Hadrian Raises $260M Series C Led by Founders Fund & Lux Capital; A Turning Point for U.S. Manufacturing

0:00America. America. America. America. America. America. America.

0:19Chris Power. Molly O'Shea. I was just going to say America again. You are founder of America. Sorry, Hadrian. You're founder of Hadrian. And welcome to Sorcery. Thank you. It's glad to be here. I think it's been about like 12, 18 months since you were last on. Something like that. We've got a much better setup than last time. What do you mean? Well, last time I think I was in the office with a bad Zoom background. Now we've got this incredibly professional setup and re-industrialized. Yeah, we're going to do a, what's it called, like a rolling tour? What's it? You just traveling tour? Something like that.

0:53I don't know. We'll get an RV. Okay. Huge congratulations. You just closed a major next round. Can you share more about how much you raised and from who? Yeah, happy to share. We just raised another$260 million, equity and factory financing. So Founders Fund and Lux led the round. So$110 million in new equity dollars, as well as new investors like Altimeter. You've interviewed Eric before. He's amazing. Big fan. I am a big fan of Eric and Brad. I think what they're doing in Invest America is incredible. And obviously all of our existing investors like Andreessen Horowitz and Construct Capital.

1:26but very grateful. Founders Fund and Lux actually led our seed round. So it's great that they're coming back to the table. And we also raised the rest of that$260 million as factory financing from Morgan Stanley, which we're very appreciative of. So how much have you raised in total now? The whole company, I think we're probably up to the 500 range, which is good, but we're actually incredibly capital efficient. So we have most of the prior round from the series B still left in the bank. So we're really just using this to put the gas down, which is great. What was this process like versus previous processes?

2:02It was actually incredible. So, you know, our seed in series A went very fast. Series B was the hardest round we've ever done, which I don't think is uncommon for deep tech companies because to the market, and I'm sure your audience will appreciate this, is any deep tech company is usually like a deep tech B, but a seed round revenue and it's always in between. This one we're really lucky where when we launched the factory to all of our customers in January, we basically 10x revenue in four quarters last year. The automation was really kicking into gear. No one's ever scaled a manufacturing company this fast.

2:38So actually we were done and closed within the round from starting to pitch to term sheets being signed or a deal done within I think three weeks. which is really impressive but honestly it's just because we've been working really hard for a year and then obviously we've had a ton of interest from the existing investor base and new investors to you know take a bite at the apple especially as we're scaling and growing so far so we're super lucky and especially on the factory financing side you know we want to use our equity dollars to build more automation hire more people hire more sales people build better product for customers we never want to dilute our employees or shareholders with factory financing.

3:18And that's a huge part of the story here is, you know, our finance team did an incredibly good job, but I really think it's just the business performance and the hard work of having a big bank like Morgan Stanley come in and lead, you know, the syndication and financing round for the factory expansion capital. So what does this capital mean for Hadrian? It means a couple of things. so our factory in LA which is about 100 ,000 square foot we basically filled it in a year from all that customer growth so we're launching factory three in Arizona which will be up and running in Christmas we're in July, we signed the lease a couple of weeks ago so it'll take us six months from start to finish to have it up and running which I think is really fast I was actually just looking at photos of all the trucks breaking all the concrete in the factory very fun and we're really excited about expanding to Arizona and then we hope to be able to launch three or four new sites next year as well.

4:10So obviously scaling so fast, need more factories, as well as just continuing to invest in deeper automation and workforce enablement, as well as more and more products which we can talk about, because we really are now in a position where for machining, which was our core manufacturing category, we need to R &D out and launch all the machining products of different alloys so that we can be everything to every customer, as well as improve on the customer experience, be faster would be cheaper. But we're also now going to expand into as many of the other manufacturing categories that make up the$100 to$200 billion domestic supply chain market in the US and really become the manufacturing platform for America's greatest companies, not just in this one category, which is going to continue to be the largest for sure, but expanding out into all those other ones.

4:56So just like a Rippling or other companies where you start with one product, but the goal is actually do everything for all these customers. So we're really excited to bring more products of manufacturing to market to our huge customer base. So what is the full stack Hadrian set of products? So we think about it in three vertical layers and then horizontal manufacturing capabilities. So the vertical layers are parts, assemblies, and whole products. So think of a part as something that we machine down to incredibly tight tolerances that we hand over to customers and they assemble it. assemblies are sub-assemblies, so maybe like a wing something like that, and then products we think of as full categories like a whole munitions round, a whole ship or large parts of it, and you imagine a factory, our current ones look like data centers, the ones that we're going to launch for whole products look more like Tesla Model 3 Gigafactory, that's how to visualize it and then underneath that there are six to seven major manufacturing capabilities that if you have all of them one, it's the entire market and you can kind of build whatever product you want So machining obviously is always probably going to be the largest one.

6:03Additive we're already up and running on. Casting, which is pouring metal. Forging, which is hammering metal. I like that one. As well as sub-processes like welding, which is huge for the naval applications and scarcity. And what we look for is where is the customer experience really bad or where is there such a lack of skilled labor that you could pay us a billion dollars to go hire a bunch of skilled people and America just doesn't have it more. And that's where we think automation has the highest leverage, not to replace people, but to really give the new workforce 10 times productivity because we just don't have the people in America anymore to build these critical hardware for our customers as well as the DoD.

6:45So you mentioned a couple use cases and a couple customers within that. Could you explain further who are your core set of customers and what are the typical things that you're building? So we don't talk about customers publicly because we sign very strict NDAs with both the government and the primes themselves. I would say we're serving currently the vast majority of hardware startups through our product for Atlas, which our friend helps run. And that's really designed when you're an engineer, you're trying to start your startup super fast and you don't have a huge supply chain team and you don't know what you're doing.

7:18So it's kind of full stack supply chain. That's scaling super fast for us. For our core manufacturing business, it's high precision machining and we work with America's largest scaled primes. So anyone that you would see building fighter jets, drones, munitions, weapons platforms, missiles, commercial aircraft, we are fastly becoming their fastest growing and most important supplier, as well as a huge business in space launch. So high precision components that then get assembled onto rockets and satellites. And for our government business, what we're primarily focused on is naval applications, where there's a huge scarcity of a skilled workforce and we just can't get submarines or ships in the water fast enough, as well as in the munitions categories where there's not much innovation to be done, but you just need to be able to produce a lot very fast and we just don't have that capability in the U.S.

8:08anymore. Talking about the capability in the U.S., we are at Reindustrialize. Big deal. Big deal. Big deal, America. I want to talk to you about how you see Hadrian fitting into this picture. Like what role does Hadrian have in reindustrialization? So we obviously want to be aggressively in every market. But the problem for the country is so large that we need about 20 Hadrians. I think CapEx heavy or complicated businesses have a unique property. I don't think there's going to be more SpaceX's. I don't think there's going to be more andurals of new defense primes or neoprimes. And I don't think there's going to be more than a handful of large industrials companies.

8:54It's very hard to get over the scale of CapEx, the operating scale, enough equity dollars to fund ludicrous amounts of software engineering and the capability to go do that. But we think, the founders and I have re-industrialized, think about that as not just defense advanced manufacturing like us. we think about it as pharmaceuticals, consumer electronics, drones, even biotech. So I was having dinner with a friend last week. And the story with American manufacturing is that the thesis from the seventies was let's give the Chinese the kind of low skilled tasks and we'll outsource more and more of that, but don't worry, we'll always do the design and the advanced stuff.

9:35And what is actually happening in reality is when you disconnect production from design, you get very bad at design. And in biotech, this is another area where it used to be that the scientists over here would create a new genome or paper or whatever and go test it in China because their labs are very cheap. It turns out now that they're actually faster than us at cloning our papers and making new biotech products as well as innovating their own products actually at a faster rate than we are. So what we want to see is this industrial movement that does two things. One is brings back all that capability that we've started to offshore, onshore through advanced automation, both in core manufacturing, defense products, biotech, pharmaceuticals.

10:16I mean, I don't know if everyone knows this, but we don't really make antibiotics onshore in the US anymore. So if we went to war or China wanted to like, they were unhappy about the tariffs, they could just shut off the entire antibiotic supply. So it's not just core advanced manufacturing for defense or space. It's all these other important categories that we just kind of like assumed we could give away the important infrastructure of the company, country and then it would be fine and now we're finding out across all these categories that's a really dangerous position to be in so our position is you know hopefully we will spawn and inspire you know many many other companies that look and feel like a hadrian where it's advanced automation with a with a new american workforce but in every single one of these categories um it's a very hard thing to do but everyone needs to be like in this together and you know one of the things i often say It's like it's brutally difficult, but you too can do it.

11:08You just have to kind of go west, young man or woman. But we actually need huge investment in all of this. The second thing is I do think we're paving the way on how to finance factories better than anybody else. It's always been a core part of our skill set is how to financially engineer. Because if you really think about heavy capex businesses, there are really only two ways to get a venture return. And manufacturers in the US are horrifically low margin. So you have to have a margin profile through automation, building a better product that venture returns can support. And the second thing is there are only very few markets like space where NASA will pay you up front for missions so you can kind of flow your business correctly and actually have the returns profiles of a large public company that venture capitals will fund.

11:55So from a mission perspective, you actually have to solve that. And I think we're proving to the market that the industrials category is huge IRRs on kind of return basis if you finance them correctly and then also paving the way where these big providers did not know how to fund AI data centers five years ago. Our CFO is from SolarCity and when that huge solar revolution was happening it's obviously really capex heavy and no one knew how to underwrite the solar market to fund all this huge cash going into these businesses. So I think that is one of the more important things we're doing is really connecting the dots on the financing side for massive factory expansion that I do think is quickly setting the standard of how to re-industrialize the country.

12:37Sorcery 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. Brex is literally built to help founders avoid that. Unlike traditional banks that let your money sit idle, chipping away at it with fees, Brex 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.

13:17With same day and even same hour liquidity, access your funds anytime. Companies like Scale LAI, DoorDash, Service Titan, HIMSS, Anthropic, Flexport, Robinhood, and Plaid. Trust and use Brex. Start today at brex.com slash sorcery. That's B-R-E-X dot com slash sorcery. In today's high-speed business world, staying ahead means using the smartest tools possible, including the powerful capabilities of artificial intelligence meet Turing intelligence. Turing builds customizable AI systems designed to solve your mission-critical challenges, no matter your industry. From expert guidance to tailored projects, Turing helps top companies realize AI that's more capable, more adaptable, and more effective.

14:07With Turing, discover how AI can accelerate your business growth. Visit turing.com slash sorcery, S-O-U-R-C-E-R-Y to learn more. That's Turing.com slash sorcery. Talking macro, what was the biggest difference that you've seen so far between this year's re-industrialized and last year's? So last year, we really pulled it together on a whim because we thought it was the right moment to try and light this fire under everyone's belly. And this year, I think what we're seeing is that, especially with the shortage of weapons systems in Ukraine, Israel and Iran, certainly a shortage in Taiwan is that production and manufacturing are critically important.

14:50And I think the second thing we're seeing is much, much more senior people from the administration, from Ambassador Greer at Trade, Secretary Phelan from the Navy, and all these people that really understand the mission and believe it and want to work with all sides of policy, regulation, the DoD, and, you know, small and large companies to try and make this thing happen. and I also think now like with a lot of the policies being passed especially in things like you know nuclear energy I mean we're finally going to have nuclear reactors being tested for the first time in I think like several decades and energy is such a critically important thing so the wait list I think is up to 6 ,000 now couldn't fit everyone in and now it's like a real thanks for having us oh you're quite welcome and we're just really really happy that people are getting bought in on the mission and are starting to understand how important it is and how fragmented the country is because we offshored everyone's good paying jobs and really screwed over the American worker for the better part of four decades.

15:45You had a lovely keynote in the beginning. Thank you. There's something that you brought up that you bring up quite a lot. You talk about this 10 year window. Yeah. Can you explain what the 10 year window is? So the specific 10 year window we're in is what's called the Davidson window, which is Admiral Davidson first started talking about this a couple of years ago. and the highest risk of China when we are the weakest and China is the strongest and has to be the most aggressive to take the Pacific theater, which will start with Taiwan, but they won't stop with Taiwan, which, and everyone knows Taiwan is basically the Arrakis from the June books of, you know, semiconductors for AI.

16:26And, uh, this is pretty well mapped and you can see both sides are gearing up for, you know, right now, I think we're in a cold war where everyone's gearing up for your kind of Bay of Pigs. But certainly I think the Chinese have said pretty religiously over the last couple of hundred years that they're going to repatriate Taiwan. And I think that's a pretty hard red line for us in terms of their aggression. So that window is basically 2027 to 2037. So that is kind of a known quantum now in defense. And then historically, this is not unusual. Every great power gets challenged by a developing power.

17:02This has happened every 120 years for the last thing. And we're just in that moment in that 10 to 20 year window where this is going to happen. The second thing that makes it, in my opinion, likely is the one child policy in China. So for those of you who don't know, China passed a rule saying you can only have one kid. Everyone picked boys, which was horrific. But we just have to last till about 2037, 2042. And then kind of overnight, China's working population will cut in half. And then they can try again in another thousand years. So that will put a lot of pressure, in our opinion, on Xi to actually do something because they have this window.

17:40And after that, they won't have the fighting force. Their economy will start to collapse. So there's a real pressure cooker going over there, which is why we've got this four to six year massive defense industrial base push going on, because we actually really have to be prepared. The goal is to never get into a war. But, you know, all great conflicts start when both sides misinterpret how strong the other one is. And I think we are misinterpreting how robust our industrial base is to rebuild things like ships and munitions if we need to. And I think the Chinese are overestimating themselves a little bit.

18:11But when both sides decide, you know, both of them are wrong and it's time for a test, it's like two idiots sizing themselves up in a bar fight. Or like I said on stage, Mike Tyson and Buster Douglas, where everyone's getting a little bit too comfortable. But that is the window that we are in in history. And we're going to find out who's got the best system, I think, in the next decade. with trends uh whether it's technology or politics or even warfare accelerating so fast we're seeing cycles increase in speed do you think there's that's going to play a role in this like is the next war going to be shorter than the last it's hard to tell i mean my argument has been that the chinese are all with us and we're just too stupid to understand it because americans only respond to getting punched in the face um you know the fentanyl crisis in san francisco is chinese aggression they're just still very angry at us for well not us but the british for destroying them with opium in the 1800s we're incredibly vulnerable on cyber security uh they could shut down la water pretty quickly and everyone would you know be in a really bad position so i think the cycles that are accelerating are huge gains in ai in terms of how fast you can do automation um huge gains in information which are leading people to make decisions quicker and certainly the duty is speeding up like extremely rapidly compared to five years ago i think the challenge that we face is that we build factories fast but if you think about this on the sort of i mean we're talking about like a quantum ship building of like i think it's 1700 last year of commercial and military vessels versus five so the kind of quantum of you kind of like need to spend six billion dollars now and you'll have that capability in two to four years to get these things up and running and train the workforce at that level of kind of a thousand to one scale.

19:59So I think the information is flowing faster. These big capital equipment moves and building shipyards or building massive new munitions plant, we'll do it faster than anybody else. But in terms of this four to five year window, we need to really be spending the dollars in the next like 18 months. Recently, I saw you comment or engage with a tweet about YC's recent request for startups. So they recently put out a request based on a simple belief, I will quote, America needs better physical technology and startups are the best way to build it and scale it. You had a pretty, I'd say collaborative response to that rather than seeing it as competition.

20:38You're like, no, we need more of these. So can you explain more about your position on that and how you would help engage this environment? Yeah. So I think that you've got to remember that there are kind of four big categories, right? There's these huge industrial companies, like a Raytheon, like a GE, who need to upgrade themselves very rapidly. There are new industrial companies like Hadrian who are starting from a clean sheet. There are 30 ,000 small manufacturing businesses in the US that are super important, even in things like making steel that have been completely unsupported by technology, including AI for decades.

21:14And then there's obviously the new prime. So my view is like, you know one there's plenty of software products out there to go build for all these companies secondly there are many micro categories of manufacturing you know just like open ai and ai won't do everything they will do the vast majority but you've for this level of mission you kind of need everything i think it's great i mean the number one thing that we did that was important was have software engineers get excited about automating manufacturing again versus getting stuck at Google, you know, optimizing ad clicks or trading cat pictures on the internet.

21:47So I think YC stepping into this just for the fact of getting like Stanford and Harvard kids and, you know, kids from the Midwest back involved in building software for the real world is really culturally important for the country. The second thing is I think it'll generate a bunch of great acquisitions for us. If any of them grow too fast in the category that we're going to enter, we have this phrase internally, which is we're going to scoop them up or we're going to bonk them. But that's fine. I think for the country, we need like orders of magnitude more than this. And I also think competition is really good.

22:18It's, you know, that's the best thing about America. I need more people. I need more people to keep me awake at night other than President G. And I think it's overall a great thing. You have a dartboard in your office, right? I do have a dartboard in my office. We don't need to tell anybody about that. I think everyone's saying. So I think going further down the technological route and advancements in AI, in AGI, now we're gearing towards super intelligence. A company I recently came across was Turing and they're helping build and deploy next gen AGI within real world industries. So I have to ask you, has AGI hit manufacturing yet?

22:57Yes and no. We use AI in the vast majority of our technology stack now. Manufacturing is so complicated that our strategy has always been automate 70 % of a task. And secondly, people don't understand a lot of advanced manufacturing is working with really dumb computers that drive machines, they run on code, or digital manufacturing where you're telling a computer something to do. So it's actually really good for software and AI. And our strategy has always been very quickly automate 70 % of something and then have humans in the loop that are training models that we can then make our systems smarter and smarter at the time.

23:34Where we have a huge advantage is we invested a lot of money in the connected systems to be able to track all that data across the entire factory, both at the process level and the part level. And what we found was we had to basically train our own models, one, because it's in a regulated environment, so it's ITAR, you can't just use something off the shelf. So there's a huge barrier to entry. And secondly, because manufacturing in the United States has been offline for 30 years, there's no Stack Overflow, there's no GitHub, there's no code base to train on. So we're the only company that's actually generating labeled data that you can then train models around for advanced manufacturing in the US.

24:11The models themselves are quite difficult, but the main actual leverage is the faster we scale, the more labeled data we have, the easier training these models gets. And it's very hard to make synthetic data in this environment. So I think we're probably the only company actually doing AI and manufacturing that's scalable. And the core thing is no one else has the data set and you can't make it available online. So we're seeing this happen very fast. I think it will continue to accelerate, especially as the core models like OpenAI and CORD and stuff get faster and faster and faster and faster.

24:42And I do think it'll be a massive accelerant for us spinning up new business units. But in that category, I don't think anyone else is going to be able to touch us because no one else has the labeled data. Super Hadrian. Super Hadrian, that's it. One of Sorcery's partners is Brex. They're all about performance, spending smarter, moving faster. How is Hadrian thinking about their next milestones that you want to hit and what metrics are you using to determine them? Obviously revenue growth rate, operating efficiency, the entire factory is a big metrics puzzle. Obviously launching our Arizona facility on time and then launching subsequent facilities as fast as possible and hitting all these product launch goals, which gets more and more complicated over time.

25:23But really our job is to train better workforce every day, build better automation every day so that the customer experiences get better, we're faster, cheaper, and now get to this point where we want to be close to a billion in top line by late 2027. It's a lot of factories, a lot of financing. A year and a half. yeah and probably take more than that but i like to go i like to go aggressive and get 70 percent of the way there good goal good goal good goal america america um this is a hot topic question and i'm really curious about your response on it but on calci there's currently an 18 chance that trump brings back manufacturing in the u.s what do you think about that what do i think about calci or what do i think trump being a manufacturing in the u.s manufacturing the u.s I think that I think the tariffs have got to stick around I think in the DoD categories it has to either it's pretty binary either you believe we're going to build a fuckload of factories very quickly or you know the big beautiful bill was a waste because we're not going to have any defense spend to be doing I think it's pretty binary so I choose to believe the former I think you're seeing tons of companies build back manufacturing in America there's been generationally huge investments but I also think it's going to take a decade of sustained policy to go do it properly.

26:48So it has to survive multiple terms of the sustained tariff or subsidy policy to really reinvigorate it. But I think the answer is yes. I think the answer is yes. I would take that bet. I think they're selling, you know, dollars for 18 cents. 18 % too low. Yeah, a dollar for 18 cents. Yeah. Okay. We should actually put all of the equity capital into that bet. Do it. I would be at fire. $260 million? Just to be clear for all our investors, we are very prudent with our use of capital. Well, if you did that, you wouldn't be able to actually achieve it if you want to re-industrial. But yes, look, this is only personal advice.

27:23I think Calci is selling dollars for 18 cents on that bet. Sounds like a good trade. This one's also a hot topic for you, and you're a macroeconomist. So when will the next U.S. recession start? Oh, that's a great question. I think in two to three years time. Okay. I think that we have so much headroom in the Federal Reserve rate that I think we're going to see dramatic cuts close to 2021 ZERP levels over the next 12 months. And I do think we're seeing a lot of overheating in public equity valuations and late stage private. But because the interest to Fed rate is still, I think it's like four and a half, 5 % or something like that.

28:07that's a lot of headroom to bring back down so that LPs rotate into venture and the growth economy keeps going. I also think that the reinvigoration of deregulation is always huge for growth, focusing on the American workforce, bringing back a lot of, turns out a lot of cash from tariffs. And if you look at my favorite macroeconomist, which is Zero Hedge, which is the only real economics these days, is it seems like the rest of the world is actually not passing on any of the tariffs to the American consumer, which is great. So my bet is, you know, I do think if we pull this off and, you know, Federal Reserve does some dot and line graphs and we tick down to like, you know, we won't get to ZERP rates, but we'll get pretty close in my opinion.