The situations like this, America cannot make artillery shells fast enough.

We can't sell tomahawk missiles to Denmark because there's a five year backlog.

And to make matters worse, 90% of all of the machine shop owners in

the US are dudes in their sixties that are getting ready to retire.

What are we gonna do about this?

Silicon Valley thinks that the solution is a $1.6 billion startup run by a young CEO

that's been around for just five years.

Before we get skeptical about Hadrian, let's be real.

The defense manufacturing base is in trouble.

The manufacturing crisis is not fake.

And a lot of it has become a monopoly in just the past 30 years.

Since 1990, the number of aerospace and defense primes

dropped from 51 to just five.

Today, 90% of missiles come from just three sources.

That is fragile.

And I didn't pull that 90% statistic in the intro outta my butt.

That's true.

90% of machine shops have fewer than 20 employees, and the average

operator get this is 63 years old.

An average precision part.

A lot goes into this takes eight to 12 weeks to deliver and about

40% of orders are either late or have manufacturing defects.

And whatever your thoughts are on the current conflicts going on that the US is

involved with, they have exposed a huge vulnerability for us that just in time

manufacturing, IE waiting until demand crops up and then making the equipment,

the ordinance on demand does not work out.

We are too fragile to do that now.

It was a peacetime fantasy.

So here comes Chris Power, an Australian who came to the

US in 2019 with just $6,000

and a thesis that America's industrial base was collapsing

What did he do?

He started a private equity fund that started buying up machine shops,

but after doing this for a while, he gets black pilled really quickly and

realizes that this is a huge problem.

These guys are retiring, new people are not going into this.

The production process is flawed.

It creates errors, and he decides we should automate

a bunch of this with robots.

He founds Hadrian in the year 2020,

and the pitch is visionary or ludicrous, they want to produce space and industrial

manufactured components for defense 10 times faster than current processes.

They have taken on $625 million over eight rounds, and their latest valuation

as of just last month is 1.6 billion.

And there are no slouches in the investing group.

In the latest round, you have Founders Fund, which is Peter Thiel's fund.

Luke's Capital A 16 ZT Rowe Price Altimeter.

Silicon Valley Venture Capital is excited

The numbers are making sense and everything's adding up.

They're scaling extremely fast.

In just one year of, they, they're scaling, they 10 XD their

revenue, so they are on a tear.

They're doing quite well,

but their bet is that they can turn a massive problem in the US into software,

which, if you've been watching this channel for any amount of time, you

know, that we're skeptical about.

So let's dig into that claim a little bit.

Their main product that they sell, they're calling.

In cutesy way factories as a service.

So essentially what that means is if you're Lockheed and you have a part

of your missile manufacturing process that maybe you outsource to a machine

company, you need parts, you need people to assemble things with very

fiddly tolerances to build the missile,

they would essentially come to the Lockheed Martin factory.

They'd claim a part of the factory floor, and they would install what

they call a pod in part of the factory to do that bit of the manufacturing.

So it's like a drag and drop little automation that you

put into an existing factory.

It's powered by their proprietary software stack called Opus, which I think

Anthropic is probably gonna have something to say about if they scale much more.

And like I said, they seem by all accounts to be scaling quite well,

but they do have a lot of long plays.

Long plays are the norm in aerospace and in defense.

They say, uh, quote, 80% of our revenue is long term, three to seven year

production contracts, so it could be a while before some of these things pay out.

But like I said, that revenue trajectory is good.

They did 3 million in 2023, about 30 million by the end of 2024, and

they claimed 10 x growth in 2025.

But we don't have proof of that.

And the biggest play, and the reason that I wanted to make this video

in the first place is right down the road from me in Mesa, Arizona.

They just opened up Factory three, which is a 270,000 square foot factory.

It's $200 million investment.

It's bringing 350 jobs to Arizona, and it's four times the

size of their latest facility.

So this is a big scale up for them, and it's unknown whether or not they

can deliver on a factory of that size.

Additionally, they plan for four to five more facilities this year,

so they are going big in 2026.

Here's where I put my, I've been in these rooms and see how

these decisions get made hot.

First, let's take a look at the valuation versus their revenue.

Again, these are on the best reported figures that we could find.

We don't have direct access to their books, but they did a $1.6

billion valuation on $30 million of revenue, which is a 50 x multiple.

Now that revenue figure is from 2024, so let's take them at their word

and assume they did 10 x growth.

So they delivered on $300 million in revenue at that $1.6 billion valuation.

That's a five x revenue multiplier for a hardware company, and so

I didn't really appreciate this until I work in a hardware field.

Those multiples for hardware companies are kind of unheard of for software.

We're used to infinitely scaling because all it takes to scale software is

you buy some more cloud compute, you negotiate the price down once you're

big enough with your cloud provider.

You hire engineers that yes, are expensive, but they're

not as expensive as hardware.

If you've never worked with hardware, you have no idea how expensive hardware is.

It is a massive, massive, massive incomprehensibly large expense, and you

have to build out factories to support it, which are also expensive 'cause then

you are very in the real estate game.

So that's a big if true moment.

That's a big multiple for a hardware company.

The 10 x faster claim.

I actually, I do believe this one.

I mean, racing against mom and pop manufacturing shops, it seems like

quite a low bar, so I do believe they can deliver 10 X faster.

The real thing that is the question is can they deliver with less

? Anomalies or defects in their parts than these mom and pop shops, and

I actually do believe that as well.

I mean, we use robots for manufacturing a bunch of stuff,

and especially fiddly things.

We use them for surgery.

So manufacturing robots for this type of work actually seem like they can

deliver definitely 10 x faster and likely with fewer production defects.

There is a customer concentration risk, which is pretty interesting.

A lot of their business is gonna be coming from subcontracting for defense primes.

So remember in that Lockheed example that I gave you, or with Raytheon

or Northrop, basically what they're gonna do is they're gonna say, here's.

X, Y, Z component of a satellite that we're building.

And we wanna automate this with Hadrian or a mom and pop shop.

They'll go and find a mom and pop shop or, or maybe they'll choose Hadrian for

this and they'll say, you manufacture this little widget that goes in the satellite.

But the issue here, and you'll know this if you're a software

engineer, these defense primes.

They don't like to pay a lot of money to these subcontractors, which is

probably why a lot of the mom and the pop shops are not cutting edge, fast,

free from defects is because they're not attracting top talent because

there's not a ton of money in it.

Again, you don't, you don't believe me.

Go look at levels side.

FYI look at the software engineer salaries for northup, for Lockheed, uh,

pitiful, laughable, uh, humiliating.

It's gonna attract the type of talent that you get with those salaries, and

that's everywhere in those companies.

They don't want to pay their subcontractors a boatload of money either.

I, I'm not calling them bad.

This is just the mechanics of the situation.

I wanna call it just one more difference between software and manufacturing

and something that involves hardware, even if software is powering it.

One of the reasons you can develop software so quickly that I can spin

up a SaaS app over the weekend.

Is because all the infrastructure exists, I can deploy on A-W-S-G-C-P

and they're all competing to make my life easier, , to make my site more

reliable when I host on their service.

And I pay them a very, very small amount of money, , for the

opportunity for me to host on one of those cloud provider platforms.

But a ton of that is not.

Legislative, there's no, there's not a ton of rules around where can you deploy?

Does your site have to work a certain way?

But in defense manufacturing, you have ITAR restrictions.

You have laws, you have compliance.

There is a headache of paperwork.

You need a. Boatload of lawyers to do this.

So I'd be curious to know what Hadrian's legal strategy is

for tackling these things.

Because the reason there hasn't traditionally been a lot of innovation

in the defense scene over the past 30 years, other than a few newcomers

and now quite a few newcomers, is because there's an, a massive amount

of bureaucracy involved, it, it tends to stifle innovation unless you have

a good strategy for getting around it.

But here's why this might not be vaporware, and I am actually

rooting for Hadrian, and I do think they will be successful.

As I mentioned, a lot of those manufacturing firms that your Lockheeds,

your north reps, your Raytheons rely on.

Are going outta business.

Those dudes are retiring, they're shutting down their shops.

They still need those parts to produce defense equipment, to

produce aerospace equipment.

So if there's a case where nobody can manufacture your part, but

Hadrian, they have a lock on the market, it, they can essentially tell

Lockheed to write whatever amount they want on that paycheck for that

part because nobody else can do it.

The primes are already starting to put some paper behind this.

Raytheon actually invested in Hadrian's series B round.

And we know that Lockheed has embedded one of their cells, these small units

of automated manufacturing already.

Even a skeptic like me admits that the problem is so big and

actually so obvious that somebody needs to step up and solve it.

Hadrian seems well on their way to doing this.

And my favorite thing about this is unlike pure AI plays, which are

sopping up most of the venture capital money right now, and most of the

headlines, Hadrian, yes, it's using ai IT at some level for optimization,

but it's not their main product.

They have a factory that you can go into.

They have physical hardware assets and honestly, , if

you're investing private equity.

And you can buy some shares of Hadrian.

I think this is a really safe place to park your money.

Not only safe, but I think that they'll see explosive growth

over the next five years.

So is Hadrian the real deal or is it another VC wet dream about the

Reindustrialization of the United States?

And I think it's real.

The problem they're solving is real.

The execution claims are aggressive, but seem doable.

But we'll have to see can they scale?

And while they're scaling, can they maintain those quality requirements

for the parts that they're producing?

I'll be watching Hadrian's actual production numbers, not just their

press releases, and I'll be reporting on it as we get new information.

But this is one to watch.

This is a bit of a deviation from the regular AI stuff on this channel.

So if you like this and you want to see me cover more VC back.

Defense companies, please leave a comment below and let me

know you're interested in that.

Drop some names of companies if you wanna see me cover any of them.

Thank you for watching and don't forget to subscribe.