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"Building the Base" - an in-depth series of conversations with top entrepreneurs and leaders from tech, financial, industrial, and public sectors.
Our special guests are weighing in on a broad selection of topics such as: shaping our future national security industrial base, leadership in challenging times, experiences related to the intersection of business and national security, and personal anecdotes related to their positions of influence.
Building the base is hosted by our own BENS member Lauren Bedula who is the Managing Director and National Security Technology Practice Lead at Beacon Global Strategies, and BENS Distinguished Fellow, Jim "Hondo" Geurts who retired from performing the duties of the Under Secretary of the Navy and former Assistant Secretary of the Navy for Research, Development & Acquisition.
Lauren Bedula 00:00
Hello. Welcome back to Building the Base, Lauren Bedula and Hondo Geurts here from Boston. Today we've got the show on the road around MIT's campus for a national security conference hosted by MIT and Harvard. We've got an alum from MIT with us today, Billy Thalheimer, CEO of REGENT. We are very excited to hear from the founder’s perspective, you're two and a half years into this unapologetically dual use case. So, we are looking forward to having you tell us about the company and your experiences while you get into the space and some of the challenges. So, Billy, thank you so much for joining us.
Billy Thalheimer 00:39
Yeah. Thanks for having me, guys.
Hondo Geurts 00:40
Yeah, awesome, Billy. So, you know, how does one become a founder? Like, were you, you know, as a kid that weird guy trying to invent something or what was your path to becoming a founder of this new, innovative way to take on regional air?
Billy Thalheimer 00:58
Yeah. Well, I originally wanted to be an astronaut. Because you know, every kid wants to be an astronaut. And when I started befriending astronauts, I realized that if you want to be an astronaut, the best way to do is to be a fighter pilot first. And I said, “Well, I've seen Top Gun. That looks like a lot of fun.” So, I started to go down that route. I actually tried joining the Air National Guard, I rushed to the Burlington Air National Guard, amazing unit there, they're getting F-35s, and I got the job. And then I was also hiking in the Green Mountains. Well, that's how I got Lyme disease at the same time. So okay, back to you know, industry. I went, I did my undergrad and my grad school at MIT here in aerospace engineering. So, I went to go work at Aurora Flight Sciences in the Cambridge area, doing all sorts of aircraft prototyping. And basically, we were acquired by Boeing about a year into my stay to build EV tools and innovate in this electric aircraft space. So, I was an engineer, then program manager, and as a business developer sort of moved up through the ranks. Eventually I recovered from Lyme disease, you know, and the guard called and said, you want to fly those F-35s? And, you know, Aurora, Boeing was like, hey, let's change the world. And so that was an amazingly difficult decision that actually sort of made me realize and respect the service component of the service, because that was really the decision at hand. Obviously, I made the ultimate decision to stay an engineer and sort of a business leader and innovate on that side. And within a few months getting deeper into that space, I basically convinced myself, I made the wrong choice. And that this whole thing wouldn't work, in my opinion. So, I wanted to do something, and I was so excited about changing transportation and electrification, I started digging into it. Like, why is this not working electrifying aircraft? You know, was it the certification pathways, taking a billion dollars in a decade? Was it the range where like, I want to go to the Boston area here and went to school here, and it was a pain to get to New York. So, you know, I wanted to innovate on these regional ranges. And today's batteries couldn't take us that far. So, to answer the question, it was sort of this winding path of like wanting to do exciting stuff, following my passions in aerospace, that eventually led me to like, “Hey, I think there's a better way,” and then leaving Boeing and starting the entrepreneurial journey.
Lauren Bedula 03:07
Awesome. So, it sounds like you're passionate about solving hard problems. And you're a great example of showing how you can do this from the industry side, too. You've kind of toyed with both and spending time in the traditional defense industrial base with Boeing, as part of your history here. What we like to focus on our show is the importance of bringing in emerging tech, the high-tech sector, startups, and non-traditional in the light. So, can you tell us a little bit about just why you think that's so important from an industry perspective?
Billy Thalheimer 03:40
Yeah. Industry moves very quickly. And there is so much motivation and alignment of incentives for industry to innovate, because eventually, you know, as revenue driven companies, we need to generate returns for investors, right. So, we go into it, founders go into it rosy-eyed, like we're changing the world. But then in order to change the world, we have to generate that revenue too. And there's a lot of pressure to do that. So, we need to move really fast. You know, I think the reason why I was drawn to industry was because, you know, I was an athlete in college, and throughout my younger years, too, and it's like that same sort of drive, like we're going to out compete, we're going to out innovate, like we're going to be the best on the field, and we're going to win, you know, and there's very much that competition in industry. And that's a good thing. You know, you think about the major technological innovations in history, the Space Race, you can argue, we're in like Space Race version two right now. Or the AI race right now, like competition drives innovation in industry is just at the end of the day competition. And so, we need, you know, the industrial base, you need the government side because of, you know, the national applicability of the funding base there because of the ability to scale this globally. You need the academic side as the Technology Development Center, but the timelines are sort of ill-defined and you certainly get these new things, right? Industry is the link between those two and industry takes those seedling technologies and figures out how to make them useful, which therefore helps the government and also makes money.
Hondo Geurts 05:11
So, you know, one of the interesting things, I think, and I'm sure you've saw, you saw it, when you're at Boeing, right? We the industrial base, we'd like to call kind of future industrial network, seems like we've lost the middle. Right, your choices are, you know, a big company or a small company that gets bitten, kind of bought by a big company, or a bunch of little small companies that don't really have the ability to scale. You're part of I would say, this new movement of venture backed companies that can use venture funding and dual-use it as a way to scale back into the middle of the industrial base, and not try and convince a big company that it's got to move. How do you see that playing out what's been your learning as you're trying to, you know, work with investors and all that, and really scale into the middle of the industrial base quickly?
Billy Thalheimer 06:06
I think this new ilk of, you know, industrial technologies, venture backed startups that are building hardware and manufacturing technologies is exciting and critical and will continue. But it's really hard. It is called hardware for a reason, you know, atoms are harder than bits. And that's especially difficult on the venture side, you know, and, and to some extent, going back to that competition, like the hardware companies have an additional burden on them, when they go out and pitch to an investor. And the investor says, “Show me you can make these 100x returns and build a moat, and be capital efficient along the way.” And you know, I have to sit here developing human carrying human safe hardware, and say, along my test campaign, I'm gonna push this thing to the limit, I'm gonna explore the envelope, I'm gonna crash a few of these things. And when I do, it's going to cost me millions of dollars, because the hardware is gonna break, and we're gonna have to rebuild it, we can't just revert to the last, you know, push of the code, right and fix it from there. So, there's this huge additional burden to us. But when I look at some of the world changing companies right now, you know, when I look at SpaceX, and Tesla, and Amaryl, you know, there's this huge hardware component, because hardware eventually builds the mode at the end of the day and says, “you know, you can't follow on to me, because I've crashed 100 different times, and we fixed it.” And we found the investors with the buy in to say, “Yes, I see your vision, and you're doing the right engineering process, and you're braking at the right amount, the right number of times, because zero is too few. And 100 is too many, you found the balance, and we'll take you the rest of the way.” So, I think it's important, and it will continue, but it's going to continue to be difficult.
Hondo Geurts 07:43
And just for our listeners, give him a little sense of what you're trying to accomplish with region, and kind of why you think that's exciting, both in a commercial and a dual use kind of military environment.
Billy Thalheimer 07:57
Yes. So at the end of the day REGENT is changing regional transfer. Sorry. At the end of the day REGENT is changing regional transportation. So we are, as you said, a more and more proud dual-use company, we really founded with the commercial division as I was coming from that electric aviation space, myself and my co-founder, Mike Klinker. We're focused on commercial transportation, you know, how do we get people on these key regional missions where you get stuck in traffic, if you take a car and you're sitting in the airport longer than you're in the airplane? And so, we said, well, we can build this electric flying machine that actually operates in the maritime domain, called a sea glider. We created the world's first sea glider that does dock to dock over water. The transportation flies within a wingspan of the surface of the ground is powered entirely by battery. So, what it offers is the speed of an aircraft, the convenience of a ferry, at a cost that is half that of an aircraft with zero emissions. And so, we see unlocking these coastal markets. And it turns out that 40% of the world's population lives in coastal communities. So, routes like Boston, New York, LA San Francisco, Hawaii, the Caribbean, the entire global ferry market, in the Mediterranean and in the Pacific Islands is accessible by this. And then what we found once we got in it is, hey, this technology is incredibly applicable to changing national defensive security strategy in the Indo Pacific where we're island hopping in the same vehicle, the same technology that enables easy accessible high speed island hopping for a Hawaii vacation or is the same one that can transport troops and supplies in the Indo Pacific.
Lauren Bedula 09:33
So you're looking at both the commercial markets and the US government as a customer. Two questions. One, how do your investors feel about that? And two, two and a half years in what's it been like? Like comparisons between the two?
Billy Thalheimer 09:47
Yeah, building hardware, as I said, is very hard. And so that dual use part has actually been critically important for us to convince investors that we can go the distance you know, REGENT doesn't have the billion dollar ticket to get to revenue because of our certification pathway. But it's certainly in the hundreds of millions, like we're building safety critical human flying machines that are flying at high speeds and low altitudes. And we do assure that every time whether it's, you know, a commercial passenger or someone in our armed services, that they're going to be safe on that mission. So certainly, hundreds of millions of dollars, and an investor looks at that and says, “Well, I'm not going to pay the whole way for you to get there.” And so, with this very strong federal mission, and applicability with non-dilute of capital along the way, we can say, “it's not you, we're not going to come back to you.” We have this government way of funding this development of getting through the valley of death, developing hardware. And then the key of being a successful dual-use company is to sell the same widget to both parties, right? My commercial product is my defense product. And that's the key because on both sides, your customers will take you down rabbit holes of new features and timelines and all this stuff. And so, in our case, we've actually been very successful in saying this first sea glider, this electric powered flying machine, with 180-mile range is going to be the same one that you know, is operating in Hawaii, and Miami and New York and same one that's operating for the Marine Corps in the Indo Pacific.
Lauren Bedula 11:14
That focus and discipline seems really important, especially now with our economic outlook and times too, and I think it's hard for companies, because I'm glad you mentioned, you see this on the commercial side, too, but to develop bespoke technologies. So, I think it is a big part of the valley of death.
Billy Thalheimer 11:56
I think the successful dual-use companies are going to be able to manage their way through a focus as they grow. And right now, our plan is really 50/50 commercial/defense deliveries. And this gives us a fantastic story to investors, because they almost alternate in the relevancy on the commercial side, we can lock people up on contracts, now they can put firm deposits down, we can count them, we can say we'll deliver you this sea glider vessel in this year and this date. And we know very specifically what those pre delivery payments and revenue payments look like very modifiable. on the defense side, we can get development dollars, right now we can get six, three and six for money to bring these products to market, which are actually much larger in magnitude than the deposits we get on the commercial side. So, we can use development dollars from DOD to fund the development of the technology, which is laid out in sort of clear revenue from the commercial side, which then may have a much bigger sort of end game in a program of record for DOD, which is very ethereal, right? Like we know, it starts with the first and we know we're selling hundreds to 1000s of these, but what does it look like? How long does it take to get there? I think defense-focused investors are absolutely so apprehensive of like, I go into them and I pitch them I say we're gonna have a C glider program of record, and we're gonna make billions of dollars. I'm like, “Well, how do you get there?” And that's a very difficult process. And there are not many companies, besides those times we talked about that are doing that. So, to be able to say, “well, even if that completely evaporated, we have development dollars from DOD right now. And we're gonna sell 1000s of these to our commercial customers.” So, a very strong business model. So, we can play both sides. And then as the company grows, really follow where the world is going. Maybe we, you know, maybe we lean more over to defense, maybe we need to pivot more over to commercial, but again, if we're selling the same product to both, that's something we can do.
Hondo Geurts 13:50
So we, Lauren and I, are actually super stoked for all the say younger folks that listen to the podcast and are at the conference today. There are hundreds, you know, that are interested in national security and interested in figuring out how to do amazing things for the country and, and found country found their own companies. As a founder, you know, you're it's a special, special treat and probably hell at the same time. What would you say to those folks who think they want to be a founder or aspiring to be a founder? What do you love about it? And what are maybe a couple of lessons learned? You've had a couple of years into the gig so far.
Billy Thalheimer 14:33
You hit the nail on the head, it is simultaneously the absolute best job most freedom most sort of passion and ownership that I've ever had and simultaneously has also put me through some of the deepest hell. Right, so, as a founder, you are trying to bring something like you're bringing a new technology or capability to the world. There's a reason it hasn't been in the world before. You know the technology hasn't existed or people have tried and failed. But regardless, there's been billions of very smart people on this planet for, you know, 1000s of years. And if this thing hasn't been reality before, like, it's probably very difficult. So, you just need to accept that if you're creating something new, there's a reason it hasn't been here. So, you need to convince people not only that this technology is good, and will service the world and generate value and generate returns, the investors were gonna pay for you to build it, but also that it's possible now and also that you're the person to do it. So I think, you know, as I went into this journey, one of the best things for me, we actually applied to Y-Combinator, and that was, you know, if our first check was going through that accelerator, and whether, you know, aspiring founders want to apply to Y-Combinator or not, Y-Combinator does have some amazingly successful companies and a fantastic process to do this. And I would super encourage them to just go through the free questionnaire, and there's no pitch deck with Y-Combinator, you answer the questions on the questionnaire, and then they decide if you want to come in for a pitch. So, you don't get you know, fancy graphics and animations, you don't get to do a demo. It's like, can you answer these questions and that questionnaire very succinctly defines, like, you should be able to answer these in two sentences immediately, all the time, and any pitch and if you can, and if you feel really confident about them, then you know, you have the chance of going the next step. And that next step is the even harder spot. You know, I think some people attribute a lot of value and ownership and even sort of equity ownership, like it was my idea like I came up with this and that's, you know, .0 whatever percent like all of it is an execution it's in raising money, getting customers building the team and keeping them together. And of course, actually delivering the technology we're bringing to market so there is so much on the founders plate, whatever your skill set is, I was an engineer, some come from business. Whatever your skill set is, there's no way you've experienced it unless you've founded before. But as a young first time founder no way you've experienced all the things that a business do marketing and legal and HR and technology and sales and manufacturing, no way you've covered all those things. So, you need to go into it. With that open mind being ready.
Lauren Bedula 17:08
We had general McConville this morning, opening up the conference, talk about how people are the Army's number one priority and recruitment workforce issues talent are top of mind for leaders across DOD, as a leader in the industry you're in how are you thinking about recruiting? Do you see an appetite to work for the Department of Defense on the industry side? Curious for your take?
Billy Thalheimer 17:30
I totally agree with general that people are everything that, you know, if you're if you're smart and intentional, understand the technology like the technologies possible could be built easy. The question is, can you build it on time to spec with a high enough quality, that it's repeatable? That all comes down to team and team is everything? So recruiting is everything for us, and I think, probably seen on Twitter a 100 times, like the only thing a CEO should be doing is raising money and building a team and like that's, we do other stuff. I'll say that. But yeah, it's not that far off. So, in terms of, you know, working for both sides, and working for DOD, specifically, we've actually found great strength in that we have some amazing veterans on our team. And we find that the training there is really fantastic from a value set in a skill set from an independence ability. And then the other part of that is when we have veterans coming to region, we're like, “Alright, you're an industry now here we go, you know, buckle up, you know those rules you had before. Now you need to start thinking outside the box and expanding in that space.” So, we found it to be a great strength, and we're really proud of the veterans on our team. But there is that sort of pace of industry that you know, we're on the field together, playing at this world championship level. That is a huge part of you know, growing our team.
Lauren Bedula 18:48
So no shortage of talent that has this drive for mission or patriotism. You're still seeing on the industry side some excitement about the issues you're focused on?
Billy Thalheimer 18:58
There's definitely excitement about both missions. I think depending on who we hire, there may or may not be a lack of understanding. You know, we say we're doing sea gliders for DOD. What does that mean? Like? Are we strapping missiles on the thing tomorrow? Are we delivering supplies? Like what's the difference between those missions? You know, honestly, at sometimes there are hesitation especially on those more militarized weaponized machines. You know, I don't want to build something that could kill someone, whether or not it's, you know, in the name of national security and protecting, you know, our servicemen and women. It's one of the reasons why I think, you know, fortunately, to some extent, as a dual use company with these commercial interests at the mission that makes the most sense for us to sell that same widget to both sides is a logistics mission. And we can be very proud of that, that backbone support, which is a key part of the military as a first market. You know, what the future holds?
Hondo Geurts 19:56
It is unclear and I think that's something that we're going to continue, but honestly, that we're gonna continue to have to sort of administer as we grow. And as the dual-use rises. Yeah. And I, again, one of the enduring strengths of a democracy is an ability to choose. And so, you know, if somebody chooses they want to work in national defense oriented or not, it's not a good or bad thing. It's just a choice. I think, as you say, an advantage of some of this dual use kind of companies is you can make that choice. And there's plenty of rooms to contribute. How is your sense? You know, I was at your, your big event yesterday, which was awesome. And one of the things that I was really impressed with was your focus on building the industrial capacity to do this. It was sometimes we see the kind of venture backed startups get a level of enamored with their own technology. And they want to prove the technology but not manufacture at scale to actually solve a customer's problem. What's your learning been, as your kind of, you know, talking about 600,000 square foot facilities and rebuilding manufacturing, that may or may not exist already. How are you thinking through that as a CEO? And what are you learning so far in your journey there?
Billy Thalheimer 21:13
Yeah, I'm glad you brought up that event. Because it was awesome. We unveiled the full scale mockup of our seaglider, we're going to be flying humans on board a full scale sea glider prototype next year. So we're moving super fast. But you're absolutely right. You know, there are multiple steps in the in the development of like us a hardware a vehicle technology, you need to sort of de risk that the technology if possible. For us. That's our float foil fly operations, and no one's done before. And we did that at a scale prototype and the seed round and moving on to the phase we're in now. And what that unveiling day transitioned us into is this full scale prototype development, basically, the prototype of your product vehicle with all the capabilities, you know, all the safety systems were carrying humans on board to do that, and then manufacturing, and that's a massive step. So, we are thinking sort of goes back to like, what powers startups and what powers that industrial base like it is generating that return to our investors and one half that it just like it is changing the world and that passion and motivation. So, we don't make money until we deliver seagliders to our customers, be them commercial or defense, like we have got to build them at scale. And that's how we get the money back to our investors. The hard part of that is how expensive manufacturing facilities are, like, there's a reason that most of the companys coming out of Y-Combinator are SAS and fintech right now. Like you do not need those brick-and-mortar facilities, which costs 10s to hundreds of millions of dollars. And as a startup here, you know, regents raise $50 million to date in two and a half years, we think we're doing pretty good there. But we couldn't even pay for one massive sea glider manufacturing facility with all the money we've raised to date. So, we need to start thinking ahead, we need to start building these relationships we're very strongly linked with the state being based in Rhode Island were strongly linked with our development entities and Kwanza Development Corporation, Rhode Island airport coordinate Corporation. You know, when we think about how to build these things, we think about leverage, how can we finance them, how can we have third parties develop them, we need to remember what we're good at REGENT building seagliders, we design and build the aerodynamics and hydrodynamics. And we write flight software that controls them and keeps them safe. We don't build buildings, you know, we don't set up, we don't like build the molds for these things are amazing aero structures and carbon fiber boat builders out there that can do that. We don't build batteries, or motors or flight computers, again, there are world leaders in that space, we can source all these components, integrate them at region headquarters and our manufacturing facilities, which have been subsidized and even developed by other groups so that we can just pay the rent on it. And then we go back to our investors and say this is the most ruthlessly capital efficient way to generate your return.
Hondo Geurts 24:00
Yeah, and I think a key that I go back to diversity in the power of diversity, right? If you're a tech startup, you may not know how to scale production, you may not know how to go buy a building, you may not know this sort of ad and building a team that has those skills and not kind of trying to do it all yourself. I think is a discriminator of those companies that can scale quickly. You know, go find the right talent, make them part of the team kind of team of teams saying you're finding that to be true.
Billy Thalheimer 24:28
Yeah, I think it's super important to be conscious of sort of what phase you are in the development and like REGENT has been moving super quick. And so, we're almost at a new phase every half or so. But you know, we're in to give you an example. You know, REGENT has a list of core values that we hold ourselves to. It's one of the ways that we, you know, ensure that we're recruiting the right people who can who can thrive in this very high paced, high pressure environment. You know, we hold ourselves to these core values. And so when we think about early on with our with our quarter scale prototype, one of the core values was, you know, focus on the right things and use the 80/20 rule because we, a lot of us came from some of those large aerospace primes where we saw analysis paralysis. And can you prove this beyond a reasonable doubt that this test is going to work. And we said, you know, we're building an unmanned prototype. And this is about proof of the technology. And if we, you know, dig it in on the water a few times, like, that's okay, as long as no one gets hurt, and we had as another core value, always in throughout, because we're working with batteries, and, you know, high voltage systems, and we're building real hardware, no compromises on human safety, so those two core values, you know, worked in tandem well, and had a balance when we were doing unmanned prototyping. Now REGENT is in the next phase, and we're doing, you know, human operated prototypes with humans on board, and that human safety is critical. So now we don't have that 80/20 rule in the core values anymore, there are living document, because the company's phases is changing. And I, CEO, buck stops with me, I never want to be in a position where we hurt someone, and if an engineering leader comes to me and says, “you know, but Billy, I used the 80/20 rule on this decision, like the core value said, so you can't even have that down right now.” Safety pieces, everything, the core value is no compromises on human safety. And we need to proceed in that. And you know, in our next phase of manufacturing, it's not going to be a safety thing that we're talking about. But, you know, what does the composition of our workforce look like right now, we're largely engineers and creators, soon, we're going to need a staff of hundreds to 1000s of manufacturer in experts at our facility. So just being very conscious of like, where you are, in the phase, what leadership you need, and what advice what advisors who have gone through this before should you have on your team to help you be successful?
Lauren Bedula 26:42
Awesome, Billy, we have a lot of listeners from the Hill. So, I want to stomp your point about the difficulties with manufacturing here. There's such an emphasis on shoring up credit, critical capabilities, bringing back manufacturing, we're seeing things like the CHIPS act or support and industrial policy for these issues. But I think it's so important for you to detail as a founder the challenges that come along with that and the hardware round. But with that, Billy, I want to say thank you so much for coming on and sharing those insights, I think extremely timely for our listeners, as we think through all the different dynamics here. So, thank you again for your time.
Billy Thalheimer 27:16
Yeah, thank you both. It was awesome to be here. And just awesome to be doing this podcast from MIT to which I gotta give another shout out.