LA Tech Week 2022: Building Better Factories

To celebrate the LA community and the city’s growth, a16z recently hosted Time to Build Los Angeles, an event where we invited LA-based investors, founders, and operators from across a diverse range of industries to talk about company building in LA. In this episode, Chris Power, the Founder and CEO of the precision parts manufacturing company, Hadrian, talks with a16z American dynamism partner Oliver Hsu, about why he decided to build his factories in LA, why software engineers shouldn’t be afraid of manufacturing company jobs, and how a single mom and pop machinist shop can affect the national supply chain.

Transcript

Oliver Hsu: So Chris, just to kick things off, and to give everyone in the crowd a little bit of context, for those that don’t know, can you tell us a little bit about your story and what Hadrian is?

Chris Power: Cool. So, for those that don’t know about manufacturing in the US, if you think about the space industry, the defense industry, and the semiconductor industry, they all outsource domestically about 50 billion in high-precision machine components a year. So SpaceX, for example, they’re making a bunch of Starlink satellites. There’s thousands of parts. They don’t make them. It’s in a supply chain that’s domestically, and it’s about 4,000 small machine shops that make up in aggregate that 50 billion in revenue, and these machine shops got started in the first space race or like the Cold War. So, the average age of an owner is 62. So basically, customers want parts super fast and super cheap and, we’re trying to scale up rockets, satellites, jets, and drones, and they’re getting parts super slow, unreliable. So, basically, we build highly automated factories to serve as an AWS-style infrastructure layer for aerospace engineers and mechanical engineers, so that they can just move super fast in actually building products versus wasting time in the supply chain.

Oliver: Awesome. And Hadrian is actually a key example of a thesis we have at the firm called American Dynamism, all right? And American Dynamism is really all these companies that actively support the national interest. So, everything like what Chris is doing in shoring up the industrial base for space and defense all the way to some of these core civic goods and manufacturing, and factories, and building that factory capacity is really at the crux of all of that. You’ve described Hadrian as an abstract factory. So, can you share a little bit more about what you mean by abstract factory?

Chris: Yeah, so what you get in usual factories is that you’re setting up equipment or manufacturing lines for a single product. You know, in automotive, you’re setting up a bunch of machines to make one screw that’s on 1,000 cars, or you’re assembling something that’s pretty repeatable. What we’re building is a factory that you can drop something into it, it comes out the other side in two weeks, and it kind of doesn’t matter what it is, as long as it’s supported material types. So, we’re building a factory that’s way more like a data center where it’s just like a minute of compute time in the factory, and then customers get that at the back-end, and building a lot of flexibility versus traditional factories, which is why it needs to be so software driven to actually kind of run itself.

Oliver: And you came here from Australia, first to the Bay Area, and then when you actually launched your factories, you have two factories now both in LA. Why did you decide to build the factories physically in LA? And do you think you actually could have built this anywhere else?

Chris: Yeah. That’s a great question. So, I came to the Bay probably right at the tail end of the San Francisco magic, and then COVID hit, and then I decided to build a factory, which seemed stupid at the time. But LA is great because what people don’t realize is basically every space and defense company is here or either got started here, so there’s huge, huge, huge manufacturing talent in aerospace and everything else from JPL, SpaceX, ABL Space, Relativity Space, and Rolls down here. So LA is the center of deep tech basically, for all that talent. So, that was reason number one.

Secondly, you definitely don’t want to build a factory in the Bay Area. I mean, you can’t even move like a light switch one inch to the right without getting permitted for six months, so, you know, good luck doing that. And especially after all are like the Fremont government, basically, a bunch of communists and like yelling at Elon, so I’m not going to do that. I’m serious. We could have built it in like Texas or whatever, but in the early days, you needed a good overlap of really high-grade software engineers with manufacturing talent, and LA was close enough to San Francisco, and it’s got a good enough ecosystem in video games and hardware-software that we could pull enough of these two cultures together to bootstrap the thing and make sure everyone’s working together in that additional hub. So, I actually think LA is perfect and definitely being five minutes away from our key customers was really important as well in the early days. So it’s been really great to be down here.

Oliver: And one thing you’ve talked a lot about is getting those kinds of traditional software talent from non-manufacturing or non-hardware backgrounds to take the leap into working on things that you are at Hadrian. Can you share a little bit about what you think some of the misconceptions, or some of the perceptions from folks from more traditional software backgrounds might have about working at a company like Hadrian?

Chris: So, I think a lot of software engineers, whether it’s from Big Tech, or fintech, whether they’re Google or Stripe, or something like that, apart from the ones arguing about stuff on Slack, the ones that are still serious, really, really want to transition to something meaningful, especially as we’re seeing a crisis in the Ukraine and climate change, and obviously, like space is super exciting, and everyone’s aware that the CCP is about to kick our ass. So, basically, there’s tons of top software engineers that want to figure out how to contribute to the future of national security, whether it’s Hadrian or SpaceX or Avaada, or any of the other amazing companies. And what people don’t realize is that all of the software engineering challenges in automating factories, it’s just regular software engineering. You don’t need to know anything about manufacturing, you don’t need to know anything about hardware. One of our best engineers is an SRE from Google, and as soon as he realized that keeping a factory up was basically like keeping a data center up, it’s the same exact software engineering challenge.

I think we have to send a really strong message that you don’t need a specific manufacturing skill set to get involved and contribute because most of the automation is either a SaaS platform that we use internally, or it’s like geometry engineering. And if you’ve been building Unity or video games, it’s basically the same tech stack, and you’re building integrations to machines. If you’ve been at Rippling or something like that, you’re building integration for parallel systems. It’s the exact same type of software engineering, but I think a lot of people get wrapped around the axle of, are they going to be a competitive candidate for a company like Hadrian or SpaceX or not? But yeah, basically, as long as you’re a strong software engineer, within a couple of weeks, you can get into the weeds and start really adding a lot of value very quickly.

Oliver: And one thing you mentioned there is how people are kind of realizing the macro situation is affecting their perception of working in these spaces. And that’s something you talk about often that the problem that Hadrian’s solving is important, it’s core to the national interest. Can you share a little bit more about your thoughts as to whether the U.S. faces existential-level challenges if a company like Hadrian does not exist?

Chris: This is why I started the company in the first place. Everyone knows what’s going on in Ukraine. So, we shipped a bunch of shoulder-mounted missiles to Ukraine because they’re cheap, and they kill big things easily. Makes sense. So, we gave them three years’ worth of inventory of stinger and javelin missiles and they blew through it in three weeks.

And then the Biden administration asked Raytheon and Lockheed, “Hey, can you give us more missiles?” And they said, “The parts aren’t getting manufactured anymore, and haven’t been manufactured in like five years. So, we can’t really spin up production that fast. And also, we don’t know how to make some of the parts anymore. So, we have to re-engineer the whole platform, and it might take a couple of years to figure it out.” Or, you know, you got the B-2 bomber, where about a year ago, they had to put a couple of million dollar contract up because they just forgot how to make some of the parts on it, and half of the birds are grounded.

Another example is like literally more than half of the F-16s in our Air Force right now are on the ground because they can’t get parts for them because no one knows how to make them anymore, and then they cannibalize the other planes to keep the other planes up, and it gets worse and worse and worse and worse and worse. Basically, in this decade, the U.S. is going to win space race two. We’re at the end of the 100-year cycle, and we’re going to hit buttheads really hard with the CCP, and we’re going to try and reshore semiconductor. In that same decade, the entire manufacturing ecosystem is run by a bunch of 62-year-olds with no transition plan. There’s nothing written down, and it’s a bunch of small, incredibly fragile businesses that are going to retire at the exact same time.

So, literally, the problem for half of the defense primes that are engaging Hadrian is not like we want things cheap or fast, they can’t get parts at all. I’m sure everyone’s heard that the Biden administration gave Intel $50 billion to build a semiconductor fab, because the CCP is going to take Taiwan, and then we’re not going to be able to buy an iPhone for less than $10,000, or a laptop. But that same supply chain that makes parts for semiconductors is the same supply chain that’s making parts for the defense thing, so it’s all a complete nightmare.

So, unless Hadrian or something like Hadrian exists, basically good luck building satellites, good luck building ICBMs, good luck keeping fighter jets in the air. And it’s all going to collapse at basically the same time. So, part of the automation game here is, that’s basically the only way we can scale up fast enough to replace billions and billions and billions of revenue that’s all going to collapse out of the ecosystem at the same time. And if we can’t just basically throw stingers and javelins at the CCP or defend Taiwan, we’re basically screwed, and that all starts with basically Bob’s machine shop who can’t ship a part. It’s completely insane. 

Oliver: And one thing you mentioned there is that a lot of these machinists are at retiring age, there’s no transition plan or anything. How do you see Hadrian as fitting into that macro movement in terms of… the generation of skilled workers and talent that are able to do this?

Chris: The biggest thing the country lost when we outsourced manufacturing, because we over-financialized it in the 80s, is not the actual factories, it’s the culture of serious people who want to build things. And it’s like software engineering, you don’t get a great data scientist at OpenAI without thousands of strong back-end software engineers. It’s like a generative cultural property. So you can’t make complex things unless you’ve got thousands of people trained to make simple things. It just doesn’t work like that. So, part of what we build is we only automate things to 80%, and the last 20%, we massively simplify.

And the reason to do that is basically you cannot go out and just hire a million machinists. They don’t exist. There’s probably like a couple of 100. And part of why that’s important is most of our workforce now, early 20s, they’re from Home Depot, or from Chick-fil-A, or something like that, and they’ve never made spaceflight hardware in their entire life. And within 30 days of joining us, they’re spun up and making flight hardware for like Falcon 9s or something like that. Now, part of that is, that’s the only way we can actually scale up. But the other part is, it’s great because we get to take all these people who, and there’s a lot of Gen Zers who are really, really in rough, like mental shape, and we get to pull them in, and get them working on some really, really meaningful stuff very quickly.

Oliver: And on that culture of seriousness, just to wrap up here, I think for people who aren’t familiar, can you share a little bit about why you named the company Hadrian?

Chris: So, for those that don’t know, Rome rose and then declined. And what Hadrian did during his reign was rebuild a lot of the critical infrastructure of the Empire. They were overextended, we pulled back, rebuilt a bunch of the critical infrastructure, and bought the Empire another couple of 100 years. And, basically, Americans are Romans, and we’re right at the end of the 100-year cycle here. So, part of why we named the company that is because that’s what we’re doing. We’re going to rebuild the critical infrastructure of the company to make sure we are the ones that settle the stars with our culture. That’s where it comes from.

Oliver: I think that’s a great place to end. Thanks, Chris.

Chris: Thanks, Olly.