How do you raise $76M with no defense-tech background?

Ep 102 Nelson Mills Transcript Jason Kirby (06:50.571) Hey everyone. Welcome back to a hundred million dollar exits. Today I have Nelson Mills. Nelson, I want to just go straight into the story of how you were a VC intern to now first time founder of a company that's raised over $76 million in the first two years of operating. How'd you do that? Nelson Mills (07:14.52) That's a great question. think from day one, I actually wrote my essay to get into Columbia Business School about starting a company and particularly in the hardware space and building it. But somehow I just kind of got sucked into venture capital as like, hey, this is something I'm also interested in and want to learn about. And I think it was a great experience. But I never really lost that mindset for like, hey, ultimately, I want to build a company. This is my pathway. This is the goal. I'm going after. So for me, I think it was a relatively like natural transition of, let's go learn what venture capital is about, to raise money, how to talk to VCs, build a network with VCs that I can then go and use when I need a fundraise. And after working at a VC full time for about a year and doing a few internships before that, I realized like, yeah, I'm ready. I have some ideas. and I met the right found the sorry, the right VCs who were like, yeah, we, we'd back you and you know, certain areas and decided to launch the company. in particular, one DC decides a point group. they approached me, or I met them actually at a, at a VC event and they're like, yeah, we're really interested in like the underwater space. And so I met the, founder, Tommy Hendrix in a dark bar in New York. And he's like, Yeah, so we think there's this huge opportunity in underwater defense, kind of laid out what they were thinking. And then he introduced me to a bunch of customers and I started digging in. I was like, yeah, there's a huge opportunity here. And we launched the company. They led our pre-seed round and that all came together pretty, quickly. Jason Kirby (09:00.503) So this goes from New York bar. Like this wasn't even in your kind of conceived idea at this point. Like this was more of a brainstorm session with this VC around this kind of underwater UAV, we've got unmanned vehicles, strategy. Nelson Mills (09:17.868) Yeah, exactly. I was working on a different maritime idea. And then I heard he was through one of his associates that he was interested in this concept. so, yeah, he came with the initial idea of like, yeah, you should really do something underwater and do defense focus and there's a big opportunity here. And then I kind of took that and ran with it. It was like, okay, yeah, and here's kind of the first product. Here's what it should look like. Here's how we should approach building it. and kind of ran with it from there. Jason Kirby (09:49.973) And where did your underwater unmanned vehicle experience come from? Nelson Mills (09:54.606) Yeah, I had zero unmanned underwater vehicle experience. What he did like though is like before I did my MBA and I was in venture capital, you know, I spent three plus years with maritime systems basically like doing hydrofoil electric boats, regular electric boats. And he liked my story arc of I actually grew up homeschooled on a sailboat. So, you know, spend my entire childhood in the maritime world. Jason Kirby (09:55.594) you Nelson Mills (10:23.598) and had a connection to underwater space. It's also funny, he always likes to say too, he's like, when I showed up in that dark near city bar, I was wearing a fisherman's sweater. And my beard and everything, he's like, wow, this guy's a man of the sea. I'm ready to invest. Jason Kirby (10:42.893) When you played the part, you went where the money was already, and you had a personal story tied to oversimplify the sea. That kind of made it, and you had a relationship, you know, so there's some mutual trust there and mutual alignment in terms of the opportunity. But I think one thing that's obvious here is that like you went where the money is. And I think that is something to kind of call out and Nelson Mills (10:47.288) Yeah. Jason Kirby (11:13.205) kind of elaborate on it was like, then decided to kind of put the work forth on developing out the strategy. like walk us through kind of that experience of scoping out this strategy to, build what is now, you know, a hundred plus million dollar company that's raised, know, 70 plus million dollars. kind of starting from that, you know, dark bar experience. Nelson Mills (11:39.694) Yeah, I I think for us, was like, hey, here's this concept, right? That there's market opportunity here. Here's some customers you should talk to. And also, I brought two co-founders with me who have a ton of experience building maritime technology. And then just as a point, here's this guy you should meet who has ton of experience with business development. And so that guy ended up being one of our co-founders too. The four of us sat down and just started talking to a ton of customers, started learning the technology and challenges. And we quickly realized underwater technology is really, really hard. It's GPS denied, environment, comms degraded, vision degraded. So it's really hard to build something that works autonomously undersea. We just started recognizing the challenges and then we got to thinking of like, this is what the people, other our competitors or potential competitors have done in this space. This is what the customer says they want. What could we achieve that the customer would be interested in and solves pressing needs and problems they have? And the things we identified is like, they're too expensive, they're not producible. There's a lot of supply chain issues. So how do we make a cheaper UAV, one that's truly scalably manufacturable and one that has more resilient supply chains and fits a bit of a different mission need, right? They don't need, you know, this exquisite vehicle to do everything. They need something that is more trittable, right? Can do kinetic missions, can do decoy missions. They don't necessarily have to get back, but you can get back and reuse if you need to. So also kind of a bit more multi-mission. And so we really focused on that problem and came up with a solution through what I would like to call like a lot of like little innovations, right? That come together and produce something that's pretty, pretty revolutionary for the market of underwater vehicles. Jason Kirby (13:55.47) So I'm seeing a general theme of, you you going towards where the demand is both on the money front and also talking to the end customers and not necessarily like we will, you know, we will build in. will come, you know, you're really trying to optimize the kind of the outcome of the product for, for them. then, so I'm going to take a step back on the capital raise. So you raised that very quickly. Uh, I think it was three and a half million you mentioned from this, you know, dark room bar, uh, experience. raising like less than a month or like a month. How does a deal like that, if you can shed light on this, get architected at that level and that stage and that high of capital, kind of like what is effectively an idea stage? How does a deal like that get architected? it just a traditional save, give up 20 % or was it more complex than that? Nelson Mills (14:43.084) Yeah. Real quick, I'll just mention on going where the demand is. On some level, that is true. We saw the tailwinds of where it was going. Though at the time, there wasn't really that official demand signal from the government. So we were like, hey, this is what US defense and foreign defense customers are going to need. And we built that. And a lot of that was insights from the customer, but it was also foreseeing where... naval warfare was going. So we fit really well in those tailwinds. And if we started a year later, I think we would have been a little late for this market. yeah, getting back to like architecting the round. yes, we raised an initial 2 million in about 35 days. At the time, I think I went to market, I was like, I'm going to raise a million, you know, just size point in, just size point put in a chunk of that. And then quickly just kept getting commitments and commitments. I was like, you know, better off, we're better off taking more money now at the, you know, at the safe cap, um, then, then kind of holding off. So it allowed us more runway and to get farther and to do more. So we took that 2 million really rapidly, um, at, um, you know, uh, you know, pretty standard, I think it was like eight mil safe cap. And then, um, from there we, uh, you know, we started executing. And over the course of the next, I think it was like 12 months, we raised another, maybe it less than that, eight months, something like that. But we raised another 1.5 million on higher and higher kind of safes. So we kind of stacked a few safes together before going out and raising an official seed round. You know, I think like when you talk about like architecting that round, it's a great question. Like, I mean, we were really raising with an idea and a deck. right? Like, hey, this is our team. This is why we're a great fit. This is the opportunity we're going after. Here's the initial product. And here's the pathway for us to be billion-dollar company. And I think to your point of going to where the money is, defense at that time was really taking off. And it's maintained as a really hot area over the last couple years. And I think that helped. There was just lot of momentum in the market, lot of interest in what we're doing. Nelson Mills (17:07.596) and like a kind of initial burgeoning interest in the maritime defense space, which had been a little under invested. And so we just met the right set of pre-seed investors who were really focused on defense and wanted to use something in maritime space. And they really hadn't seen much up to that point. Jason Kirby (17:24.669) And at this point you, you stack the safes. What kind of milestones were you at in this type of category? Cause it's not like, it may be was revenue or not, but like, you know, typically building something that's like this doesn't just happen overnight. And there's a lot of money at capital and capex. how did you go? What kind of milestones did you hit for the seed round and what was that seed round process like? Nelson Mills (17:50.988) Yeah, the seed round took a lot longer. I think it ended up being about 10 months total time to fundraise it. we you know, we raised the pre-seed off of like an adept in that idea. We were trying to raise the seed round off of like, hey, now we've executed here's a vehicle, it's in the water, it's working. We've been accepted to all these military exercises. We're not really getting paid yet, but We're executing on these, we're doing well. We showed, in particular, we had like a three phase military exercise where we ended up getting paid in the third phase and we executed really well and got great feedback. And so going into closing our seed round, I think we had, you know, hundred something K in revenue and basically zero dollars in bookings. And so we're really building off like, hey, we have this technology, we have all this interest and traction in the market. though we didn't have a ton of revenue, but we had a lot of like, I think really solid indications of interest and support from government customers, which helped. And we de-risked lot of the tech. Jason Kirby (18:58.925) So like the tech was believable at this stage and people were lurking. They were watching, they were interested, they wanted to see what happened, but not necessarily materializing in contracts or booked revenue at that point. So still some solid trust in the team and the general narrative. Was it mostly insider or was it all fresh capital? Nelson Mills (19:12.204) Yeah. Nelson Mills (19:23.426) That was a fresh lead and mostly fresh capital, though we had a bunch of insider support. But yeah, the biggest chunk of it. We ended up having Dine Ventures lead and then Raytheon, Lockheed Martin, SAIC, and a couple other new investors joined around, Cuba Capital, and they were the bulk of it. Jason Kirby (19:45.165) So that's a pretty heavy strategic round at that stage. You know, usually these players don't come in that early. guess, how did you go about building those relationships? Nelson Mills (19:47.704) Mm-hmm. Nelson Mills (19:54.318) Yeah, that's a great question. Those intros came through, I'm trying to remember, I think existing investors introed us to pretty much all those firms. We ended up just building those relationships over the course of about six months. And they're all industry insiders, big primes, and they understood the tailwinds for this market. And we're really excited about that and excited about what we'd already proven with our technology and how we'd approached it. and wanted to be on board and, you know, along for the journey. Jason Kirby (20:31.286) So you mentioned that the seed took you 10 months. I guess how do you define the start and how did you, like, obviously the end is when the money's in the door, you know, I guess walk us through kind of the thought process of like, I need money, but, you know, I need money in 10 months. Like, or it just, took that long to kind of cultivate things. Like what was kind of what going on there? Nelson Mills (20:34.894) Mm-hmm. Nelson Mills (20:52.046) Yeah, that's a great question. You know, I think it's all a little like up in the air of like what you consider a start and what you don't like, you know, sometimes you hear about these founders like, oh, I raised in like five days or 30 days. And I know obviously I said that for my pre-seed. In that case, I think it was pretty much a true 30 days where like, hey, we kicked off fundraising and then we had concluded by that and kicked off by like any conversations, right? Like 35 days after our first conversation with the VC, we closed around. I think after that, it became more of like, you get into more of like a continuous race process. So like, how do you actually measure when how long the fundraise took, right? Like, like thinking about our series D, like some of the potential our future series B. some of those potential folks that could leave their series B. I mean, I've built a relationship with them over the course of the last two years. So like if we raise that in a year, did it take us three years to raise that? We started building those relationships early. So I think there really is like this sense of like, you never on some level stop fundraising. You're constantly building those relationships and deepening those relationships with folks who may lead a future round, right? Like the lead of our series A, BVVC, they put a scout check into us about two years ago, right? And so we continuously built that relationship with them and then they led that round. officially I kicked off the fundraise, I think it was early January of this year. But on some level it's like, we've continuously been putting work into fundraising. And so sometimes I think when, Folks are like, we raised our round in X number of days. It's like, yes, but you probably did a lot of backend work building those relationships, getting people excited ahead of that. And even now, when we close this fundraise, I don't really stop on some level raising, right? I'm continuously building those relationships, developing them, deepening them with future investors. Jason Kirby (23:07.916) So when it comes to that relationship building, that's one thing to say it. like, we build relationships, but you know, you're, sounds like you're, you're actively seeking intros, you know, and like the fact that your seed round was all net new capital, mostly new capital. Like that's probably what took so long. had to build those relationships with the people that didn't know you existed before. So what's kind of your tactic to keep relationships warm and activate those relationships so that when the timing's right, they're, they're there and can take a serious look. and investment. Nelson Mills (23:40.142) Yeah, I think it's important to have a lot of touch points. mean, it doesn't necessarily need to be weekly, but texting and investing, you're like, oh yeah, we just had all these great key wins. Hope you've been well. Just kind of updating you, hey, I'm in San Francisco or New York. Want to grab a coffee and catch you up. We're not fundraising, but it'd be good to just stay in touch. Stuff like that, right? Jason Kirby (24:07.38) Not fundraising. Nelson Mills (24:09.376) Yeah, exactly. that is thing, People love to say, I'm not fundraising, but they're all trying to get preempted. So are you really fundraising? Probably. I'm seeking to get preempted actively. Jason Kirby (24:22.986) away. Yeah, exactly. And so is that what happened? You were just teeing up all these relationships and then one of them was like, so you're going to take my money? Or was it, did you come to them and say, hey, the round's open and you turn around like a competitive process? Nelson Mills (24:32.782) Mm. Nelson Mills (24:41.742) Um, yeah, at some point, um, we, we, we opened the brown or like, Hey, we're running a competitive process here. And we ended up getting, you know, for our series a and our seed, ended up getting multiple term sheets, um, in the end, even though the process took a little while. Um, I think there's a lot of like stigma on that. It's like, there's, there's this. Like, and I see it from some of our investors, investors we talked to her like, Oh yeah, you're supposed to like raise around. months, right? That's how long it's supposed to take. And if you're on market longer than two months, there's some sort of like negative signal. I think that's kind of a false narrative. The fact is, you are a massive outlier if it takes you a really rapid time to raise a big round. And then to my point earlier, it's like, how are you actually measuring how long it took you to raise, right? The reality is you're probably a lot of those relationships have been in place for a while. There's always, there's always a few outliers though. It's like, yeah, I the guy yesterday and today he's like commits $5 million to my round. I haven't personally had to that degree, but I've had like a million or something like that happened within like 24 hours. But yeah, sometimes that happens where people get a lead and you know, they commit really rapidly, but I would say in general, that should be the outlier. And if you're a founder, Jason Kirby (25:47.84) Yeah. Nelson Mills (26:04.238) In fact, think it's a good thing if from the investor perspective, if a founder is really grinded on a fundraise because they've shown that, we're not going to give up despite the fact, know, 100 or 200 funds have passed on us, right? That they refine their pitch and get to a good outcome, right? Jason Kirby (26:26.07) So I know we're talking a lot about fundraising, but I think you have a really unique insight on it. Just being on the other side, being an investor yourself, and then, know, kind of switching gears to be the founder, which I'm in all fairness, now, so I'm going to have to have my editors go and take your, I want to call it kind of like your VC photo that's on your Twitter that shows you all cleaned up, no beard, you know, hair all done. And then I want to call it, and this picture of you now is like founder. The beer, the hair grown out. It's like you your VC, finance look. Got you open to the doors and now you finally get to be more of yourself in fact about it. I think it's going to be kind of funny if I'm contract. Nelson Mills (26:52.972) Yeah. Yeah. Nelson Mills (27:04.642) Yeah, I forgot about that. totally. I've totally forgot about that photo on Twitter. That's old. Yeah, honestly, I don't really go on. Jason Kirby (27:09.996) I know I just, I looked you up and I was like, that's the same person. Um, but you know, kind of like, I think I'm unique in perspective. And so, you know, now you just, you know, closed recently this much larger round, uh, I you said it was 60 million, uh, for a series a. So enlighten us with what you can on what that was, you know, how, how'd that come about and why 60 and what did you prove to investors to warrant such a sizable round? Nelson Mills (27:14.22) Yeah, yeah, that's funny. Nelson Mills (27:34.83) Mm-hmm. Nelson Mills (27:40.878) Yeah, so the awesome thing is as soon as we close our seed round, we just started getting massive customer momentum and started showing like real revenue. So we ended up closing that year with a little bit more revenue, a bit more bookings. And then we were rapidly multiple X'd our bookings. I think we were going to end the year with think seven, eight X on bookings, maybe more. Um, and we're going to end the rev the year with, I don't know, 16, 17 X in revenue. Um, so we, we, we showed that clear pathway and that, you know, customers are now actually putting money down. We're, not only that, but we're not just getting these R and D contracts. We're actually, you know, 50 plus percent of our revenue is production, right? We open to production facility. We. started building our vehicles, delivering them to customers and having them go out and use them and get it got like really good feedback and follow on funding. So follow on purchases. So we're proving out not just, hey, we can get a contract, but we can also execute on a contract and we can get folks to re-up on those contracts and buy more and convert pilot programs. I think that was really compelling for us. sorry, for a series A, and then also showing like, hey, there's this massive pipeline here, right? The government's now finally showing the demand signal. We said that was coming for the last two and a half years, right? They passed this $150 billion reconciliation bill with, you know, two and a half billion plus for underwater systems and vehicles and torpedoes. You know, the government is now... putting out real programs through DIU and SCO and other folks that are relevant to us. And so that massive pipeline increase along with the revenue and bookings accomplishments really set us up well for a large series A so we can go out and actually execute on that. So we need the capital now to further increase production capacity. Nelson Mills (29:58.744) put out some new products on market and go win these true like multi hundred million dollar contracts that we have line of sight on that. Jason Kirby (30:07.308) What would you say you can attribute internally? it's like, were talking all about external relationship building, proving your metrics, but like you have to have talent, have to have team, you have to have like people, you know, are allow, allow you to kind of have this momentum and be able to scale up. So when it came to kind of your talent strategy and acquiring the right talent and how did you go about that? Nelson Mills (30:33.546) Yeah, and I think you bring up a really good point that VCs, investors do really look at your talent, the talent you're hiring and you're planning to hire. And then you also need to have your internal strategy of like, what talent do I need to win these contracts to execute on these contracts? Because the customer also looks at that, right? And I think what has really paid off for us is really investing in manufacturing talent and capacity far ahead of winning contracts. Because that has actually helped us win contracts because there's very much a chicken and the egg issue here. So we invested really early in hiring a very talented director of manufacturing who came from Boston Dynamics, with proven capability in scaling robotics production, and then building a team around him. And we invested really early in really talented engineers. And then a director of supply chain, it came from SpaceX and all that has contributed to us telling a really good story to investors. And another key hire actually was the VP of finance with a deep manufacturing background, not just like a startup guy with SAS experience, but somebody who's done finance at a manufacturing company. And I think that really solidified the story and showed, Hey, we're approaching this market smartly. acquired the right talent to succeed and acquired impressive talent. And that was good for both the fundraise and for winning contracts and for the company to execute on our strategy. I would say never hire someone just for the sake of appearances with VCs. But it is also important to understand how things look, right? And making sure that you have an explanation for why you're hiring the people you're hiring and how that affects and improves your growth trajectory. Jason Kirby (32:39.596) Yeah. And often what I see is like companies that kind of have this breakout velocity when it comes to capital, securing capital, yeah, often talent flocks to, those types of opportunities. And that's one of the strategies around venture is if you, you know, going into a winner takes all type market or a very big market, raise more so that you can get the best talent, which again, chicken and egg broth, you have the best talent, you're to get more money. you're to get more contracts, you're to get better deals. so I see that as. something that's not talked about enough. think a lot of founders will say it's because of me, which could be true, but being able to recruit and retain some of the best talent is often what's kind of leads to these, these types of rapid scaling opportunities. So one thing we've completely neglected on the show thus far is, you know, obviously do unmanned vehicles, but like kind of walk us through like what it's like competing against, you know, Andrew and other players in the space that Andrew, guess, is still a startup, but like, know, would say they're pretty sizable at this point. And then obviously the incumbents, you know, being in this kind of defense tech, maybe dual use, what's it like kind of competing in this space and building your company? Nelson Mills (33:57.122) Yeah, I mean, one of the things I initially liked about the underwater space is that there are fewer competitors, right? You'll get like the USB market, some of these, the UAV market, there can be hundreds of companies that you're potentially competing with. Undersea market is far more limited. It's just a lot harder, right? There's a lot harder barriers to entries. I think that have discourage people to enter the market or rapidly force people out of the market. And so, you when I was looking at this company, was like, this is kind of VC's dream, right? There's real technical barriers to entry if you can build the tech. There's kind of this massive white space and there's huge tailwinds around this needing to be a core part of the future of naval warfare. and so when obviously there are competitors, though, Andrew has undersea vehicles, including some that are directly competitive. you know, there's, there's a bunch of other traditional companies out there that have products. There's some new startups that are starting to look at the space. but relatively speaking, compared to some other markets, it's still pretty limited. I think what we do. is we certainly do the competitive analysis. You know, we did a big competitive analysis this summer actually, but we focused really on, what does the customer want? What can we achieve and spend less time just looking obsessively at what other competitors do in this market? And I think, I think ultimately, you know, winning contracts is about doing the best thing for for the actual buyer, right, the actual customer, and having a really strong lobbying game on the Hill and in the Pentagon. So if you can sell yourself well and come with the best in class product, you ultimately do well. So understand what your competitors are doing, but I think you got to stay really focused on executing your mission and your strategy that has been defined by your analysis of the market and the customer. Jason Kirby (36:23.211) Walk us through the lobbying aspect, having people on the Hill. You you have in-house people that you've hired or you outsource it to a firm. Like, you know, this is not a common thing for most founders to deal with, but as you get to certain scale and if you're selling to the government, it becomes more and more of a reality. How do you think about that strategy? Nelson Mills (36:46.518) Yeah, I mean, if you're if you're a company that's focused on selling to the government, whether it's defense or potentially another market, I really know defense the most. But you need to start lobbying as close to day one as possible. Basically, I got this advice from a founder a few stages ahead of me in the defense market. He's like, get a lobbying firm and and get out on the hill and start building relationships. And it paid off really rapidly. Right. You know, you're going to pay 10 to 15K a month for a lobbying firm and you can pretty rapidly get wins. It takes a while for the money to show up. actually still waiting for, you know, 2025 appropriations dollars to show up. But you know, we're getting, you know, a 10X multiple on our investment, right? And that's just the beginning. And it's not just about appropriation strategy. There's also about getting language in the NDAA. So like authorization language that helps you advance your product. It's, you know, getting influencing strategy with, you know, the right folks on Congress who will communicate certain strategies to the Pentagon. And it's also about spending time with senior leaders at the Navy at the Pentagon. And, you know, giving them a perspective on how you see the market and how you see solutions and educating them on what you're doing so they can make the most educated and best decisions. And so, you know, I think for early stage startups, you have to start building those relationships as soon as possible. So get a good lobbying firm and go spend a lot of time with your customers on every level, build out a great like advisory board that can help you get access. And then eventually, you know, hire a VP of Government Relations who I think should ultimately really be customer focused. That's the strategy we've taken at least of let's hire a VP of Government Relations who you just announced recently, who has deep connections within the Navy with our customers, can go and open those doors and have those conversations. And then you can hire the Hill experience through a lobbying firm that can... Nelson Mills (39:01.166) you know, take that person to the hill and open those doors, right? And ultimately they act as that conduit between the hill and your customer. So that's the approach we've taken. think it's the right approach. I think we've experienced quite a bit of success with it to date, though there's a lot to be still proven out. But yeah, you can't undersell, like, the best technology, unfortunately, is not necessarily what wins. Jason Kirby (39:30.111) Thank you. Nelson Mills (39:30.658) you have to sell it correctly, have to lobby for it, you have to advocate and build advocacy among key players. And if you don't do that, I think you'll rapidly run into roadblocks. Jason Kirby (39:43.561) What sucks about this process? Nelson Mills (39:47.918) Selling to the government. Yeah, I I think a lot has improved, right? I think there couldn't be a better time to build a defense startup in that sense that, you know, procurement process is rapidly changing, but it never goes as quickly as you want. I think that's always been the challenge, right? It takes a lot of like, specific knowledge of just how far based contracts works, how OTAs work, how DIU works. It takes a lot of relationship building that I don't think maybe every founder understands. so educating yourself on that really, really helps. And I went into this with almost zero knowledge around government acquisitions, right? I had a co-founder who knew about it. Um, investors who knew about it and educated us. Um, but I wanted to tone really quickly. Um, and I think if you're going to build a company in this space, you really have to immerse yourself in it and really try and understand it. Um, because there's a lot of peculiarities to it. And so I think there's just like high barriers of entry, um, just on knowledge of, of how to deal with this, this market. Um, I think there's improvements being made there. Um, but yeah, it can get, it can get frustrating. Jason Kirby (41:15.307) Sounds like an understatement. And so when it comes to, you know, now that you have this capital and when you, let me ask, when it come back to the 60 million, like, was it all equity or was some of a debt or are you adding debt to it? Cause you know, it sounds like there's going be some capex investments. I'm kind of curious how you think about the capital strategy from there. Nelson Mills (41:39.756) Yeah, so far that's all equity. We're exploring some debt and leasing opportunities. So we don't necessarily have to use equity for buying equipment or building a new facility or things like that. That's kind of still TBD and how exactly we're going to approach it. But like our seed round, for example, I think we added like, I think it 2 million in a leasing facility for equipment. Right. And that was really helpful and extended our runway. So I think that's definitely something founders should always look at and consider. Venture debt can be expensive, but it can also be useful. worth considering. Yeah. Sorry. there, I feel like in this part of that question, but. Jason Kirby (42:23.869) I just, yeah, it's just more of like a, because when I see these like large rounds, sometimes it's not always equity. Sometimes it's equity and it's, you know, a good chunk of its debt to kind of, you know, do what you just talked about. Sometimes it's, you don't have to use equity. why, you know, equity can sometimes be the most expensive capital. So, you you think that as an alternative. So I typically see the big announcements or the big numbers, there's like debt chunked into that, but that's not necessarily equity, but. Nelson Mills (42:30.006) Mm-hmm. yeah. Nelson Mills (42:37.966) Yeah. Nelson Mills (42:43.224) Fisher. Yeah. Nelson Mills (42:51.53) Yeah. Yeah. Not, you know, our actual equity raise was 60 million, though I 100 % agree with you. It's worth. Yeah, it's expensive. And particularly, I think doing equity for like working capital often doesn't really make make sense if you can avoid it. The challenge is always with startups is that, you know, the financials aren't always what banks want to lend on. Right. But. I think there's interesting alternative debt sources and leasing facilities that while expensive can really ultimately be cheaper than equity. And I think those are always worth exploring. we're going to have some of those available to us, but we haven't made any announcements around it as part of the fundraise. Jason Kirby (43:38.86) That makes sense. Yeah. think it's always wise. It's something I spend a lot of time with founders just exposing their options is, know, equity or giving up maybe 20, 30 % of your company or something to that degree. What's that worth in 10 years? you 10, 20, 30 X, versus what people, yeah, everyone's so used to like mortgage rates for interest rates. I was like, oh, like 6%, 7%. It's like, ah, it's not what you get when you run a business. Yeah. Much, much higher. But in reality, in terms of what you could do with that capital, what the return on investment could be. Nelson Mills (44:02.328) Yeah. Jason Kirby (44:08.327) It's often complimentary to go get that capital shortly after an equity race, because that's going to be the absolute easiest to secure the lowest cost, debt in most cases. When it comes to the hard stuff, so hardware, and building this type of equipment. So you're dealing with cameras, autonomy, everything working underwater. and being sealed and then being able to be self-sufficient, charged, all that kind of stuff. Unravel a little bit of that complexity and what are the problems that you find are the most difficult when it comes to scaling a hardware business? Nelson Mills (44:50.158) Yeah, think there's two issues companies run into. One is, hey, what's good enough for us to actually decide to productize this and hit the market? And how do we how do we figure out what what that is to actually manufacturing and prepping supply chain, right? And scaling manufacturing and supply chain. That will always be, I think, the number one killer of hardware startups. Not enough intention is paid in the initial phases of the company to manufacturing. One of our first mechanical design engineers was actually a manufacturing engineer at Tesla, right? And I think that is really helpful. that from day one, we focus a lot on manufacturability and supply chain resiliency and made decisions that enabled this to go from R &D vehicle to product really rapidly. And I don't think you can start soon enough for most hardware startups on that pathway. There's always exceptions and maybe if you're doing fusion reactors. Right? Like you need to focus more on executing, but I think for stuff like ours where, you know, you can develop these pretty rapidly. It's not a 10 year process just to make the technology work. Manufacturing and supply chain will be massive issues and you got to figure out. I don't think enough people in particular talk about design for supply chain too. Right? Like don't design your vehicle around particular parts. Make them a little more modular, a little more flexible on how you include different parts and having backup parts and think about, know, like, if I can order for a thousand of these or 10,000 or whatever number, how would I execute on that? And what design choices that we made that might limit that and fix them. So that's really, I think. Nelson Mills (47:09.814) what we invested in and focused on early, that's been helpful. I think there's still a lot to prove out because we haven't produced a thousand vehicles yet, but we know we're are gonna end the year producing 50 vehicles. So, you that's kind of the pathway, you know, we've been on. Jason Kirby (47:25.255) And, know, you don't have to, if you don't want to, but could you share kind of like what the unit economics look like for these types of products? Nelson Mills (47:33.166) Hmm. Yeah. I mean, we have today about 60 % gross margins on our vehicles. know, selling to government, there's a lot of costs in the sales process, a lot of fixed costs in manufacturing and stuff that gets you to much lower net margin. But it ends up Yeah, you know, actually thinking back on it, I don't know if I want to stay or yeah. Yeah. Yell me. Fair, fair. Yeah. Jason Kirby (48:06.187) I'll cut it out. I was thinking more of the, yeah, so I'll tell my team, like cut out the question. Just because I was thinking about it, because you can't really, you don't want the government to know you have 60 % margins. I was thinking more of like, you know, economics of how you think about like the, so I'll rephrase the question so they can start from here. It's like, when it comes to building a business like this and building hardware, you obviously, there's components, there's capex, there's all these different moving pieces to. Nelson Mills (48:17.748) No, no, not really. Yeah. Yeah. Jason Kirby (48:36.515) building a product that's ultimately sellable and scales where it really becomes profitable at some point. but when you think about like the, the parts that go into these equipment and like there's buying certain parts, sourcing, talked about this kind of sourcing certain parts, and then there's like maybe custom manufacturing some parts. when you think about just the dynamics of this business, Okay, I'm gonna stop that. That question was just gonna ramble on and I was trying to not ask you an economics. It's just gonna go right. Let me just we don't have to go into that doesn't matter. Nelson Mills (49:08.098) Yeah. Nelson Mills (49:13.066) I think I'd maybe I can make a bit of a point on, on unit economics, which would be that. Like, I think, I think when you're a founder thinking about doing a hardware product and, you know, this is something we thought about, because I've seen this in the past is that there are certain hardware products where you, you look at the market, right? and you're replacing systems that maybe are. really cheap or relatively low costs and have been sold at scale and probably, and then you're looking at a new system that might be more expensive naturally. Maybe it has some benefits and reasons it's better. You can look at like electric boating, Like electric boats tend to be a lot more expensive than gas boats. And you tend to, in some ways, get worse performance, in some ways you get better. right? Like it's quieter, it's better for the environment, but you know, your range is worse, your speed is worse. But you're also like dealing with an environment where it's really hard to get good margin, right? Because of that. I think one of the things I liked about the undersea market early on was that we weren't dealing with a similar situation, right? There was an opportunity to build something that was better with good unit economics. And that we wouldn't have all that margin pressure that you do in other industries, other technologies. And so that's something we recognize really quickly is that there's just going to be a lot less margin pressure on us and a big opportunity to sell something that's a lot cheaper to the government while still having good unit economics. Does that sort of help better? Yeah. Jason Kirby (51:01.681) Yeah, appreciate you, you know, going into do that in a little bit more detail. And yeah, I guess I want to switch gears to like more of a fun topic now. you know, this doesn't always come up, but I think it's interesting that you built this company with your brother. you know, it's often like people are like, don't mix family when starting startups and stuff like that. But, know, kind of what's been that, how's that journey been, you know, raising money and going and scaling a company with your brother. Nelson Mills (51:29.868) Yeah, no, I mean, it's been great. I think my brother and I can be a bit of a yin and yang, but in a good way, right? Like he's very execution focused, which is what you want in a COO. So he's really good at executing the vision, making sure people will get stuff done. And I really appreciate that. Exactly. Like I just went away for two weeks. was in Japan and Hawaii doing customer meetings and partnership meetings. And I can trust like, I'm going to come back and stuff's going to be done and we're going to be on track. And so there's a deep level of trust in that. That's been great and really, really helpful. And it's good. He's my brother. I love him. It's great to work together and spend a lot of time together. so I think, we really do have kind of like matching personalities on that sense and that's worked well. Jason Kirby (52:27.635) I just got a weird question, but just looking at the pictures, are you guys twins? Okay. Nelson Mills (52:31.438) No, no, no, he's uh, yeah, we both, yeah, we both have the beard and the hair, but he's two and a half years older than me, actually. Jason Kirby (52:38.731) Okay. I just thought that'd fun. was like, Oh, could you ever do like a switcheroo on the team? Like, you got to do a CEO meeting. can't make it. I don't think I've ever seen twins actually build a company like identical twins. So that's kind of an interesting thing. Um, but, um, yeah, from, from here, you know, having so much success so quickly on raising capital, um, you, shared some really good insights for, for our community, but Nelson Mills (52:46.382) Yeah, nah, nah, a little different. Nelson Mills (52:52.396) Yeah, I don't know if I have either. Yeah. Jason Kirby (53:07.689) What would be something that you haven't shared to this point? Maybe it's not something you share often, but could be meaningful for founders out there looking to either get into defense tech or hardware and go and secure capital. Nelson Mills (53:23.466) Yeah, great question. think there's a lot of pathways to success and, you know, success in fundraising. think it's, you know, people assume they need to reach certain milestones to do certain things. I don't know that that's always true. It's often in our heads. So like go out and have conversations with investors and tell them, hey, this is what I'm doing. This is what I'm up to. know, figure out the right ways to get get intros to them or meet them at certain events and have those conversations. you never know, you might be able to raise on the idea and the team you've put around you. You don't necessarily need, you know, all these certain metrics. think DC's particularly pre-seed early stage VCs really invest in the vision and the team, right? So if you can put together a vision and a pathway towards building a large business that gets them the eggs that they need, and you can talk about the founder market fit and put together a great team that really puts you on the pathway to raising money that you can go and execute. on and actually show traction. think the biggest thing is that when you raise that money, have a plan for what are the KPIs, what are the things I need to accomplish to then validate that next round of funding and go out and execute on that. Jason Kirby (55:07.541) Sage advice, I appreciate that. if someone wanted to reach out to you or connect with you or learn more about your event systems, what would be the best way to do so? Nelson Mills (55:16.94) Yeah, feel free to connect with me on LinkedIn, reach out on LinkedIn. I do not use Twitter too often or X, guess it's called now. So yeah, yeah. So no guarantees. We'll see that. But LinkedIn, yeah, definitely on there. Jason Kirby (55:22.763) That picture looked pretty dated. Jason Kirby (55:30.475) Okay, perfect. Well Nelson, I really appreciate you coming on and sharing your story. And again, congrats on the recent series A. It's a massive win and I'm really glad you got to share that with us and kind of the insights that led to that success. Nelson Mills (55:44.206) Thank you for having me on, really enjoyed the conversation and yeah, appreciate the opportunity to tell my story. Jason Kirby (55:50.861) Perfect. Well, we'll cut here. I'm just going to make some editing notes for the team just real quick. So obviously, cut out the unit economic questions on my part. We can add your tidbit. Just kind of roll in where you just kind of start answering the question. So I think that can kind of go into what you were talking about previously. So it shouldn't be much of an issue. But yeah, that's all I wanted to make a comment for the editing team. But for you, I guess for distribution, kinds of stuff I can mention, it'll all go out probably in the new year. It's kind of looking like, cause I think we're, told my team to cut out the last episode on like December 9th or it's kind of be the last episode before the new year until the new year. But for sure it won't be coming out before December 1st. I can assure you. Nelson Mills (56:38.966) Okay, great. Yeah, yeah, just yeah, if you could give me a little warning just to make sure that writers had their moment to announce it. Be good. Thanks. Jason Kirby (56:49.642) Yeah. So we'll, what we do is, we kind of do a soft publish of all the collateral materials. We don't really like push it out or anything like that. So you'll get access to it a week before. if you need to like review, jump in like, like we forgot this piece, you know, any of kind of stuff. That's your chance. you can send off your team or whatever. and then we'll, then we'll do like a proper push where we'll, on the Thursday, the Thursday, Thursday's when we do like a big push. Yeah, I think from from here, if I can be helpful to you, if there's anyone in my network, they'd be useful to you by all means. I kind of opened myself up to anyone that's come on to the show. So if you're we all connect with you on LinkedIn, if there's anyone that you're like, Jason, you know, this guy can have a intro, just ask any time. And then. Nelson Mills (57:25.486) Thank you. Nelson Mills (57:36.974) appreciate it. And same, if I can be helpful to you, let me know. Jason Kirby (57:41.162) No, I do. I think I'm very bullish on defense tech. I was happy to have you on here. had another, UK based, company out here that's doing defense tech, more of like a Palantir model, for Europe. And, so that's just something I'm seeing more and more of and generally interested in. and then, yeah, sometimes people will watch the episode and they'll just reach out to you cold or, the watch episode, reach out to me and ask for an intro that kind of stuff. just, you know, bear warning. Hopefully it's useful and not spammy. But yeah, appreciate you coming on. I'll put the links to your LinkedIn, not your Twitter, and the website so people can take look at it from here. But any questions I can answer for you. Nelson Mills (58:11.566) Appreciate it. Nelson Mills (58:28.246) Awesome. No, it's perfect. Thanks. Jason Kirby (58:30.956) Awesome. And yeah, if you want to shoot the shit on the debt side and you want to know some options on that front, feel free to, um, I guess that's what I do all day every day. Nelson Mills (58:40.829) okay. nice. Awesome. Yeah, yeah, man. It be good. I'll reach out maybe have our VP of Finance talk talk with you about it. Jason Kirby (58:49.77) Yeah. if he wants to kind of know which players are out there and what kind of structures would be effective for you guys. Cause obviously there's. Equipment leasing for the scale of the manufacturing, but there's also working capital or venture debt that could be available to you. Cause now that you close the money, that's like the best time to get the best rates. Cause you don't want to wait when you need it. Cause then you can't get it. so feel free to connect me to your, VP of finance if it's, something that's of interest to them and, Nelson Mills (58:53.102) Mm-hmm. Nelson Mills (59:05.516) Yes, definitely. Yeah, yeah, totally agree. Nelson Mills (59:17.582) Definitely, I appreciate it. Jason Kirby (59:19.244) Yeah, look forward to staying in touch. Nelson Mills (59:21.422) Awesome, sounds good, thank you.