Applied Intuition: The $15B Physical AI Company (You Should Know)

0:01Qasar Younis:Mark and Driesen has been with us from day one. Series B was led by Hemant at General Catalyst. Series C was Bilal at Lux and D was Elad Gil. Without a doubt, our customers look at the fact that we've been around for nearly 10 years, our crazy claim to fame that we've never spent the money we've ever raised. We have to talk about that. Yeah, most companies in the Bay Area are more hobby projects than they are earnest, serious businesses. This is all happening autonomously, and these operators can control a whole fleet of vehicles remotely here. People don't want to work in mines in faraway places.

0:33Qasar Younis:These are dangerous jobs. AI really, in these industries, is being pulled out of our hands because technology can help solve this problem. We opened also in India and UK offices last year. About 18 sites globally. Australia could be one of those countries where we're doing driverless trucks and we're doing a bunch of different ports. We're kind of hopscotching like a board game throughout the planet. In 10 days, we showed them a video of these infantry squad vehicles driving autonomously out in a test environment. This view that everything is going to take a long, long, long time and it requires many years of planning, it's just false.

1:15Qasar Younis:Molly, what's the craziest thing I can do to get this thing to be viral? I don't have a sword. Kassar, what is your hottest take? My hottest take? I've gotten in trouble for giving hot takes, but you know what? I'll try to be restrained, but maybe I won't. I think most companies in the Bay Area are more hobby projects than they are like earnest, serious businesses. And it's kind of like, we'll take a swing on this. And I don't mean to disrespect my own co-founders. I'm in the fraternity of co-founders or founders who are kind of toiling away. And it's very hard to see who's doing it for the right reasons, doing it for the wrong reasons.

1:55Qasar Younis:And I think it's like kind of maybe some of the wrong motivations that exist. I think if you roll back the clock 15 years ago or 20 years ago, right when we were entering the Bay Area, literally around that time, it's not it's I'm not like one of these people are like the old days are always great and the new days are terrible. But the new days are definitely popular. like it is like i think there's some time between like the social network and the hbo show silicon valley it's and then like just us as consumers just adopting smartphones and software becoming a real part of our day-to-day life silicon valley like sunnyvale went from this cottage industry to suddenly the center of you know economic activity for america and for the world and that attracts a huge group of people like a magnet.

2:44Qasar Younis:And so the valley today, especially, you know, I always make the distinction between South Bay and SF Silicon Valley and San Francisco, but a lot of times it's interchange. Because I think the cultures are different. I think the cultures in Sunnyvale and Santa Clara and Mountain View are different than the culture in Mission or Dogpatch. I do. Maybe it's a perception and maybe it's not true, but I don't know, at least I perceive it. And so the point being or the punchline being is that if you look back at finance in the 80s and 90s, Manhattan attracted everybody and it kind of became a money thing.

3:27Qasar Younis:And not to say that the old Silicon Valley wasn't a money thing. These are businesses to make profits. But it seems like it's more of a money thing. And is that good or bad? I mean, who am I to judge? But at least that's not our motivation. I think if that's singularly your motivation, I think you probably maybe build a company a different way. Like we wouldn't build a company this way if just making money was the only outcome we wanted. So I actually wanted to talk to you about that on like a couple of different dimensions. One of them being, I feel like you just came out of stealth. Yeah, yeah.

4:05Qasar Younis:Well, you know, cult classic, not bestseller. So I think if you know, you know. Mark Andreessen has been with us from day one. Mark Andreessen is not exactly an unknown person. So I think, yeah, it's his guy. He created this thing called the web browser, which is, yeah. But he's been with us from the beginning. And, you know, our Series B was led by Himal at General Catalyst. And, you know, it's like Series C was Bilal at Lux. And, you know, D was Elad Gil. These are like this, you know, they're the in folks of Silicon Valley. uh and i worked at y combinator before we worked at google before so we were here i think we're just our relationship to the ecosystem has always been different it's not been antagonistic or or anything like that but i think we're just not we have actively sought that limelight i think before that's changed in the last year because now every time people hear me say that they're like oh but you were on this podcast yes we're actively changing that we're getting our you know we're here we're talking to you i mean that that's something that we wouldn't have done in a couple of years ago.

5:08Qasar Younis:I think there's two practical reasons why we've changed this. One is just recruiting, recruiting numbers. Historically, we've gotten all the people that we ever wanted, but if you look at the mix of outbound versus inbound, you have certain benchmarks as the company grows. And as we've gotten bigger, the benchmark moved to where we're still doing a disproportionate amount of outbound to the stage we're in. Roughly as you get bigger as a startup, your outbound actually drops because people know who you are and you're starting to get a lot of inbound. A company like OpenAI or Anthropic, there's other reasons because we're also a technology provider and they're more of a consumer, prosumer product.

5:45Qasar Younis:They're not going to do a lot of outbound. There's enough inbound coming here. And so when we saw that, that was the first time we had that internal debate like, hey, this, and we're, you know, all of our values can be reduced to two words, radical pragmatism. And so it's like, that's maybe not the right strategy. And then the second thing is that I think, you know, heavily influenced by Mark and some of our investors who said, let's get the word out there. I think this is a great company. And I think earlier on also, you know, we were very, very thoughtful of not creating so much attention that would inspire a lot of people to compete with us.

6:17Qasar Younis:Now it's kind of like we've grown up a little bit. We got some muscles, you know, we've gotten a few rounds under the belt and we can go into the ring and fight basically any oncomer. When you're really small, you're embryonic, that's a little dangerous. And I do think actually the new crop of Silicon Valley companies, Some do take inspiration from us in the sense of, you know, not like the pithy things like the shoes and the name and all of that stuff, but like real things like, hey, we're going to be South Bay based and we're not going to be very, very loud. And I don't think that's necessarily a bad thing.

6:48Qasar Younis:Maybe it's just perception, but it harkens back to that more of that craftsmanship aspect of building technology and building businesses and building companies. Yeah, it also anchored back to our company's mission, right? So our mission is to build physical AI for a safer, more prosperous world. And you sort of hit a point where to accomplish that mission, we need to be better known. We need to have access to a wider talent pool. And so that's why we've been more open. Yeah. And honestly, our customers do know us. I mean, we are very well known in our industry. I think we're more well known in construction and mining in Asia than maybe some bar in mission.

7:28Qasar Younis:But that directly correlates to where we're going to make money, right? Pretty cool. Yeah, yeah. So Peter, you were on stage and you walked through the timeline of the company and some of the biggest milestones. For people who didn't get to see that, maybe they will, but could you share some of those biggest milestones? Yeah, so we started in 2017 in, I call it the early era of self-driving cars. And back then, for strategy reasons, we didn't think it was going to be smart for us to really go directly into self-driving at that moment. But we started out building tools. We built simulators and data management offerings and large-scale distributed compute offerings.

8:10Qasar Younis:And we sold these out to the industry. And that was sort of our early success as a company. And then... They gave us resources. Yeah. And we just learned and learned and learned. And we really expanded out and became very horizontal. We started working in a bunch of different industries. And we were very much on top of all of the latest AI breakthroughs at every step. And so we could sort of see when something interesting was happening, should that actually change our strategy? And so there were a few interesting things that happened, which evolved the strategy. One was transformers that were originally successful for large language models, like you're about Anthropic and OpenAI.

8:52Qasar Younis:Those started to have an impact on self-driving technology and robotics. And we thought that was really interesting. And then on top of that, there was some breakthroughs in what's called end-to-end deep learning, which is where you can now take lots of data and you can train these models to actually control these systems in a way that wasn't possible before. And that was the moment when we actually decided to really enter the self-driving space ourselves, but not so narrowly thinking about self-driving cars, but really more about the foundational physical AI technology needed to control any kind of machine.

9:28Qasar Younis:And that's what we were showing downstairs. That's a bit of the history. Sorcery is brought to you by Brex, the financial stack trusted by more than 30 ,000 companies, including one in three venture-backed startups in the U.S. Nearly 40 % of startups fail because they run out of cash. Rex is literally built to help founders avoid that. Unlike traditional banks that let your money sit idle, chipping away at it with fees, Rex is designed to help you spend smarter and move faster. Their all-in-one solution combines checking, treasury, and FDIC protection into one powerful account. You can send and receive money globally at lightning speeds, get 20 times the standard FDIC coverage through their partner banks, and even high yield from day one.

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10:56Visit Turing.com slash S-O-U-R-C-E-R-Y. When are you going to the moon?

11:02Qasar Younis:Oh, you know, it's funny. We actually did work on moon simulators. Yeah, we did. We did. So we go there in a simulated reality. Yeah, I can't remember exactly the customer at the time, but there was somebody that was developing a moon rover and they used our - I remember them, but I don't think we're allowed to say who. Yeah, it was like our vehicle dynamics simulations for simulating literally the moon rover driving on the moon surface. So we have. Yeah. Wow. Oh my gosh. So when you work with a new customer or a new industry or vertical, how do you start to get integrated and onboarded within them?

11:44Qasar Younis:It really depends. I mean, we're in a bunch of the verticals. Maybe it's better to look back than look forward because we're in a bunch of them already. It's a mix. And this is more for like education for founders who are trying to do this. I'll put it within that context. What's best is first if you know some vertical that establishes a pattern. So I'm, you know, both of us collectively know the automotive industry extremely deeply. right? So then you have a pattern. And then you have to, defense being the next one that we went into. We saw some inclinations of like, okay, well, we can sell to like a General Dynamics as an example.

12:17Qasar Younis:And they'll use the tools kind of like General Motors. Once you have your foothold in there, then you start very quickly understanding, okay, these are the types of people with these are the types of backgrounds that are going to be successful in this environment. And then we hired our, which became our gov team. First with just one person, and then ultimately all around them. I think founders sometimes make this mistake where they want the perfect lead for the Tokyo office. They want the perfect lead for their, you know, whatever construction or mining business. And perfect is often the enemy of done.

12:49Qasar Younis:And so it's the idealist. You have the first person ends up becoming the lead and is the lead for the rest of the years. But it's better just to start. And so we started. I mean, all the things that you're seeing now, we're seeing these are compounding results for many, many years. There's no fast way. One of the things that I think is underreported in physical AI is, you know, how this technology will kind of diffuse to the real world. Whether you're, you know, if you're working in kind of anything from consumer AI to code complete, you know, products, all that diffusion happens, all that distribution happens through browsers and phones.

13:27Qasar Younis:And everyone has one of them. And they're all fairly consistent environments. Physical AI is very different. The companies are different. The geographies and regulatory environments are different. The machines are different. The cultures are different. And so the diffusion is actually way, way slower. So time becomes a much more important thing. Without a doubt, our customers look at the fact that we've been around for nearly 10 years, our crazy claim to fame that we've never spent the money we've ever raised, which is... We have to talk about that. Yeah, which is kind of... I was just thinking about that.

14:00So you've raised over a billion dollars.

14:02Qasar Younis:First of that, yeah, in primary, yeah. In primary. Because we've also done tenders in secondary, yeah. And you're saying you haven't touched any of that money. Yeah, we use some for M &A, but then we make money and it kind of, like, that's the, you know, but yeah, roughly, that's roughly the truth. I mean, we're not using our capital to, like, pay payroll and things like that. Yeah, which is kind of crazy. But for a customer who wants to have this long-term relationship, that's really confidence-inspiring. They're like, hey, this company's been, they've got a thousand engineers, been in business nearly 10 years, and they have a functioning business.

14:32Qasar Younis:Like we can do a five-year relationship with them. We can do a 10-year relationship with them. And that makes it, you know, frankly, difficult to compete with us because, you know, we've been in the business. But like I said, that's very relevant. It's not relevant if you're building, you know, Anthropic, you're building some open claw kind of product because that doesn't matter. But in physical AI, where the diffusion is way more complex and multivariate or variegated, I should say, then suddenly time becomes an important thing. Staying power becomes important. So what is it like, we talked about this a little bit, but what is it like hiring out in this AI era versus before?

15:11And what are you looking for in those hires?

15:13Qasar Younis:The funny thing is, I mean, the people who come to Applied are frankly different than people who go to foundation lab companies. I don't know if you saw our research talk. We are as technical as any AI company in the business. And a lot of people, I think, because they see our commercial success and they somehow think we're like a really commercially oriented company. It's like this is as technical of a company as you can imagine, all the way to the big labs. Our commercial teams are actually really small. Our commercial teams are surprisingly small, right? And so, yeah, I think like the so then why would an engineer choose us versus, you know, working at like a cool company in San Francisco?

15:56Qasar Younis:And I kind of implying we're not cool. Really what I'm implying is we tend not to attract those types of people, particularly because the type of technology you need to know and be interested in is different. If you like sports cars and you like fighter jets, applied is a great place because those companies aren't doing sports cars and fighter jets. or if agriculture resonates to you because that's your family's upbringing or construction or mining, those are the people that fit that Venn diagram, that overlap of they love AI and they want to make the farmer's life in America easier. That's a great candidate for us.

16:34Qasar Younis:And so I think in that way, we've done quite well. And also just like what I was saying earlier about us being more public, it's not necessarily that we've had... Everyone has a talent. Everyone's fighting for talent. The real point is, I think, the more we get our message out and how distinct the company is, the more it resonates to those specialists who are maybe working at Google right down the street from us and don't even know that we exist. They're like, I love the car business. I grew up working at Ford, and then I came to the Bay Area and worked at Google for the last 10 years. That's a great candidate for us.

17:07Qasar Younis:That candidate is not as relevant for Harvey. And all of us could really love AI. And you have plenty of runway. Yeah, exactly. Exactly. Yeah, exactly. But yeah, at a high level though, there's honestly two types of people that we're really looking for. One is it's the enthusiastic engineer who loves AI tools and they can use them super effectively. I think that it's becoming a little bit less important now to be, let's say, a specialist software engineer in a given field because the AI tools, they can turn you into a specialist much more quickly, but you need to be an expert in a in the AI tool use itself.

17:46Qasar Younis:And that is a real skill. And so we test for this hard now and we're looking for people who are just really, really good at using AI tools. And then the second type of person relating more to the research is individuals who so deeply understand how the AI systems work that they can actually push forward the state of the art. And that's really where you get into the deeper research topics. But it's that combination of deep research plus just experts in the application of these tools. And that's what makes us a strong engineering organization. Is it true there's over 40 CTOs? Yeah, we have ex-CTOs or co-founders of that company.

18:24Qasar Younis:It's a very entrepreneurial culture. Yeah, which sounds so flat and dry, but it's absolutely true. We attract a lot of founders. I think, like I said, cult classic, not bestseller. I think among founders, and I'm really proud of this because I want us to be founders' founders. I think to some degree, I like the respect of other founders. Is that I think my YC background and us building this very intricate business and all these different verticals globally, I think the founders know how difficult that is. And they know that that's a special thing we've accomplished. So I think the magnet has been like, this company has somehow figured out how to take really complex technology and, you know, have it go out into the world and all these different places.

19:15Qasar Younis:And maybe I can learn from that. And so if you're a CTO whose company isn't working, you know, we're always hiring. Applied.co slash careers. Or you can just email me directly. Oh, my gosh. So today you launched the Applied Edge product. I think, again, I think your defense...well, I think mostly all of applied intuition is a bit underrated, but I think in the defense space, at least for the public, it is. So there's a stat that you launched an autonomous infantry unit in less than 10 days. Is that correct? Yeah, that's right. Yes. So Secretary of the Army, Dan Driscoll, visited our headquarters in this campus about a year ago and...

20:01Qasar Younis:Oh, it was the old office. Oh, you're right. Oh, yes. And he... Sort of a throwaway comment. He sort of said, like, hey, what if I gave you an ISV and a Humvee? Could you guys do something with it? And I said, like, yeah, I think in 10 days we could do something pretty interesting. And to be honest, I wasn't expecting much. But then after he left, we got a phone call and it was somebody in the army saying, like, I need an address and delivery instructions. And they just dropped off these machines in our office, these military vehicles. And so, yeah, in 10 days, we had a very small team retrofit our vehicle operating system and our SDS, our self-driving system, onto the vehicles.

20:46Qasar Younis:And then, yeah, in 10 days, we showed them a video of these infantry squad vehicle driving autonomously out in a test environment. and then they shipped it off to an army test facility and soldiers got to use it for a few weeks. So it was just a great example of adapting commercial technology into defense. And I think Dan Driscoll has spoken about this event actually on many occasions now because it's a pretty interesting story. Yeah, there's a lesson there, which is I think this view that everything is going to take a long, long, long time and it requires many, many years of planning is just false.

21:21Qasar Younis:And I think especially within the reality of today, this technology needs to get out there faster and faster and faster. We don't have the luxury of waiting three or five or 10 years.

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23:32Qasar Younis:Yeah, I mean, we're an at-scale business. So, you know, all the classics, top line, bottom line, gross margins. What are those numbers? Those numbers are not public. But, you know, I mean, they're healthy. This is a mature business. So we look at all those things from like a traditional finance perspective. The things that are more difficult to measure, which might be even more important because, you know, those financial figures are lagging indicators of your technology and your products. We don't have good financials because we focus on the financials. We have good financials because we focus on the products, and the products are really world class.