The CEOs Behind America’s Next Frontier in Air & Sea Travel

24:13And so you have to figure out as a startup how to survive in this, you know, in this environment of uncertainty and somehow attract consistent funding while, you know, it's even unclear what the procurement of the exact product they even want is. It's just, it's not a very straightforward process. And so it's going to take big companies to do that. I think it's hard for small startups to be successful. They have to sort of earn their way into becoming a big company to be able to execute against the big programs. So Andrel's earned that right. And so what they looked at was some of the biggest programs that existed out there.

24:47And so there is an interested customer, interested programs are looking at, and they involve some very deep technical expertise in rotorcraft. So, you know, VTOL type products. And so could Andrel have done this himself? Sure, they had enough time, but there's real need now. And so by partnering with Archer, it was a way for them to still be able to execute against a big program where we could build the aircraft, but at the same time be able to be in the game of some of the biggest programs I think that will ultimately come to be. Well, we also need to talk about AI. The world is transforming really, really fast with AI, and there's lots of data that's involved in eVTOLs and aircrafts.

25:28A company I recently came across was Turing, and they help build and deploy next-gen AGI systems for real-world use cases across industries. So I'm curious from your standpoint, what is Archer doing in AI? And I know I think you're doing something with Palantir too, so how does this all come together? If you watch any sci-fi movie and you see the flying cars, the highways in the sky, that's the 20, 30-year dream of what I'm trying to build. But you couldn't do that today, even if we could deploy all the vehicles, because the way the air traffic control system is built is it's extremely manual.

26:05And that's created this sort of endless cycle of manual instructions to pilots, manual instructions to air traffic control, and sort of the whole chain has become very manual. So right now, a lot of the focus is on to stabilize the ATC, the air traffic control product, and then to modernize it. But the way I look at it is there's a third level, which is to revolutionize it. And in order to do that, if we're going to put, you know, hundreds or thousands of vehicles in the air per city, we're going to need to, it's going to be necessary to do that. And it actually will likely be much safer, meaning when the machines are doing things rather than humans.

26:46I always like scratch my head at why people protest against these new technologies that are safer. Waymo, there's people protesting Waymos. It's a way safer way to drive than drunk drivers, than, you know, some older people driving, or than most drivers, even on a statistical basis, just looking at, you know, deaths per million miles. And so I think it's really important that these new technologies do get developed. I think AI is going to play a huge role in modernizing and ultimately revolutionizing air traffic control. And I want Archer to play a big part in that. And I think Palantir is a great partner to do that with.

27:21You know, we kind of have complementary skills. I mean, we are, as an OEM, can build stuff into the systems that we're building, but also look at it as a system as a whole in order to think about what the end product, the end state should be. As we wrap up, I definitely need to mention Brex. So Brex is a sponsor of Sorcery. Archer was a sponsor of Sorcery at one point. Thank you very much. That was really fun. We had a really good Archer ad in there. For Brex, they're all about spending smarter, moving faster. You're going to be unlocking performance for cities, for people that live in the suburbs, for people that live in the cities.

28:00So could you share more on that and how you're gonna be increasing performance for Americans? Today, people live and work in cities, I think for many reasons, but one is it's convenient. Meaning if you live outside the city and you wanna drive into the city, that's time away from your kids, your families or whatever. Also, I think humans like that. I think humans do like living in kind of small areas. And I think they enjoy the social interactions of that. But if you did have an inability to move around much easier, I do think it'll change the way cities will be built. I think new cities will get built.

28:36That'll be much easier to travel back and forth. And so ultimately, I think transportation generates commerce. I think that's a big part of it. I mean, look at what aviation did in general. I think we're the next layer of that. And so I do think it will generate not just jobs from building, but ultimately a lot of commerce as people are moving back and forth, creating new experiences. So as an example, if you are 20 miles outside of LA, there's desert. And, you know, there's, you know, you can imagine, you know, a beautiful hotel making this up. Somebody builds some, you know, incredible oasis in the middle of the desert.

29:08That's only really 20 miles outside of LA. If you drove, it would take you forever to get there. But if you flew, it would take you. Yeah, exactly. It doesn't take you very much time. And so you can create whole new cities, whole new experiences that I think will create a lot of business that will be, I think, good for everybody. So exciting. Well, thank you so much for coming on, Adam. It was a pleasure. Thanks for having me. Billy Talheimer, how are you? Hello, I'm good. Welcome to Sorcery. Thank you. Excited to be here. Long time coming. Yes, definitely. Long time as in like Hill and Valley a couple months ago.

29:41Impromptu meeting in Hill and Valley has led to us here. Well, we're at Reindustrialize. This is a pretty sweet conference. It's awesome. It's sweet. You had some huge news earlier today. We did. We did. We announced Regent Defense. which is an expansion of Regent's sea glider business line for huge growing need of our defense customers. So it's, I think, absolutely the right place to announce it. Couldn't be better timed. I'm pretty stoked. Let's unpack it all. First, let's start out with what is Regent? Yeah. So Regent builds sea gliders. Sea gliders are a new mode of transportation, hybrid between boats and planes.

30:17Technically, they're a hydrofoiling wing and ground effect vehicle. There's a lot there. So generally hybrid of boats and planes. They do regional routes. So in the commercial side, up to about 180 miles of range on battery technology alone. So doing stuff like Manhattan to the Hamptons, Miami to West Palm. Internationally, we have markets in the Middle East, Japan, have some great routes in Hawaii, et cetera. And then today we announced how we're expanding that into DOD. We've been working with the Marine Corps for a couple of years on contested logistics mission. And now we're adding range with the hybrid and autonomy and other form factors, too.

30:56Wow. So why now? Why Regent Defense now? Yeah. Well, I think it's sort of been a natural growth for us. Like we've been working with the Marine Corps for two years. We've been working with SOCOM even longer. So the company was founded like myself, my co-founder. We came from the aviation background. We were working on EV tolls. I love the electrification technology. It's low cost, it's low noise, it's sustainable, it's safe, but it didn't really work in the aviation domain because of limited range and because of long certification pathways. So that was sort of the initial vision was we're going to take that technology, bring it into the maritime domain and get something to market faster that can go twice as far.

31:37But pretty early on, it occurred to us that building something that is very high speed, low cost, hard to see, operates on water, easy to crew, was just as relevant in defense as it was in commercial. So that sort of started us down the defense pathway. We've been on contract with the Marine Corps for a couple of years now, going through the prototyping process, testing, developing, war gaming, et cetera. with us with our quarter scale sea glider prototype, which proved that we could do these float foil fly operations. And now they're with us. Actually, they were out at our headquarters a couple of weeks ago working on the full scale prototype now that we're getting close to flight.

32:16So it was sort of an evolution there. But what we've seen certainly over the past six months or so is just a growing use case, obviously sort of geopolitical environment. Things are getting hotter in Indo-Pacific. Logistics through the island chains is sort of this reversion to World War II style tactics. And if you look at leadership of DOD, and particularly in the Marine Corps that's tasked with this mission, it's like moving things around these island chains, contested logistics is underwriting success of the naval campaign. So our vehicle fits into that perfectly. And what we realize is like now is really the time to lean in.

32:50Our contracts are growing, this use case is growing uh and so let's let's build the portfolio okay that's a lot that's big so how does this enable the warfighter like can you give a more tangible like use case or like day operation for sure so you know high level we can sort of boil it down to just the the performance so a surface vessel today is going to go 20 knots you know mid 20s miles an hour that's when you start skipping off the waves and stuff like that so a sea glider can fly at 160 knots or 180 miles an hour. So we're eight times faster. So if you translate that into moving around island chains in the Pacific, you know, Guam is about as close as the U.S.

33:30gets to China. And then the first island chain is, you know, Taiwan and Japan and sort of those islands there. So that's like a four or five day sail if you're a surface vessel today and a sea glider could fly there in 10 hours. So it just gives you a sense of how quickly we can reposition things around island chains in the Pacific, which is the critical theater. But then also you have the capabilities of the vehicle compared to aircraft because you could say like, oh, well, I could fly a plane there, but planes need fixed land infrastructure and sea gliders can take off and land in five foot seas.

34:01That's like the key differentiation of a sea glider versus sea planes or flying boats of the past. So we're basically, we're a surface vessel and that we can do open water operations, but we're eight times faster or we're an airplane, but we can land and take off in these in these high sea states. Does that mean they're more stealth? Absolutely. So sea gliders are, as I said, a kind of vehicle called a wing and ground effect vehicle. Not many people know about them. Fewer have ever been on one. They've never really been commercialized before. So a wing and ground effect vehicle flies at this low altitude called the ground effect.

34:35So that's within a wingspan of the surface of the water. You start to sort of pressurize the air under the wings. So when a bird is flying low over the surface of the water, they're not just having fun. Like it's actually very efficient for them to do that. So we use that same air cushion over the water. We always stay at that altitude. And so from that sort of stealth or more of a low signature perspective, because we're not actually deflecting radar, but by flying low, you know, we don't touch the water surface. So we're above any sonar detection and we're just over the surface of the water.

35:05So we're below long range radar in some cases. So we can actually move around and be very hard to detect. And also because of that electric propulsion, we're very difficult to hear. Like we'd be out on the water having this conversation the sea glider would be going by us right now oh interesting yeah it's pretty surprising actually the first time we got out there really like we knew it we knew it would happen and we did all the math and stuff on it my dad's an acoustic engineer so that's sort of like wired into my brain growing up but but just to get out there and and see it and and not hear it and uh on the hydrofoils there's no wake at all so it just passes you and it's imperceptible and it's 15 000 pounds so it's pretty surreal what's the process for testing these Yeah.

35:44So when you get into test, and we're doing human tests, we decided from the get-go, we're going to put humans on board. This is going to be human safety critical systems. You may have seen the whole Boeing thing about how they only had two redundancies. So when one failed, you trust this one, but this one's faulty, so the system breaks. So we have triple redundant systems. Love that. Yes, critical. Critical. Also means you have to do more testing, right? So we have this triple redundant autonomous flight control system. And then the way you test these complicated systems, particularly if you're doing stuff like high-speed testing, is we have a whole simulation environment.

36:19So we have every wiring run, every piece of computer equipment in a simulator exactly the same way as it's installed in the vehicle, like the actual same components. We test everything with our physics models. Then we go out and validate it. So we're really never doing anything new on the water, or at least we shouldn't be. We're just validating something we already simulated. And then we go back and we tweak the models and we iterate and then we rinse and repeat. In today's high speed business world, staying ahead means using the smartest tools possible, including the powerful capabilities of artificial intelligence.

36:50Meet 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. With Turing, discover how AI can accelerate your business growth. To learn more, visit Turing.com slash sorcery. Spelt S-O-U-R-C-E-R-Y. That's Turing.com slash sorcery. You mentioned, I mean, like now it's stuck in my head, all of the defense use cases, but on the commercial side, like more, I don't know, like day to day, I guess, recreational.

37:27Yeah. So what are people using Regents for, for that? Yeah. Yeah. So, um, you know, my, my founding pain point. So, uh, you know, grew up in the Boston area. We're based in Rhode Island now. So it was like the East coast, Boston to New York or Rhode Island to New York, you know? And so no matter which way you go today, it's four plus hours. Like you can drive your second traffic. You can take the train. It costs as much as a plane, same amount of time. You take the plane, you're in the air for maybe an hour, not even long enough to like pull out your computer and send an email before you're coming back down to altitude.

37:58And you're spending more time in the airport and sitting in line than you are in the airplane itself. So like none of these are optimized and there's this hole in the market in regional transportation where it's too long to drive and too short to fly. And we don't have boats and high-speed rail costs billions, billions of dollars. So like what we're doing is bringing that high-speed rail level of speed and cost and comfort without the billions of dollars of high speed rail infrastructure. And we're doing it to obviously coastal transportation. And you could think like, oh, that's only the coast.

38:26How big is that? But like 40 % of the world lives in coastal communities. Like we're in one now, Boston's one, New York and Miami and LA and San Francisco. And so like all of these are, are the big markets we're going to do. I mean, there's a river here that borders Canada. There's rivers. We can bring rivers back. Bring the rivers back. We can do Mississippi. We're, we're bringing back the Mississippi river. Bring the rivers back. That'd be great. Uh, one of the questions that I was like really curious about are more on the regulatory side of this, like what are the regulatory constraints for creating new vessels or I don't know, airplanes, sea gliders, all of it.

38:58Yeah. That was one of the big frustrations from working in our previous lives as aerospace engineers. It's like we do months and months of work and we'd have all our paperwork ready and we'd have the, you know, airplane on the tarmac ready to fly. And we'd just be waiting on a letter from the FAA or, you know, the radio, you know, the FCC or whatever other three-letter agency you had to satisfy with some paperwork. And so that's not how you constructively test. And so one of our sort of unique insights, and we're not making up new rules, these actually existed. It turns out like if you go into US law, there is a definition of a wing and ground affects craft as a vessel.

39:37We're like, that's pretty cool. So we can build this flying machine. So we have this high speed mobility, we can service this massive coastal market and we can do so under maritime jurisdiction. So in the US, that means the US Coast Guard. So we're working through certification with the Coast Guard now. The details of the process actually sort of mirror an aviation certification process. It's similar safety analyses, similar documentation, et cetera. But the Coast Guard, and I would say maritime overall, is used to doing new builds because the same entity needs to certify a cruise ship and an oil tanker and, you know, all these different kinds of vehicles.

40:15And so they all look very different and have different systems. Whereas the FAA is like, I will certify an Airbus commercial airliner and a Boeing commercial airliner. And like, they all look pretty much exactly the same and they have similar systems. And that's why certifying electric aviation has taken so long. It's like, well, I certify engines and I certify fuel systems and what's a battery. It's sort of both. It's sort of neither. So we're going down the maritime certification pathway with the U S coast guard here in the U S and then internationally, there's actually great alignments that these kind of vehicles, wing and ground craft and sea gliders are kind of wing and ground craft are boats and not planes.

40:51Can we talk about waves? Let's talk about waves, waves and weather. I love waves. You do? Yeah. Tell me about how waves come into picture. What if there's a rogue wave? Yeah. So when we founded the company, we did, we did a whole bunch of research on wing ground craft, but you don't need to do that much. If you go to Wikipedia and you're like, what happened to wing and ground craft? And they're like, they don't take waves. Well, or like seaplanes don't take waves well. Like that's why they only do rivers and lakes. We're like, okay, if we're going to make this vehicle, it has to do winds and waves.

41:18Requirement is sea gliders are going to be as reliable as, or more so than commercial aviation, right? Admittedly, a lot of the commercial aviation problems right now are related to the crew. And we don't have pilots, we have mariners. So actually we'll solve that problem too. But from a weather perspective, you know, if aircraft are flying, sea gliders are operating. So that meant we needed to take high seas and be able to take off and land. So that's where a hydrofoil comes in. Sea gliders were literally meant for this open water, high sea state mission. Um, so typically a seaplane or a flying boat, or even a past wing and ground craft, like the Russians built the Akronoplans back in the sixties floated.

41:57And then you have to come up to speed on the water, which means you basically need to clear a runway, which is not always viable in a busy Harbor, but clear runway, come up to speed a hundred plus mile an hour. Uh, if you've been on like a speed boat or something, you know, you're going to like start skipping off the surface of the water as you come up to speed and then you take off into the air. So you go from float to fly. So with sea gliders, we float, foil and fly. So we have that intermediate hydrofoiling mode. We're taking technology from the America's Cup or SailGP, these racing yachts or e-foil surfboards, if you've seen or been on one of those.

42:28Those are really hard. Have you been on one? Yeah, I always wipe out. Yeah. So you know how difficult it is to control them. So hard. That like gives me a lot of respect for our controls team when it's like, oh, this is like pretty difficult. Well, it's hard because it's electric, so it just jolts. Yeah. Oh, there's a ton of torque in those motors, and then you have to control. So our system is doing that 50 times a second, and we're going 50-plus miles an hour on the foil to give you a sense of how hard that system is working and how hard the problem is. But the whole point is it had to work in this high-sea state.

42:56So we have this hydrofoiling mode that lets us take up to five feet waves, and we've pulled buoy data from all around the world, and we're like 90-plus percent utilization in every harbor in the world. and so we can take off in five feet and then we retract those foils. Now we have this really deep V hull that we can land and shed the wave energy so we can land in five feet too. Interesting. I was going to ask about the landing process. Yeah, it's an important process to consider. Yeah, especially with the foil because that's, you know, a pointy thing. Yeah, so that was the other sort of key design change is that the foils are great for takeoff, but once we take off, we retract them.

43:30So they're sort of like takeoff gear instead of landing gear. And then what it allows us to do is we have this really deep V hull. It almost looks like a canoe hull. So you'd never be able to get up on a plane or up on a step, they call it, to be able to get enough speed to take off if we just had the hull. But we don't need to because we have the hydrofoil. So we can land on this hull and it pierces the water almost like an icebreaker and we can shed all that wave energy. Since we're at Reindustrialize, let's talk about manufacturing. Yes. Let's talk about American manufacturing. Where exactly are you manufacturing right now?

44:02And how do you kind of like source the whole supply chain? Yeah. So, uh, regions based in Rhode Island, uh, we just broke ground on our manufacturing facility. So it's 250 ,000 square feet. There is a massive building. It was pretty awesome. I like drive by every day. I'm like, this is cool. Like congrats. Thank you. Uh, super excited. Um, we currently have about 30 ,000 square feet of engineering and build space. Then we have some test facilities there, uh, as well, um, in the, in the Quonset business park in Rhode Island, which is a pretty cool spot right now to be, because we're sort of seeing this resurgence of defense and ocean technology.

44:35So our factory is right across the street from Anduril's new factory that they're building with their dive robotics division. Ours is a little bigger, but building right across the street. You know, we have a few other autonomous drone and subsea and surface vessels in town and SOBs brought a factory in and Raytheon has a factory. So like, it's actually a really cool spot to build right now. But yeah, So we've done all of the integration work in-house. We built all of our carbon composites using resources in the state. And that's one of the reasons why we're there because Newport, Rhode Island, it's like the center of the sailing world.

45:09So we have these incredible craftsmen and carbon fiber engineers that are actually like way more advanced than what you'd find in aerospace today. And then as we get into manufacturing, you know, we'll start sourcing. We already source from a global supply chain of some of the components. But we're solidifying that as we're about a year from opening that facility. that's really exciting i love rhode island yeah really go a lot yeah i grew i grew up in connecticut so we we would go to watch l we'd go to uh newport nice it's great all right well you gotta come by and get on the water with us i would love to yeah you know you always pass by the big like submarine hub and all that stuff yeah so the kwanzaid is is the same spot where that's electric boat but now we're now we're electric flying boat good up leveling yeah next level.

45:52Yeah. Okay. So I just want to talk like more future scope. Okay. So like in the next five to 10 years, what does the future of maritime look like and aviation? Yeah. Like generally, holistically beyond Regent even like. With Regent. With Regent. We're talking about Regent today. Yeah, I know. But like how high do we go here? Tell me about the future with Regent's view. I love it. Okay. So 10 years from now, you send your kid to kindergarten and they learn about all the modes of transportation and they learn about cars and trains and boats and planes and sea gliders because it's just that integrated into society.

46:28Like you take the sea glider to go to Watch Hill instead of driving there. You sea glide to go to work. People change how they live and work because sea glider opens up their commutes. You don't need to live in downtown Manhattan anymore. You can live throughout Connecticut because your sea glider puts you on a 20-minute affordable commute. It is high-speed rail on every coastline on the planet. And then in defense, in 10 years, we will not have had a World War III because of Regents' efforts and many other efforts in deterring that conflict because we put 1 ,000 sea gliders in the Taiwan trait and we said, try it.

47:04So that's the future. Can we crank out 1 ,000 a year? We'll get there. We'll get there. Yeah, we're working through exactly how many we can build now. 1 ,000 a day? What are we looking for? Yeah. I mean, certainly in the plan, like that's the goal. Hell yeah. That's the goal. Yeah. So I want to talk about AI and how this like is implemented in the manufacturing process, design process, even if it is, I don't know. So are you thinking about AGI within your processes? Like, is there been any pressure in the boardroom? We're definitely thinking about it. I mean, I'm putting pressure on the team. Like we are in the wave of this incredible, this was like the development of the computer, the development of internet, the development of AGI.

47:45So like for sure, we're trying to figure out how to get it into our systems. I think to some extent, one of the impressive things about like all of the stuff going on in mobility right now is the lack of AI in some cases. Like SpaceX brings the rocket home and lands them. Like that's a deterministic algorithm. Like someone did the math on that and wrote those controllers and it landed itself. So there's a lot of that too, especially when we have human levels of safety on board, as this needs to be reliable, traceable. We need to understand the math and the physics. It needs to do the exact same thing every single time to a very, very high level of precision and reliability.

48:20But as it pertains into manufacturing, so it's sort of like as we build the manufacturing pipeline, we can sort of have these AI capabilities or systems or tools sort of following us. So I don't know actually right now how heavy we're going to lean in on AI in the initial factory build. Because, again, to some extent, it's like we have these incredible boat builders and aerospace engineers that have built systems before, that have manufactured systems before. And so we need to get this product into market. But as it pertains to optimization, increasing the scale, introducing robotics, that's where I think we're going to see these AI systems playing a massive role.

48:57How can I go from 12 sea gliders a year to 120 sea gliders a year to 1 ,200 sea gliders a year? Like, that's where I think we're going to see the scale. I think, too, and obviously, like Tesla has shown this in the self-driving cars, like, and we talked about it with the announcement of Regent Defense today, is we're also going from our human crewed, human captain systems to fully autonomous systems. Right now on the sea glider, we have a fully automated flight control system. So if you take your hands off, it flies itself. And we have this really robust sensor system that's looking ahead and down and underwater and controlling your altitude.

49:31So the autonomy part of that just needs to connect those two and say, do I go left or right or fast or slow? So I think we can use AI and I think we will use AI as we introduce that full autonomy capability. But it's going to be growth. And always there's going to be a coupling of these sort of call it old fashioned, but still critically important deterministic math and physics based algorithms, which is sort of the underpin and backbone of like every aerospace technology plus these new technologies of AI. But it'll be a balance. Intense. Yeah. That's great. It's a fun place to be. that's that's super fun yeah go on autopilot mode for sure yeah oh i mean that's sort of the coolest part honestly is like you and and you got to come fly our sim too we have our sim here too yeah that'd be great downstairs but um you you get in your like and those are using actually the same flight physics like when you move those you know when you go left and right fast and slow like it's using the same flight physics that are on the vehicle right now so it's like this thing literally will fly itself and just hold you at 30 feet on that cushion of air over the water and And that's why, and we have a DC office as well.

50:39And so that's why when we bring down the Coast Guard and when we bring down the admirals and generals, it's like a boat driver really can drive this thing. And this is really operating in the maritime domain. Like it flies, but this is not an aircraft because of that control system and because we're flying so low. So fun. Do you just play around in the sims sometimes? All the time. I would imagine. All the time. Yeah. You'd sell those. I think we, I think we will. Video game. As we wrap up, I'm really curious for performance on your side. How is Regent helping the U.S. with defense? Like, how are you increasing performance for U.S.

51:14defense with your new sea glider? Yeah. I mean, we're, we're bringing speed to maritime mobility, right? Right now we have aircraft that are taken off and landing from land bases and we have boats that can go 20 knots. And so we're, we're bringing this capability to have aircraft speed and go well over a hundred miles an hour, 180 miles an hour on the wing with the ability to be deployed like, like a boat. So it's, it's actually like a game changing capability. That's why they're so excited why we've been working with them. And every time we meet, it's like, when can we get these? Can we go faster?

51:46We're like, guys, this is safety critical. There's a lot of building here. There's a lot of complexity. But yeah, the Marine Corps needs this technology. And we're moving as fast as we as fast as we safely can. Fantastic. Well, Billy, it was a pleasure to have you on. I'm so excited to test out via the sim, maybe come out to the facility in Rhode Island. I don't know. This is very exciting. Thanks for having me. Mitch Lee, welcome to Sorcery. Thanks for having me. So you're the founder and CEO of Arc Boats. Yep. What is ARC Boats? We build fully electric boats and hybrid electric boats. We're really thinking about how do we rebuild the maritime industry around a more modern powertrain.

52:28And on the consumer side, what that means is we started with some power sport boats. The first one we brought to market was the ARC One. It's kind of like our version of the Tesla Roadster. And then we followed that up with the ARC Sport, which is a fully electric wake sport boat. We're ramping production of that right now. We just announced a fully electric fishing boat called the ARC Coast and have also started some work on the commercial side or at least announced our intentions to go after some projects on the commercial side. Again, all rebuilding this industry around more modern powertrains.

53:05Love it. And I love boats. I grew up on boats, so I'm a big fan and they're beautiful. ARC's boats are beautiful. Yeah, we're leaning into the opportunity to kind of rethink the design of these boats when you have a more simple powertrain. I mean, in the same way that Tesla came along and said, hey, we're going to build this vehicle around the battery pack. That gives you a frunk and that gives you a more modern software system powering everything. And you can celebrate that. We're trying to do the same thing in boating. boating's lagged the automotive industry by decades uh at most points in time and so we're excited to modernize it and we're at re-industrialize so i have to ask you what is arc's role in re-industrialization going electric makes a ton of sense there are all these sayings in the boating industry like the best days of a boat owner's life are the day they buy it and the day they sell it because their maintenance headaches they're unreliable they're super expensive to operate.

54:07You have to winterize them. They've got fumes coming off of them. The analogy I give is like today's boats look a lot like the old lawnmowers or leaf blowers that are loud and noxious and run out of gas on you. Going electric solves all those problems. The challenge is that boats consume a lot of power moving through water. And so you need to solve that power challenge by putting a lot of energy on board. we do that by building our own battery packs in-house they're giant battery packs 226 kilowatt hours so you know the size of multiple electric sedans put together when you build your own battery pack like that you have to build the vessel around it or you're going to end up with a very compromised product so our version of re-industrialization is a pretty vertically integrated product here we build our own battery packs we build the primary structures around those battery packs.

55:02We designed both of those together in unison, all under one roof. We've got 150 ,000 square foot facility in Torrance, California, in Los Angeles, California, and are manufacturing boats out of it. It's exciting. Someone in my building in LA works for ARC. Oh, nice. Yeah. His fiance or wife was wearing an ARC hat. And so I was like, oh my god arc we have a we have what i view as an unfair advantage when it comes to the team that we're able to attract because it's a compelling mission and it's not just about emissions into the air it's also about like you know cleaning up our water and um not exhausting down into the water and when you look at the commercial sector it's about black carbon and all of that so it's compelling mission it's also a really fun product like really one of our company perks is that you get to take the arc sport out on the weekend or you know after work and that's really compelling and it's a it's a fun product that gets developed on a very fast timeline we went zero to first boat on the water in about three months at arc we went zero to first customer delivery in about 24 months and our next products are on an even faster timeline so if you're an engineer you're somebody working on, you know, at ARC, you're seeing your work ship at a, at a very fast pace.

56:23And then you get to enjoy it yourself on the weekend. And that's really fun. Um, I mean, we've got a lot of aerospace engineers that will never be able to ride those rockets or at least not in the near future. Uh, whereas they could sit on our boats and show their family, their boats. Yeah. You have employees from Rivian, Tesla, SpaceX. So how do you, I mean, those are really fast timelines. So how do you guys all come together? You use principles from where they worked? Like, how does this work? Yeah, there's a balancing act here. We do try to reason a lot from first principles. The founding team was pretty heavy at SpaceX.

56:56And so that first principles mentality is definitely something we're bringing as well. But building is also a craft industry. It's got a long history of these really talented boat builders and naval architecture firms designing the vessels themselves. And so we tried to take from both of those. We don't want to ignore that storied history of boat building and think that we know better because often we don't. But we are also trying to rethink a lot of the problems that we're solving in the context of an electric power chain or hybrid electric power chain. There's a big opportunity here. So what is your long-term vision?

57:38We want every vessel on the water to be powered by ARC. I mean, we're big believers in this isn't you could you could kind of take the environmental aspect out of this electric power trains are better suited to a water environment than these pure diesel or pure gas power trains are so we want to modernize you know this entire industry around those power trains layer software in at every level and create this platform that on the consumer side makes for just better boats. They're more performant. They're quieter. Uh, they have software features that aren't anywhere in the industry today, but on the commercial side, there are also these platforms that you can start layering in autonomy or start layering in, uh, added safety features.

58:25Um, yeah. So every, every vessel on the water, what is the experience like? So you mentioned some software features that's like boats, boats are not, they're not that crazy impressive. I mean, Some of the newer models are great, but it's not like you're getting like a Tesla screen in there or like a whole dashboard that's a screen. The industry looks very different than automotive.

58:50Today, like the way it evolves is boats have a pretty low barrier to entry. Almost anyone, somebody in a garage can kind of build their own boat, strap an outboard to the back of it, and it's a boat. what that naturally means is that the industry has evolved in a way where most people are buying most components off the shelf and that means none of them are integrated you have your garmin display you have uh jl speakers you have like all of these things are kind of separate systems and the biggest downside of that is that you don't have software tying it all together because boat builders don't have software engineers.

59:30They don't have electrical engineers. In building ARC, we do have those engineers, and we are integrating all these different components. And that allows us to do everything from very basic features like steering in reverse, which does not exist on most boats because you back up and they don't have the software that says, hey, we know the position of this boat, and we know that the prop walk moves it in a certain direction and we have the thruster on board that we can activate to compensate for that. It's actually a pretty simple engineering problem, but it takes the foundation of all these components talking to each other and having the sensors and then just having the software engineers on staff to do it.

1:00:11So at a basic level, it's features like steering in reverse, but you could get more advanced and you could get into station keeping. Just keep my boat here without me thinking about it. You could get into assisted turning where you're starting to use different propulsion mechanisms on the boat to get you better handling.

1:00:30Waypoint navigation, like there's skier down detection where somebody falls and we have a camera on board and it will alert you and it will automatically retract the surf system. And there's just so much that we can do with software given the platform that we've built on the hardware side. one thing that I was impressed with um in a model that my my dad got was skyhook and I just thought like being on boats for so long like there's there's no new innovations and it's like you've skyhook you just like get to stay in one place for a while and it was like amazing yeah yeah and that's like a you know that I don't want to be too reductive here but like that's not a lot of work for us to do.

1:01:14That was a week or two of somebody's time to just say, okay, hit a button, keep the boat here. The hard part is actually getting the hardware on there and getting all the systems talking together. And then the software component of this, that's just scratching the surface and all the features that we have planned from here on out, take the industry from where it is today and leapfrog it by decades. You've raised around a hundred million dollars from some big Silicon Valley names. Investors like Eclipse, Andreessen Horowitz, Lower Carbon Capital, Abstract Ventures, and a newer investor, Menlo Ventures.

1:01:50The last round was a Series B. It was like a$70 million Series B in 2023. Why did you go after venture capital? This is such an obvious idea. There are probably a million people in the US that have thought somebody should make Tesla for boats or somebody should make electric boats. Again, in going from gas to electric, it's not a gas car to electric car. It's a gas leaf blower to an electric leaf blower. The percent improvement in the experience is dramatically better. So it's this obvious idea. We're not trying to invent a new category. We're not really taking demand risk. We're just delivering better boats.

1:02:30There's also not a lot of technology risk in what we're doing because the automotive industry has existed for the past 10 years and has been plowing money into electrification and high-voltage power electronics and battery supply chains for 10-plus years now, it's all driven by execution risk. And so when you have a business that is driven by execution risk, that is a great fit for venture capital because you already have all the conviction you need and you just need to hit go and actually go attract the team and do that hard work. And it comes with an upfront investment. Like it takes, it's hard to actually go do that.

1:03:12It's hard to go build the battery packs and get them working reliably and safely and fully tested and qualified and ready to go out into the field for many years to come. It's hard to go attract that team. It's hard to go spin up a production system. Risk capital is a great fit for that. And the upside here is every boat on the water can benefit from this. And that's a big opportunity. When you're testing and building the boat, there's a lot of data involved. There's AI involved. We're in like this transformative time where it's proliferating across the board. I'm curious from your perspective, like how are you thinking about AI integration and potentially AGI within the boat itself?

1:03:59One of our biggest bottlenecks today is actually just manufacturing boats. We have a ton of demand and we need to increase the supply that we have. Manufacturing is hard for any number of reasons. It's this complex orchestration problem. You could have 99.9 % of things go well, but if one screw is missing at some critical step of the process, everything slows down. I think a lot about how do we use tools to make that process go better, faster, be more efficient. And so for us, it's almost less about what goes on the boat today and a lot more about what goes into building the boat today. How do we take the team that we have today, make them a lot more efficient?

1:04:46Obviously, our software engineers are all using these new tools to basically be more efficient, more effective software engineers. But electrical engineers are starting to get a bunch of new tools for how you do circuit design and how you validate some of the designs and manufacturing work instructions and the generation of those work instructions, which are kind of like for the uninitiated. It's kind of like imagine Ikea furniture where you have some set of instructions that tell you how to assemble something. That happens at a more extreme degree in a manufacturing environment. And so like how do you actually go write those and generate them when a design changes or something like that?

1:05:29You can kind of look at every step of this and people can get a lot more efficient. We also pull thousands of data points a second off of our boats. And so you could deploy what you might call AI or machine learning to go do anomaly detection on those boats. Say like, hey, this boat, something seems off about it. And you can have engineers go check that out proactively so you catch issues before a customer ever notices. Can you also put it on autopilot? I mean, all these routes have been tracked for a while on satellite systems. Yeah, we definitely have aspirations for these boats to navigate themselves.

1:06:09It's a steer-by-wire system and throttle-by-wire system, meaning you can electrically control the entire boat. We have a little bit of a hackathon project that over the course of a weekend and about 15 minutes in a screwdriver, one of our engineers turned it into a remote control boat. Wow. which really just proves how technologically advanced the boats are that these are platforms that software sits on top of we have not yet gone full into autonomy because a lot of the times especially on the consumer side of this business people like driving it's you're not stuck in traffic you're not dealing with like that sort of thing like you're out on the water uh with a wake surfer a wakeboarder behind the boat so you'd like to drive but especially as we look at hey how do you get this boat back onto a trailer how do you get it docked there's a lot of opportunity to use software to make that a lot easier for people at the end of most days when we're on the water my dad's just like isn't this fun it's just very wholesome it is so fun being out on the water and then owning the boat is not fun and that's the part that like we want to make the owning the boat part way more fun uh or at least way less bad uh and then the being out on the water all that much more fun because i think about my own time out on the water like i grew up water skiing wakeboarding all of that and being able to talk to people while the boat's in motion while you're pulling a wake surfer or wakeboarder is really nice it's it's like a most people just get accustomed to when the boat's in motion you stop all conversation and and you don't have to do that with an arc um or recording somebody automatically and say wow they just landed a cool trick or they just wiped out and you have that recording you send it to your phone and now you get to joke about that for the rest of the day um there's just so many different ways to make that experience both on and off the water better when you modernize these these vehicles So it is so fun.

1:08:18This is one of those cases where seeing is believing. Like I could talk about the benefits here. The reality is there's no replacing, just experiencing it. When you actually punch the throttle and get thrown back and you don't have that roaring engine noise, it is a wild experience. So what is the ride difference on an electric boat versus gas? Because, I mean, there's the same for cars. You get jolt. It's much faster. But does that transfer in the water? It's more noticeable in different ways. So when you first pull away from the dock and you don't hear anything except water, it is a wild experience because you're so used to that roar of an engine.

1:08:59Then you punch it and it's, I mean, we've got over twice the torque of even the most premium boats out there. And we size up our propeller, which is, you kind of think of it like the tire for boats. It's what allows you to transfer power into the water. we have a bigger propeller so that we can transfer more power before it starts to cavitate. That translates into just a really snappy experience when you punch the throttle. If you've been on a newer boat, you punch a throttle, and there's multiple seconds of lag before the boat's like, okay, I'm going to start moving forward now. Very different experience.

1:09:34When you corner, like when you turn this wheel really hard, it handles like a jet boat. And you'll hear people say this, like this feels like a jet boat, except it's a 24 foot or like, you know 23 foot uh 7 000 pound wakesport boat um and then again the like software experience of it and not inhaling fumes and being able to hold that conversation like it it's a great experience for for many different reasons than you'd find in automotive well i'm convinced hopefully my dad's convinced this seemed like a little bit of a pitch for you look they're in the market for a boat right now. So Steven, if you're listening, I know a guy.

1:10:18Yeah. Um, we do have a, we do have a, quite the backlog right now. And so, um, we're selling our boats now for next summer season. Perfect timing. We'll be there. It's a lot of fun. As we wrap up, um, I do want to ask you a question as CEO of a capitally intensive business. How do you think about performance and spending smarter to move faster in an arc boat. Yeah. Boating, like this whole business is predicated on how do you make a lot of progress without spending a lot of money? Because it's not the same size, at least none of these pockets of like wake sport boats and center console boats, they're smaller markets than your sedan market.

1:11:03So you need to normalize the amount that you're spending to the opportunity in those industries. We pride ourselves on being capital efficient. We brought our first product to market with less than$20 million deployed, like delivered it to a customer. If you compare that to automotive companies, they will spend billions of dollars getting to first delivery, first revenue. We pride ourselves on that because you need to stay lean and scrappy for that return on invested capital to be lucrative in the marine space. And, you know, continue to expand the addressable market as you build up into bigger and bigger vessels.

1:11:45Great. Well, all I'm thinking about is getting an ARC vote. Come out on a demo. It's a lot of fun. I definitely will. We can do the next conversation out there. Let's do it live in action. We can do it. Great. We'll bring Brett. Brett's in LA. Grab him on. Sounds great. All right. Well, Mitch, this was so much fun. Thank you for coming on. Thanks for having me. Hey, it's Molly. If you enjoy our interviews, check out our newsletter, sorcery.vc, where we deliver a once a week top deals and tech headlines email and also go deeper on our podcast interviews. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple, or wherever you listen.

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