00:00SPOFs, SPOF, single points of failure.
00:04You and I have had really robust conversations about how to be specific,
00:09how to focus on what is now a broad category, right?
00:12Defense tech, national interest tech.
00:14Explain your thesis here.
00:17Thanks, Ed. It's great to be back with you.
00:19One of the things we've focused on is single points of failure,
00:21and we wrote this piece last week.
00:23We called it the most valuable map in the world,
00:26and this really came on the heels of the president's executive order
00:29focused on supply chain,
00:31and that executive order had sort of three key pieces of it.
00:34The one we honed in on was mapping supply chains down to the raw materials,
00:38particularly for defense contractors.
00:40So how does that manifest for us here at Overmatch?
00:43We're really focused on companies that have some edge
00:47that is oriented on these single points of failure,
00:50and those single points can be technical in nature.
00:52So think the heat shielding on a hypersonic missile.
00:56They can be physical in nature.
00:58It could be a plant or a mine.
01:00We've got a couple of companies that are orienting in that domain.
01:03Or it could be regulatory or labor or several other key facets we're focused on.
01:09So I want to get deeper into what we are literally talking about.
01:14Drones are a good case study.
01:15So you can go out and invest in a drone company,
01:18but the fetters or barriers to the drone industry are their supply chain.
01:22So it sounds like what you're trying to identify is that problem,
01:26and then the people that are solving specifically for the supply chain problem.
01:30Correct.
01:31And I think the drone example is a great case in point.
01:35You know, the Department of War has been very focused in the Office of Strategic Capital.
01:40Their first major tranche of financing was oriented on critical minerals.
01:43They're now focused on the unmanned systems supply chain.
01:46And so that's everything from printed circuit boards.
01:49We actually have a company that's focused on that space called Principal Mineral.
01:53They're also focused on actuators.
01:55All of these places where we have drone companies that are effectively,
01:59I mean, they're systems integrators at their core,
02:01but they are also doing this hardware-software combination.
02:05But one of the things we realize is they're all reliant on the same core suppliers,
02:11and how do we create better secondary suppliers to create more robust supply chains?
02:18You write, today, SPOFs are simultaneously a strategic crisis for America,
02:25as well as one of the most mispriced investment opportunities.
02:29Mispriced to the downside?
02:32What do you mean by that?
02:33So they're mispriced because they're not factoring in just how critical they are from a geopolitical perspective.
02:40So SpaceX is a good example.
02:42If you think about the upside of SpaceX,
02:45I think one of the things that's not yet priced in is just how reliant some of the communications companies
02:50are,
02:51just how reliant the military increasingly is on Starship.
02:54So there's a lot of upside there if you factor in geopolitical risk.
02:58Same thing for some of these assets that are sort of sleepy industrial assets.
03:04Think actuators.
03:05Think uranium mining.
03:08Think all of these things that used to not be venture-backable.
03:12But with the combination of some of the financing that's coming from the government side,
03:16so Office of Strategic Capital is one example,
03:19but you also have Exim Bank, you also have DFC under Ben Black's leadership.
03:24You've got a whole bunch of organizations that are making it pricing some of these assets in a way
03:32where they're actually venture-backable now,
03:34although there's always still going to be that conversation of what can be an early-stage venture business
03:39and what should stay in the private equity domain.
03:42Okay, so that last point I find fascinating.
03:44The cap tables look different.
03:46When I read, you know, big rounds, maybe at the growth stage,
03:49but the names are different, right?
03:51So American Dynamism for Andreessen, Founders Fund is very focused on this area,
03:57but increasingly you've got, like, the legacy mutual funds, private growth equity,
04:01also kind of catching on that this is important.
04:04What's Overmatch's experience of playing in that field?
04:07So we have great relationships with these organizations.
04:10I think one of the things that has built a bridge to the Blackstones of the world,
04:15to the Cerberuses of the world, to the J.P. Morgans of the world,
04:19is the fact that the government is putting their money where their mouth is.
04:23There's a real demand signal there.
04:25And so, you know, we work a lot with J.P. Morgan.
04:28That's one example I'm sure you've talked about on the show.
04:31Yeah, we covered it.
04:32But they've been really focused not just on on and off balance sheet investments,
04:37but also they've got a $10 billion fund focused specifically in this domain.
04:42So we see it as a great way to bring follow-on capital alongside some of our early stage companies.
04:48We just had that in one of our more recent funding rounds with a company called Armada,
04:54really getting some of that growth capital in earlier to focus on some of the CapEx spend.
05:00That's just really tough when it's early stage venture capital dollars.
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