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[Miles] Five days out from Demo Day, and my inbox is still full

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[Miles] of pitch decks that all start the same way.

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[Grant] Let me guess.

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[Grant] We're the AI layer for-

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[Miles] For something that didn't need an AI layer.

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[Miles] Yeah, that's every third deck this batch.

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[Grant] Mm-hmm.

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[Miles] I'm Miles.

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[Grant] I'm Grant, and this is the show where we follow one startup

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[Grant] through the one decision that actually mattered.

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[Miles] But before we get to our founder, I wanna sit in the

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[Miles] room for a second because underneath all that AI wrapper noise, something

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[Miles] else was happening on that stage.

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[Grant] The soldering irons.

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[Miles] The soldering irons.

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[Miles] Booths with actual metal on the table, CNC parts, circuit boards, not

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[Miles] a single dashboard screenshot in sight.

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[Grant] Which raises the question I can't shake.

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[Grant] Is that a real shift in what YC is funding, or did

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[Grant] I just wander into the one corner of the floor that had

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[Grant] hardware in it?

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[Miles] That's the first thing we're chasing today.

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[Grant] And the second, even if it's real, can a team of four

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[Grant] people with one CNC machine actually go up against Defense primes that

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[Grant] have been doing this for decades?

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[Miles] Big contractors, government relationships, decades of institutional weight.

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[Grant] Against four people and a machine shop.

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[Miles] And somehow that's the pitch everyone in the room wanted to hear

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[Miles] more about.

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[Grant] We've got the founder behind one of those pitches coming up.

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[Miles] But first, Grant, walk me through what's actually in the data because

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[Miles] the vibe in that room and the numbers behind it might be

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[Miles] two different stories.

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[Grant] Pull it up.

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[Grant] Let's see what the Batch actually did because right now this is

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[Grant] all just vibes and soldering irons.

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[Miles] So I actually went and pulled the numbers this morning.

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[Grant] And?

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[Miles] Twenty-three percent.

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[Grant] Twenty-three percent of what?

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[Miles] Of the whole batch.

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[Miles] Two hundred forty-five companies launched, and a researcher named Heyman, he's with

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[Miles] Rebel Fund, counted robotics, manufacturing, hardware, energy, defense, logistics, all lumped together

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[Miles] as industrials.

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[Miles] Twenty-three percent.

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[Grant] Is that a lot?

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[Miles] The five-year average for that category is six point six percent.

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[Miles] This is the highest share he's tracked.

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[Grant] Wait, so it basically tripled overnight?

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[Miles] Basically, and here's the flip side.

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[Miles] SaaS, the dashboards and subscription stuff, dropped to twelve percent.

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[Miles] The historical average there is twenty-eight.

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[Grant] So software didn't just plateau, it got cut in half.

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[Miles] Cut in half roughly, yeah.

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[Grant] Okay, that's not noise.

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[Grant] That's a real move.

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[Miles] And industrials is doing a lot of work as a label.

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[Miles] That's six different kinds of company getting rolled into one bucket.

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[Grant] Right.

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[Grant] It's not just drone makers.

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[Grant] It's anyone building an actual physical thing, whether that's a factory line

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[Grant] or a power system or hardware for a warehouse.

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[Miles] So the label's broad, but the direction's still the same, away from

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[Miles] pure software.

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[Grant] Away from pure software towards stuff you can actually hold in your

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[Grant] hand.

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[Miles] There's a piece from a writer named Verma that frames the whole

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[Miles] Demo Day around exactly that, hard tech and defense pulling ahead of

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[Miles] the usual AI software story.

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[Grant] Right, which lines up with what we were saying in the open.

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[Miles] There's a second analysis that gets more specific.

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[Miles] Same twenty-three percent figure, but it says that's up from twelve point

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[Miles] eight percent last batch.

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[Grant] So it wasn't a batch blip, it doubled batch over batch.

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[Miles] And it names names.

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[Miles] At least eight companies in this batch building precision munitions, drone swarms,

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[Miles] counter-UAS hardware.

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[Grant] Counter-UAS meaning?

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[Miles] Anti-drone systems, stuff that shoots other drones out of the sky.

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[Grant] Huh.

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[Miles] And that's just the ones explicitly building weapons systems.

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[Miles] The broader industrials number includes plenty more than defense.

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[Miles] It's the whole category rolling up together.

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[Grant] So defense is the loud part of the story, but it's riding

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[Grant] on a much bigger wave.

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[Miles] Exactly.

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[Miles] Defense gets the headlines because it's dramatic.

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[Miles] The manufacturing and energy founders are just as much a part of

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[Miles] that twenty-three percent.

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[Miles] They just don't get videos of drones getting shot down.

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[Grant] Fair point.

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[Grant] Still wild that a batch that used to be almost entirely software

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[Grant] now looks like this.

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[Miles] So when we talk about looking past the, you know, the AI-wrapper

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[Miles] around a model pitches, that's what we mean.

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[Miles] Founders building energy hardware, manufacturing lines, defense systems, physical stuff you can

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[Miles] drop.

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[Grant] Not a dashboard you log into.

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[Miles] Not even close.

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[Grant] Okay.

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[Grant] Numbers are numbers.

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[Grant] I wanna actually sit with one of these companies.

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[Miles] Yeah?

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[Grant] One of the Counter-UAS ones, ideally.

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[Grant] I wanna know what it's like being four people trying to out-build

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[Grant] people with actual defense budgets.

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[Miles] I know exactly who you're thinking of.

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[Grant] Good, because a number's one thing, but I wanna know if a

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[Grant] team like that can actually compete, not just exist.

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[Miles] That's exactly the question we're about to test.

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[Grant] Bring 'em in.

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[Grant] Let's see if the pitch holds up.

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[Miles] Okay, so the company is Greypoint Industries, four people this year

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[Miles] based in San Francisco.

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[Grant] Four co-founders too, Nic Chu, Jordan Khoo, Steven Xu, Darcy Zhang, all

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[Grant] from this year's batch.

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[Miles] That's a lot of names for a company that small.

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[Grant] Right.

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[Grant] Everybody's a co-founder when there's four of you and a lathe.

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[Miles] So what's the actual product?

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[Miles] This is the part that got me.

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[Miles] YC's own company page says the thing they've built is called LEGION.

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[Miles] It's a drone swarm that finds enemy jammers and command posts by

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[Miles] picking up the enemy's own radio signals.

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[Grant] Wait, so it's not shooting anything down.

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[Grant] It's listening.

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[Miles] That's what YC's page says, yeah.

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[Miles] It's a geolocation swarm.

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[Grant] Huh.

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[Grant] Because the press write-up I read on them called it something totally

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[Grant] different, autonomous interceptors that shoot down attacking drones cheaper than the drones

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[Grant] they're killing.

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[Miles] Right.

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[Miles] That's the tension.

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[Miles] One source has them hunting jammers, the other has them as kill

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[Miles] vehicles.

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[Grant] Those aren't the same mission.

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[Miles] No, and I don't think we should pretend we know which one

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[Miles] is the real product or if it's both.

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[Grant] Could be both.

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[Grant] Find the emitter, then hand off to something that ends it.

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[Miles] Could be, but nobody said that out loud in either piece.

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[Grant] Fair.

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[Grant] So we flag it and move on.

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[Miles] Yeah.

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[Miles] What we do know is why they started it.

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[Grant] Go on.

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[Miles] Jordan Khoo, one of the co-founders, quit General Dynamics to do this.

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[Grant] He left an actual defense prime to go build in a garage?

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[Miles] Basically, and in a LinkedIn post, he frames the whole mission around

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[Miles] Canada's Avro Arrow program.

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[Miles] The government killed that fighter jet program back in nineteen fifty-nine.

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[Grant] I remember that story.

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[Grant] Canada had a genuinely advanced interceptor and just shelved it.

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[Miles] Khoo's argument is that's the pattern repeating.

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[Miles] Big institutions can design the thing and still fail to build it.

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[Grant] So his fix is what?

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[Grant] Faster paperwork?

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[Miles] No.

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[Miles] His words were first principles engineering, real factories, not another software layer

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[Miles] on top of the problem.

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[Grant] That's a hell of a mission statement for four people to sign

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[Grant] up for.

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[Miles] It is, but it also tells you why he left a company

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[Miles] with actual production lines to go do this with a small team

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[Miles] instead.

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[Grant] Because the big company wasn't moving.

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[Miles] That's his read on it, at least.

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[Grant] Okay, so we've got one team, real product ambiguity, and a founder

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[Grant] who quit a prime out of frustration.

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[Miles] Right.

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[Miles] And here's the thing that's nagging me.

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[Miles] Greypoint isn't unusual in this batch.

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[Miles] It's one of several teams telling almost this exact story.

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[Grant] Same shape.

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[Grant] Small team, hardware, a founder walking away from something bigger because it

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[Grant] wasn't shipping.

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[Miles] So it's not one scrappy shop we happened to find.

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[Grant] It's a pattern nobody's actually said out loud yet.

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[Miles] Which means the real question isn't Greypoint, it's whether this was always

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[Miles] going to happen.

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[Miles] Remember our Nine Mothers episode, the founder who raised two hundred million

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[Miles] and everybody treated it like some freak outlier?

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[Grant] Yeah, the one where we kept saying, "How did that even happen?"

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[Miles] Right.

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[Miles] I think we had it backwards.

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[Miles] That wasn't a fluke, Grant.

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[Miles] That was the front edge of this whole cohort.

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[Grant] That's a big leap from one company.

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[Miles] Is it, though?

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[Miles] Look at the numbers we just walked through.

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[Miles] Industrial share, SaaS share, all of it moving the same direction at

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[Miles] the same time.

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[Grant] Okay, but a batch-wide shift and a two hundred million dollar check

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[Grant] are different animals.

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[Miles] They're the same animal at different ages.

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[Miles] Hard tech eats capital the way SaaS never did.

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[Miles] No recurring revenue cushion, no ninety percent margins, just steel and machinists

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[Miles] and burn.

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[Grant] Yeah.

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[Grant] That's the part nobody wants to say out loud when they're pitching.

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[Grant] You're not funding a product, you're funding a factory.

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[Miles] Think about what that actually looks like month to month.

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[Miles] You're not paying for another engineer's laptop, you're paying for a Batch

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[Miles] of machined parts that might come back the wrong tolerance.

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[Grant] And then you scrap the Batch and order again.

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[Miles] Right.

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[Miles] There's no rolling back a bad shipment of aluminum the way you'd

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[Miles] roll back a bad deploy.

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[Grant] That's real money sitting in a bin somewhere, not a Git commit

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[Grant] you can revert.

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[Miles] And Greypoint isn't alone in that factory.

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[Grant] Who else is in it?

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[Miles] There's a whole defense cohort this Batch.

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[Miles] ISENGARD, Earendil Robotics, GUILD, Hop Aero, all building some version of

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[Miles] the same thing Jordan's team is building.

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[Grant] Wait, Earendil too?

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[Grant] I didn't clock that one.

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[Miles] Mhm.

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[Miles] Precision munitions, drone stuff, counter systems, different shapes, same bat.

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[Grant] So it's not four kids with a CNC anymore.

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[Grant] It's basically a sub-industry inside one batch.

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[Miles] And it's not just one flavor of hardware either.

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[Miles] Swarms, interceptors, munitions, sensing, all sitting under that same industrials umbrella.

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[Grant] So it's not one company getting cloned four times.

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[Grant] It's a handful of different bets on the same underlying shift.

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[Miles] That's the reframe.

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[Miles] Nine Mothers wasn't the exception that proves the rule, it was the

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[Miles] rule showing up early.

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[Grant] Okay.

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[Grant] I'll give you that.

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[Grant] But early doesn't mean right.

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[Miles] No, it doesn't.

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[Grant] These companies are burning cash on tooling, on materials, on testing hardware

235
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[Grant] that either works or it doesn't.

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[Grant] There's no soft landing where you pivot the UI and call it

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[Grant] a win.

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[Miles] And you can't beta test your way out of it either.

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[Miles] A software bug you patch overnight.

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[Miles] A structural failure in a drone chassis, you're grounding the whole unit

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[Miles] until you re-qualify it.

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[Grant] Which eats weeks, not hours.

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[Miles] Which is exactly why I keep coming back to Jordan's line about

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[Miles] real factories.

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[Miles] If the capital's not there, the whole thing stalls on the shop

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[Miles] floor, not in some Slack channel.

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[Grant] Right.

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[Grant] And investors know that, so either they've decided the margins eventually get

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[Grant] there or-

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[Miles] Or they're betting on defense budgets during the heavy lifting instead of

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[Miles] gross margin.

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[Grant] Probably both.

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[Miles] Probably both.

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[Grant] Okay, so here's my actual hangup.

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[Grant] A story is one thing.

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[Grant] Twenty-three percent of a batch is one thing.

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[Miles] But?

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[Grant] But none of that tells me if Greypoint specifically has customers, orders,

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[Grant] anything real.

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[Grant] A pattern is only as good as the proof underneath one company

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[Grant] in it.

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[Miles] So does Greypoint actually have traction, Grant, or is this just a

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[Miles] really good pitch with a compelling founder story attached?

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[Grant] That's exactly what I wanna know.

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[Miles] So I went and pulled Darcy Zhang's LinkedIn last night.

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[Miles] Full nerd move, I know.

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[Grant] Of course you did.

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[Miles] Somebody's gotta check the receipts.

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[Miles] But it's real information.

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[Miles] A LinkedIn post from his team lays out that Greypoint's already got

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[Miles] a contract with the Canadian government.

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[Grant] Wait, an actual signed contract, not a letter of intent?

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[Miles] That's what the post says.

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[Miles] Signed contract, plus a demo with the Canadian Armed Forces where they

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[Miles] geolocated an actual target with the aerial platform.

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[Grant] A live target.

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[Grant] Okay, that's not a slide deck anymore.

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[Miles] Right.

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[Miles] That's the part that stops you.

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[Miles] Four people, one machine, and they're already flying with soldiers watching.

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[Grant] Who's actually building this thing, though?

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[Grant] Because a contract is only as good as the team executing it.

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[Miles] The same post breaks that down.

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[Miles] You've got someone out of the Canadian infantry, somebody from General Dynamics,

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[Miles] that's Jordan, we already covered him, plus a founder from Bosch Quantum

286
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[Miles] Sensing, and one from TerraSense Analytics.

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[Grant] Quantum sensing and geospatial analytics sitting next to an infantry background.

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[Grant] That's an odd little roster.

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[Miles] It's exactly the roster you'd want if you're trying to find a

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[Miles] drone in the sky and put a number on where it is.

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[Grant] Okay, but I wanna slow down for a second.

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[Grant] This is one LinkedIn post from one team.

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[Miles] Sure.

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[Grant] It's not a press release from the Canadian government.

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[Grant] It's not a filing.

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[Miles] Darcy's writing about his own company.

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[Grant] You're not wrong.

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[Grant] Nobody's independently confirmed a contract value, the timeline, any of it.

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[Miles] Right, and founders self-report wins all the time.

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[Miles] I've watched people call a pilot program a partnership.

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[Grant] Sure, but a demo with an actual armed forces unit isn't something

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[Grant] you just invent.

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[Grant] You can fake a testimonial.

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[Grant] You can't fake a country's military showing up to watch your hardware

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[Grant] fly.

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[Miles] Fair, and honestly, even the skeptical read still lands somewhere good for

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[Miles] them.

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[Miles] Worst case, it's a credible pilot with a national government.

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[Miles] That's still further than ninety percent of this batch gets by demo

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[Miles] day.

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[Grant] That's basically my point.

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[Grant] I don't need this to be a nine-figure defense contract to take

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[Grant] it seriously.

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[Miles] No, but I wanna be honest about what we actually know versus

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00:12:29,351 --> 00:12:31,172
[Miles] what we're inferring from one post.

316
00:12:31,631 --> 00:12:36,111
[Miles] What we know, a government engagement, a live demo, a founder team

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[Miles] stacked with infantry, defense industry, and sensing backgrounds.

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[Grant] What we're inferring is that it scales past one contract.

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[Miles] Right.

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[Miles] And either way, look at what year one means for these guys.

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[Miles] It's not a dashboard shipping to beta users.

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[Miles] It's a physical product in front of a military.

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[Grant] Which is a completely different clock than a SaaS company running on,

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[Grant] and it's not one they get to reset.

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[Grant] So if that's Greypoint's year one, what does that look like for

326
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[Grant] the rest of this defense and hardware cohort we've been naming?

327
00:13:06,111 --> 00:13:08,302
[Miles] So zoom out with me for a second.

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[Miles] Every year on this show, we've told the SaaS founders year one,

329
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[Miles] free trial, first paying customer, board deck.

330
00:13:14,621 --> 00:13:17,841
[Miles] This batch, that story doesn't cover most of what actually happened on

331
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[Miles] the floor.

332
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[Grant] Because the press wrote the AI story.

333
00:13:20,731 --> 00:13:22,831
[Grant] That's the piece everyone filed five days ago.

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[Miles] Right.

335
00:13:23,511 --> 00:13:27,892
[Miles] And underneath it, you've got hardware, defense, biome, fintech founders whose year

336
00:13:27,951 --> 00:13:30,110
[Miles] one looks nothing like a dashboard demo.

337
00:13:30,591 --> 00:13:33,412
[Grant] Different capital, different timeline, different everything.

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[Miles] Different everything.

339
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[Miles] Greypoint's year one is machining tolerances and a government contact, not AB

340
00:13:39,251 --> 00:13:40,511
[Miles] testing a landing page.

341
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[Grant] Which is why four guys with a CNC machine are suddenly one

342
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[Grant] of the hottest tickets in the Batch.

343
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[Grant] Think about that for a second.

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[Grant] A team that size building physical hardware, pulling the kind of attention

345
00:13:51,751 --> 00:13:54,432
[Grant] that used to go to whoever had the slickest onboarding flow.

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[Miles] It's not about slick anymore.

347
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[Grant] It's about does the thing actually fly, actually geolocate, actually work when

348
00:14:01,312 --> 00:14:02,672
[Grant] someone points it at a drone.

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00:14:03,272 --> 00:14:05,692
[Miles] It's a bar is higher and lower at the same time.

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00:14:06,091 --> 00:14:06,552
[Grant] How do you mean?

351
00:14:06,932 --> 00:14:10,091
[Miles] Higher because you can't fake a part tolerance in a slide deck.

352
00:14:10,481 --> 00:14:14,011
[Miles] Lower because nobody's asking you to prove product market fit with growth

353
00:14:14,032 --> 00:14:14,361
[Miles] charts.

354
00:14:14,672 --> 00:14:17,011
[Miles] They're asking you to prove the thing doesn't fall out of the

355
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[Miles] sky.

356
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[Grant] And that's a completely different kind of proof.

357
00:14:20,251 --> 00:14:21,400
[Miles] Completely different.

358
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[Miles] So here's the part that doesn't get said out loud enough.

359
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[Miles] What does a founder actually sign up for when they pick this

360
00:14:27,152 --> 00:14:28,341
[Miles] path instead of SaaS?

361
00:14:28,741 --> 00:14:30,432
[Grant] A different kind of investor, for one.

362
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[Grant] The people who write checks for hardware already know the capital intensity

363
00:14:34,831 --> 00:14:35,292
[Grant] going in.

364
00:14:35,552 --> 00:14:38,292
[Grant] That's not news to them as it is to a first-time founder.

365
00:14:38,672 --> 00:14:38,892
[Miles] Right.

366
00:14:38,951 --> 00:14:42,432
[Miles] It's not the same crowd chasing monthly recurring revenue by month six.

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[Grant] No.

368
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[Grant] And the fundraising math follows from that.

369
00:14:45,772 --> 00:14:49,302
[Grant] Longer rounds, more of them before anyone knows if the thing works

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00:14:49,331 --> 00:14:49,831
[Grant] at scale.

371
00:14:50,312 --> 00:14:53,672
[Miles] So when a founder picks this over SaaS, and clearly this batch

372
00:14:53,711 --> 00:14:56,552
[Miles] a lot of them did, they're not picking the easier path.

373
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[Grant] No.

374
00:14:57,511 --> 00:15:00,581
[Grant] They're picking the one with a harder physics problem and a slower

375
00:15:00,731 --> 00:15:04,831
[Grant] fundraising clock, and somehow more attention right now than the software pitches.

376
00:15:05,192 --> 00:15:08,451
[Miles] It's a strange trade to make on purpose, but it's the trade.

377
00:15:08,831 --> 00:15:11,991
[Grant] Every founder in that cohort is making it, whether they've done the

378
00:15:12,091 --> 00:15:13,652
[Grant] spreadsheet math on it or not.

379
00:15:14,011 --> 00:15:17,072
[Miles] Eyes open or eyes closed, either way, that's the deal they signed

380
00:15:17,131 --> 00:15:17,471
[Miles] up for.

381
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[Grant] Yeah.

382
00:15:18,231 --> 00:15:20,272
[Grant] And that's not a bad place to leave it before we do

383
00:15:20,312 --> 00:15:23,432
[Grant] the actual math on what it actually costs them dollar for dollar.

384
00:15:26,251 --> 00:15:27,552
[Grant] Here's the number that sticks with me.

385
00:15:28,111 --> 00:15:32,111
[Grant] If Greypoint's contract falls through, that capital doesn't come back as a

386
00:15:32,152 --> 00:15:32,631
[Grant] lesson.

387
00:15:32,692 --> 00:15:33,871
[Grant] It comes back as scrap.

388
00:15:34,211 --> 00:15:35,331
[Miles] That's brutal.

389
00:15:35,371 --> 00:15:36,652
[Grant] It's just the math.

390
00:15:36,681 --> 00:15:37,912
[Grant] Doesn't mean they lose.

391
00:15:37,951 --> 00:15:42,052
[Grant] It means the runway math is completely different, and nobody on that

392
00:15:42,072 --> 00:15:44,152
[Grant] demo day stage was saying it out loud.

393
00:15:44,231 --> 00:15:47,751
[Miles] And that's true for the whole cohort we named, not just them.

394
00:15:48,331 --> 00:15:52,892
[Miles] ISENGARD, Earendil, GUILD, Hop Aero, every one of them is running that

395
00:15:52,991 --> 00:15:55,672
[Miles] same scrap or scale bet right now.

396
00:15:55,711 --> 00:15:58,761
[Grant] Which is why I keep coming back to the twenty-three percent number.

397
00:15:58,792 --> 00:16:02,471
[Grant] That's not twenty-three percent of a batch choosing the easy choice.

398
00:16:02,511 --> 00:16:06,552
[Grant] That's twenty-three percent of a batch choosing the harder clock on purpose.

399
00:16:06,631 --> 00:16:07,951
[Miles] So do they make it?

400
00:16:08,072 --> 00:16:10,072
[Grant] I genuinely don't know.

401
00:16:10,172 --> 00:16:11,030
[Grant] Ask me in a year.

402
00:16:11,672 --> 00:16:11,912
[Miles] Fair.

403
00:16:12,371 --> 00:16:14,772
[Grant] That's the honest answer, and I think it's the right one to

404
00:16:14,812 --> 00:16:15,302
[Grant] leave hanging.

405
00:16:15,851 --> 00:16:19,162
[Grant] This show's whole premise is that year one doesn't resolve on a

406
00:16:19,192 --> 00:16:22,841
[Grant] five-day timeline, no matter how good the demo day pitch was.

407
00:16:23,251 --> 00:16:23,721
[Miles] Yeah.

408
00:16:23,772 --> 00:16:26,600
[Miles] Well, if you're out there and you know a YC founder living

409
00:16:26,611 --> 00:16:30,022
[Miles] through their first year right now, hardware or otherwise, we wanna hear

410
00:16:30,091 --> 00:16:30,121
[Miles] it.

411
00:16:30,432 --> 00:16:33,172
[Miles] Write in, tell us what it actually looks like from the inside.

412
00:16:33,552 --> 00:16:36,192
[Grant] Especially if it's messier than the highlight reel.

413
00:16:36,532 --> 00:16:38,032
[Miles] Especially that.

414
00:16:38,111 --> 00:16:40,051
[Miles] And if you liked this one, leave us a review.

415
00:16:40,172 --> 00:16:42,991
[Miles] It genuinely helps people find the show, and it helps more of

416
00:16:43,052 --> 00:16:46,052
[Miles] these hardware stories get told instead of just the AI ones.

417
00:16:46,532 --> 00:16:47,432
[Grant] Genuinely.

418
00:16:48,011 --> 00:16:49,152
[Miles] Don't steal my line.

419
00:16:49,491 --> 00:16:50,131
[Grant] Too late.

420
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[Miles] We'll catch you next time.