2: I joined in eighty seven, and within seven years that
Speaker 2: scheme had been gone. So it was an army apprentice
Speaker 2: scheme where like a recruit sort of fifteen and a
Speaker 2: half year olds and we went did three years, two
Speaker 2: or three years. My trade was three years in we're
Speaker 2: we were on good and that was it sort of fun.
Speaker 2: Oh so people asked if I enjoyed the Army. I
Speaker 2: enjoyed a lot more now I'm out to be honest
Speaker 2: just talking about it. So but yeah, I did that
Speaker 2: sign up for a fifteen years signed nine year contract
Speaker 2: when you're fifteen, which wow, yeah, well your parents up
Speaker 2: the co sign. So now as a father, I realized
Speaker 2: my mother was devastating. I didn't get I didn't understand
Speaker 2: it at the time. And now I have like mates
Speaker 2: with fifteen year old kids, and I think, oh, that's
Speaker 2: way too young, because it was your idea.
Speaker 1: I guess.
Speaker 2: Yeah, I was not doing what at school. I was
Speaker 2: just a mixed up kid, Pubert. It was just playing
Speaker 2: have it with my common sense, if you know what
Speaker 2: I mean. I was in the fights, that sort of stuff.
Speaker 2: And then so this was a pretty good opportunity, truthful,
Speaker 2: either out of the meat works when I Campton.
Speaker 1: To be quite blunt, yeah, so would you say it's
Speaker 1: like not much opportunity in those those days, in those environments.
Speaker 2: No, but even back then, but going working the mines
Speaker 2: were seen as like some sort of it was a
Speaker 2: failure in life. You had to go work with the
Speaker 2: ruins because you couldn't get another job. Now, oh my god,
Speaker 2: you're making bank in the minds, well then everybody. Yeah,
Speaker 2: so kids left school to go to meat works and
Speaker 2: they all get an apprenticeship, which then you end up
Speaker 2: in the mines essentially.
Speaker 1: So what happened after you left the army?
Speaker 2: Yeah, so I left the army in nine to early five,
Speaker 2: So a year before leaving I usually started a business
Speaker 2: from home, a dial upt in service sort of you
Speaker 2: put not as email home mate, and actually yeah actually
Speaker 2: I was E mail are quiet us actually in the end.
Speaker 2: So we started that ninety five and saw that in
Speaker 2: twenty ten, two thousand, saw that in two thousand. Excuse
Speaker 2: me in Adelaide. So back then there was I was
Speaker 2: the thirty cent local called tariff on the telephone call,
Speaker 2: so you could service a very large casement of people
Speaker 2: for not much money essentially, and so there was a
Speaker 2: very strong regional ICP. So there was if you know,
Speaker 2: Michael Malone out of iron It in Western Australia, for example,
Speaker 2: we owned Adelaide to a large degree. And then there
Speaker 2: was another business out of Melbourne and as email sort
Speaker 2: of rural East Coast.
Speaker 1: To be honest, I got you to do that though,
Speaker 1: I mean, like you, how were you think? Like I
Speaker 1: don't understand it, like your sort of you know X
Speaker 1: army guy apprentice blah blah blah, and then here you
Speaker 1: are thinking about it building a dial up business too. Yeah.
Speaker 2: Well I was a guide weapons technician essentially in the army.
Speaker 2: So back in the.
Speaker 1: Days guided weapons technician. Yeah, so what is that?
Speaker 2: So the I primarily worked on two weapons systems, A
Speaker 2: low level air defense missiles to shoot down aircraft, so
Speaker 2: an RBS seven in Rapier technically, so we looked after
Speaker 2: the guidance, the hydraulics, optics, the.
Speaker 1: Whole box and die guidances, comms.
Speaker 2: Guidance now is laser and all radar, right, So so
Speaker 2: on the on the the RBS seven it was a
Speaker 2: laser god it so it was a laser your point
Speaker 2: of a laser beam at the aircraft. The missileld to
Speaker 2: ride the beam to the aircraft and you know the
Speaker 2: operators had to say in this so go for the
Speaker 2: glass bits. So they'd like to put these things for
Speaker 2: the pilot's heads essentially, if you know what I mean.
Speaker 2: So they were very very accurate weapons to be honest,
Speaker 2: and so so technical background, and we used to go
Speaker 2: and exercise for you know, four weeks to four months,
Speaker 2: and back then, you know you couldn't take enough books
Speaker 2: in four months to not go because it's actually really boring.
Speaker 2: You go, you drive for three or four days. You
Speaker 2: dig a whole. Every few days someone will bring you
Speaker 2: something to repair, and then that's how it sort of goes.
Speaker 2: And it's really boring. So you used to take books,
Speaker 2: and you can only take so many books. So I
Speaker 2: enrolled in part time university, so I ended up getting
Speaker 2: exemptions for me not finishing school. Did part time Universe,
Speaker 2: which is a computing science in the end, and that
Speaker 2: got my really fired my passion for it. I hate
Speaker 2: the word it, but for computers. And then you know,
Speaker 2: I did this one subject where it was called Linux,
Speaker 2: which is a very proper or popularp brating system now,
Speaker 2: and then you know, I got to boot it up
Speaker 2: at home and plug some items and it went, holy
Speaker 2: do you could you could charge people to use this?
Speaker 2: It was just that sort of entrepreneurial brain far actually,
Speaker 2: Glenn Richards from Shark Tank cause entrepreneurial brain farts, which
Speaker 2: I think is a really good term. And then you know,
Speaker 2: you start it. It's almost a bit like Gerber's. If
Speaker 2: you've read the Myth by Gerber, he talks about that,
Speaker 2: you know, the accident for entrepreneur type thing. It was that,
Speaker 2: but we jumped through a window that was open into
Speaker 2: that Internet in the mid mid nineties, which is well
Speaker 2: probably the twenty fifth or thirtieth internet service provider in
Speaker 2: Australia at the time. Within the year that were twelve hundred.
Speaker 2: That gives you an idea how much it rammed up
Speaker 2: if you good time, alf Yeah we sold. We sold
Speaker 2: just prior to the dot com bust. So I was
Speaker 2: email requiring us and they got acquired by unit and
Speaker 2: halfway through that says you unit got a quiet baby,
Speaker 2: so I will come. So we're in the middle of
Speaker 2: three acquisitions as we're getting where we're getting purchased. For
Speaker 2: the time, it was good to five mill win. You
Speaker 2: know what, I made a bit almost five mil. That's
Speaker 2: a lot of money then yeah, yeah, big time A
Speaker 2: business partner then as well, So we were fifty five
Speaker 2: percent of that business. So mate Chris, he was it
Speaker 2: was forty five. It's still a good bunch of the him.
Speaker 1: But I guess where I'm going to is, why do
Speaker 1: you think you decided to build a fund that's going
Speaker 1: to invest in defense opportunity?
Speaker 2: In twenty sixteen, the Army asked me to get involved
Speaker 2: with their innovation program. I was a so exulgier boy
Speaker 2: made good at a public profile. That was two years
Speaker 2: on shark tanking at that point, literary pr job coming
Speaker 2: to camera, I get a picture with the general pattern
Speaker 2: on the head and they let me in the tent
Speaker 2: say to speak, and I just saw this amazing capability
Speaker 2: that was being created through non diluted grants out of government,
Speaker 2: which is incredible. It's like James Bond's weapons lab. I
Speaker 2: walked into. It was amazing.
Speaker 1: And then he walked into like an actual lab.
Speaker 2: No, it was. It was as a demodo. It was
Speaker 2: like a it was a display. Yeah, he's got Army
Speaker 2: Innovation Day was the name of the event. And they
Speaker 2: have a series of programs over the years, and I
Speaker 2: culminate in this in this display at the end type
Speaker 2: things a graduation display almost and I've walked in. I
Speaker 2: thought it was also. I thought it was all classified,
Speaker 2: but that we'll get around taking pictures and put on
Speaker 2: LinkedIn and I was like, oh, this is interesting. So
Speaker 2: that's where the other Where are the other investors? And
Speaker 2: they said, oh, we don't trust investors, but while I'm here,
Speaker 2: we trust you, And I said, you just meant me.
Speaker 2: So So I worked with Army. I tried to work
Speaker 2: with the army and then defense about the role private
Speaker 2: capital complaining early stage innovation. So I saw this amazing
Speaker 2: stuff being credited and just falling into the valley of
Speaker 2: death for move that concept of value of death. Yeah,
Speaker 2: but in defense to chasm and nothing gets out of
Speaker 2: the chasm. So these things just die.
Speaker 1: Yeah.
Speaker 2: So I thought, well, I know a better way to
Speaker 2: do this, and I know there's a larger customer, which
Speaker 2: is the US. So the US Department of War at
Speaker 2: that stage were spending about eight hundred billion dollars a
Speaker 2: year US on defense. We're spending about thirty billion US
Speaker 2: dollars on defense at that point, and so there's a
Speaker 2: there's an opportunity to take this great capability, find that
Speaker 2: exquisite customer user market budget long in the US, get
Speaker 2: in that market, get the high revenues, get the multiple
Speaker 2: uplift because they're very undervalued in Australia. So the real
Speaker 2: opportunity is the buyseld equation. These things are that unloved.
Speaker 2: They're very cheap to buy, to be quite blue. So
Speaker 2: our role is to get them into the US, get
Speaker 2: them revenue, and get them get them rated as the
Speaker 2: US company to go from two or three times revenue
Speaker 2: multiple for example, to a thirty two hundred times revenue multiple.
Speaker 1: Make you just explained to you then, so if they so,
Speaker 1: let's just go through a little unpacking a little bit
Speaker 1: if you don't mind. So when you say on the
Speaker 1: buy side, you talk about the US as a buyer,
Speaker 1: potentially I spying the equity here in Australia, you buy
Speaker 1: the equity hearing so you can get.
Speaker 2: When we invest in the startup here. Yep, it's irrationally unloved.
Speaker 2: So for a variety of reasons, defense assets here rational unloved.
Speaker 2: The perception of the market is this one customer being
Speaker 2: the austrain Defense Force, right, And that's not true. There's
Speaker 2: thirty three customers we can sell to in Australia. The
Speaker 2: thirty three Allied customers we can sell to without being
Speaker 2: arrested as a gun runner. So we have Defense Corporation, right,
Speaker 2: and each one of those as an army in ad
Speaker 2: Air Force Blessed America. They've got Marines, Coast Guard, Space
Speaker 2: Force as well. Each one of those has at least
Speaker 2: one unit that can buy off tender. You knock on
Speaker 2: their door and you can sell them and stuff.
Speaker 1: Through the door without a tender.
Speaker 2: Yeah, it's very I'm being a bit flipping there. It's
Speaker 2: a very low overhead process. Yeah, right, typically uncompetitive process,
Speaker 2: which is good. So in fact, in the US Department
Speaker 2: of War there are two to seventy five organizations that
Speaker 2: have the ability to do that, right, and budgets and
Speaker 2: budgets yep. So the thing about the US Department of
Speaker 2: War is that they don't buy the best technology. They
Speaker 2: buy the best technology they can get on contract. So
Speaker 2: you might have the best tech, but if you knocking
Speaker 2: on the wrong door and the person who can't spend
Speaker 2: you got it wrong. So the opportunity there is to
Speaker 2: buy the equity in Australia to invest in the startups
Speaker 2: here and then to transition them into the US. We
Speaker 2: will not invest in the startup here that has a
Speaker 2: material exposure to Theustralian Defense Force, Austraini defense forces a
Speaker 2: risk to its supplies. Really my word, why you've seen
Speaker 2: the headlines about the bugget that the stuff ups with
Speaker 2: contracts and bringing capability. I mean, I'm an exultier. If
Speaker 2: they need a meit to carry a offle again, I'd
Speaker 2: do it tomorrow. That need to be pretty desperate. My
Speaker 2: needs are pretty bad, to be honest, But it's it's
Speaker 2: just in all my investing careers about finding finding an
Speaker 2: investment and getting him into a bigger market. Great, you're
Speaker 2: you're the expert at this. I'm not. That's awesome. Now
Speaker 2: let's get you the courage and the capital get in
Speaker 2: a bigger market. So it's no difference in defense to
Speaker 2: some degree, to be honest. And the US is a
Speaker 2: it's not an easy market, but it's a damn so
Speaker 2: easier than Australia. No government sales easy, and this is
Speaker 2: still a government sale. So but you've got a new
Speaker 2: US administration there and the Secretary of War that you
Speaker 2: young Pete Hess's a young man in a hurry, and
Speaker 2: I really hope he's just a young man in a hurry.
Speaker 2: He's not staring at a piece of intelligence and he's
Speaker 2: got he's got to do what he's doing because he's
Speaker 2: being flagrant with capital over there. They just are trying
Speaker 2: to bring this new capability in and they're happy to
Speaker 2: spend like drunken saless to do it. I said, I
Speaker 2: hope it's you know, I fear what's coming.
Speaker 1: You hope it's not reckless. You just hope it's like purposeful.
Speaker 2: No, I think I hope he's I hope he's reckless
Speaker 2: to be honest, because you can keep selling to it.
Speaker 1: Yeah.
Speaker 2: No, because because he's not reck close, it means he's
Speaker 2: looking the piece of intelligence, which means confidences about to
Speaker 2: kick off. There's there's there's there's a there's a background.
Speaker 2: There's a background macro here, which is the demographic issues,
Speaker 2: rend the jew geo political issues around the world, and
Speaker 2: demographic to be honest, you know, exemplified by what's happened
Speaker 2: in Ukraine, in the Middle East and what China is
Speaker 2: threaten to do with Taiwan, to be quite blunt, that's
Speaker 2: all the background. And so the US is arming, rearming
Speaker 2: like crazy. And I started this back in twenty twenty three.
Speaker 2: The Allied the Allied cumulative defense expendites was one point
Speaker 2: two trillion new stormers. This year, it's one point seven
Speaker 2: next year, it's one point nine trillion. Well, and none
Speaker 2: of that's gone to an extra soldier.
Speaker 1: That's all gone to staffing.
Speaker 2: It's not starfing your basis, it's it's it's technology changing
Speaker 2: out as well. So in the in the in the press, now,
Speaker 2: in the popular press. Now you see a lot about
Speaker 2: the drone, the expensive missile versus the cheap drone. It's
Speaker 2: a lot more nuanced than that. But that's essentially so
Speaker 2: that they're changing out arsenals and what I call the
Speaker 2: articles for conflict. They're changing those out into the more
Speaker 2: commodity stuff the people we invest in essentially, so that's
Speaker 2: all that uplift goes into things that we can put,
Speaker 2: we can allocate capital, and the companies that can exploit
Speaker 2: that increase in budget.
Speaker 1: So it is therefore in the US is a big
Speaker 1: retooling exercise, very much retooling the manufacturing or whatever it
Speaker 1: is that they're going to use.
Speaker 2: You look at the start of the year, just provider
Speaker 2: prior learning tick war. They kicked off on a m
Speaker 2: prior to that. So Secretary of War Pete eggs that
Speaker 2: he had this. He's a showman about this. It was
Speaker 2: called the arsenal of democracy too. What he called it.
Speaker 2: Eight out of the ten companies a visitor didn't exist
Speaker 2: twenty five years ago. And if you because SpaceX is
Speaker 2: twenty three years old, exclude those seven out of ten
Speaker 2: didn't exist ten years ago. So he's making a statement there.
Speaker 2: He doesn't like the old primes. He's really tired of
Speaker 2: being ripped off and the US generally are they understand
Speaker 2: their defense base was just fat, dumb and happy, if
Speaker 2: you know what I mean. And spending yeah so now,
Speaker 2: but now they're actually spending with smaller companies, more agile companies,
Speaker 2: startups let's call them near primes are sometimes called as well.
Speaker 2: And they're getting results. To be honest, there they are.
Speaker 2: They are changing, they're changing how this all, how this
Speaker 2: all works?
Speaker 1: How how has war changed?
Speaker 2: It's well, it's been to change a lot of ways.
Speaker 2: I suppose the and it's been the once again, I'll
Speaker 2: ever characterize it's the drone, but it's it's unmans systems
Speaker 2: and men platforms really really cheap and inexpensive. I'll like
Speaker 2: really cheap and expensive things. Not because I'm a tired ass,
Speaker 2: to be quite honest, right, but because if it's cheap,
Speaker 2: you can give it to a corporally use. If it's expensive,
Speaker 2: you give it to a kernel to use, and that
Speaker 2: corporates more like and pullice through drive out and fix
Speaker 2: it if it's broken, or to if it's not working right,
Speaker 2: to modify it so that the innovation cycles you get
Speaker 2: through commodity war goods will speed up development innovation a lot, so,
Speaker 2: and there's there's lots of new modern business techniques. So
Speaker 2: the biggest change in war is that the new modern
Speaker 2: Internet marketing techniques have actually come into equip procurement. So
Speaker 2: there's an amazing book it's about twenty three years old
Speaker 2: called the Clue Train Manifesto.
Speaker 1: Their Clue Train Minifestosto.
Speaker 2: Yeah, the clue trains leaving the station, get on board.
Speaker 2: It was the late nineties. It was essentially when organizations
Speaker 2: were resisting get on the Internet because their customers might
Speaker 2: say bad things about them. And the whole part of
Speaker 2: the thesis of the book is, well, they'll say bad
Speaker 2: things about you whether you're on that marketplace with them
Speaker 2: or not. So the internet's a marketplace of ideas. If
Speaker 2: you're not there, they're still talking about you. You just
Speaker 2: have not have no ability to absorb that feedback. So
Speaker 2: get on there, get on the clue train, essentially. But
Speaker 2: then it goes into the whole the modern mechanisms around
Speaker 2: gamification and rewards and that sort of stuff at the
Speaker 2: same time, and so the in one example that the
Speaker 2: Ukrainian Ministry Defense, they have an innovation and they're obviously
Speaker 2: threat that war with the rushiappoinment. The Ministry of Defense
Speaker 2: have their innovation arms called Brave One, so Brave number
Speaker 2: one essentially, and so you can approach them and get
Speaker 2: your goods.
Speaker 1: Into the Indo, the Aman civilian or anybody.
Speaker 2: Yeah, anyone can. Yeah, yeah, I don't want anyone in
Speaker 2: the old will can. Yeah. And then they created something
Speaker 2: called the Brave one marketplace, so it's like it's like
Speaker 2: t move for war goods. So you put your stuff
Speaker 2: on there. And then a Ukrainian, a soldier in a
Speaker 2: trench with mud and his boots, gets to his phone
Speaker 2: and goes, I need that sort of drone. He's an
Speaker 2: allocated currency from the Ukrainian center.
Speaker 1: That they can make this sort of democratic redistributed the
Speaker 1: decision making.
Speaker 2: Yeah, yep, and I can get it. He gets delivered
Speaker 2: to his trench, he gets to use it. He can
Speaker 2: give staff feedbacks, he can give one to five star feedback. No, no,
Speaker 2: this is the whole thing. No one wants one starff feedback. Right,
Speaker 2: If you launched this thing in a Russian and it
Speaker 2: doesn't work, that's bad. If proba be angrysoken to give
Speaker 2: one staff feedback, what you do is you bring up
Speaker 2: the supply and say, mate, this didn't work right, and
Speaker 2: it goes, well, what to Leo's people, give me a
Speaker 2: bed with you, I'll fix it and send your ten more. Yeah,
Speaker 2: And so that all of a sudden that that cycle
Speaker 2: in the West takes years and that Ukraine takes weeks.
Speaker 2: So it actually shortened these cycles out. But they've added
Speaker 2: one other aspect in which is quite macarb but fascinating
Speaker 2: at the same time. So not only can you use
Speaker 2: central hour added currency from the from the bank, but
Speaker 2: you have in game currency. So if you actually can
Speaker 2: submit proof you destroyed a certain piece of Russian equipment
Speaker 2: for example, you get allocated You get allocated in game points,
Speaker 2: so Russian tank's worth forty and artillery piece is worth
Speaker 2: sixty and are as a leader board and so every
Speaker 2: week they publish a leader board results and the units
Speaker 2: have competition to see how much Russian equipment they can destroy.
Speaker 2: You and take those intend then take those points, go
Speaker 2: back to the store. Instead of using money, you can
Speaker 2: use points to buy more drones, more radars, more intendors.
Speaker 2: What if you actually need they're their credits, their credits. Yeah,
Speaker 2: and they actually they actually did an incentive test. So
Speaker 2: they actually changed the score for a Russian KA, so
Speaker 2: actually killing a Russian soldier from two to six in
Speaker 2: one week, they doubled the KA account. Wow, so InnoCentive
Speaker 2: an outcome, right, So Barry mccabb fascinating. The US are
Speaker 2: trying to most Western militaries are implementing that. They've actually
Speaker 2: seen what that does, just shortening that innovation cycle down.
Speaker 2: So that's probably the biggest innovation in military logistics since
Speaker 2: the standardization of rifle.
Speaker 1: Is that, like in terms of changes the way wars
Speaker 1: been waged? Is that about making your players, your team
Speaker 1: be more intense in terms of what they do day
Speaker 1: to day, thinking intense, physically intense, intense and every aspect.
Speaker 1: So you just sitting there being like a like an
Speaker 1: old school soldier.
Speaker 2: Look, I think the driver is the desire for the
Speaker 2: soldier to go home end of the day, so that
Speaker 2: they face a very extontential every day. It's a very
Speaker 2: existential problem they face. Yeah, so everything everything they do
Speaker 2: probably relates to that problem. The risk, reduce the risk.
Speaker 2: If you look at the front line in Ukraine right now,
Speaker 2: it's not a front line, it's forty kilometers, So you
Speaker 2: have a lot of contact, which is technically the front line.
Speaker 2: The twenty kilometers either side is no men's land where
Speaker 2: your job as a soldier is to look exceptionally unimportant
Speaker 2: because you're under constant surveillance and the more important you look,
Speaker 2: you're probably going to get serviced as a target. That's
Speaker 2: the military euphemism for blowing up with the drone globe blunt.
Speaker 2: So now you go from front lines where you might
Speaker 2: have had a thousand men per kilometer to maybe ten
Speaker 2: men per columns.
Speaker 1: Wow.
Speaker 2: So because I've just got these got these platforms, which
Speaker 2: is why I'm not worried about the constant, the constant
Speaker 2: sort of retrick around. You know, Vladimer using nuclear weapons
Speaker 2: on that you need to deploy one hundred nuclear weapons
Speaker 2: to have an impact because you know, new weapons had
Speaker 2: to kill soldiers and if every kilometer you've got ten soldiers,
Speaker 2: you need.
Speaker 1: A lot of nukes and you're not going to waste
Speaker 1: that much money.
Speaker 2: No, I means are pretty cheap, to be honest. So
Speaker 2: but I mean it's definitely a periodic victory. But you
Speaker 2: can't use one and have the effect. You typically use
Speaker 2: one or two. Drive a thousand tanks through and you've won,
Speaker 2: and that's you know, I'm oversimplifying it, and now you
Speaker 2: just can't do that. The front is it's gone from
Speaker 2: it's gone from this. When it started, there's massive armored
Speaker 2: thrust that came to know sort of throbell of Roast,
Speaker 2: tried to capture Kiev and all the rest of it.
Speaker 2: And there's very brave Ukraine. You stop. That was an
Speaker 2: amazing that when the true story comes out of the
Speaker 2: incredible and then it went to trench warfare. If I
Speaker 2: remember that, we saw a lot of the pictures of
Speaker 2: trench warfare. Then it went to the drone started coming
Speaker 2: in and that they're probably now on like generation fifty
Speaker 2: eight of that in that conflict. That's how fast innovation
Speaker 2: cycles are moving. So they've had like drones that like
Speaker 2: pe thermite falling thermit gas on the soldiers. Now they
Speaker 2: now got the five optic control drones, they've got deep
Speaker 2: strike drones. They've just it's it's terrifying. The other really
Speaker 2: cool thing they've done with the respect of modern business
Speaker 2: techniques is your chrome. Ukraine's are clever. They're going through
Speaker 2: some political eruptions at the moment with their defense staff.
Speaker 2: You're seeing some protests there, but they've got something called
Speaker 2: Trophy Lab. So all the captured Russian equipment they've got,
Speaker 2: it's called Trophy Lab. So all the captured Russian equipment
Speaker 2: they've got, they're actually putting it up on a website
Speaker 2: for people to access once you go through your credentials
Speaker 2: and everything else. So in order to bring their Western
Speaker 2: partners in sort of say hey, you're got to partner
Speaker 2: with us. Not only you know, can we use and
Speaker 2: test your kit, but we can also we get from
Speaker 2: the Russians we can make available for you to exploit
Speaker 2: in an intelligence, to inspect, to explore an intelligence full apart. Yeah,
Speaker 2: so they've not only got that marketplace, but they've also
Speaker 2: got to forget they've got a marketplace for intelligent tonight.
Speaker 1: So very clever, clever leverage.
Speaker 2: Yeah. So it's literally it's modern business marketing techniques. Yeah,
Speaker 2: I applied to combat, Yeah, in that conflict.
Speaker 1: More precisely, it can be just all about drones because,
Speaker 1: like you just mentioned, drones, were talking about drones, as
Speaker 1: I understand, you wouldn't have better me, But as I understand,
Speaker 1: the original drones were coming in from Iran. When when
Speaker 1: Russia first started using the drones, the Iranian DROs. Why
Speaker 1: was Iran so far ahead of everybody else, at least
Speaker 1: ahead of Ukraine and Russia, so much so that Russia
Speaker 1: then drew on the Iranian drones and started drone warfare.
Speaker 1: Now there's a whole lot of stuff responses to drone warfare,
Speaker 1: so there's drone defense, et cetera. We'll talk about that
Speaker 1: in a moment. But why was the Iranians so far ahead?
Speaker 1: Or they're understanding this change in warfare?
Speaker 2: So it wasn't just the Iranians. I mean there's also
Speaker 2: several core becauses as Bojan and the other place that starts.
Speaker 2: So they went Hammer and Tong had a few years
Speaker 2: ago with the drones as well. To be honest, Yeah, yeah,
Speaker 2: I mean you're as I want to say, Yeah, that's
Speaker 2: a bit of a dust up.
Speaker 1: Yeah, they haven't fight because they got borders.
Speaker 2: Yeah, and and drones were used to the decide they
Speaker 2: had the most drones essentially won that battle, if you
Speaker 2: know what I mean. So I think there might have
Speaker 2: been a tell there. Iran has been embargoed for most
Speaker 2: things for many years, so but you know, it's hard
Speaker 2: to embargo a lawn maarer engine and in balsa wood,
Speaker 2: which is what those those she heads are made at. Really,
Speaker 2: oh yeah, they's nothing. They're like very cheap, very inexpensive
Speaker 2: in balswood in the derogatory way because it's obviously very light.
Speaker 2: It's quite structure anyway. So but you can't and you
Speaker 2: can't you can't embargo lawnmar engine. That's what it's got
Speaker 2: on it. It's not like it hasn't not a jet engine.
Speaker 2: So they built that out of necessity of what can
Speaker 2: we do, what effect can we create? So very innovative
Speaker 2: to be honest. Yeah, and their construction how they built
Speaker 2: them at the same time. So, but they haven't haven't
Speaker 2: moved much since so Iran hasn't on the innovation side.
Speaker 2: Rights again, they've got limited facilities that are bargered. There's
Speaker 2: not a great deal of high tech probably Uless it's
Speaker 2: a nuclear center, few so imaged. It's not a great
Speaker 2: deal high tech in Iran. A lot of support through
Speaker 2: China at the same time though, So that's if you
Speaker 2: look at the just I suggest anyone who wants to
Speaker 2: have to think about that conflict get on Google Maps
Speaker 2: out and understand where a run sits. It's quite fascinating
Speaker 2: to be honest, it tells you a lot about who's
Speaker 2: playing in that region. But on the ballistic missile front,
Speaker 2: I mean blistic something that the first ballistic missile was
Speaker 2: built by the Germans and World War Two it was
Speaker 2: called the V two. Right, They've been around for a
Speaker 2: long time. It's actually really old tech that I think
Speaker 2: in essence, the world can be pretty proud. It's it's
Speaker 2: proliferated quite slowly, if you know what I mean. So
Speaker 2: not now now everyone need is it? Unfortunately?
Speaker 1: So yeah, you mentioned earlier on that were to sort
Speaker 1: of iteration fifty eight of drones. Where's that innovation coming from?
Speaker 1: Like is that Russia? Ukraine? Is it here in Australia? Both?
Speaker 2: I know we didn't do it here in Australia. We
Speaker 2: have some great companies here in Australia. But the innovations
Speaker 2: that existential. Young men from the murder each other, kill
Speaker 2: each other basically. And then, like I said, because the
Speaker 2: platform is are that cheap, they can let you pull
Speaker 2: the square about, so I think I can make this
Speaker 2: work out, and so they'll do that tinkering. Tinkering is
Speaker 2: and when it's sheap, you can do it. Was it
Speaker 2: was weird, and so it's gone through many phases. I
Speaker 2: remember talking to one of our advisors and he was
Speaker 2: saying that one stage, what they were doing is they
Speaker 2: were doing very much localized so they'd work out something
Speaker 2: U dronal feature or something, and they deployed in a
Speaker 2: certain part of the front to test it right and
Speaker 2: then it'd work, and then they'd actually then mass manufacturer
Speaker 2: gived all the units. But in that sort of period
Speaker 2: of time two weeks, the Russians had counted it, so
Speaker 2: that actually because they'd seen it one place. The Russians
Speaker 2: aren't dumb, They're very much a learning army. They get
Speaker 2: exposed to this this innovation, and they'd learned that lesson
Speaker 2: they'd counter it and they'd deployed that across the front.
Speaker 2: So by the time the Ukrainians went to deploy their thing,
Speaker 2: it was now null and void. So that point in
Speaker 2: time they sort of said, we can't test this on
Speaker 2: the Russians. We have to assume it's going to work.
Speaker 2: So they get some innovation and they just they wouldn't
Speaker 2: test it against them, just go for it. They just
Speaker 2: they create it, put it out there, see if it worked.
Speaker 2: So that so also the format, not just the goods,
Speaker 2: but the format and how you actually deploy that because
Speaker 2: like you know, it's war, the enemy gets to say
Speaker 2: as well. Unfortunately, if you know what I mean. So
Speaker 2: in the Rusians are well, they're very much maligned. They
Speaker 2: are very much an adaptive learning army, that's for sure.
Speaker 1: In terms of drone defense, there's Australia player role because
Speaker 1: we see those companies like Drones Shield and all those
Speaker 1: sort of companies that came out in Australia, But are
Speaker 1: we doing anything in terms of defense for this sort
Speaker 1: of stuff.
Speaker 2: Drones Shield is not to be not to be discounted.
Speaker 2: Obviously Sydney based company. Obviously they that were called it's
Speaker 2: called a soft kill solution. So they're all about jamming.
Speaker 2: So you know, drones work on little radio signals GPS,
Speaker 2: so you can spoof GPS, so you can tell that
Speaker 2: you can convince the drones in the wrong spot, do
Speaker 2: you know what I mean, and it'll fly at another spot,
Speaker 2: you can take it over, you can jam it. So
Speaker 2: a lot of those so that there's in the innovation
Speaker 2: race that a lot of that's been counted. So now
Speaker 2: drones will actually spool will actually they'll put a spool
Speaker 2: of fiber carlon it. So single fiber strand thirty kilometers
Speaker 2: are five were ways about three and a half kilos,
Speaker 2: So I put that there so you can send this
Speaker 2: thing thirty kilometers and not be able to jam. It's
Speaker 2: unjammable essentially, so they've already count to the jamming. So
Speaker 2: the drone Shield solution the kinetic sense, I like Droned
Speaker 2: Shield as a company. I think in the civil defense sense,
Speaker 2: that makes a lot of sense.
Speaker 1: What civil defense been not military?
Speaker 2: So I suppose defending sports grounds and bridges and things
Speaker 2: like that. Right whereas I'm in the military space. You know,
Speaker 2: a soldier has to know he can that he can
Speaker 2: stop that threat. And then he really weighed to stop
Speaker 2: the drainers to put a big smokey hole on it
Speaker 2: mark to be honest, and.
Speaker 1: You got to blow it up to blow it up,
Speaker 1: and how do you blow it up there with a Yeah.
Speaker 2: One of our port Fi other companies I can probably
Speaker 2: talk about that they makes a solution that it's a
Speaker 2: t US company. They've got a solution which is a
Speaker 2: set of sites, lasers and actuators that fits onto a
Speaker 2: soldier's rifle.
Speaker 1: Actually being something that turns something off.
Speaker 2: Yeah, so the actualtor is actually the butt stockh fits
Speaker 2: on the soldiers, but you're actual acquie the target through
Speaker 2: the camera and then this there's actually a pneumatic actuator,
Speaker 2: so the computer lays the rifle onto the target and
Speaker 2: the laser to engage the target. And they're talking about
Speaker 2: sort of first second round accuracy small flying grains at
Speaker 2: two hundred meters, which is game changing in that space,
Speaker 2: to be honest, And they've just they're doing very well.
Speaker 2: We think where we got some good news there soon
Speaker 2: which we're probably done and when this is going to ES,
Speaker 2: I don't know if I can actually say anything about it.
Speaker 1: Well, don't say about it at the stage. If we
Speaker 1: find out it's something that we might put it up.
Speaker 1: But it's but just on that, like, are you saying
Speaker 1: to me that, like there's a drone coming at me
Speaker 1: and this new tech allows me to basically blow a
Speaker 1: hole in it by virtue of this technology.
Speaker 2: That there's laying of the weapon. So that's a soldier system.
Speaker 2: There's also they called crui serves, so you're a bigger
Speaker 2: machine gun to go on trucks and stuff. I suppose
Speaker 2: they've also got the software and hardware, the optics can
Speaker 2: go on that and save an individual soldiers version. They
Speaker 2: have a cruise serve version, and then there's also the
Speaker 2: ammunition that's involved at the same time. So big now
Speaker 2: is so the early counter to drones with shotguns, which
Speaker 2: are quite effective, but the only work when it gets
Speaker 2: within ten meters.
Speaker 1: Shots just goes everywhere.
Speaker 2: That's a bit scary close and never have never have
Speaker 2: have the ammunition that breaks in like sort of six
Speaker 2: or seven fragments, so over I think over fifty meters
Speaker 2: it gives you about a one and half minute dispersion writing.
Speaker 2: So that's so you have been able to get the
Speaker 2: round near the target then being able to actually engage
Speaker 2: it with that. But there's many many facets that. So
Speaker 2: there's a great Austraian company here down in South Australia.
Speaker 2: They have a passive radar solution. So passive radar is
Speaker 2: this is what these guys are with the canter of
Speaker 2: the strange defense they are will be I'm hoping they
Speaker 2: will be yep. So I just think it's war winning
Speaker 2: technology personally. So passive radar is great. So let's say
Speaker 2: you've got a triple J and Chenna treashment in Triple J.
Speaker 2: It's that way, but for some reason, you know, as
Speaker 2: treatment's out, a little bit bounced off the wall there
Speaker 2: and coming back. So that's cool. Signal. That's called noise. Now,
Speaker 2: modern radio is a really good at rejecting noise and
Speaker 2: accepting signal. These guys listen to the noise, so they
Speaker 2: will sit there and listen to Triple J. And then
Speaker 2: now it's at that Greg Cordon over there doing this
Speaker 2: and they can so all the little errant bounce as
Speaker 2: they get. They build a map of the world based
Speaker 2: on that. So a radar is a really good way
Speaker 2: to find something. What a radar does it sends out
Speaker 2: a pin and it listens for the response. Right when
Speaker 2: you do that, though the other person gets a bounce back. Yeah,
Speaker 2: the other person can hear you exactly where you are,
Speaker 2: and so they'll send you a present to turn your
Speaker 2: radar off. In a military sense, I'll blow you up.
Speaker 2: This doesn't make any mission. It just sits there and
Speaker 2: listens to So you could use the enemy's jammer. You
Speaker 2: could use the enemy's jamming signal as a radar source,
Speaker 2: so then you can find the drone. So there's one
Speaker 2: thing about once you can find them, they're reasonably easy
Speaker 2: to kill. They're quite flimsy, they're small. Most aircraft, you know,
Speaker 2: they're built light, they're built for emission. They built light.
Speaker 2: So if you can actually get an X, y Z coordinate,
Speaker 2: you know where this thing is in time and space,
Speaker 2: it's reasonably easy to create an effect. In military terms,
Speaker 2: I took a bet effects and effectors. An effector is
Speaker 2: a weapon and effect is the explosion. But you can
Speaker 2: create an effect that disables that drone. So it's not
Speaker 2: just the actual kinetics of it, it's also how do
Speaker 2: you find that Unless you know it's there, then you
Speaker 2: can't shoot it. So we have that in Australia. That's
Speaker 2: really good. We're coming up with an EOS who are
Speaker 2: listed company. They do a lot of lasers, remote weapon sites,
Speaker 2: the turrets are the bits and pieces like that. They
Speaker 2: have a lot of space capability as well. EOS we
Speaker 2: have the soft kill guys from drone Shill. We spoke
Speaker 2: about encounter drone space. Our investments with the US company
Speaker 2: called called zero Mark.
Speaker 1: It was zero Mark zero Mark.
Speaker 2: Yeah, I got a great solution. So but in drones
Speaker 2: in general, like I I find I think drones are
Speaker 2: absolutely scary combat innovation, and they're actually scary in investment.
Speaker 2: We don't invest in drones. That's a fund. We look
Speaker 2: at the commodity platform itself has been commoditized.
Speaker 1: And as a result, as in the machine itself, the.
Speaker 2: Machine is selfie. Other the platforms being commoditized and there's
Speaker 2: this no value left in it. To be honest, it's
Speaker 2: a race to the bottom.
Speaker 1: Right, they're all discounting each other.
Speaker 2: Yeah, yeah, and there's very little differentiation. I mean, I
Speaker 2: get these pictures from these lovely goalers. You make drones
Speaker 2: and it looks nine to nine percent identical to the
Speaker 2: last one I saw. But there's supposedly different and you've
Speaker 2: good on them that they're pitching it right now. So
Speaker 2: what we did though about two years ago, much of
Speaker 2: my team so agree with about twenty drone opportunities pipeline.
Speaker 2: I just kicked them all out. I said, no one's
Speaker 2: who's going to pick the winner from that? That's crazy.
Speaker 2: So let's pull a drone apart and let's see what
Speaker 2: makes it tick. It turns out that the best Allied
Speaker 2: Nations autopilot for small drones is made in Geelong, Victoria.
Speaker 2: The video modem. Guys in the best in the allow
Speaker 2: world are made in what do you call it?
Speaker 1: Yellow world?
Speaker 2: Allied allaid world, Allied, Well, the best are Chinese, right,
Speaker 2: and then on Allies right, okay, Allies all So the
Speaker 2: best I'll just say the best in the world. Assumement
Speaker 2: means allies is a video modem which takes the camera
Speaker 2: signal from the drone back to the operator. That's in Bristain.
Speaker 2: For example, you have two of the world's best speed controlers,
Speaker 2: so the thing that actually makes the power get routed
Speaker 2: to the motors properly, very very importan probably the most
Speaker 2: important part of the drone. Best one of those is
Speaker 2: in Hobart. Probably real besters and said, yeah, second best
Speaker 2: is here in Sydney. Maybe second or to the best
Speaker 2: is in Sydney in the world. Yeah, in the world.
Speaker 1: Yeah wow.
Speaker 2: So we had the world's owning non Chinese motor manufactural
Speaker 2: was in Canberra. That young, beautiful young man had the
Speaker 2: best mentors Andrew he got brought out by a Californian company.
Speaker 2: I think he left a couple of Sydney mansions on
Speaker 2: the table. He could have he could have waited and
Speaker 2: solved for more personally but yeah, good on him. He's
Speaker 2: lovely chap, so he's done well. So there is capability
Speaker 2: in Australia that goes across all the platform.
Speaker 1: And as our government involved in any of this stuff,
Speaker 1: it looks army navy, it is it is.
Speaker 2: So look a lot of this, a lot of these
Speaker 2: things are actually created through nondoluded government grants. So before
Speaker 2: people like me came along and yet private capital funding,
Speaker 2: the way this thing's got funded was through nondolutive government grants.
Speaker 2: So loosely, federal government have granting mechanisms through the Partment
Speaker 2: of Defense, then allocate funds out. You know, he missed.
Speaker 2: To be honest, it's a government granting system, so you know, got.
Speaker 1: To do they own it? Does the government get a percentage?
Speaker 2: Typically not.
Speaker 1: They just say we'll grant you the money to go
Speaker 1: to the research and build it or prototype it, whatever
Speaker 1: the case will be. And then what happens then is
Speaker 1: someone like you come as long as it says the guy,
Speaker 1: I'll give you another hit because the government grant is over,
Speaker 1: I'll give another hit, and because I think there's something's
Speaker 1: going to go someway.
Speaker 2: Yeah pretty well, pretty much, yeah, pretty well, it's a
Speaker 2: bit different. It user gets to the end and everyone
Speaker 2: complains that you know that not everything the government funds
Speaker 2: from an innovation sense should should get picked up or
Speaker 2: should work. There's got to ben element of throwing socks
Speaker 2: at the wall here, right, and the ones that stick
Speaker 2: you go for right. Yeah, so so, and it got
Speaker 2: a very bad rap. In the past, the scheme was
Speaker 2: called the Defense Innovation Hub. Doh, it's been superseded. Now
Speaker 2: I got a very bad rap. They spend about ninety
Speaker 2: million bucks a year on various creens. It creates a
Speaker 2: lot of great stuff. So I'm not sure if for
Speaker 2: me there's a there's a business I talk about a
Speaker 2: lot called the cardboard drone, the cardboard cardboard drone. So
Speaker 2: it's a business, family run business out of Melbourne, coll So.
Speaker 2: I packed the Voncino family. They're lovely people and they
Speaker 2: created this flat packed. So it's a drone, it's a
Speaker 2: it's a you get it. It's flat packed cardboard. You
Speaker 2: get it. Your assault's got a hot blue gun, a
Speaker 2: roller masking tape, fold flat beat of flat beat of
Speaker 2: flat sea. Forty five minutes later, there's an aircraft shaped thing.
Speaker 1: Care's no care drone?
Speaker 2: Yeah at forty five minutes later you get this thing
Speaker 2: that can take two kilos of humanitarian payload sixty kilometers.
Speaker 2: So you have to talk about things in euphemisms. You
Speaker 2: can't say two kilos of explosives. Yeah, to the point
Speaker 2: where so that was created through those DH granting mechanism
Speaker 2: and this comes on like a palette of thirty come
Speaker 2: on the palette and there's like thirty drone things on
Speaker 2: a sort flat pack to soldiers put them together and
Speaker 2: then they send them off on their missions and they
Speaker 2: program up the strainer soldiers any soldier. So yeah, I
Speaker 2: believe there are some quantities in Australia. The biggest, the
Speaker 2: biggest user. It's got a lot of coverage a couple
Speaker 2: of years ago whether the Ukrainians use them to destroy
Speaker 2: Russian aircraft and an air basing curse, so they it
Speaker 2: was a long way behind the line. So we're thinking
Speaker 2: they actually got smuggled through the checkpoints and very hard
Speaker 2: cardboards right in that respect, because it doesn't show up
Speaker 2: on X ray machines. So I think they did a
Speaker 2: covert insertion through X ray machine. I'm only guessing. I
Speaker 2: actually don't know Mark to.
Speaker 1: Be truthful, but it feels like a pretty good story
Speaker 1: right now, like to stick with that one.
Speaker 2: So that's a cardboard and cardboard. It's great because it's
Speaker 2: literally and they're meant to be some of some have
Speaker 2: them like sixty seventy missions or they can be a
Speaker 2: one way job, but they can do a variety of things,
Speaker 2: and people have talked quite openly about they've actually used
Speaker 2: that they've taken like Ukraine's put aircraft radios in them
Speaker 2: and they use them as decoys to try and get
Speaker 2: Russian missile systems to start up their radars to understand
Speaker 2: where they are, so they can sort of go them
Speaker 2: into into lighting up their radars, they can discover they
Speaker 2: are and bomb them essentially. So they've got all.
Speaker 1: Sorts of different they're using them for surveillance, yeah, surveillance everything.
Speaker 2: So that's that's a really good drovet. And there's been
Speaker 2: a recent listing on this train stock exchange and the
Speaker 2: company called ball Site. We almost invested in these guys
Speaker 2: before they're listed. Actually, our fun can't do a listed
Speaker 2: that we're prohibited from doing listed. Is it the ACTEA
Speaker 2: you do with no, it's part of innovation signs. I
Speaker 2: want to say, right, Okay, so yeah, I mean they
Speaker 2: feed information back to.
Speaker 1: The that's Arthur ced this is old portfolio.
Speaker 2: What have been actually too. Yeah, yeah, he's very involved
Speaker 2: in defense now, Arthur, he's like chairman of business called
Speaker 2: Hypersonic Launch Systems and Bales Land based business. They they
Speaker 2: want to it's a great story and mutually let me
Speaker 2: just now go for it, pull me off target you
Speaker 2: want to. So we didn't invest in these guys. One
Speaker 2: we missed unfortunately, but they've made a hope somenic aircraft
Speaker 2: called the dart Fly, and they won a US contract
Speaker 2: from something called the Defense Innovation Unit the US. So
Speaker 2: you know, if there was a five star rating system
Speaker 2: for defense funders innovation funders in the US, these guys
Speaker 2: that have four point nine nine stars die is brilliant.
Speaker 2: So they got a fifteen million dollar award. There three aircraft,
Speaker 2: a five million bucks apiece, plus the US Department of
Speaker 2: Defense had bought like the eighteen million dollar rocket. They
Speaker 2: had to strap it to times by three, so there
Speaker 2: was a massive sort of wing they launched there. So
Speaker 2: that got three because you know typically in rocketry and
Speaker 2: that the first one blows up the second one to
Speaker 2: get flights for ten seconds and blows up and the
Speaker 2: third one works, you know, and they all tend to
Speaker 2: celebrate their success or their failure in very much in
Speaker 2: the open. This is why it blew up, and everyone's
Speaker 2: all of high fiving the fact they just blew a
Speaker 2: rocket up. They've launched this scene in February out of
Speaker 2: Wallops Island and the thing took off, and or the commentary,
Speaker 2: you know, the aircraft separated in the US government cut
Speaker 2: the feed and said, what law, that's good. That's good, Rob.
Speaker 2: I don't know, I'm only guessing it's good. So so
Speaker 2: that's going to be an amazing ASTRAI so hype personic
Speaker 2: story in the world as written by an Australian company
Speaker 2: out of Brisbane. Michael Smart's the founder of the technology there.
Speaker 1: So but what is it? Just explain what to hype
Speaker 1: us on?
Speaker 2: The aircraft is hypersonic, hypersent. Flight profile is usually above
Speaker 2: mark fiventh.
Speaker 1: It's going faster than five thousand films an hour of it.
Speaker 1: I don't know where yees.
Speaker 2: Twelve on kumeters in our speed of sound.
Speaker 1: Yeah yeah, yeah, that's Mac one.
Speaker 2: Mac one, Yeah, is Mack five Mac five mafile is.
Speaker 1: Going like two more max faster than concord.
Speaker 2: And air breathing as well, because you can go very
Speaker 2: fast in space, but that's there's no resistance in space.
Speaker 2: But this is so it's a hypersoning and steerable So
Speaker 2: a lot of these things haven't been steerable in the past.
Speaker 1: And in this aircraft, what would be the objective? Like
Speaker 1: they want to have something to go so fast like
Speaker 1: puffling about to get somewhere quickly.
Speaker 2: Yeah, get somewhere very quickly, carries small payload very quickly.
Speaker 2: It's not for to put any one in well that
Speaker 2: the dark flight, the initial one's quite small, like there's
Speaker 2: nothing to stopping them from actually scaling it up. Right, So, look,
Speaker 2: we've done d D in this business, and I can
Speaker 2: tell you a lot about it, but I won't do
Speaker 2: that on camera.
Speaker 1: O Captain, I understand that. Of course I was going
Speaker 1: to ask you about that. There's been a lot of
Speaker 1: discussion about robots in warfare. What's what's the deal there?
Speaker 2: Is that for real, they're being used in the warfare
Speaker 2: now you know really not well not the walking ones,
Speaker 2: not the Bible I'm walking the walking ones. Yeah, so
Speaker 2: they look like people. But did you see that that
Speaker 2: that thing was a Chinese New Year or some of
Speaker 2: those robots were dancing with the unbelievad stuff. I thought
Speaker 2: to myself, Oh my god, because robot it's an industrial machine.
Speaker 2: If it goes crazy, it's heavy. You imagine we're out
Speaker 2: of control and slaptic. Yeah, the kidnap a broken jewel?
Speaker 1: Right, well, I actually did see if that happened. Not
Speaker 1: not broken jaw, but I saw one of those robots
Speaker 1: actually throw an adult.
Speaker 2: Oh is it great YouTube channel? Robots going crazy? Yeah,
Speaker 2: actually hilarious. Watched some of the videos.
Speaker 1: To be honest, do you think we'll have wars with robot?
Speaker 2: I'm very much so. I hope so, I mean a
Speaker 2: drains a robot at let's got the humans out of
Speaker 2: the picture.
Speaker 1: Be awesome to be honest, yeah yeah, but I do
Speaker 1: you know of is there anybody sort of doing this
Speaker 1: sort of stuff now?
Speaker 2: Not with bipeds, No, very much regrant with wheeled with
Speaker 2: with air vehicles, underwater vehicles, a surface vehicles. Yeah, they're everywhere.
Speaker 2: We've there's you know, so not not bipeds. I have
Speaker 2: not seen biped yet. I have seen the dogs. You've
Speaker 2: seen the little look yeah, the dogs. That's not me
Speaker 2: I feel right too. They strap machine guns these dogs
Speaker 2: you're like, or bombs. Yeah, so yeah, I mean the
Speaker 2: object now is digging them down in price so you
Speaker 2: can actually deploy in the scale. That's kind of the
Speaker 2: real object there.
Speaker 1: But is this stuff happening in Australia? And do we
Speaker 1: have robotics you know, innovation here? We do?
Speaker 2: I haven't seen I've seen people doing things in the
Speaker 2: proofray of robots. So there's a great business here. I
Speaker 2: can't remember the name of it now. We almost invested
Speaker 2: in at ten thirteen. We lost out of that deal.
Speaker 2: So they actually process so a robots a series of
Speaker 2: machines and a lot of those machines are small computers
Speaker 2: that make up them robots SOLF and they generate a
Speaker 2: lot of data. So these guys have a business of
Speaker 2: processes the log fold data to help the people understand
Speaker 2: and train how that robot works. So they've got this
Speaker 2: really it's it's like the pick and shovel example for robots.
Speaker 2: Why I build robots and it's when you've got a
Speaker 2: pick and shovel robot shop type of thing. Yeah, it's
Speaker 2: that old analogy. So I don't know anyone doing the
Speaker 2: actual robots themselves, but I know people are working on
Speaker 2: the peripheral parts of the robotics problem to be honest,
Speaker 2: So well.
Speaker 1: I've always wanted to know this too. But why is
Speaker 1: there a resistance to investing in defense?
Speaker 2: Yeah?
Speaker 1: What is it? What are we worried about?
Speaker 2: Like like not put down the three things? From my analysis,
Speaker 2: it is that as an investor's a perception as a
Speaker 2: single customer. So I don't think it's we mentioned that earlier.
Speaker 2: The perception is the adf the any customer.
Speaker 1: And it's right, But that's a commercial resistance, isn't it.
Speaker 2: But that also that also then then reflects on the on,
Speaker 2: the on the on the opportunity and the opportunity to return,
Speaker 2: the potential for return for opportunity. The other one is
Speaker 2: defense is hardware for the most part, it's it's defense
Speaker 2: is mostly you know, heavy things made for robust mean
Speaker 2: if you know what I mean, we never have to
Speaker 2: use so and that's got a different return profile. A
Speaker 2: software business might return your twenty five x fifty x
Speaker 2: one hundred x, you know, a hardware business for returns
Speaker 2: to five to ten x it's really good. So that's
Speaker 2: it's a different return. So it's I suppose it appeals
Speaker 2: to different sorts of investors. If you know what I mean.
Speaker 2: And we're investors, we always go for the we're lazy,
Speaker 2: we go for the best thing we get the return from. Right,
Speaker 2: then there's ESG. We have that. Sorry, I don't know
Speaker 2: if you lay to swear here, but it's just socie
Speaker 2: of pox ESG where it's just environmental social governance and
Speaker 2: in whatever reason, defense has been been put in the
Speaker 2: naughty box with respect of that. In eighty three percent
Speaker 2: of investment funds in Australia a link to the super
Speaker 2: innovation industry and they default rule that investing.
Speaker 1: Oh really, oh yeah very much though, So the big
Speaker 1: super funds, the big industry funds, is that right?
Speaker 2: They went touch it when the tarnish is coming off,
Speaker 2: We're starting to talk to a few of the operators
Speaker 2: in there, and they wanted them discover more. I suppose
Speaker 2: then you get that. Then the really cheap shot answer
Speaker 2: is a bit like oh you we wouldn't we wouldn't fund.
Speaker 2: We wouldn't fund the warship, but we'd fund the dock.
Speaker 2: You could tie the worship too, Yeah, bassy is excuse me?
Speaker 2: So look now now in the US and Europe changed
Speaker 2: in the heartbeat. One thing happened, Vladimir Drevis takes into
Speaker 2: Ukraine and everyone just everyone got over ESG the next day,
Speaker 2: to be honest. So it's a little bit more existential
Speaker 2: over there. The Yanks never really swallowed it, but that
Speaker 2: hard anyway to be trueful, So, so is G is
Speaker 2: the biggest thing stopping it.
Speaker 1: So let's call it ESG being sort of like we
Speaker 1: call it at but really the ethics of war, ethics
Speaker 1: of war. Yeah, and here in Australia there's a resistance
Speaker 1: to investing that I didn't realize. The super funds have
Speaker 1: a mandate across the board, no that stuff. So that
Speaker 1: but that of course hapens opportunities for people like it.
Speaker 2: Oh yeah, it is an opportunity. And the reason that
Speaker 2: the equity is so low we get a great buyside
Speaker 2: equation is because we're the only investor at the table. Yeah,
Speaker 2: you're properly right. Yeah, if any one invests, only one
Speaker 2: person turns up to buy a house, is the price
Speaker 2: higher and the flower Yeah? So and that's we So
Speaker 2: our fund needed to get a bit more, bit more director,
Speaker 2: I suppose we invest in defense first.
Speaker 1: Technol to explain what them is.
Speaker 2: We like companies that increase capability around lethality and survivability.
Speaker 2: At the end of the day, you don't stop the
Speaker 2: enemy with harsh language alone a robust man carrying something heavy, right,
Speaker 2: I never want to see these things used, right, So
Speaker 2: if we if that's going to happen, we need better.
Speaker 1: Politicians, the more deference.
Speaker 2: Yeah, we need better polities and diplomats to de two war. Right. So,
Speaker 2: so for us, it's about I think defense of the realm.
Speaker 2: That's is a sold or good. I have no problem
Speaker 2: with that. Our fund will only invest in things that
Speaker 2: the ADF will legally use, so I think we got
Speaker 2: quite a moral doesn't mean legally use. Well, that won't
Speaker 2: use LAMB mines for example. They won't use weapons of
Speaker 2: mass destruction, right, things like that, you know, gases and stuff,
Speaker 2: and gases the apex of evil that men did other men.
Speaker 2: I think it's a terrible thing. Gas. So we'll only
Speaker 2: I suppose we won't break the law in Australia. Yeah,
Speaker 2: if you know what I mean, we won't use class
Speaker 2: that's in your mandate though, that's a manday, Yeah, that's
Speaker 2: that's in that clustervenitions on the bits and pieces. So
Speaker 2: what will the ADF deploy this? That's that's a tick
Speaker 2: for us.
Speaker 1: Yeah yeah, yeah, so you just sort of you can
Speaker 1: sit under there sort of lists rules. Yeah, pretty well there.
Speaker 2: Yeah, if they want to change the change the law,
Speaker 2: then it's not the you know, democratic processes said laws
Speaker 2: not not not businessmen, right, I think.
Speaker 1: That's not a good way to go or army generals.
Speaker 2: Yeah. So the other parts of our mandate, we have
Speaker 2: our taxation mandate at the early stage, the SPC or stuff.
Speaker 1: That always is always early stage.
Speaker 2: Yeah, always early stage. We have that. Then we have well,
Speaker 2: we have our own sovereignty mandate.
Speaker 1: What does that mean?
Speaker 2: So we weren't invested in any businesses that for whatever
Speaker 2: reason might be precluded from doing business with the US. Right, So,
Speaker 2: so you can't have Chinese scientists, Russian shareholders, contracts with
Speaker 2: medies talk to jurisdictions for example, that that's problematic.
Speaker 1: But about Chinese micro chips or the proces microprocess or electronicies.
Speaker 2: Basically, if you're in defense in Australia, there's a blue
Speaker 2: list of computing the US called the Blue List. The
Speaker 2: Blue list is non Chinese. Yeah, everyone uses the blue list.
Speaker 2: It's almost not a thing nowadays, to be honest.
Speaker 1: But is there many components electronic componers the d come
Speaker 1: from China these days.
Speaker 2: More, there are more. I wouldn't say there's a lot,
Speaker 2: a lot.
Speaker 1: Of something out of Mexico and played on that, but
Speaker 1: like the Chinese companies understand it.
Speaker 2: But there's also China. No one regards Taiwan as part
Speaker 2: of China. One's in the blue especially so and a
Speaker 2: lot of stuff comes out of there, but you can't
Speaker 2: get them. It just puts the price of their goods
Speaker 2: up because stuff is actually pretty good and it's really
Speaker 2: bloody cheap.
Speaker 1: Yeah yeah, yeah, and.
Speaker 2: So it becomes a cost equation.
Speaker 1: But I just know that a lot of NATO countries,
Speaker 1: including the US, they won't take something if it's got
Speaker 1: Chinese components.
Speaker 2: Yeah, I mean they still there's some things they can't
Speaker 2: get away with, to be honest, but getting pretty rare
Speaker 2: that there's a pretty good supply chain of blue stuff
Speaker 2: for most things now.
Speaker 1: I remember many years ago, like a long long time ago,
Speaker 1: my mum was involved in this business technology business, and
Speaker 1: we won a NATO contract for the new NATO building
Speaker 1: in Belgium and the General. I had a meeting in
Speaker 1: the General and he said to me, you can't have
Speaker 1: any Chinese components in it when the when you ship
Speaker 1: to us, it's all going to be one unpacked, but
Speaker 1: it's in front of us, but it's also going to
Speaker 1: be disassembled. We want to look at all the componentory
Speaker 1: and then you reassemble it and then we'll install. You
Speaker 1: install it, but then we'll run it. But that was
Speaker 1: the process.
Speaker 2: Surprised me. People. But look at what these rallies did.
Speaker 2: Was it Hamas or the modern Lebanon? What are they called?
Speaker 2: They with the pages and stuff, if you know what
Speaker 2: I mean? So has Yeah, with the pages, I mean
Speaker 2: you know they they said.
Speaker 1: That both a long period of time there. Yeah.
Speaker 2: But the Russians when the US built the Rebissy in Moscow,
Speaker 2: the place was little with bugs. The contractors were putting
Speaker 2: bugs inside of bricks for chrissakes, if you know what
Speaker 2: I mean.
Speaker 1: Yeah.
Speaker 2: So there's a lot of crafty stuff goes on. But
Speaker 2: we're their man. The other thing we don't do, we
Speaker 2: don't get asked this A lot is you know, is
Speaker 2: made in Australia a mandate. We can't be like if
Speaker 2: you sold to the US and you get a major
Speaker 2: contract that they at least, even way before Trump, this
Speaker 2: has been going for decades, they expect at least final
Speaker 2: manufacturer to excuse me, final assembly to occur in the US. Yeah,
Speaker 2: at the very least. So, I mean, as we should
Speaker 2: do in Australia. We should have the same expectation of
Speaker 2: defense goods you we just don't.
Speaker 1: So what that means is the components can be all
Speaker 1: coming from various places, but it august shipped to the
Speaker 1: US and it sort of gets assemble in the US.
Speaker 1: That's sort of a minimum. I mean, and this is
Speaker 1: a defense defendse Yeah.
Speaker 2: Yeah, But the reality is is you're you're also in
Speaker 2: a competitive process against other US businesses who have fully
Speaker 2: est wsh US businesses right, and they do what I
Speaker 2: would do if I was them, They would say, I
Speaker 2: look that they're Australian. They're not doing enough, and so
Speaker 2: you're non Australian, your non US status will get used
Speaker 2: to agaged you in a competitive way, which got to expect.
Speaker 2: But Australia is still a good place to run prototypes. Now.
Speaker 2: We've got really good people here, We've had really good
Speaker 2: tax incentives, to be quite blunt. The RTTI is actually
Speaker 2: really good. The Research Development Tax that you're forty three
Speaker 2: cents in the dollar back for research. Oh yeah, yeah, yeah,
Speaker 2: R and D R and d yea RDT I think
Speaker 2: it's called. Yeah, So that's really beneficial. Leave a really
Speaker 2: good core.
Speaker 1: Basically, if fuseure tax, but you get whatever you spent
Speaker 1: the money on. Now is that you get a sort
Speaker 1: of a briefund of some of the money from the government.
Speaker 1: Means you can't deduct it down the track when you
Speaker 1: get your income. But that's okay. It helps your funding.
Speaker 2: Yeah. Well yeah, and as a startup you worry about cash,
Speaker 2: let's worry about the bottom war. Yeah, because we might
Speaker 2: never make a profit. There's this no we don't like,
Speaker 2: let's get their profit. It's confusing, Mark, Yeah, let's get there.
Speaker 2: Then you get rated by profit. So we're like we're
Speaker 2: like growth in traction.
Speaker 1: So so we have two really good schemes here from
Speaker 1: a tax point of view in Australia for startups.
Speaker 2: Well, they're probably three. So you probably probably heard of ESIC.
Speaker 2: So Malcolm Turm will introduce the n and National Innovation
Speaker 2: Science Agenda Back in twenty seventeen, and there's something called
Speaker 2: ES I see, so where Angel and Vesta's got a
Speaker 2: twenty percent tax credit capital gain in STUXT that's right.
Speaker 2: So that's so, yes, we have there's the ES I see,
Speaker 2: there's the Junior scheme, the Senior scheme, and then there's
Speaker 2: our R and D scheme as well. So there's there's
Speaker 2: three pretty good schemes to be honest.
Speaker 1: And then when that was when Malcolm term introduced the
Speaker 1: Innovation Nation concept of Australia in the Innovation Nation. And
Speaker 1: as I said earlier, this is ins who end up
Speaker 1: becoming the embassador of the USA, and now you just
Speaker 1: talked about him in relation to that help us on
Speaker 1: aircraft prototype. Arthur was running that for Malcolm. I think,
Speaker 1: as I said earlier, it was the Minister for Innovation
Speaker 1: of Science for a long time.
Speaker 2: He's going out of the blue bag. When I was
Speaker 2: Queensland Chief Entrepreneur for a year, he just called me
Speaker 2: out of the blow We have a chat and stuff.
Speaker 1: Queensland Chief for the government.
Speaker 2: Yeah, for the government. Yeah, it's pretty cool. We don't
Speaker 2: get party. It's pretty cool bsiness card you walk around with.
Speaker 2: But yeah, I was supposed to be the first one
Speaker 2: and then we found out we're having twins. My wife said, no,
Speaker 2: you're not going to do that. So Mark Alby, who
Speaker 2: was Mark from his Blue Sky Equity, I.
Speaker 1: Haven't even know who he is. Sorry, So that your
Speaker 1: fund now, So your fund which they given that the
Speaker 1: super funds mandated this outside of their realm, so they
Speaker 1: can't spend. You've formed this fund and this fund is
Speaker 1: investing in in all these technis.
Speaker 2: So we invest so I can get a little bit
Speaker 2: more complicated. For so, under the ESVC or Peace scheme,
Speaker 2: you have to invest at least eighty percent of your
Speaker 2: committed capital in Australian businesses, and you can do twenty
Speaker 2: percent off. Sure, So we have some US businesses as well.
Speaker 2: For the most part, we invest in sovereign austraim businesses
Speaker 2: who want to move whoever demand and whose home eventual
Speaker 2: home is the US. Yeah, yeah, so yeah, we've we've
Speaker 2: got fifty we got almost sixty shoarholders investors in that business,
Speaker 2: about twenty one point five four million dollars. There were
Speaker 2: spreadsheets correct this morning, we've invested in seven businesses, should
Speaker 2: have been eight. One just fell over annoyingly, but you know,
Speaker 2: never under restaurate entrepreneurs ability to snatch defeat from the
Speaker 2: jaws of the trick. As they say, we'll probably get
Speaker 2: them back. So we've got businesses that We've got two
Speaker 2: space businesses. We've got a said the counter drone business
Speaker 2: I mentioned before. We have a business that makes a
Speaker 2: long range artillery sholl So artillery shehell normally goes thirty kilometers.
Speaker 2: This thing goes one hundred and fifty. Well, I've put
Speaker 2: a ramjet motor in the front of it and and
Speaker 2: sort of, yeah, shoot out an artillery piece and the
Speaker 2: ram jet motor starts up, and it goes one hundred
Speaker 2: and fifty k's and it lands of less effect, landing
Speaker 2: with forty seven kilos of effect. It lands with eight
Speaker 2: kre loads of effect. But eight kilos is like sixteen
Speaker 2: hand grd agent. It's still a pretty much bad day
Speaker 2: for the person who gets it. So that's that's another
Speaker 2: US business. And the team they're like they've sold businesses
Speaker 2: to Google and Apple before. You look at the team
Speaker 2: and they are making roofing nails Mark, I'd invest in
Speaker 2: the making roofing.
Speaker 1: Now. Yeah, by these financials they seem is that good. Yeah,
Speaker 1: you mentioned that ultimately you want to take it to
Speaker 1: the US market and sell something to the US. How
Speaker 1: do you know these people in the US?
Speaker 2: Well, we have a US fenturepartment, so that Shawn Singleton,
Speaker 2: he's a former US Air Force chap that defense innovation,
Speaker 2: you know, that really good innovation business. I was a
Speaker 2: government departments at before JP Morgan. He's a financial background.
Speaker 2: He's the politest man alive to mark with a goal
Speaker 2: is to get and just wear one before he dies.
Speaker 2: But he's exceptionally polite, Southern gentleman, and so like, how
Speaker 2: do you.
Speaker 1: Build these relationshships up?
Speaker 2: Its a great bad I love it. You've an Australian accent,
Speaker 2: so you naturally they naturally want to talk to you,
Speaker 2: right really yeah, oh very much. So that gets your
Speaker 2: foot in the door. I mean after that you've got
Speaker 2: to be a bit more with children. But that literally
Speaker 2: it's an amazing asset when you do business in the US.
Speaker 2: How do we get them? So trade shows are helpful
Speaker 2: and then you land and expand. If I'm one person,
Speaker 2: you know, you start the cocktail party, then you have
Speaker 2: the meetings.
Speaker 1: Yeah, so a lot of sort of networking, but not
Speaker 1: in the loose sense.
Speaker 2: Well of those two hundred and seventy five organizations that
Speaker 2: can buy in a low dock method. We have web
Speaker 2: close connections into sixty of those. Wow, we think probably
Speaker 2: fifty or sixty are probably just offices empty with a
Speaker 2: brass plant on the outside. To be truthful, you know,
Speaker 2: they're probably like the old Apollo office was in there.
Speaker 2: They're not sending the men to them move they've started again,
Speaker 2: I suppose, but you know so so we I suppose
Speaker 2: we know how to we know the easy ways to
Speaker 2: get in what we do for our businesses is if
Speaker 2: this might blow austrain as a way, but that in
Speaker 2: the US there's nine thousand and seven hundred taxation jurisdictions. Wow,
Speaker 2: every state, city, and county can lodge their own tax
Speaker 2: and often do. Yeah, impose their own tacks, yep, pose
Speaker 2: their own So you have fifty states, you know, US
Speaker 2: never knows it's fifty states. So you have all these
Speaker 2: other counties. There's some states that you should never do
Speaker 2: business here. So places that don't have a loy call
Speaker 2: are at well employment, which means you can fire the
Speaker 2: person on that day. And you have a very different
Speaker 2: approach to industrial relations. If you go to Texas, or Florida,
Speaker 2: go to some place where you can basically tell the
Speaker 2: person to bugger up and don't come back again. They're
Speaker 2: really flexible states, and people like setting up there.
Speaker 1: California is slightly different.
Speaker 2: Yeah, California's bad, Oregon's bad. There's a whole bunch of
Speaker 2: ones you're run scared from basically, But then you also
Speaker 2: need to then and democracy is very much done in
Speaker 2: the open over there, and as in Australian it feels
Speaker 2: a little bit dirty and groddy. So I've been on
Speaker 2: Capitol Hill and lobbied as in Washington, Washington, you know
Speaker 2: I've gone lobbied. You know, elect to Representative staff is
Speaker 2: over there. Dozens of times. You walk go on it off,
Speaker 2: you sign in. It's all open. There's a register. You know.
Speaker 2: You go to the guy who's you know, the Florida
Speaker 2: or the Texas sort of representative, and you know if
Speaker 2: you put a factor in his district, it will work
Speaker 2: to get your line on. And the thing written in
Speaker 2: the US Defense budget, it won't mention you by name,
Speaker 2: but it looks like you're the only person who can
Speaker 2: deliver that because it's it's written so tight that it
Speaker 2: actually pitch your specifications, so he will a lobby to
Speaker 2: do that and it's all done in the open as
Speaker 2: in Australian it feels bloody corrupt, right, Yeah, it's just
Speaker 2: that you do business in the US. Yeah, so you've
Speaker 2: got to break that. You've got to break that. Don
Speaker 2: a nurse, you can't. You've got to do that because
Speaker 2: your competitors are doing that. So by god, you've got
Speaker 2: to do that.
Speaker 1: How much having you having lived there for a while,
Speaker 1: did assist that or is it just more on you? Yeah?
Speaker 2: This is I live there for you. I've learned this
Speaker 2: over over the last three or four years. To be honest,
Speaker 2: I happen to.
Speaker 1: Be aggressively aggressive in that regardless. I mean when I'm
Speaker 1: in aggressive I do I mean tough guy aggressive, I
Speaker 1: mean like relentless.
Speaker 2: About the other people to describe me Mark, I'm not
Speaker 2: too sure to be honest, I don't know. I think
Speaker 2: Australians aren't as assertive. We're a bit laid back. Yeah,
Speaker 2: like Americans. Oh I say that. Americans. You know, they're
Speaker 2: very very confident. Born with a pitch deck in the hand,
Speaker 2: they can they can pitch. They're very confident. Yeah, they've
Speaker 2: got no problem faking it before they make it. Where
Speaker 2: was in Australia. We don't tend to do that. That's
Speaker 2: a disadvantage. We have to break that.
Speaker 1: Yeah, so uh and so am I.
Speaker 2: When I look at how Shan operates in the US,
Speaker 2: for example, whilst he's been acceptionally polite man, he's he
Speaker 2: has that American flair about him and he can he
Speaker 2: can do the stuff that I find a little cringeing.
Speaker 1: Maybe maybe you could explain what that is when you
Speaker 1: see very good flair.
Speaker 2: Trying to give give an example. Now it give them
Speaker 2: a director, give a direct example. It's like you must
Speaker 2: have been the pictures of these guys. You go there
Speaker 2: and you're like, look, if you ever seen the pressment.
Speaker 2: You hear like Mark A. Rubio, Yeah, who's just the
Speaker 2: most amazing guy, you know what I mean? And he
Speaker 2: looked at our feet, look out of bloody politicians. Excuse
Speaker 2: in comparisons. That's that's the delta. Yeah, you go there
Speaker 2: and you come out. And actually I was in Perth.
Speaker 2: I've just mentioned I flew in the Red Eye this morning.
Speaker 2: I was in Perth and I was meeting a business
Speaker 2: over there. We'd love to invest in. They had the
Speaker 2: US representative over in person. We caught up for a
Speaker 2: bar and he's actually a strange living in the US,
Speaker 2: and he came and he gave me that you can
Speaker 2: tell he's been. He's been, he's lived in the he's
Speaker 2: been steeped in that US ecosystem for probably five or
Speaker 2: six years. Because when he spoke, he commanded. He left
Speaker 2: you no certain doubt he was going to get that
Speaker 2: thing done. He identified, like he identified that the people
Speaker 2: needed to attack, to convince, to control in order to
Speaker 2: get these contracts through, if you know what I mean,
Speaker 2: in a very very confident way. So we shun. We
Speaker 2: had one example there where we were dealing with the
Speaker 2: very boring story. We're dealing with an Air Force unit
Speaker 2: that ran but that operates the bombing rangers, and so
Speaker 2: was it was his way into ingratiating his way in there.
Speaker 2: He investigated who the guy went to school with, and
Speaker 2: he worked out he had someone in his background who
Speaker 2: was common if you know what I mean, absolutely exploited
Speaker 2: that this absolutely tenuous link.
Speaker 1: So sort of somewhat profile. Yeah, but in a good way.
Speaker 2: They don't. But no one takes it badly. Everyone expects
Speaker 2: as there's a little bit of bullshit.
Speaker 1: Ya.
Speaker 2: So whereas in Australi we tend to we call the
Speaker 2: bullshit out whereas in the US they said to celibrate
Speaker 2: the bullshit.
Speaker 1: Yeah, yeah, because it's because that's where you're party of
Speaker 1: Adam and apart from identifying for your investors it's a
Speaker 1: good investment because it's an early stage et cetera. And
Speaker 1: all the other government sort of you know, there's tax
Speaker 1: offsets and those tax benefits. I guess what you're doing though,
Speaker 1: is taking helping the startup people through your connections turn
Speaker 1: it into something out there in terms of who might
Speaker 1: end up being an end up and customer.
Speaker 2: We're a US market entry organization. Our job is that
Speaker 2: So when I when I started this, I thought I
Speaker 2: thought it'd be like a playbook. Yeah, it's like a
Speaker 2: soccer three D tetrasport. The way you get in there,
Speaker 2: if you follow the path, you'll get there. But it's free,
Speaker 2: bloody complicated. So but it's just it's we invest in
Speaker 2: people we think are the best in their field in
Speaker 2: the world. And then so but for me, the bottom
Speaker 2: sixty percent of businesses identical the top forty percent of
Speaker 2: secret source and that's that's what they do. But you know,
Speaker 2: I add operated business. We know for the most part
Speaker 2: how to get a better chance of success operating and
Speaker 2: business in the US. So you know, you don't go
Speaker 2: to Oregon, for example, they have this if they have
Speaker 2: a concept. They're called hub zones historically underserved business something
Speaker 2: or other. So it's a poor area. If you put
Speaker 2: thirty five percent of your staff in a hub zone,
Speaker 2: for example, and that's a if you're if you're hit
Speaker 2: by a hurricane the last ten years, you're automatically a
Speaker 2: hub zone for example. Right, So you put thirty five
Speaker 2: percent of your staff in a hub zone, then you
Speaker 2: get a ten percent dispensation when bidding for federal contracts.
Speaker 2: So if you have that status and you're better a
Speaker 2: federal contract at a million bucks for the leg up, yeah,
Speaker 2: I have to consider you at nine hundred.
Speaker 1: Yeah.
Speaker 2: So as you do that, if you have a fifty
Speaker 2: one percent female ownership of your business, if you have
Speaker 2: a service to sayable veteran, and you get another ten percent.
Speaker 1: Yeah. So there's always tricks tricks to the game.
Speaker 2: Yeah, and your competitor and then it all feels weird.
Speaker 2: It's very confusing. But your competitors are doing it, so
Speaker 2: you can't not plan, You've got to do it. Yeah,
Speaker 2: so it's making sure and then you know, if you're
Speaker 2: selling just a special operations command in the US, and
Speaker 2: they are, I mean, this is the way that they
Speaker 2: should do business. I mean a the so common in
Speaker 2: the US that they're the innovation arms. Omon ywers have
Speaker 2: a budget that size the Ross Rain Air Force, which
Speaker 2: is just bloody incredible. He it's a massive budget. But
Speaker 2: then what they do is they have very open They
Speaker 2: put these solicitations out saying, hey, we need this, we
Speaker 2: need satellites or magic boots or magic guns or whatever
Speaker 2: it is, you know, and so you go and pitch
Speaker 2: them right, and it's all very open. It's very business like.
Speaker 2: They publish numbers and stuff. You know, Seal Team six
Speaker 2: public perchaing officer has got a number he publishes, and
Speaker 2: you go there and if you win that business, then
Speaker 2: what happens is if you get brought into that that
Speaker 2: so comy. Their aim is to get your gear used
Speaker 2: by the regular US Defense Force, which is a larger
Speaker 2: purchasing power. Because when they do that, it then goes
Speaker 2: off their budget and under that budget, when you get
Speaker 2: into this wonderful.
Speaker 1: That's why they want to get you off. They want
Speaker 1: to get you in to get off their budget.
Speaker 2: And again they're very very fast to get in the
Speaker 2: way there. I mean, when you approach these guys, don't don't.
Speaker 2: Don't take them half bay technology because the will test
Speaker 2: the real conditions and if it doesn't work, they'll be're
Speaker 2: dead to them. So you take very very good stuff,
Speaker 2: get us through that system, and they like it. Ayre great,
Speaker 2: but we like it. We're going to keep using it.
Speaker 2: But if we can convince the other army to pay
Speaker 2: for it. And so they try and drag you through
Speaker 2: sales process, yeah, which is bloody beautiful. Yeah, but they'll
Speaker 2: leave and send a testing crews over to Australia. This
Speaker 2: scheme called FCT Fine Comparative Testing. So I'll send like
Speaker 2: does and or so people over who are experts in
Speaker 2: their field and we'll spend a week with your technology.
Speaker 2: Will buy a part of it, they need to. They
Speaker 2: have an extraordinary ability to purchase stuff and they'll test it.
Speaker 2: They'll go back and understand whether whether they should buy
Speaker 2: it or not. So you don't have to you don't
Speaker 2: even have to jump on a plane to go there.
Speaker 2: So I suggest you do. We look at businesses where
Speaker 2: a co founder or materially a senior executive who's materially
Speaker 2: equity incentivized will reside in the US. If not in
Speaker 2: front of your customer five days a week, your competitor
Speaker 2: is you're always going to lose. You've got to buy
Speaker 2: into that market.
Speaker 1: Yeah.
Speaker 2: To get the best, you've got to be there.
Speaker 1: Yeah, and there's another way to do it, really other
Speaker 1: than your being there and in.
Speaker 2: Our capital game stactual, I have more reasons to move
Speaker 2: to the US, to be honest, market you go over
Speaker 2: there and find someplace that taxes you at fifteen percent
Speaker 2: instead of bloody forty seven.
Speaker 1: Well, once you get past that two and fifty million
Speaker 1: to them.
Speaker 2: That for the investors, but for the start, for the
Speaker 2: actual founders and the yeah, yeah.
Speaker 1: Because the founders don't get there, do they. No, No,
Speaker 1: it's only for investors. That's an interesting point.
Speaker 2: They actually explicitly carved out of it too. Actually, now
Speaker 2: I think about it, are they Yeah, because you can
Speaker 2: understand they could be a little bit of Shenanigan if
Speaker 2: they let them do that. To be honest, Yeah, you
Speaker 2: start your own business, with your own text, with your
Speaker 2: own tax free.
Speaker 1: Yeah, yeah, okay, So it's not available to founders, there's
Speaker 1: only available investors, and the idea is to attract capital.
Speaker 2: Yeah, it's a very successful scheme. I mean, it's it's
Speaker 2: a it's a I think one of the best schemes
Speaker 2: of the world personally. So yeah, final question for you.
Speaker 1: And there's probably nothing to do with your fund. By
Speaker 1: the way, what's the name of your fund.
Speaker 2: It's called Beaten's Own Venture Partners Beaten B A T
Speaker 2: N Z O E Zone So venture Partners Partners. Yeah.
Speaker 2: So when I started the journey with with the Army,
Speaker 2: I saw a few things, Like one of the things
Speaker 2: I saw was that the businesses in the defense sector
Speaker 2: were shown by polite society. So a lot of guys
Speaker 2: couldn't bank in their couldn't bank in their business name.
Speaker 2: You can't get make someone to deal with it credit
Speaker 2: cards yet, so I thought, look, Beaten Zone is it's
Speaker 2: a it's a business. My my my absolute laser focused
Speaker 2: goals or turn multiples of invested capital back to my investors.
Speaker 2: I'm investing six million bucks that twenty So I've got
Speaker 2: skid in this game, right. But so it's not a charity, right,
Speaker 2: But I didn't want to stand behind these people I'm investing.
Speaker 2: I want to stand beside them. So the beaten zones
Speaker 2: and a military terms, it's a part of the battle
Speaker 2: for the rule of bullets land essentially, right. So there's
Speaker 2: you know, there's more lethal places against stamp and not
Speaker 2: very many. So it's like, you know, it's on the
Speaker 2: tip night, we're not we're not trying to hire what
Speaker 2: we do. I think a lot of the a lot
Speaker 2: of the issues Western society is having at the moment
Speaker 2: because we use euphemisms instead of something uncomfortable truths, if
Speaker 2: you know what I mean. So, we don't want soldiers
Speaker 2: to governor battle, but if we do, we want to
Speaker 2: have the most well armed, most well trained, most violently
Speaker 2: controlled woman we get our hands on. But please don't
Speaker 2: make issues them. Yeah, right, So I think in.
Speaker 1: Words, and I think the point you're trying to make
Speaker 1: is you're not a warmager because you don't want war.
Speaker 1: I've got three kids. I think, all, yeah, that's the
Speaker 1: last thing one. But but you know, if if but
Speaker 1: you want enough someone from Australia or anywhere for that matter,
Speaker 1: in the in the the good guys goes to well,
Speaker 1: you want to make sure that they're not going to
Speaker 1: They're going to have the best possible chance of survival.
Speaker 2: Now, I think the terrence is probably the best way
Speaker 2: to do it, because yeah, starts, it's just a horrible
Speaker 2: thing to kick off.
Speaker 1: Totally, and so just on that. So you have me
Speaker 1: fairly vocal on this. What do you think of the
Speaker 1: IRM wire, I.
Speaker 2: Want to really say for Australia and prosperous Australia, and
Speaker 2: I think to do that we need a really a
Speaker 2: really good US government and really strong US government. And
Speaker 2: I think the Republicans are more at least what the
Speaker 2: Republican Gun has done with the Reflected Defense and that
Speaker 2: sort of stuff, that they can guarantee our future more.
Speaker 2: And I think the chance of a good outcome in
Speaker 2: Iran was two out of five and we're seeing this
Speaker 2: three out of five downside at this point in time, right, Yeah,
Speaker 2: I think there's such a poor chance of a good outcome.
Speaker 2: So look, if anyone need a blowing up, it was
Speaker 2: a mother. So no no love loss for their running ragially,
Speaker 2: don't get me wrong, but just that I just hope
Speaker 2: that he was staring at a piece of intelligence said
Speaker 2: they're days away from a nuclear weapon or something like that.
Speaker 2: Otherwise I don't understand it.
Speaker 1: Otherwise you're got to George Bush moment. Yeah, webs of
Speaker 1: mass destruction, webs of mass destruction there in the nineties.
Speaker 2: So you know, they haven't militarily prevailed, but it's not
Speaker 2: as an economic issue now right with the respect that's
Speaker 2: straight within within the five years, this is the Comien issue.
Speaker 2: They'll be pushing oil and gas out of the out
Speaker 2: of the North America's out of the Gianna and placing
Speaker 2: me in the Garnet. The reserves in Gianna and Argentina
Speaker 2: coming on line, they'll blow the Middle East away. Wow
Speaker 2: if you yeah, so obviously they did the Venezuelan rain,
Speaker 2: but you've got the back of Verta down in Argentina,
Speaker 2: which is a massive field. You've got the Garnon fields
Speaker 2: which are bigger than Saudi Arabia for christ. You know,
Speaker 2: they are massive. So once they come online, and that's
Speaker 2: being accelerated now because of this issue, then yeah, and
Speaker 2: there's there's like hundreds of years of world oil supply.
Speaker 1: Do they get at any stage, I mean sometimes they
Speaker 1: get a bit conspiratory, but do you think it any
Speaker 1: stage the actually outcome or objective of the war in
Speaker 1: Iran could be that you want Iran to close everything
Speaker 1: down and you want no more oil coming out of
Speaker 1: those places and just opens up the oil produces in
Speaker 1: other parts of the world.
Speaker 2: This is a this is a subject of Beers two
Speaker 2: nights ago, and perpose I was I was laughing. Actually,
Speaker 2: we'll sort of I'm trying to understand if that was
Speaker 2: actually that the purpose of this positive downside.
Speaker 1: Yeah, yeah, positive downsid or or an actual downside that
Speaker 1: they're going for.
Speaker 2: Yeah, but I think that it's like, I mean, there's
Speaker 2: there's there's stories about supply and demand the past and
Speaker 2: the big one. There's a great newsletter. I don't know
Speaker 2: if you're I'm not sure if you're recalled Doomberg might
Speaker 2: afford that.
Speaker 1: Yeah.
Speaker 2: Ye. So they did one on the what happened with
Speaker 2: the rubber back in World War two. So the Japanese
Speaker 2: took control of the Malaysan rubber fields, and like all
Speaker 2: of a sudden, no one had any rubber, and within
Speaker 2: like nine months they created synthetic rubber, and so they
Speaker 2: no longer needed the Malaysian rubber fields. So I think
Speaker 2: a part of this, so the competitive reaction out of
Speaker 2: this through the Trada runs is are you going to
Speaker 2: be more pipelines not going through the Trada humors, which
Speaker 2: I think will be good, and then utilizing oil reasons elsewhere.
Speaker 2: So you've got the amazing sort of US oil story.
Speaker 2: You've got the Central and the Argentinian stories as well,
Speaker 2: So we'll find a little from other places that are
Speaker 2: less problematic, to be trueful.
Speaker 1: And even even the new prominence of the UK is
Speaker 1: now talking about opening up again. And you know the
Speaker 1: apparently the oil reserves in the North Sea are like monstrous,
Speaker 1: but there's just haven't look for anything for a long time.
Speaker 2: We can do the same in Bastralia because bastraight's still
Speaker 2: that hasn't been tapped back to it and to any
Speaker 2: large degree.
Speaker 1: Good luck seeing it happen.
Speaker 2: Yeah, I know it'd be bit harder, isn't it.
Speaker 1: See back to this has been fantasy. I really enjoy
Speaker 1: this conversation. Probably I want to just want to throw
Speaker 1: to you last words for those people who and I'm
Speaker 1: not here as a proponent or an advocate or someone
Speaker 1: who's against this, but I'm here to actually hear your
Speaker 1: story for someone who's investing in defense capability, let's call
Speaker 1: it that here in Australia. What would you say to
Speaker 1: others who are nervous about that or and I don't
Speaker 1: mean economically, just nervous about doing that from the point
Speaker 1: of view of the look or perhaps the ethics of it,
Speaker 1: What would you say to those individuals.
Speaker 2: I understand why from an economic senseenc it's a rising market,
Speaker 2: so their economic justifications are simple. But then there's social justifications,
Speaker 2: and I understand that. Look, I think that it's unfortunately
Speaker 2: it's a human condition. And you know, for as much
Speaker 2: as you might dislike war, it doesn't care about your feeling.
Speaker 2: It's going to kick you front door in and I
Speaker 2: think they're best go out putting it. Yeah, I think
Speaker 2: the best waut of this is is de terrence quite literally.
Speaker 2: I mean, and I have three daughters. I think I'd
Speaker 2: love if they voluntarily want to deserve, if you know
Speaker 2: what I mean, if we had to conscript them we've lost,
Speaker 2: or if they were forced to serve because of a
Speaker 2: war we've all lost. I want to prevent that. Yeah,
Speaker 2: I think the way to prevent that what I'm actually
Speaker 2: trying to do. And I said in a philosophical as, Yeah,
Speaker 2: but what I'm and I want to say my business
Speaker 2: is a business, is not a charity. But if I
Speaker 2: get it right, I can demonstrate a better way that
Speaker 2: we can do defense funding. I'm going to back some
Speaker 2: young kid who's going to go on to be the
Speaker 2: next billionaire, for example. Right then he's going to back
Speaker 2: two young kids to be the next billionaire. So we
Speaker 2: can create this defense investing flywheel and get more sovereign
Speaker 2: sovereign impact of Australia. That's my fervent hope and I
Speaker 2: think the most honest way to do that is to
Speaker 2: for investors to invest and get returns on capital and
Speaker 2: want to keep going back and doing it again and
Speaker 2: doing it again, so we can prove if we can
Speaker 2: prove a non government backway, a private capital, free enterprise
Speaker 2: way forward and that's repeatable, I'm not die happy, man, Marks.
Speaker 2: That's the best thing we can do.
Speaker 1: Steeve, based of these from much next Mark