European Defense Sovereignty Starts in the Factory: Stark’s Uwe Horstmann and Johannes Schaback

0:00

I think what came together is obviously an understanding in Europe that Europe needs to take more responsibility for its own defense. You know, that is, of course, something that the US have told us repeatedly. And they're right. You know, Europe has to step up and needs to be able to defend itself because that is our way of continuing to live in peace.

0:18

It's deterrence, right? My partner Luciana and I are here with Uwe and Johannes, the co-founders of Stark, a neo-prime serving the European defense community. Gentlemen, thank you for joining us. Thank you so much for having us. Thank you. All right, to get things started, you guys landed billions of dollars of contracts within 18 months of starting the company, which I believe is unheard of in the defense business.

0:59

What did you do right? How did that happen? So obviously, you know, this is something that we like to claim as a big success, but it's also probably a moment that is just optimistic for all of us because something has changed beyond just what we built in our company. And we're moving in the right direction, I think, in Europe. What we did specifically, I think, is four things.

1:21

We did innovation really close to the battlefield. So really being integrated with units and soldiers who actually use the systems. Then we venture first, thanks to Sequoia and others, which basically means we fund the innovation, kind of the product development ourselves. We don't rely on some government R&D spending. We focus on designing the products in a way that they become really usable and mass deployable.

1:44

So beyond pure innovation use cases, all the way to certification, validation, safety of the system. So really usable for NATO forces. And then number four, we designed the products, clearly thinking industrial scaling from the get-go. Like, how can we make sure that those are not only a few exquisite systems that, you know, stand around somewhere, but how can we make sure that, you know, factory is part of the weapon, you know, production is deterrence.

2:13

Now, let me ask you on point number one, close to the battlefield, I'm guessing that most military units would not let a couple of random guys traipse into their units and understand their needs. Like, how is it that you gained access to the battlefield so early in the life of the company? We do that with a large presence in Ukraine. So we have a large team in Ukraine and we integrate in those units quite extensively.

2:37

We also do work with the European forces. So there are more and more formats, I would say, where that thing is enabled. So you can connect with the soldiers, you can show up with them, you can go to the battleground and the testing grounds, the training grounds. And that's where you get the best feedback. That is the most important input factor for us.

2:57

The capital we can get, you know, again, thanks to Sequoia and other people, but what we really need is that input of the customer, which is not necessarily the buyer, right? The buyer is probably some, you know, high-level official, but the customer oftentimes is a relatively simple soldier, you know, on an operational tactical level. We need their input.

3:18

That's more important to us than anything else. Well, and just to level set on what you guys do, What is it you heard from those customers and what's the product that you've now given them in response? So at any point in time, we probably run 10 to 15 different programs, almost like a venture-like innovation portfolio. The one at the moment is, you know, you would probably call it a strike drone.

3:38

It's actually a munition, but it's like a weapon system that is very much software and AI driven. It's relatively inexpensive compared to what other weapon systems are out there. And we got a lot of great feedback on the usability. We only begin to understand what does it do to the mental load of a soldier, for example, who is supposed to operate those unmanned swarms.

4:00

How exactly does that work? How should the box be created? Should it be wood? Should it be plastics? How do we visualize a swarm on a small screen so that the soldier can operate it? Earlier, you had this interesting anecdote about plastic versus wood on the boxes that go into the field. Can you share that anecdote? Because I think that really illustrates the difference between the lab and the field.

4:26

1,000%, because you often... have those great ideas, how this product should be, and you came up with the idea on a whiteboard. And then you put it in front of the users, the soldiers using it in the field, either in real battle or in trainings and simulations. And sometimes it's very, very different. So for example, we show up with this beautiful plastic box that is light to carry.

4:52

And the soldiers look at us like, what do we do with this? Why don't you give us wood? Because wood, at least we can put in the fire and it keeps us warm in the winter. And like... I didn't think about that.

5:03

And there's many anecdotes like that. The feedback is so valuable. So traditionally, you would say, you know, most important soldiers in, you know, the product development and the procurement are the generals who tell you, that's what the big budgets are, and you should do this and that. And for us, we always like to say, you know, the staff sergeants, the enlisted personnel who then actually use those systems are...

5:28

maybe even more important to us, because in a true startup spirit, you want to be close to the customer. You want to develop for that customer. The customer for us, yes, it's the buyer, but it's also the user. And those are not the same people in the military situation. And we're just beginning, for example, to understand, if you think about a drone swarm that you are now controlling, how exactly do you do that? Like, do you have a mouse? Do you have a keyboard? Do you have a touchpad? How does all of that work? How does it work when you wear gloves? What clicks are okay? Where do you need to be really precise? All those things.

6:04

What is the mental load? How much information can I process at the same time? We're only beginning to understand. And if you treat soldiers, they are used to industry just showing up and dumping stuff on them saying like, here, this is the best thing. If you have issues with it, it's because you didn't understand it. You really need to change it around.

6:23

You need to treat them as your customer. The most valuable thing they can give to you is their time and their feedback. and sometimes we show up and they say like you know what this is absolute but you can really win trust by saying tell us how exactly does and we'll show up again tomorrow or the day after tomorrow we do you know we create a new version and we'll be a bit little bit less tomorrow and that goes a long way and some of the things that make me the proudest of this company is we gained like a lots of, you know, minds and hearts in the community by people saying, you know what, those guys, they approach it from the right perspective.

7:03

You know, they have a soldier centric view and they really want to build a product that's good for us. It's quite obvious for startup people, right? Probably everybody who sits here says like, yeah, we want to build for the customer. The customer needs to be happy. Net promoter score and, you know, retention and NRR and ARR growth. And for us, the translation to that is listen to the soldiers, build with them, build for them, and hopefully good things will happen on the procurement side as well.

7:28

Can we take a step back? You mentioned that there is a favorable moment in Europe right now for building defense companies. And Uwe, you and I have known each other for a long time. We started as venture capitalists in Europe and you saw the opportunity in defense before other people. You were investing in defense way before it was obvious, I would say.

7:48

And you also have a background in the military yourself. Can you tell us a little bit Firstly, about what came together in Europe and why there is this opportunity to build a new Neoprime today? I think what came together is obviously an understanding in Europe that Europe needs to take more responsibility for its own defense. That is, of course, something that the US have told us repeatedly.

8:10

And they're right. Europe has to step up and needs to be able to defend itself. Because that is our way of continuing to live in peace. It's deterrence, right? We probably understand now that the world is, unfortunately, probably not as default peaceful as it ideally would be, but it needs to be defended. And the only way we can be safe is by deterring a potential attacker.

8:35

So that understanding has really, you know, really materialized in people's minds. And it came together with a point where people also understand something's happening on the battlefield. New technologies emerge. It's software driven, AI driven. It's relatively inexpensive to produce. It is small scale. And those two points came together.

8:55

And we give a lot of credits to the Germans and other governments who also understood, well, if that's the case, we should, A, procure those solutions where the capabilities that we have are lacking, where there is a gap. And we also need to change the process of how we procure because you don't procure a drone like you procure a battleship.

9:16

It's just different. So that did come together. And that was also probably like the starting point for us, coinciding us with the founding of the company saying, okay, now we need to lean in. This is going to be like one of those moments where in a few years, we probably will ask ourselves, what did we do during that time? And for me, you kind of mentioned my biography, things really came together.

9:40

Two big streams, like an interest in military and security, international relations, things like that. And then the technology part. So it was quite a clear moment for me to say like, okay, I need to step in. Do you think that the procurement process changes are sustainable? Or do you think this is a moment in time for Europe, for Germany and other European countries? I think they are sustainable.

10:05

Changes like that in Europe... They don't happen because there is like a charismatic leader who says, you know, we need to change. This is the way. Follow me. Here's a great narrative. That's not how Europe works. Europe works based on, well, I guess we kind of have to do it now. It's reality kicking in. And the positive side of that would be hopefully changes are more lasting because they are based on actual structural fundamental changes.

10:29

And, you know, now we are in a new world.

10:33

That's what gives me hope that we change the procurement processes that took years to months and that includes the certification, which is a big, big part of what we do. It's a very boring topic in a way, but it's very, very important. I think those changes are there to last because the real learning from the Ukraine-Russia war is probably not drones, no drones.

10:53

It is about an innovation ecosystem. That is the actual wonder weapon. You know, we always like to read on the internet like what new weapon system, how awesome is it? That doesn't really matter. The whole point is how do we as Western societies set up ourselves so that we can continuously innovate in defense with all the different ingredients.

11:12

We already talked about the input from fighting soldiers. There's a talent aspect of it, you know, like our smartest minds should be willing to work in defense. There's a capital aspect to it and all that stuff. I think that is there to last. I'm quite hopeful about it. What advantages do you guys have as a two year old company selling into the defense apparatus that a 70 year old company selling into the same customer might not have? In that field, that segment of the market, the inexpensive, the AI-driven, the mass scalable systems, our strike drones come to mind, but also, for example, unmanned boats and things like that.

11:59

We have a startup DNA. We built the prototypes like you would prototype in a startup pretty much. And we built them from the get-go to be mass manufacturing items, which is not something that defense typically does.

12:16

And when we walk into our factories, we want, just a few days ago, had some operational experts and they looked at this and like, oh, this is about as complex as a washing machine. And I don't know if they tried to insult us, but it is exactly where I want to be. Like, if I tell you, hey, Pep, today we're building a thousand washing machines a month.

12:32

We need to scale this to 10,000 a month or, you know, to a million a year. You would say, okay, I mean, it's not easy, but it's doable somehow. So that's where you want to be. And the established primes are not necessarily great at that. They're really good at building those exquisite, very important, very expensive systems. And I think they still will play a big role.

12:55

But there's a part of that industry where it's about rapid innovation, ongoing development, close to the customer, understanding the customer, and then building for mass scalability, where I think we have a pretty good edge. Awesome. Johannes, can you say a word about the product engineering organization? And as Uwe was saying, like, how do you execute on kind of the rapid innovation close to the customer? You know, it's not the thing we typically associated with hardware companies selling into defense.

13:24

So say a bit about the organization and a bit about how you move fast. At its very core, Stark is an engineering company. It's everything we do. And so the way how we organized the company is by building programs that can act and build very autonomously. And so as Uwe said earlier, we're organizing the company almost and running it almost like a venture fund where we're building small startups in a startup.

13:52

And so engineers who join Stark find themselves very quickly in a family, a program that is very autonomously and works in a very cross-functional sense towards the mission of the program. That can be fully autonomous maritime systems, that can be fully autonomous naval or aerial systems, strike drones, that can be in electronic warfare, or that can be in software.

14:15

Is there a platform layer underneath these different programs, or how does that work? Exactly. The programs serve external customers, and then there is a platform layer that we call capability teams, and they build capabilities that augment the ecosystem that we're creating. For example, GNSS denied navigation or object classification, target re-identification.

14:42

communication links. There's various, you know, how we go about flight control. There are certain pieces that we then bring back as a compounding value into the family of systems, into the programs. And so as an engineer, you always, you know, either one can work on a platform and help the entire family of systems, or you want to be rather centric or focusing a customer and work on a frontline system.

15:06

Which capabilities are you most proud of today? We're extremely proud about being very, very accurate at hitting targets. That's what we're extremely good at. What does that take? It took us a very integrated approach to bringing hardware and software systems tightly integrated together. So, just building a hardware system is good, and just building a separate isolated software stack that would be able to cope in a simulation, for example, is not enough.

15:37

But the actual sub-meter precision for striking a tank or a moving target that moves at a speed of 60 kilometers per hour requires to fine-tune and get the settings and the parameterization in terms of compute, in terms of compute budget, and memory allocation all perfectly well done for the system to fulfill its purpose. And that is what we're very, very proud of and that we accomplished.

16:01

And you guys, you had a moment a year ago-ish where there's an experiment you were running and the experiment didn't quite hit the mark. And it's an experiment, so experiments don't always hit the mark, but it was reported that there's a big hubbub about how it failed. And you had, what, four weeks or something to turn it around and conducted even more experiments? pass an even harder test.

16:24

Can you just say a word about like, how did it feel to go through that? How did the team rally to get the job done? You know, maybe the details on like, what was it you were trying to do? that was a forging moment for Stark. Stark, in many regards, was born out of fire, but that was a particular moment. So just to get the context right,

16:44

we had a major upgrade in one of our systems, the Virtus system, that was hardware as well as software, and as always, Every engineer knows that. You have a regression. If you have an update, then the center of gravity is off. Or since the opening angle of the camera changed, you have to retrain some of your edge perception model. That's just how it is.

17:08

However, The Bundeswehr, like the German Army, asked us to participate in a very important experiment. And so we couldn't say no to that. And so we went there with a system that we knew is not at our ambition level. But at the same time, we also couldn't say because we also thought that the step wasn't so big. And so we weren't able to fully test.

17:26

Now, that's number one. Number two is also that we tested that in an environment that was not ideal for the setup that we were at at the time. However, now, you know, the media was all about it. They knew that they wanted to bring us towards the edge and stress us out. And so that was, in their mind, actually not that bad. However, media caught this up and, you know, went all about it.

17:51

And so what we did is essentially we did an all hands on deck meeting. We said, OK, everybody, this is a make or break moment for the company. This is where true engineering excellence will show. So the best minds of the engineering community at Stark has to come together. We booked a three-star spa hotel

18:16

which for the purpose of just being close to the shooting range where we had access to at the time, it was in November actually, it was extremely cold. And we worked three shifts around the clock. So while the flight test team went out, collected data, they were sending that back. So we had, at the time, several containers set up. We had even

18:40

mobile generators. We had basically buy from DIY stores very, very quickly set up base in order to have the necessary infrastructure to collect data. And so that as the flight testing was flying, it was extremely cold. The software engineers took that data and continued to work optimizing the full stack flight test as well as perception. And so at the same time, some parts of the hardware engineers also helped improve the actuation and tuned the system out.

19:10

And so in the course of actually only two weeks, we were getting to a hit accuracy that was perfect. But there was this moment, because we wouldn't hit, we said that we will only leave this place if we had three consecutive spot-on strikes.

19:31

By then, the tanks that we shot at were totally perforated. They were already like, we wasted a lot of systems on that. And they're not exactly cheap, right? But that was clear, you know, no questions asked, you know, money doesn't matter. We have to get to the precision. And so we worked all 20 hours shifts. When the flight test team came back, the hardware engineers came back, repaired some of the systems.

19:56

We, you know, had to also, you know, since we were flying and shooting so much, we had to basically scrap some of the debris that we have from our own systems, put it back together in order to have a few more shots and stuff like that. And so that was one important stream that happened on site. At the same time, the simulation team helped us further improve the flight dynamic modeling.

20:16

So we were employing AI systems at that time already to train flight dynamics modeling in order to improve the accuracy of the simulation so that our AI models can be trained within a simulation better. And so all these two work streams then came together in the end. And after two weeks, as a matter of fact, it was less than four weeks, there was this one moment where we realized, okay, that's it.

20:38

And from there on, we've always hit. We've always hit. Johannes, if you're building a software company today, it's very clear where the talent pools are. If you're building a defense company, it's not as clear. Tell us a little bit about how you find the best people and where you look. We look for talent in the classic industry, but also at universities.

21:01

We're looking at startups. We're also looking at governmental institutions. We look everywhere because the talent that has to come together has to come from everywhere. It's such a breadth of functions that we need that... If it's very senior or very junior, we have to bring all the greatest minds together. And so if it's an existing established prime, that usually comes with knowledge that is very, very valuable.

21:29

But at the same time, the startup mindset is extremely and equally important. So they're coming from different domains and different cultures. How do you stitch all that together and get it to work cohesively, particularly as you guys scale so quickly? So the programs build products for the outside world and they are cross-functional. Within each function, there are function heads that bring cohesiveness and consistency across electronic engineering, mechanical engineering, and the various functions.

22:00

And so they build communities of practice within the cross-functional teams. And so that's how we share knowledge, best practices, but also tooling decisions, AI approaches, AI workflows, skills, very important, MCPs across the company. There's definitely something of a cultural shift in the tech and startup community. A few years ago, it would have been unimaginable for people to go into defense.

22:27

It was not something you would do. And that's really changing. So we observe all over Europe, in all the countries basically, People understand this is a generational challenge. This is a generational task. It's time to step up for it. And we see people who have no touchpoint with defense before saying, you know, maybe this is something for me.

22:49

And for them, people like us with Stark specifically can be like a good first touchpoint, right? Because we are as much a defense company as we are high growth tech company. So we understand both worlds. And for people who for the first time really want to apply their technical skills or their general skills into defense because they think, yeah, this is what I want to contribute for, we're a very good first home because we understand both sides.

23:13

You don't need to have worked in defense if you want to work at start. Could you walk us through, as a way to illustrate the technology itself, a single strike from launch to strike? What's happening? What are all the different systems? What are the inputs and outputs? Can you walk us through that? For sure. I'm just wondering where to start, because if I was to start at the logistics level, that's what matters.

23:41

So you don't win wars just because you strike, but it leads everything to the strike. Working backwards from that, it always starts with the logistics. And so we just heard about the wooden boxes that are important. And so how do you disassemble and reassemble a system is extremely important. And how do you transport it? Can it withstand the shocks and vibrations the pressure if it's transported by air or, you know, over YSC.

24:06

So there's various different effects, environmental conditions that a system has to withstand until, and, you know, in some cases it actually had a shelf life of, say, 10 years, until it actually gets deployed to the frontline where the system is then assembled or put on a catapult. And then what happens is the concept of operations for

24:28

all our systems is that an operator prepares the intent. So the system always implements and follows the intent. Think of it as a mission. And so the intent is modeled as, say, no-fly zones or a kill zone or certain... elements that comprise the mission. And so when the system then takes off, it automatically and autonomously finds its way, evading no-fly zones, evading anti-air installations, and flies its way, if it's in the combination with a swarm, communicating across the swarm what they see, so they share situational awareness across the swarm, across the members.

25:08

Would that work only if the swarm is all Stark products, or can it work? Is there some communication that works across different We are very open to that. We are extremely open, and we're going to speak probably about modularity as well. But just to finish that off, the system arrives at the kill zone, starts looking for the system, and then depending on how the customers implement human in the loop, either the system fully autonomously seeks and destroys the target, or if there is a human in the loop element, waits for confirmation by the operator and ultimately fulfills its mission.

25:43

And so it sounds like there's a lot of high-speed, very precise computer vision that is processing on the device. Correct. So the devices, the units, need to be fully autonomous. That requires perception, that this perception is fed into a reasoning engine to act upon the environmental perception and the conditions in order to fulfill a mission.

26:07

So there's a higher order corridor, you may say. Do you need to use your own ASICs to make that work, or...? So we do buy various different components from suppliers in order to make that work. So there is an element of recency. As we always learn, there is new target types. The war in Ukraine is changing daily. So there is a lot of modularity and flexibility built into the systems.

26:33

And so, yeah, we're buying a lot of... components that are procurable in large quantities, such as infrared cameras

26:43

or electro-optical cameras, bring them together, sensor fuse them in order to get a situational awareness onto the system in order to act autonomously. How do you guys think about where you need to be vertically integrated and where you want to leverage the ecosystem or the supply chain that's already in place? The governing principle for us is how do we solve the customer issue? And the scalability of output is a big customer issue.

27:07

So that would be my first question towards vertical integration. A strong argument for vertical integration is can we solve the scalability issue through that? there is that's one force kind of like pulling on that there's another force which goes exactly the opposite way in a way which is it's so helpful for us if we sell those systems to other countries if they can plug in their own suppliers basically because we want to root the production of those systems in the countries in which they're being procured So that's kind of like the ongoing balance, I would say.

27:38

Number one, you know, principle, can we solve the scaling issue? Number two, how can we plug in different suppliers to make everything more resilient? You've talked a lot about your strike drone product. What's your philosophy around being a single product company, but being the best in the world at that one product versus being multi-product since day one? So we look towards where are those capability gaps.

28:02

Those are basically self-described by military saying, hey, we have a capability gap here. And we observe them quite closely while they're being analyzed and formulated. And then we look at them and we think, can we be a good supplier? Can we be a bit provided? Do we have a right to offer a solution for this? And is there one in the market?

28:23

And that's kind of like the first exercise that we do when thinking about the product portfolio. that pretty quickly also gets you to multi-product because we don't see an abundance of offerings in the things that we do. So it's almost like a mandate. We have to try. We, of course, always have to counterbalance against the complexity and loss of focus of multiple programs.

28:45

But I think our first initial reaction would be there is a capability gap. It is evolving. We try to contribute to the definition of that gap. And then we probably will always ask ourselves, can we help? Can we contribute? Because multiple things, on the technological side, on the understanding of the concept of operation side, can be taken, for example, from the aerial domain to the maritime domain, as an example.

29:11

What Johannes mentioned, there is an intent planning, a mission planning. That doesn't matter if the asset is flying or swimming. There is navigation in denied environments where there's jamming. Both happens in the maritime domain, in the aerial domain. There is object detection recognition. Again, the same. There's even some targeting that I'm homing in on a target.

29:34

So there's a lot of things that we can use across domains, as we call them. So dimensions, if you will. Can we talk about a topic that may sound boring on the surface, but it's really make it or break it for a company like you, which is manufacturing? How do you go from zero to manufacturing at real scale? There are two goals when we start a program.

29:56

We optimize for time to market, and second, we optimize for production readiness. And they are often partially competing, because if you're optimizing only time for market, then you may end up relatively quickly with a product that you can show and demonstrate, but then it's very difficult to For example, a Formula One car, you only build one.

30:21

You're very quick in order to be ready, but you hardly ever produce them in large quantities. And so from an engineering perspective, this has to happen. We shift left on manufacturability. That's extremely important because otherwise you accrue a debt that you have to fix later on. And that is really just the beginning because the moment you decide on which components you buy, Supply chain resilience plays a massive role in the decision making process early on as well.

30:50

And so we may not always buy, to the analogy of the washing machine, the greatest and most leading edge camera, for example, but we buy those that are very, very good, top quartile, but actually procurable in large numbers. People in defense talk a lot about local supply chains. Is that realistic in Europe or do you have to look at, say, China or other countries as well? I think it is realistic.

31:17

It is realistic specifically for certain components where it is fairly simple and kind of like the first step, oh yeah, here we can diversify and we can source from different suppliers and even from different countries. And conventional wisdom would be, well, is that good from a bottom line profitability perspective? But it's probably good from a resilience perspective and even more so if your whole business is resilient.

31:43

There are still certain components, I would say, where we have dependencies as the Western world entirely on, for example, Chinese supply and so on and so forth. We try, of course, to work on that and we reduce it dramatically. I think the current systems have hardly any reliance anymore. But there are also things where I think we as an industry, all of us have to come together and together with politics or militaries and figuring out what are the strategies on those things where raw chemicals, ingredients are needed that maybe go beyond the scope of just one company.

32:18

It's probably more of an industrial coordination effort that's needed. Speaking of supply chain, I want to ask you about a very different part of your supply chain, which is AI. And part of the future of warfare is not just this move from exquisite systems to attributable systems. It's also the move from humans doing everything to more autonomous systems.

32:40

And we're kind of sitting here in the wake of the Hugging Face hack where these civilizations of agents, so to speak, broke out of their sandbox and wreaked havoc. And so I guess I'm curious, given the power of the system and the inherent dangers in the product that you guys have, how do you think about the possibility of AI going rogue or it's somehow not working exactly the way that it's supposed to? Stark has, since the beginning, implemented NATO's principle of responsible use of AI.

33:13

And that entails that we are auditing our own systems, not only by humans, but also by safeguard or layers that safeguard the AI in a corridor to be restricted to implement the operator's intent. That is what governs the entire autonomy stack at Stark, at every system. And so, and also at every stage of the mission. And so that are hard coded constraints that depending on where the system is, for example, if it's all flying over a particular inhabited area, it may not arm as one example.

33:52

And so there are certain safeguards and IEC 61508 and several things we borrowed from autonomous driving that we have learned and that also found its way into our autonomous systems. More generally, I know that autonomy is kind of interwoven throughout the product and the operations of the product. Can you kind of sketch out, like when we talk about autonomous systems, what does it mean? Like where does the AI actually show up in the product or in the operations of the product? It shows up in every bit of the product, also in every part of the mission.

34:25

And so whenever there is a decision to be made, be it on what the system perceives, how the system interacts with its environment, also how the mission is planned on the ground before the system actually takes off, that's a very important aspect because, you know, mission planning is, or used to be in the past, very cumbersome and long-term.

34:46

Yeah, actually, can we talk about that? How does AI plan a mission planning? What's a good example?

34:53

Imagine that there is a target coming in, very hands-on example, and that the operator has three systems at his or her disposal. And then the first decision to be made is how many systems do I shoot at this target? What's the most cost effective way of addressing this threat? And so that's the first decision to be made. And then once that tradeoff has been made, in our case, the ground control system called Minerva optimizes the mission planning in order to address this threat accurately and most cost effectively.

35:25

You saw a gap in the markets and you went for strike drones, maritime drones and other products. Why haven't existing primes, traditional primes, figured this out as well? I think they do to a certain degree, sometimes more, sometimes less. Some of them have leaned into this and some of them, including some that speak to us, say that's just not our DNA.

35:46

We're not an organization that builds cheap systems. We are a company that is focusing on a different end of the market and some are trying to. we welcome that. I think like one of the core ideas of what we need to do now is to start a competitive process. We want to compete against those people and their systems and jointly we'll get better, right? I mean, at the end of the day, we're all on the same team.

36:15

So some are trying, some are not so much, but we welcome all kinds of competition. Arguably, they have more capital than you. How do you think about that? Yes and no. If you look at, and that's maybe an interesting fact, if you just look at how much capital we intend to invest over the next 12, 24, 36 months,

36:35

that's a sum of probably something like 600 million euros,

36:39

significantly more than half a billion dollars, potentially much more. That's all going to go into research and development and products, you know, production capability build up. And when you just compare that to the orders of magnitude of spending, R&D spending of the big European primes, and if you subtract all the R&D spending that is government funded, but the actual core R&D spending that those companies do, we're not way off.

37:08

So that's not automatically a good thing. We want to stay nimble. We want to focus on our segment of the market. But we want to do a meaningful contribution. What I said earlier about understanding the customer, building exactly what the customer wants, getting that feedback from the staff sergeant. It needs to be different. Training, iterating with them.

37:26

That's what we intend to do. And I think we're in a good position with the startup spirit and now with the capital in our hands to hopefully build a real pillar of the Western defense architecture. You mentioned the capital you raised. You have done a lot in two years. You also went from zero to 700 people in two years. Is it chaos? How do you handle all of it?

37:51

So first and foremost, the blueprints of the company need to be crystal clear. We spoke about that earlier. Number two is... Yes, growth always comes at the trade-off that there are sometimes hard decisions to be made. However, that is a process that is very manageable. We are improving towards our talent

38:15

growth as always. Generally, we feel that the blueprint works very well, but we also need to be clear that the problem that we're helping to solve is now. And so we have to be fast. We have to make a dent now. And so being slow is not an option. And so allocating these 700, not all engineers, but the majority are engineers, to extremely important and valuable programs is key.

38:46

And so this is what we set out to do. Are we at the end of the journey? Of course not. However, we are very determined to succeed in these programs. Is there a very hard problem you're trying to solve right now? What's on the roadmap that you haven't figured out yet? What we always see in Ukraine is that systems are flying faster. That is something that we are leapfrogging, that we're going into as well a lot.

39:09

We see that compute becomes more accessible. We're thinking a lot around how we can further drive AI on the systems, in a safe manner, but give it more capabilities to deal with, to be, for example, adjustable to targets that are on the naval side, as well as maybe in the air, and not only on the ground. There's various areas we're going into, but also in the electromagnetic space, there is a massive disruption happening, thanks to software-defined radios and affordable compute that allows to bring down costs for sensors of the electromagnetic space.

39:48

That's extremely interesting. I'm really interested in solving the next big thing, which for me is kind of like the contractual design.

39:58

Because I think there's a big deterrence possibility in the way we structure those contracts. Because it's one thing that we sell hundreds of thousands or potentially tens of thousands, hundreds of thousands of those systems. But what's really interesting is can we come to a contractual design between the government and us and potentially others actually that already kind of like

40:22

has everything in place for the massive surge in scaling that we need if there's ever a hot conflict for us. Because that would be very interesting. All of a sudden, we maybe think about this more in terms of cloud contracts with surges and so on and so forth. Because if we get that done, that is probably where the real deterrence comes from.

40:44

It's not about the individual capabilities of one product here or there. What would that look like? So there's some stockpile, presumably, but then they prepay for manufacturing capacities that you can just spin up in the event something gets out. I mean, there's a big question about the supply chain. There's a big question about storage of systems.

41:03

There's a big question about... Who updates those systems? Probably if you look at a drone at the moment, probably the motors, they're good for three years, but a software probably should be updated every week with new training data and so on and so forth. So how do we structure all of that? That's something that's very interesting to me because that's one way how you can create real deterrence, I think.

41:26

Has anyone in the Western world figured this out? I don't think so necessarily. There's not a blueprint. The same goes for all things that we do in procurement and all things we do in product development. There's not like hundreds of people who have done this and now they can just teach us. I think we all learn together. And that, by the way, kind of crosses both sides.

41:47

On the government side, on the military side, on the industrial side.

41:51

I do think there is like an optimistic spirit of, okay, we need to figure out a few things because we don't have the right tool set just yet. But in that spirit, I think we need to solve it together. I don't think somebody has the perfect playbook. Here's how it's done. Just copy this. We don't have that yet. But it makes the whole thing so exciting.

42:07

It's at the forefront of what's technological possible. It is very clearly what's required to be able to survive in those battles. And bringing those two things together is kind of like allowing us to make a real contribution to kind of like continue to live in peace. What is the mission of the company? The mission is quite clearly we want to be one of the absolute pillars of our European and Western defense architecture.

42:37

And that means, yes, we want to be a sizable company that specifically delivers the capabilities that we talked about. But we also want to help orchestrate a real innovation ecosystem. We want to be a good collaborator with other people. We want to work with the large ones, the small ones, our peers, with everybody. Because we think about the one mission for the company is very closely linked to all of our mission.

43:00

That's very important for me to stress that we want to be a pillar. We want to be a dominating pillar, of course, but it's not a mission that can be achieved by one single company alone. And if you do achieve the mission and we're sitting here five or 10 years from now, what does Stark look like? What does Europe look like? What does the world look like? I think Europe will become a better partner for the US again.

43:22

There will be hopefully a new chapter of transatlantic cooperation. Europe is a helpful, strong, principled ally among each other and towards the US and other partners in the world. And we live hopefully in more peaceful times where we go back to how the world was a few years ago. And hopefully we have de-escalated some of the wars and situations around the world and others have never flared up.

43:50

Amazing. Uwe, Johannes, thank you for joining us. Thank you so much. Thank you.