Scott Nolan - SpaceX, Founders Fund, and Rebuilding American Uranium Enrichment - [Invest Like the Best, EP.467]

Transcript from https://podmenti.com/t/93ce070ae55dc64e

And welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money.
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Um
My guest today is Scott Nolan. Scott has led a fascinating career. He was employee number thirty five at SpaceX, helping develop some of their critical early systems. He then went on to more than a decade investing at Founders Fund, where he invested in SpaceX and many other of the defining companies of this generation.
More recently he started a company
incubated that founders fund called General Matter.
The topic of today's conversation is his time investing at Founders Fund.
And more recently his decision to build this company full time.
General Matter is attacking one of the most interesting bottlenecks in the United States, the enrichment of uranium to create power in nuclear power plants.
We don't do any of that in the United States today. We've outsourced it overseas for years.
Scott and General Matter are seeking to reverse that.
Through the enrichment of uranium here in the United States.
We touch on all aspects of what he learned both as an investor and already building this company in its early years. Please enjoy my conversation with Scott Nolan.
Scott, I think an interesting place to begin our discussion is actually with a worldview type question.
Which is how you figure out what to work on.
If I just plot your C V over time, you work at SpaceX very early on.
You've been critical to founders fund success. Now you've started your own business and are basically devoting your time to that.
And even the path between those things looks very interesting, like when you switch from one to another
Intrigues me.
And so I'm curious, both from your perspective and maybe from the founders fund perspective too, since that was
A shaping experience for you.
How you think about this question of what to work on and what to spend your time on?
My framework has always been just do something that's useful.
Do something.
That you feel like you're making a real contribution and using your talents.
To make some type of positive impact.
It's
What important problem is there?
That's not gonna get solved otherwise, that somehow I can contribute to
I think all three major things I've done have fit that in some way.
If we take them one at a time, like yeah, SpaceX founders find it now, general matter.
SpaceX, I was just a
Engineer coming out of undergrad.
I had worked at Boeing during college.
Just saw what the incumbent
aerospace industry was like
Didn't want to work in that. Didn't believe it was gonna
Change anything.
And so
Aerospace background, always want to work on rockets, aircraft.
Ask myself
Okay, what's the most exciting thing to do? And it was
I still want to be in the industry. I know the incumbents are not gonna make an impact.
But there's this new company, SpaceX.
That
is going to ultimately own the entire space launch.
industry, which I believed even when it was thirty people.
It was to me a no brainer to go work there right after college.
I interned during college. I saw what it was
It was like, Yeah, these guys are gonna win.
I want to be a part of that.
That was an industry that had stagnated for decades.
No incumbent was doing anything interesting. They're all just writing government cost plus contracts.
The US assumed that space launch was
A nation state capability that would never be a commercially interesting thing to do.
And it just had to be subsidized forever.
And so the result was cost plus contracts.
Layers of subcontractors.
Dozens deep.
And no ability for anyone to like
Do something really novel.
It was gonna take a new company. So
That led me to SpaceX early on.
And then found my way to found her shine and
Twenty eleven.
So I was actually at Stanford in business school.
Started in twenty ten.
Was quickly voted most likely to drop out.
It wasn't exactly
I want to get to work. I just want to do stuff.
And so I thought about dropping out and actually the first
Or second month.
A business school?
To join Square.
And so this one path
Was maybe go join Square.
And Keith, who was at Founders Fund for a while.
Was the person trying to recruit me to drop out and go to squares?
In the meantime at Peter.
I was sitting in a class that he was doing at the law school.
This one was called Technology
Sovereignty and globalization.
There were many different readings.
There was things about theory of government.
How would technology change the power dynamics around
Government versus industry.
And he convinced me to join his startup.
In the venture capital space.
And
The basic premise was
V C needs innovation. The incumbents won't do it.
And circuit.
Two thousand five the concept was
Founder friendly.
If you looked at all the most successful companies, they were found or run all the way
To the end.
And so the premise was let's give founders back control of their companies and unilaterally support them.
In building that.
That was two thousand five Genesis.
of Founders Fund but by twenty ten when I was talking to Peter, twenty eleven.
It was more this contrarian thing of what important companies is no one funding and how can we be the capital for that?
The thing that I focused on when I joined in twenty eleven was really
Yeah, what side of companies are really promising that people underappreciate?
And I had just come from SpaceX, which was
Not yet in twenty eleven, like Appreciated. Appreciated.
Four years later they were landing rockets and it was obvious that all this stuff was gonna work from the inside, but the whole world didn't understand it yet.
And so my thesis was
Hey, I think there's a huge set of
physical world companies that could be really valuable.
And this could span biotech.
Computer ships, satellites, space launch.
Transportation infrastructure.
Almost anything.
that was not digital and that this was a huge opportunity area.
That everybody was ignoring.
Came across this problem.
Of
Enrichment.
Of uranium in the US's
Total lack of capacity in the space.
Which
Essentially forced me to go start General Matter.
If you think about the eleven or twelve years that you're
Principally just investing.
In what ways
Did Peter most affect the way that you think about things? And vice versa.
There's like many layers.
To this.
Number one was it was just avoiding trends.
Avoiding the herd.
Thinking for yourself.
That was probably layer one.
The second part was probably that
Whenever we looked at any companies.
Peter always took a very orthogonal view to most people, so
There'd be like layers of abstraction.
Instead of just doing a spreadsheet and trying to analyze this investment.
Why don't we think about why are we even seeing this investment?
How should we think about this investment from this very different perspective than everyone else?
And so
Sometimes there would be like layers of abstraction that were
Many layers.
And you would end up with a really different view on things.
It's like really natural to just dive in and start trying to understand the business, but
Trying to develop a very
different perspective on it that would yield some alpha.
He probably also thought
At the time.
I think around twenty ten it was all very contrarian.
What is no one investing in? What's underappreciated?
I feel like that was around the time that he was talking a lot about
We've made all this
Progress in the world of
Bits, but not in the world of Adams.
You could be on your cell phone and
It was interesting, and then you look around and nothing's changed in fifty years.
And so I think he was starting to already think about this probably even more than he was talking about and
probably thinking which companies are doing this well, where would someone
Who could kinda understand the business world.
And the investing world and then also the startup world come from.
How do you think you affected him?
Or changed his own.
Mind.
Some of our hardware investments turn out to be pretty good.
I think they exceeded all expectations for everybody. So like
SpaceX.
Found her son first invested in in two thousand eight.
And then what it is today, I don't think
Many people would have predicted, like maybe
Maybe Elon could have seen it going to this
Length.
The ultimate purpose is colonize Mars, so
Inherently.
It has to become the scaled company to do that.
But
I doubt anyone would have expected
This sort of outcome this quickly.
Maybe it's an obvious question, but what is behind the avoid trends?
Concept.
There's two layers of competition.
So the avoid competition thing was a huge, huge part of this.
That's definitely a lesson learned.
But the competition piece is typically understood as the company level competition.
And so if there's a trend inherently you have
Many companies going after the same trend.
You're gonna have new entrance.
It's become a thing. It's not about one company. It's about
The theme and if there's a theme that's not about one company, then it's about many companies.
And so
How is it not the case that they'll compete?
Prophet sounder.
Economic equilibrium of perfect competition.
So there's that piece of avoid a trend for that reason, but then layer two is
If there's a trend then probably many investors are looking at it and they're pricing it up.
Where's your advantage?
And so you want to avoid competition.
On both fronts.
And when there's trends.
You usually get both fronts.
This notion of finding something that is not being worked on or is underappreciated.
You made so many investments in companies where this was a thing.
What are the common
through lines or attributes of something
That isn't being worked on but is important. Like that.
quadrant in the two by two, like is or isn't important, is or isn't being worked on.
Is important not being worked on as the place you hunted.
What are the typical causes behind that being the case?'Cause it doesn't really make sense that
Something doesn't get worked on if it's really important.
For better or worse, they can draw you into a potentially brute force sort of approach.
First few years at Founders Fund.
I'm looking for great founders. I'm looking for underexplored ideas.
It's just lots and lots of meetings.
So from the investor perspective
Unless you have things that you're into.
that you think are underappreciated by the world and you've maybe been
Really excited about them for a really long time and
Why does no one think about this? And maybe it's this idea in your head that you just keep digging on and maybe someday you find a company.
that's actually an expression of that trade, then it's just meeting a lot of people and trying to find what's interesting and what sounds really different and what makes sense.
From the investor perspective, the attributes are something like
Hey, you mean a founder, they seem really smart, they're talking about this thing no one's really talking about.
They're telling you why.
Everyone who's thought about this problem either thinks it's impossible or they're all going about it in the completely wrong way.
And if you
A just
And come at it from
A different point of view.
It results in a really different solution that has really different
business characteristics. When you meet a founder like that who's working on something like this.
Usually they're not
Just gonna give you superficial answers to convince you to give them money.
The conversations.
with great companies like that always felt more like
This person is really into this thing for some reason and
When I ask them a question, they're not just giving me an answer and trying to bounce back to the surface.
So like here's the answer, here's the next question you're gonna ask and let's take you all the way down the rabbit hole.
So they like showing her around the space.
That's how it fell from the investor seat.
If you think about what are the attributes
of industries where this is the case, I think a huge
Portion of them.
are gonna be industries that
Somehow just stagnated.
And I think the thing that's most linked to stagnation
Is
Probably being a cost plus industry.
Where there's very little incentive for progress.
Not much incentive to
To bring the cost structure down.
And therefore you end up with this fixed market size that never takes off because
You just get in a stalemate.
Where all the companies
Maybe get to like oligopoly status.
The equation for max profits is just
Make pricing high enough to the breaking point.
Collect your cost plus revenue.
And your margins and then
It never becomes a really compelling thing. So like space launch, for example.
To some extent.
Defense.
Which you see with Anderl trying to break that.
To some extent infrastructure.
Like
The boring company.
This is their prime thesis.
So I think incumbent stagnated
Oligopolistic.
Cost plus industries are just prime for this.
If forced to go beyond that definition, there's only so many of those.
And you've probably invested in companies effectively attacking
Each category.
For each subcategory.
Lot of those doing extraordinarily well.
What else would you say? Like there's lots of great founders from investments that weren't in cost plus industries or something.
What would I find if I went digging on this same thread there?
I mean Airbnb is a classic huge example.
when founders fund invested it was still crossing from
Kind of a weird backpacking, couch surfing.
Air mattress in someone's living room.
To
What it is today.
And so
Not that many people.
We're that interested in sleeping on air mattresses in people's houses, but
That was something that that team was really into.
And how do we
Turn this into something much larger where people can
Meet each other and have like a really
authentic experience when going somewhere instead of just staying in a hotel.
That wasn't something many people were thinking about.
And yet.
when you actually looked at it, you realized how big the market could be and
If they could cross over to a mainstream thing, it could be huge.
That's one example.
Sean Parker was on the founderswin team right when I joined.
And led the Spotify investment.
And the internal
memo or thread on the Spotify investment was just so well reasoned.
And it was because of this history of understanding music and
doing the Napster thing and then
Years and years of trying to find the right company that was taking the right formula.
I think led to that and led to him seeing the potential of Spotify and why it was the perfect
Geography to start in and the perfect licensing strategy and
So I think it's often just like a really deep interest in something that's of personal interest to a founder and they believe it should exist. They believe there should be some way to solve this.
And everyone's done it the wrong way, and here's the right way.
I think sometimes people are sitting with those ideas for
Five or ten years.
Across all the meetings you did, first meetings.
How did you improve at
conducting that meeting to figure out if this was the type of person and problem that you could get interested in.
It probably wasn't even the meeting itself.
It was probably just trusting your judgment more.
So I think
On day one it was just
Okay, I don't know anything.
I'm gonna take a lot of meetings.
Some of these seem good, some seem not so good.
Do we need to do the work'cause what do I know?
I think
Early on the intuition was all that you had to go on, and I think it's usually correct.
And then you know, I get probably a little bit better at the job in the next couple of years.
Get better at trying to analyze things, understand it.
That might actually lead you astray, I think. The analytics might because then you start
Doing the analysis.
When you kind of already know. Like, Oh, I guess we should do the work.
But you kinda already know which ones you like.
In fact.
You should just concentrate into the fewest number of companies possible.
And don't dilute your average returns by indexing.
And then over time.
Get better at asking the right questions to
help harness the intuition or like
Okay.
We should dig into this.
Can you think of a single investment?
That
Your gut was not flashing, yes.
almost immediately that you like worked your way to get there.
And did it.
Airbnb was one of these. We did a lot of work on it.
At the time.
So founder Sun did a small angel check.
Early on.
And then did a much bigger check.
In the next round. And so at the angel check it was still the
Very informal.
Air mattresses.
I think there had been something where
Some guests completely destroyed a home and there's a whole bunch of controversy around that.
And then the company took a hard stance on that and said, We will reimburse the hosts and we are professionalizing this.
And I think that was maybe the moment that
You could tell it was gonna go mainstream. And then Founderswun made a huge investment.
But if you just look back in the past, you might say, Oh, this seems like a niche thing.
But if you did the work.
You could see a bunch of different trends. You could see the demographics were shifting to slightly older crowd.
Not just
Backpackers.
out of college, like the some people had perceived.
The market share in different markets was increasing a lot.
We did the work. We looked at like
Every single market.
Sliced market share.
Marketing spend.
And you could see like all these markets that they were in, they were just
Taking share and becoming the dominant thing.
So
You analyze the data and
It was like they're winning.
It's over. They're gonna win.
There's two other components of the no competition idea.
One is the valuation and price that you have to pay, and the second is
Capital intensity. You've invested in lots of stuff that requires lots of money.
to get the thing up and running and to revenue and to profitability. Curious how you learned about those two dimensions of earning high returns that
Did low competition bring lower entry prices on average? And is that something you cared about much?
Once you found someone that was doing one of these things.
And then also how you think about the amount of capital that you would have to put into the company to make it work.
The low competition thing
Typically would be associated with lower valuations, but I think that's
Trying to find value deals in venture is a dumb idea.
Man.
Maybe if you have a very small fund.
And you can pick up.
Some interesting
I P or
This company maybe will never be that huge, but this is a really good deal and you look at multiples and stuff and starts to
Look a little bit more like PE or something.
I think that can probably be okay, but for true venture I think it's dangerous.
Because
Either it says something about the company's ability to raise capital.
That they're unable to and
Market prices.
And unless this is the last round that they need to raise or they really are gonna be a capital efficient business, that's probably a risky thing.
Maybe the team is incredible at debt financing, but terrible adventure financing and so
They're gonna switch to debt and that's gonna be amazing.
You can imagine a situation like that, but typically
If you're meeting a company.
And it's a crazy
Value deal.
That's probably
Just not gonna end up being that good is what
I've observed empirically.
Do you think if we did an analysis of the actual dollars deployed by founders fund, that more of the dollars would have been deployed once the company was already popular?
That may be the case. Yeah, if you look at actual dollars deployed, it's probably more
The whole concentrate into the winners strategy.
I think the way that that can still be
A good strategy, even if the company's popular is
A
It's popular, but not as popular as it will be.
Or B this idea that up rounds
It's almost like anchoring on the past versus looking to the future.
Peter has said this a bunch of times and has guided the founders on team to think this way.
It was more talked about in the early twenty tens, but
If you've got a company.
That was growing steadily, but then there's a big upround.
It's probably the case that that upround is not even
Enough up.
that if it's like a two X up round, maybe it should be a four X up.
Yeah, what's going on there, there's that famous quote of his, which is the steeper the up round, the greater the undervaluation.
What is actually happening that makes that true?
Yeah, people are just anchoring on the past.
Or they're like, Oh, last round was this. I guess it should be reasonable compared to last round price.
And then in reality, like
Okay, all that matters is next round price.
How do we make sure the next round's an up round? Like what are the catalysts gonna be for further increases? And so
Yeah, you don't get paid
As an investor based on
How close you were to last run's price it's it's ultimately against exit price.
But the only thing you have to go off of that's
Actual data or empirical is the past.
And so people are much more anchored on that.
What have you learned about how much
to be in love with the problem itself. This is a good excuse to talk about general matter too.
Like are you inherently
fascinated by and love with uranium enrichment, or is there some other big thing going on behind the scenes? And I'm curious if you think about all these founders you backed.
My guess is most of them were deeply passionate about the domain'cause they had this thing where they could
Go down the rabbit hole or whatever.
How much does passion
matter in selection of
Found.
From the investor seed, I don't think you want to be in love with an idea.
I think that's a risky thing.
'Cause then you're gonna try and find a way to express that by investing and
You're gonna maybe make some compromises on the team'cause you know this idea is just so good, it's time has come.
But then if the team isn't there
Ninety percent of the time it doesn't work.
Then there's a whole thing of course in jockey, can you swap out the team? But the whole founders thesis was always
No, you need the founder.
To run the company, to have this vision.
And to see it through.
From the investor side, I think being in love with an idea is really dangerous.
And it can cause you to make all sorts of compromises that come back to haunt you.
And it can cause you to put good money after bad.
Just made.
The writing on the wall.
But I think on the company side you have to be in love with the idea.
It's like not that rational to start a company.
There's a lot easier.
More comfortable ways to make money if that's the goal.
So it's gotta be about what the company's doing specifically.
I think smart people who'd want to make money like
There's so many good.
Jobs in the finance world for that or
People who just want to build, there's lots of places you can build, but
If you want to actually
start a company, it better be something that you're really passionate about, or you think that the problem's really important?
So for me now, enriching
Uranium never
Never was something I was
specifically excited about. I was always into nuclear energy. I always thought that this was a no brainer.
Probably the two things from
Sci fi from like the sixties.
was always the two industries we were supposed to have.
Not just from sci fi, but like
What our country thought was
We're gonna be going to space and we're gonna be doing things in space.
And we're obviously gonna have
Nuclear energy.
We went from
Burning wood.
Two
Chemical bonds and now
Atomic energy was clearly so much more energy dense and powerful and
Should be lower cost.
Those were always things I was excited about.
Never had a specific interest in uranium, but then
Through the course of investing in founders fund.
One from
Twenty ten, just looking at all sorts of different
Hardware companies. First investment I ever made was a satellite company, Planet Labs.
They did a lot of different things.
That were
Outside of pure software.
last couple of years I've founders fund drifted back towards
Almost pure hardware by the end, and then really energy.
Where we invested in Cruso Energy and
Understood the whole stranded
Supply.
Inside of things.
And what could you do with that?
And then invest in a company called Radiant, which was the inverse stranded demand.
How could you serve that demand?
Maybe you could serve it with a small micro reactor.
Even if that micro reactor's output was expensive.
The stranded demand had to pay crazy rates anyway.
for diesel generators in a remote Alaskan village, for example, or an army base.
And so that's a good starting point.
fitting the whole founders one thesis of
Start with a really small market.
And grow into a bigger market. Like don't worry about your tan, worry about
Owning that market and then grow from there.
And so
Yeah, my path to understanding
The bottlenecks in nuclear energy.
Was
having invested in Radiant, having met so many other advanced reactor companies along the way.
And then all of them said the exact same thing.
We're gonna make nuclear affordable, we're gonna make it scalable.
We're gonna take this from huge construction projects.
Two factory built.
And yet the one thing that's the hardest is not
Licensing. Everyone thinks the NRC is impossible to get through, but
No, it's not that. They told us. It's actually
We cannot get the fuel. The fuel comes from Russia, only Russia makes it.
We have to import it.
That's quite challenging. And this was even pre Russia ban.
We just need some source of fuel. And so I spent all of twenty twenty three looking into this.
Trying to understand, okay, of the five steps of making fuel, what's stopping it? Is it all of them? Is it there's not enough uranium? Is it something about the process? And it was the enrichment step.
And so
Look to trying to find a company in the enrichment step to debottleneck nuclear?
And to actually get the nuclear future that we want.
Could not find anything for an entire year.
Finally decided if this is gonna exist, it's gotta be a new company.
It's not an incumbent, it's not a government.
It needs to be a new private company.
And so this was the important company that nobody was building. This was the important problem.
Nobody was solving.
That I could somehow actually
contribute to.
In all the work you did, what did you learn about the thing you alluded to earlier, which is the relationship between governments and technology?
So much of the history
of technology in the US.
was actually military rooted. So much of what we developed was for a military purpose and then became commercial.
So the two seem like they're have always been deeply intertwined technology and governments.
Curious what you learned about
That history
What surprised you, what interested you?
course it's relevant for what you're doing now.
What have you learned about governments and tech?
My experience
Through SpaceX.
Which the government wants to work with private industry and wants to solve problems.
At SpaceX, I worked on the engine systems under Tom Mueller.
And did a lot of the structural thermal work on those and helped make sure that they would
Stand up to the environments and everything.
And
Be low cost and high performance, that's ultimately what we were optimizing for.
And then once those engine systems were working really well, I moved over to the dragon capsule.
And in Dragon, we were on the NASA
Cottz program, commercial orbital transportation services.
And it was a multi hundred million dollar program.

Two things, capability of launch to space station and then a
First a cargo vehicle.
And then an ultimately a crude vehicle that could dock with a space station.
The last year or two I was there was really focused on Dragon.
And working very closely with NASA.
Because we were gonna go dock with
I guess the most expensive asset.
Mankind had ever developed.
And so the last thing anybody wants is any sort of issue with
Our private companies
Yeah, like you would think collision
And yes, that's an issue, but
The way orbits work, it's actually
There's some ability to avoid it even if things are
Off track.
The harder thing to
really get a handle on was
Things like thermal and pressure and
Okay, you got this vehicle and it has solar panels and what's the heating on the vehicle and
What thermal.
Load is that driving back to the space station and can that handle it?
So all these interface requirements.
And so we were working closely with
NASA on those.
And ultimately these were
Incredibly smart people who believed in space.
We've been working at Nassa for
decades in cases despite
Not a ton of growth in space activity.
They were there'cause they believed it and they loved it.
And the opportunity to work with a company to like
Okay, we have the space station.
We have this program. How do we get you guys to the next step in the milestones? How do we collaborate to like
Make sure this is safe.
But that it actually happens.
Super collaborative.
Very positive. So I think
My takeaway was
In industries where you have true believers who are in
The government
Agencies.
And who have been doing this for a long time. They're there because they want it to happen in
There's
a lot of openness and excitement to working together.
If the company is
credible and as cares as much about safety and performance as the agency does.
In your operating time in SpaceX, what did you learn about making great things that work quickly?
I think there's all the classic things. There's the Elon algorithm at this point.
I don't think it was explicit back then. It was just a little bit more.
Hey, we have to get this rocket launched.
Let's make sure it works.
Let's not over optimize or have analysis paralysis, just
Define what the goal is.
Come up with a good solution.
This looks like a good solution.
That's a good plan. Let's run with it.
Let's not
Deliberate for months and months and months over things. Let's just decide and move forward.
And if we're wrong we can always go back.
Extensive testing along the way.
So it's really use good engineering principles, think from first principles.
Move fast.
Get it to ninety, ninety five percent, not ninety nine percent.
Get operational and you can make it better later.
But
If we just
Never launch if we never get operational.
This isn't gonna work.
One of the things that's most interesting to me today is this whole learning by doing thing, which has not been carefully studied, that it's in the iterations that you gather lots of your learnings and there's like a literal
predictable curve to these things. And that we've outsourced so much of this, especially in manufacturing to overseas.
And so it's not that we do innovation and someone else does manufacturing, it's more that the manufacturing
creates a lot of the innovation. And I'm curious
How important you think that is in the next
decade or two here in the US. Obviously you're doing something that
Got shipped over to Russia and now we're trying to bring it back.
Curious for you to say a little bit more about the broader effort to bring
More of that stuff back onto our own shores.
Yeah, I think there's the onshoring piece, but it's maybe even simpler as just vertical integration. So even domestically you have
companies in the nuclear space, the aerospace industry, like
Defense.
Many different sectors where
Subcontracting is the norm.
And
You're gonna subcontract a subsystem to somebody.
Your subcontracts like component.
And then that component has different inputs and
They subcontract that all the way down. I think in aerospace at the SpaceX days, it was thirty layers of subcontractors in this one.
System somehow.
I think was the case.
From the space shuttle, some crazy number of subcontractors.
And then in the nuclear space recently there was one analyst call where a company was
bragging about having something like nine hundred subcontractors and so many
But
They needed regional organizers of the subcontractors. And on one hand, it's like okay, clearly what you're doing's really complicated then and there's
Deep barriers to entry, but
Every one of those interfaces that crosses another company.
is typically a fixed interface that's not gonna move very quickly.
And so you have to treat it as fixed.
And so everyone's designing their individual piece against preconceived interface requirements.
And you end up with a really calcified
Architecture of your system.
This is just at the system design level.
And you can't optimize across layers for the overall goal.
Now, if you bring all that in house and don't have a lot of subcontractors, you can actually as an engineering team
Optimize with every iteration.
trade off interface requirements. Hey, this thing that you're asked of me.
Over in the electrical team.
For me the mechanical team is gonna be really, really hard. Do you mind giving me a little bit of breathing room on that?
I'm gonna make it up somewhere else.
And so you can have those conversations much more easily when two people are sitting
Side by side at a desk.
Than when you have two separate companies.
across the country. And so
At a minimum I think you need to pull the engineering together.
And vertically integrate.
And just sign up for doing more of the engineering yourself.
And not outsource it.
And then part two is the manufacturing.
That's just on the design side. If you're actually gonna make the thing.
And you're trying to design for manufacturing.
Well then maybe you want your manufacturing actually co located with engineering. And so that's what
All the great hardware companies.
are now doing is
You at least have your first of a kind manufacturing co located with engineering.
Under the same roof.
You basically talk it out of here's why this thing that you just designed is hard for me to make.
If you can make it this way.
I don't need a six axis C and C. I can use this with a laser cutter and make this part. We're gonna get ten X throughput at one tenth the cost.
And so I think you need to at a minimum
But you're first of a kind manufacturing co located with engineering.
And then better yet.
Small scale manufacturing, mid scale manufacturing.
Maybe a large scale you can
Push it somewhere else and go to a lower cost center.
As opposed to like Southern California, where so many of these companies are.
I think it's mandatory.
You've got to bring it all together.
What have you learned about
the role that energy plays in a civilization or a society.
It's funny, like we didn't really talk about energy for a long time. I think the per capita
Growth of the
Energy was kinda flat for a couple of decades prior to this recent surge because of AI and data centers and everything.
What is your framework for thinking about the role of energy in general? And then we'll get into the specifics of what you're doing.
There's two of my favorite charts around this topic.
One is
GDP per capita versus
Energy consumption per capita.
The R squared on it is
Certainly over point eight.
You cluster every country on earth.
You plot GDP per capita.
You plot energy consumption per capita.
And there's a very obvious line through them. There's outliers, but it's so predictive.
It is the thing.
Energy use and production is
The ultimate
Proxy for
human prosperity for economic activity for all these things. This has been
I think pretty well understood for a while, but completely under discussed.
And then you look at the US, this is the other chart I always look at.
Is
We grew our grid for a long time.
And then starting around the nineties.
Essentially no growth until today.
China was growing a long time.
Twenty ten, we were equal, neck and neck.
I think this year they now will be triple us on total energy production.
And so the
U S just needs to do something if it wants to continue to be relevant economically. You need more energy production if you want to grow your
Economy.
And I think just purely outsourcing stuff.
overseas just gives up capability, especially as it gets to like new manufacturing techniques.
How to scale manufacturing rapidly.
All these things that are so important.
How do you think the causality runs?
One idea could be if China surpasses us on a per capita basis, and let's say they get to double
Is there some rule of the way things work that will just mean they'll find ways to use that energy in some way that raises GDP per capita and
Drives all this progress.
Or is the causality the other direction?
as GDP rises or we find new innovations, like energy catches up to rise to meet that demand or something.
It's curious to imagine if I just airdropped
I don't know.
three times the US per capita capacity of energy on some random country, would that country necessarily become prosperous?
The whole argument.
From the nineties almost till twenty twenty was something like
Even if it would increase the economy.
Would you want to?
So
Okay, do I wanna have
dozens of aluminum smelting facilities in my country, or is that better done overseas and it's
low margin and not interesting and not gonna accelerate your economy. And why do you have people working on that when they can be in the services world and
Do more interesting things.
Certainly that was an argument.
But I think we're seeing it right now, what happens when you're not proactive about it, when you don't
have the capability even of expanding rapidly and
You don't wanna be caught completely flat footed when there's a large demand for
energy production and now here we have it with AI and data centers and
You look at some of these curves and
Looks like data centers could consume if they were allowed to the entire grid.
By twenty thirty.
At this growth rate and so
I think in theory.
You would say energy production will come online as we need it?
But then in practice, if you don't develop it, you may bias yourself towards other things because
While our energy costs are kinda high.
Or our energy cost is higher than other countries because we're tighter on supply.
And they've overbuilt and they're subsidizing
But then they take those industries.
And then they take the front of the supply chain and just start
Marching forward to where they can
dictate a lot of different things about the economy.
That was the classic view is economies are efficient.
Markets are efficient.
If there's a demand for energy
We will bring it online when we need to.
But physical world stuff has a timeline with it.
And then in the US it can be very hard to get stuff permitted to go do things.
And so when there's unexpected demand that's very rapid in its increase.
You might be caught completely off guard, which I think is the situation in the US now with data centers.
And then scrambling to find power.
And where
A few years ago if you looked at a data center and and you thought
Okay, where are they gonna place it?
The answer was they'll put the data center where there's stranded power.
Stranded wind in West Texas, stranded flare gas in South Dakota, North Dakota.
And now those stranded assets are gone and now it's
Time to build new capacity and
Data centers are
Completely backed up on getting natural gas turbines and
Nuclear takes a few years to get
Installed. So
I think just from a
Energy stability, economic
robustness point of view, you want to have
Capabilities and at least the ability to stand those up as you need to.
Obviously you're doing something about it.
But how do you feel about the state of things overall?
The state of energy in the United States overall.
Both state and direction.
The state's been fine until now and then the direction's completely flat. So to me, the issue is that we have not increased at all in decades on the supply side.
The direction don't feel great.
The state
I wish we had more. I wish we were
Not one third of China.
I think we could be doing a lot more things if
Energy was not just abundant, but cheap.
And so
Just making more high cost energy also one bring back.
certain industries that won't
Cause us to
Start doing things we used to do.
You think energy is the bottleneck to us bringing back some of these industries that have left? Or is it more labor
I think the labor is actually the one that's probably the most responsive.
If there's
really compelling jobs in a field, people will shift over to that.
The classic one the last couple of years has been electricians. Massively undersuppless. Massively undersuppless. Can't get enough to build all the data centers.
They're commanding a very high great wages.
Can make more than people.
Oh.
When got a master. Yeah. Yeah. It's like an incredible career and now

I think labor responds, it probably takes a few years, but it's faster than
Building infrastructure.
Infrastructure's probably the bottleneck and then
Is it just energy? Probably not just energy, probably permitting.
Can take a while.
And so
I think there's a bunch of different bottlenecks to getting things online.
Why do you believe in nuclear?
Why that specifically?
If you look statistically, it's always been the safest, cleanest base load.
So I think for the economy what you really want is baseload.
Always on.
Very reliable supply of electricity.
Not intermittent.
But something you can actually design
An industrial process around.
As the foundation of the economy.
Even data centers want baseload.
And so
Solar with enough storage could be baseline, but typically it's not
Anywhere near that amount of storage, usually solar is
More intermittent, more for peak shaving.
So if you really want baseload, if you want something that
businesses and industry can rely on.
It has to be on
Almost all the time.
You need it to be.
highly reliable. And so nuclear is the most reliable.
So you check the base load box?
People only in the last
Ten, twenty years of sort of caring about climate.
Even remotely as much as they do now.
And if you care about climate, I think
Maybe you care about carbon, you probably also care about particulate.
Nuclear is the cleanest by far on these dimensions.
So on the environmental side, nuclear winds for baseload.
And then the safety side, this is the part that people think
Big question.
Safety side, it's the safest by far baseload too.
You have fossil fuel plant that has known impact on
human well being from emissions.
And nuclear.
Has
None of the carbon emissions and
There have been high profile
accidents with nuclear. You think of Chernobyl, Three Mile Island.
Fukushima.
But the actual
risk associated with nuclear despite those high profile incidents.
is still far, far lower than any other form of baseload energy.
And so it's like okay, if you ask me
What's the safest, cleanest form of baseload?
Nuclear, absolutely.
Why do I believe in nuclear? I think those things are important.
Okay, what about cost?
How does it stack up on costs?
And this is the piece where it gets really exciting to where
Over time we did less and less and less nuclear, probably starting in the seventies.
And you see the cost of nuclear going up as we do less of it.
You look at where the cost of nuclear is today and it's more than fossil fuels.
It's like okay.
Unless you really care about safety.
Which is
Pretty acceptable from all forms.
Or you really care about carbon emissions.
Is it really worth it? Are you really gonna do nuclear when it can take ten years, fifteen years to build a reactor?
And they can be
double the expected budget, that's really hard for a utility to stand up to and say
Yeah, I want to do more of this.
They need to bring it up.
Cost down for repairs.
They need to have predictability in when they're gonna bring capacity online.
On those dimensions, nuclear has not been the best. It's not
highly responsive new energy generation.
And it hasn't been the lowest cost. So
You say, Okay, why care about nuclear?
It's because
On first principles it should be one of the lowest cost.
You've got
Much more powerful physics.
Much potentially smaller.
Reactors outputting a lot of energy.
You look at a pellet of nuclear
Fuel?
And the amount of
that that's equivalent to is like a ton of coal.
And so I can take all this stuff, all the space.
And pack it in so much smaller, I don't need as much material for my reactor.
I'm not gonna be going through as much mind product.
It's just an order of magnitude different. And so on first principles, nuclear should be an extremely
Affordable thing.
Potentially much more affordable than
Fossil fuels. No, it has not been at all.
But
That's the goal. And so now you see this whole
Wave of advanced reactors trying to make that true.
On the reactor side and then we're trying to do it on the fuel side.
Can you
create a taxonomy of the advanced reactors, like what kinds of approaches are being tried. I think everyone thinks of nuclear as the massive kind of plants and the
Stacks that they're used to seeing pictures of and are very evocative.
And it's sort of been that same way for a long time. They cost ten billions to make or something.
What are the things being tried?
Take that one piece at a time. So on the reactor side.
Everyone thinks of the cooling towers.
You have cooling towers in other industrial
Processes too.
But everyone thinks of the cooling tower, which all it is.
is steam
Going off.

We're used as a coolant at the start of the cycle.
So
Lots of industrial processes do that.
But nuclear is known for it. That's typically about a gigawatt scale reactor.
Often in the US and AP one thousand Westinghouse.
Gigawatt scale reactor design.
Which
We can get into the technical of
What type of coolant they use and what type of fuel.
Which might be interesting.
But the thing to think about
In my mind is
That's a big reactor. That's a gigawatt scale.
I think the interesting buckets are around the size,'cause they link to applications and markets.
And that's grid. So you want to go
battle it out on the grid. You need gigawatt scale because it moves the needle on the grid.
And you're getting the scale that can bring your cost down as low as possible.
At least for now, then that's a good format.
On the other end of the spectrum you have
Micro reactors.
Where you're saying there's a stranded community that's doing diesel generators.
This is both bad for the environment and not that cheap.
We can beat them on cost, and so you go micro reactor
Thank you.
One megawatt scale, nine gigawatt, megawatt.
And then you have the middle, which is
A hundred to three hundred.
Total megawatts SMR.
Where SMR is small modular reactor.
And
All three.
Buckets have different approaches on the technology side.
But I think all three are gonna be important. And so if gigawatt scale is for the grid.
And megawatt scale is for
Remote communities or
Government installations.
Then the middle scale I think is gonna find its niche.
behind the meter with data centers over the next five to ten years.
where one unit could be dedicated to one data center, like something that doesn't interrupt the cost.
that I'm paying as a ratepayer in whatever district I'm in.
Even if there's a data center there, like something that's more cordoned off. Yeah, exactly. So think of it as like the ultimate behind the meter thing is just an island. Imagine a fence around
A few hundred acres, you've got a data center and you've got its
nuclear power plant there or whatever other form that they might have.
Peaker plants, natural gas.
Turbans.
Maybe even solar in some cases.
Okay, that's all cordoned off. It does not even touch the grid. It's not impacting the grid. It's not doing anything to the community's
Like rate cost.
Completely separate.
I actually think there's a huge opportunity
To improve communities through this. If you have a data center putting billions into both the computer
And the power production.
Let's say they're even fifty fifty on power production and compute.
Can we increase that power production ten percent?
Which is only a five percent project increase.
And in the case of a gigawatt.
Data center.
Bring an extra hundred megawatts to the community.
That's huge.
That would plummet.
Utility prices for that community. So
I think at a minimum we're gonna see people
going behind the meter or not disconnected from the grid.
And ideally we see them actually feeding the grid and feeding base load. That reminds me of your BYOE concept.
Maybe just spell that out a little bit more detail.
There was just the concept of
We're doing all this investment in the grid for the first time in decades.
private companies are making the investment, they will make the investment
With
Bringing their own power, bring their own energy. B Y O E.
And
They're going to be doing that investment anyway.
their biggest worry is probably something like, will I be allowed to build this data center in this community?
Over the last year. I think that's been the start of a discussion.
And
If they wanted
And they can tell a community
Hey.
We're gonna be over here.
On this unused land.
Are you okay with us being here and running a bunch of compute?
And
being net positive to your grid. Can we just plug in and give you some extra power in return for inviting us to be a neighbor?
To me that's a complete no brainer for everybody.
At a slight cost increase.
During a time when
Hyper scalers.
Building data centers.
Are all about speed to power and they want to be online as fast as possible.
Because this is the contest, so who can get to the greater scale first?
That is a very low cost compared to the advantage of deploying quickly in a community and being invited
There versus being rebuffed.
So I think total no brainer.
And the modern data centers can do completely closed loop cooling. So the water issue is not an issue. It's really just this power thing.
What would be the
explanation for these new advanced reactors ultimately not working.
What keeps you up at night,'cause this is kind of out of your control. You're not designing these advanced reactors yourself. You're helping them achieve their mission.
But they need to be successful.
What do you think if you had to handicap the reasons why they might not be?
Or the most likely.
I'd say number one is they don't have fuel to operate.
That's a showstopper.
So we're trying to eliminate that risk. And then part two.
Is they're too expensive.
I think the physics will work. I don't think anyone's too worried about that. You have
Dozens of incredible companies with great engineers.
Who are trying to solve the advanced reactor problem.
And
Typically they'll pick a form factor that is of the right size to focus on
A certain market.
Whether that's micro reactor for remote.
Or SMRs for data centers.
Or very large.
Gigawatt scale for the grid.
And SMRs I think ultimately have the plan of being cheaper than the gigawatt scale construction projects for the grid.
But there's many reactors that are trying to solve the reactors cost side of it.
And the question's gonna be, is their energy production cost low enough?
But for these advanced reactors.
It's not just a fuel availability problem and question. It's a cost question. It's the fuel can be half of their total cost. And I think long term enrichment will be half of the fuel cost.
For general matters specifically, I'd love to hear at three levels how you're thinking about
Building this thing.
The product level, the business level, and then the company itself.
So starting with the product.
How have you figured out what the market wants or needs? You're enriching uranium.
Uranium's the key fuel source for this different parts of this taxonomy.
For creating energy.
There's lots of different kinds of things that you could provide to your customer. What has the journey been like to figure out what the actual product is gonna be?
Yeah, so this goes all the way back to understanding the fuel cycle or
The fuel supply chain for nuclear, so there's five steps.
You minoring him out of the ground?
You then convert it into a gas.
You then enrich it.
You then deconvert it back into a salad. And the enrichment step is really a refining step, a separation step.
Then you turn it back into a solid
And then you form fuel pellets five steps.
To go from ore on the ground into a
Little pellet.
Into a fuel rod that goes into a reactor.
The US

Good capability across the board, except
In enrichment. It's the one area that we don't

commercial scale capability. There's some R and D capability, but
Nothing that's commercial scale or commercially competitive with
Russia and Europe.
And so
We decided let's hone in on the enrichment step. That's the bottleneck.
That's the thing that's leading to these what we call the nuclear fuel cliffs.
Where there's three cliffs.
Cliff One.
is
The Halo supply chain, this is the same problem we heard from
All the SMR companies who don't have a source of Halo.
Halo is the fuel that they need.
Hey Lewis.
Uranium that's enriched to about twenty percent.
U two thirty five, which is the physical material.
They want it enrich a little bit higher to twenty percent because it helps their reactor be smaller. So
That's the first cliff is Halo for advanced reactors. They have none.
If there's no reliable supply in the next few years.
It's going to make it very difficult for them to scale up.
So far they have small amounts from the DOE to prove that their reactors work the way they think they will and to do first deployments.
But not to scale to where it really moves the needle on the grid.
The second nuclear cliff.
The nuclear fuel cliff is twenty twenty eight.
When the US's ban on Russian uranium ports
Goes into full effect.
January first, twenty twenty eight.
We are
Through a act of Congress no longer
Allowed.
To import Russian uranium.
Enriched uranium specifically, or ore or both?
We will not be importing enriched uranium from Russia or Urani from Russia.
Which
The only place we get it enriched.
Is Europe and Russia and
Today Russia's about twenty five percent of US imports.
And so
twenty, twenty five percent immediately goes away.
In twenty twenty eight.
And so utilities in the US will then start
eating into their inventories.
And trying to work out deals to import more.
From Europe.
But Cliff One is Halo.
twenty percent.
Cliff two is L E U low enriched uranium.
At three to five percent enrichment.
And then
At some point in the future the US stockpile
Of enriched uranium for
Propulsion for the Navy and
Eventually that runs out. And so there's these cliffs.
We're focused on the nuclear energy side of it.
L. U and Halo, and that's what we're gonna be producing.
We realized hey, the most urgent cliff that we need to address as soon as possible is Halo for Advanced Reactors.
And coincidentally
This is the small market. This is the emergent market that we can go after.
That we don't think any incumbent will go after on the same time frame as us.
And we can serve those advanced reactor
customers that we've known for years.
And make sure that they have the halo that they need.
to deploy and scale their reactors.
That's where we're starting.
And then
Phase two is
Go into LEU production.
Low and rich uranium for
the ninety four reactors on the grid today.
And supply them with the fuel that they need, which
Today in the US is a
Two two and a half billion dollar market.
What's the relationship between this kind of enrichment and a more weapons oriented type of enrichment?
All enrichment is
For the most part the same.
If you think of it again as like a refining process or a distillation process.
You're just refining it further.
Ultimately the project that we make is Enrichment Services.
You can run with material through from
Natural uranium as it comes out of the ground.
And you can run it through an enrichment process to get to any arbitrary level of enrichment.
The commercially relevant ones are LEU.
Three to five percent.
For existing reactors.
Or Halo, twenty percent for advanced reactors.
And so when we set out to do this, we said hey
Halo is what the market needs most right now.
And we set out pre Russia ban.
So there was no L A U cliff.
We said we're gonna develop enrichment.
Capability.
To serve that market.
And the fundamental unit of enrichment capability is it's just the ability to do this refining. It's measured as something called separative work units.
In the enrichment.
Field.
We will provide that service and we will sell that service to utilities and advanced reactors to get them the fuel that they need. So
Ultimately the product that we developed.
is enrichment.
And you can apply it to
Either of those levels.
To your question on
How is that different from weapons grade?
When you see countries going to weapons grade, they're often trying to go north of twenty percent, which is the internationally agreed
Limit to where you go to weapons grade.
For non proliferation reasons.
There's strong international consensus that
We should all just stay below twenty. There's
Really the risk is not worth the reward to let people go higher.
You see countries
Going to sixty percent.
Saying that it's further.
Nuclear
energy industry and it's pretty suspect.
I think clearly they're just trying to get as close as they can.
To weapons grade, which is
Well over ninety percent.
And they're trying to develop weapons and so
Ultimately it's not different technology, but it's applied in a different way and
In a completely
non international consensus
Set up.
Is the percentage
Is there everywhere to think about that like purity or something?
Yeah, there's U two thirty eight, there's U two thirty five.
As it comes out of the ground, there's other
Isotopes also, but
The main one's U two thirty eight and you basically wanna
Filter that out.
To get U two thirty five.
E two thirty five is the the isotope that wants to react.
That's the fissile isotope.
What do we know about the stock of ore in the world?
The raw element.
Do we have enough of it?
Yeah, plenty.
I think we've got
Certainly hundreds of years.
Of supply in the ground.
U S has supply
We have active mining in the US.
Canada has even more supply, higher grade ores.
Enough to supply us for a very long time, same as Australia.
And then
Kazakhstan's a huge
Deposit.
And US imports from there as well. So
On the ore side, not an issue.
That'll progress, that'll get more efficient, there's new techniques there.
So mining's gonna make progress.
I think the cost of mining will come down.
Output will go up.
But it's not really an issue.
How do you build a great business on top of this product?
Is it so easy just because there's so much laden demand for it from these this new segment, or are there other considerations?
I wouldn't say it's so easy at all.
And I think the latent demand has not been obvious for a long time.
Until the last couple of years.
So
Any large latent demand I think is
In the last twenty four months linked to the thought that there's gonna be a lot more data centers.
Doing
AI inference or training jobs.
But if you go before that
There wasn't a lot of new nuclear being talked about.
There was need for Halo, but that's a pretty small market.
And so
I think a lot of people have thought that this is
Not really something where we need a new capacity. If you go back to the twenty tens.
Really no new capacity building anywhere.
In the twenty tens.
Certainly not for LEU production.
Certainly not for
Hey Lou.
Just'cause it's been emerging so recently. So
I think the fact that this is a growing market is
We're still betting on that in many ways.
It's not the case that we're currently deploying tons of new reactors in the US, but we think that's coming.
So I think the market we believe in deeply. I don't know that the entire industry
believes that the demand is there. They've been
through nuclear renaissances before that
Didn't pan out and I think
Their point of view would be
We'll build it when we know that there's a need.
At least that's been the attitude of many people that we've talked to.
On the ease of doing this, it's the proven thing. People have done this before.
But it's still not easy. I'd say you see some of these retro technologies that were done in the past.
And then we lost a lot of the capability'cause we didn't do it for so long.
And so for enrichment
It's been an industry without a lot of change since really the nineties.
Not a lot of progress, not a lot of leveraging of new technology.
There's a lot of
doing the hard engineering work to get back up to speed to modern.
And then
Even once that's done, you're building facilities that are a million square feet.
And
large, large multi billion dollar infrastructure projects.
In the same way that like maybe building the first Tesla Roadster was hard.
But the real challenge was how do you scale this up?
I think
It's extremely underappreciated.
How
much goes into standing up a huge industrial facility. And I think that's actually the hard part.
How do you think about the North Star metric for the business? Like if I equate it to SpaceX, the cost per kilogram to orbit or something like that is like a really cool thing to visualize over time.
What's your chart gonna look like?
What's the metric?
Yeah, so they had costs per kilo to orbit.
Really to a specific orbit of low Earth orbit.
And you can actually decompose the orbital piece into a velocity.
So it's almost like cost per kilo to some velocity?
Our version is
Cost per kilo.
Of uranium, that of a payload.
To some enrichment level.
And so it's like
Cost per kilogram.
To three to five percent or to nineteen percent.
Which can be described as
cost per separative work unit.
Or separate of work unit is the industry measure.
of enrichment.
To where it's basically kilos.
Times some.
Entropy reduction.
Or separation or organization of the material.
And so a separate of work unit is
Typically referred to as
KG Sw.
Kilos times separate of work units.
North Star metric.
His dollars.
Per kilo sw.
Does that map onto the value creation cycle of your customer?
Is that input cost?
The key determinant of their success.
As a business?
It is.
The importance depends on what type of reactor you're running.
So if you're
Doing a gigawatt scale.
Classic AP one thousand light water reactor.
That uses
Three to five percent enriched fuel.
Low and rich uranium L E U.
then the cost of that fuel is a percent of your overall cost is
Quite low.
It doesn't really matter.
What you want is availability. You want reliability. You want diversity of suppliers. You want to know that they're gonna be there.
And you don't want them
overly concentrating and creating supply risk for you.
But the cost of the fuel is not a huge input.
Into
Your cost electricity, your L C O E.
Most of that's gonna be CapEx.
For your huge
Ten billion dollar
Project.
So for them it doesn't matter that much.
But for advanced reactors, it matters a lot. So some advanced reactors, the cost of the fuel, the Halo fuel that goes into it.
Enriched.
further to nineteen point seven five percent.
Which requires more input material to refine it all the way there as you filter through more and more and more material.
That fuel can be more than half of their energy production cost.
And so
To them it does matter a lot. And the way that the fuel has been purchased in the industry so far.
Which maps directly onto our North Star metric is five different services.
A utility purchase use uranium?
And then it purchases
Upgrades to the uranium as it goes through the supply chain.
So it's really a tolling business.
Where you buy they own license to the material and it's book transfers all the way through.
And they are paying different people.
Per unit of service provided.
To do their work.
The service that they provide to us is priced in dollars per sw.
And
If you look at the actual cost structure of producing fuel all the way through.
For low enriched, maybe.
Enrichments.
Little bit less than a third.
But it's one of the largest cost segments.
For Halo, it's even more.
And we think it's gonna be the dominant cost driver of fuel costs.
Tying it back to the founders fund stuff we were talking about at the beginning.
You sort of found the highest cost segment of the workflow.
sold to the highest percentage of the cost.
new customer that's emerging that's small that you can go own.
And that's how you then ultimately build a great business is by driving all this force through kind of the narrowest possible
Choke point.
If you want to put it in investment terms and like business strategy terms, that would be it. But
I think if you go back to the very beginning, it just turned out that this was the thing that was most necessary.
This step of enrichment was why we didn't have the more enriched fuel.
That advanced reactors needed.
And you realize the U S had lost the ability despite being the number one in the world during the eighties by far.
It was something we were extremely good at.
We completely stopped doing it.
This bottleneck was gonna be the bottleneck to all of nuclear energy if you believed in advanced
Nuclear energy.
This is the thing we have to solve. So
We did it because no one was doing it.
And it was extremely important and urgent. And I think that
Ended up corresponding to
this very good entry point for the market.
But I think the two are really linked. I don't think it was coincidence.
That if you're solving a problem that's urgent
That no one else is doing.
on a small but emerging market.
It will completely fit that framework.
And then the final step is building a great enduring company.
By which I mean not just a flow of cash flow, but a collection of people and a set of impacts on the country.
How do you think about the most important things you can do starting now to build a great company? And like what does that mean to you?
You've invested in many great companies.
What is a great company on top of
A good product in the stream of
Cash flow.
It comes back to the team.
I think Naval has said this a bunch of times.
The team you build is the company you build.
And so to us it's team DNA. We want people
We thought about where do we put the company.
This was a big question at the very beginning.
And
You look at who you actually need on the team.
And of course you need nuclear engineers
But you also need great.
Mechanical engineers, electrical, software, chemical, every type of engineering.
And so you ask yourself, Well, where do we want to put the company?
And it turns out the percent of the team that's nuclear engineers is
Single digits?
We're not doing a reactor. There's actually no nuclear reactions in our process.
We need to make sure that there's no nuclear reactions, but to do that you don't need a huge number of nuclear engineers.
And so
There was this question of do you go to where the nuclear engineers are or do you go to where
All those other types of engineers are.
And on to mention one, the nuclear engineers you don't need that many of
You need great ones, though.
Where are we gonna find them?
And you look at where they are in the country and they're just scattered everywhere. There's no one place to go.
And so
We had to go with the other option. You go to where all the other engineers are.
specifically hardware.
Aerospace.
And that's Southern California.
The team DNA that we wanted to set up was
This is an engineering driven company. We're not doing a science project.
No new physics.
No going down.
A multi year R and D path that's uncertain.
We need to get this operational as fast as possible. This is an engineering problem. Everything we have to do has to be thought of as engineering.
Engineering cost out of
The system or engineering performance up.
Engineering cost of capital down.
We're engineering scheduled to be as tight as possible.
We're even engineering our own buildings.
This is taken from the Tesla playbook.
Don't hire a G C and outsource everything, you lose total control.
The schedule could be
It's not in your hands anymore.
You need to build your own in house.
Engineer, procure, construct, EPC firm.
As a team.
to go run your construction projects because it's one of the hardest things about this is
Not just engineering, not just manufacturing, but actually construction of
Millions of square feet on schedule, on budget.
And so
The whole DNA of the company is oriented around
Drives.
Two
deliver for the industry as quickly as we can while being safe.
Reliable.
Every other dimension you would want.
Subject to those constraints.
Go quickly because the industry needs it.
Don't have analysis paralysis, don't deliberate over things that don't matter.
Let's get a service.
Live.
That can deliver for the US industry.
And then let's bring the cost down over time. And so
Everything's oriented around schedule and costs.
How do you run the company, like literally your time?
as one of the key inputs into everything you just described happening or not.
You've watched a lot of vertically integrated companies that own a process end to end.
Do that really, really well.
How are you running the thing? Like if I were to follow you around for a week, what would it look like?
Changes over time. So
My strong preference is internal facing.
And so to
Really be there.
Helping to do the work internally.
Right now we're in a phase of company building and team building and so we're rapidly
Hiring. So a lot of my days right now is interviewing people.
I'm I'm the last step in the interview.
Then what I'm screaming for is
Does this person not just have the skills which have already been screened for at that point?
But do they have the attitude of
They care about this problem.
They know that there's lots of places that they could work, but this may be the only place that they can work on this problem in a private company.
And
They know that there's probably places that
They could potentially go
Make more salary.
That they could
Have an easier job.
A more predictable schedule.
We're trying to do this mission that requires us to go as quickly as possible.
And to deliver before end of decade for both
The advanced reactor industry.
And the existing reactors on the grid, which is like twenty percent of our grid.
And this is gonna mean a lot of late nights, weekends.
Just working as hard as we possibly can.
And is that something that they've done before?
Is that something they like doing? Do they know what they're signing up for?
Are they really motivated by this? Those are things I'll typically screen for subject to everything else being already verified. And so
A lot of my day right now is
Trying to make sure we have the right
early people on the team.
To build the right culture.

Recruit and hire
The next people.
And so it's the saying, yeah, it's not just
The team you build is a company build, but the early team you build is the company you build. And that's the modified Naval quote.
And so right now so much of the time is spent on recruiting
Interviewing, filtering.
Which
It's actually what drives
A lot of my external facing stuff is
We gotta get the word out to the right people so they know what we're working on. They know why this is important.
why this is the bottleneck to scaling nuclear and to scaling energy in the country.
And why they should.
Join our team.
How do you reason through the
What seemed to me like illogical.
data free fears.
that people have about nuclear in general. You started to address them earlier around
Just the amount of waste is actually quite small. I think it fits in like
This room or something, something crazy.
The
bad events that we can call to mind Chernobyl and Three Mile Island.
were bad, but if you dig into the data it seems like nuclear is very safe.
But these fears really do seem
to be the reason why we don't have a lot more of it.
What matters is reality, not the data.
How would you like pitch people on not being
Worried about these things.
So we can get over this problem.
You're pointing out kind of the difference between acute and chronic.
sort of events. And I think acute events that are very
Attention worthy
People remember those.
And the things that are just low level in the background people don't think about either. Car crashes every day. Car crashes, all these things.
You can think of it in terms of catastrophic events like that. You can think of it in terms of your health and
What are we chronically doing that's unhealthy, that's taking its toll versus acute things that take their toll.
I think people have a strong bias towards that, but
Often it's
The right thing is to look at the data.
I don't think most people find that compelling. I think
The more compelling thing
In nuclear for me is
Think of a world in which we are not constrained by energy.
And we won't be constrained because we can all agree that it's good because
It's baseload.
It's very affordable. It's gonna bring down your rates.
It's safe and it's clean.
And we can debate those and we can look at the data, but
Let's imagine.
That future world in which
We have all those things.
I think the way to make nuclear really compelling to people
is actually to check the final box, which is cost.
Again, going back to
Why have we not had more nuclear?
the schedule to bring it online for the large gigawatt scale projects has been uncertain. The costs are often
above what's projected.
And
When you look at the total package, it's not cheaper than coal. It's not cheaper than natural gas.
It's not cheaper than hydro, so why do we want this? And I think
If you told someone
Okay.
Nuclear is safe. We can dig into that.
Understood you're not interested if it's more expensive.
Why would you be?
But what if it's cheaper?
What if your utility bill got cut in half?
I think people would suddenly find that extremely compelling.
For something that could be
Tens of miles away from their house and still powering the grid.
To bring it back to where we began the conversation, why do you think there are not more founders' funds and more founders pursuing some
radically different, or unique.
vision for the future.
There's many of these people
More investors have taken on this mantle of
Big contrarian unique projects, I suppose.
But why are there not more of each? It seems so strange.
It's all case by case even for Founders Fund. It's not a programmatic thing that Founders Fund has tried to do.
It's almost
The opposite. Founders one recruits for people that want to be investors.
That don't want to be entrepreneurs. If they want to be entrepreneurs, they should go be entrepreneurs.
And the two roles are extremely different.
people that have done both realize how different operating is than investing.
And so Founders Fund explicitly selects for people that want to be investors.
And yet once in a while a company will start just'cause it almost feels like a disservice to not go started. So in this case
Decade plus of investing.
Man, all the reactor companies they all say the same problem. No one's doing it.
And then you look at the final thing of like okay, important problem, no one's doing it, maybe I can do it.
And you look at what it takes to actually go do that.
And you realize, wait, my background is really aligned with that.
If I don't do this then
If the goal is to have an impact on the world.
And we can have positive impact through investing, but a much greater impact through starting the specific company.
Then
It's actually wrong to not go do that and so
It's almost like
There's a desire to not start companies.
Full stop.
And then only with extreme exceptions will we start'em.
I think if it's a an extreme exception it
It makes sense that it doesn't happen that often.
Now, why don't most people do that? I think.
Be investing life is
Probably far better than the operator life.
Have you experienced it that way so far?
I like what we're doing a lot, but
In terms of quality of life, it's not as good.
I think any entrepreneur would tell you that the quality of life is not as good.
Once you start a company.
You're taking the harness and you're latching on.
Whatever it is you have to go do, it's not optional.
If you're an investor in
Deal comes across your plate, but
I'm a little bit too busy. I've got enough over here I gotta work on.
It is easy to let that one go.
And not have to do that work. I think when you're running a company
There's stuff that comes up that you just have to deal with and you have to take care of it or it's gonna be a problem. Now
That's also a function of
The time horizons.
Of each job. So I think when you're operating
You can see the feedback cycle very quickly.
As an investor, that company that you might have just chosen to not meet with
To preserve
Quality of life.
That could be the next great company. You might not realize that you're not doing well until five years from now when you don't have that
return from that company.
Some people are just wired a certain way, like even in the investing
Raw.
I would take
Ten meetings a day. Like
To the point of
Definitely diminishing returns, but
Wanna work hard and make sure you see everything.
The other thing about investing when properly understood is that you actually don't need to invest in that many companies.
And while you can brute force it and boil the ocean and try and meet everyone and try and be extremely helpful to everybody.
All that uh ultimately matters is a few companies per vintage.
And you just have to be into those.
Certainly as a V C much more than
Even private equity or hedge funds.
As a V C
You don't actually
Have to work.
That hard meeting everybody.
You can dive in as much as you want into specific companies and value add and help them and
Be their preferred investor.
But it is not a job of labor, it's really a job of ideas and thinking.
the quality of life of being surrounded by smart people, talking through ideas and thinking
I think can be a lot more comfortable than
Rolling up the sleeves and diving in.
Well I for one I'm glad that you're now working on the problem that you're working on. It seems enormously high leverage and I certainly hope that
the future that you might enable is the one that we get to see. Uh I think there's very little arguments against more, cheaper, cleaner energy. So
An incredible project. When I do these interviews, I ask everyone the same final question. What is the kindest thing that anyone's ever done for you?
Maybe the recent
Example that's
Completely linked to this conversation is the transition from founders fund.
And
You have to say okay, well
What was this thread that led me here?
It goes all the way back to like
being recruited into founders fund by Peter and then
support through a decade of investing and then as I wanted to go shift focus to this
Total support for doing that. Obviously Peter
try to beat up the idea and make sure it's good.
But
being along for that journey and then ultimately joining our board.
As one of
Very few boards that he's on.
Really appreciate that.
What was the hardest part about him beating up the idea? What was the hardest
aspect to get through.
All the abstract
Layers of
meta level questions of
Just even going back to the fact of like
We haven't had any new nuclear in a long time. Why is that?
Is nuclear.
Just regulated to death.
Is the regulation actually.
A thing that's meant to stop it.
Basically,
Make it illegal.
So all these questions of like why is it really the case that we're gonna get more nuclear now?
And I think it was that challenging of this that
force us to ask a lot of hard questions that
We feel great about our answers to like even the one you asked of
Are you dependent on every SMR?
succeeding to make a real market.
On the Halo side, yes, the Halo production.
Ultimately
Will be SMRs that create that demand.
But to make Haley, you have to make L E U?
And L use what goes into the
Grid today.
Our technology works on LEU also and we'll be building LEU capacity and so there's this
two billion plus US market and a similar size market in our
Allied.
Partners.
that we can sell into and so there's this known good market and so you work through questions like that.
When being challenged on what if nuclear doesn't grow?
And it's like well, worst case.
There's an existing market.
We can start a business there.
And time is then on our side for when and if nuclear grows, which we think it will grow very rapidly.
We're in a good position, and a lot of these conversations that I had with Peter were twenty twenty three.
before the AI data center boom. And so now it's extremely obvious why we do this. Yeah. In a good position. Scott, this has been so much fun. Thank you so much for your time. Yeah, thank you.
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