NCI: AI is crowded. Defense is next

Non-Consensus Investing AI is crowded. Defense is next

Speaker1: [00:00:00] We drop all of our electronics. We get in the van. The windows are blacked out, painted out, so we have no idea where we're going. We're clearly underground. They're responsible for about thirty percent of the effects on the battlefield with less than three percent of the total personnel. 

Speaker2: There's always a euphemism in war.

The Ukrainians figured out how to put a rocket on a jet ski and use it to target and take out thirteen Russian Navy ships. 

Speaker1: Ukrainians defeating the Russian Navy without having a navy of their own. 

Speaker2: The US has twelve aircraft carrier battle groups that are aged. They're not relevant. They're targets.

Speaker1: The US is exhausting its stock of interceptors. That is gonna create a decade-long backlog to rebuild our arsenal of exquisite weapon systems. It's hitting a bullet with a bullet. It takes six months to build one. If you're talking about a drone that basically has a lawnmower engine for an engine, you can build that in every shed.

My pilot, Don,'s I think this hotel's on fire." Yeah, we've got ballistic missiles inbound. You can see the smoke rising from across the 

Speaker2: town, imagine. 

Speaker1: If you're a civilian in Kyiv tonight, if there's a ballistic missile coming in, [00:01:00] your course of action is duck and cover. That's what you got. 

Speaker2: Will we see conflict the next five years?

Speaker1: I think that there's very real risk. 

Speaker2: Are we alone? 

Speaker1: Where are the aliens? At- The, the appointee is like, "Actually, that's my portfolio." He provided an answer, and I'm not gonna tell you what it is. 

Speaker3: All right. Thank you so much everyone for coming. For everyone that, who don't know me, I'm Carolina D'Addario with Lumida Wealth.

We're a tech-driven registered investment advisory firm, SEC regulated. We invest across private and public markets focusing on opportunities driven by major sh- structural trends. Tonight, we're gonna be discussing how defense tech is becoming a major AI investment theme with government as customers and how geopolitics is driving demand for global security.

We're very fortunate tonight to have two great speakers, Ram Ahluwalia, our founder and CEO of Lumida Wealth. Ram is a seasoned investor and [00:02:00] exited founder with deep experience across financial markets, technology, and emerging investment trends Joining him, we have Dan Madden, Principal of Squadra Ventures, where he leads defense frontier technology investing and strategy.

Before Squadra, Dan served in the Office of Secretary of Defense, RAND Corporation, the US House of Representatives, and the US Marine Corps. With that, please join me in welcoming Ram and Dan. 

Speaker2: Awesome, Dan. Good to see you. Yeah. All right. I'm really excited to spend some time with Dan here. Let's take a step back.

You wanna be early and right to new trends as they're developing. If you're at an event and the, and it's crowded, that's probably a trend that's a little bit too late. And I feel like that is the case with AI private market investments, where you're seeing insane valuations relative to revenue. That was a great trend in 2023 [00:03:00] with the NeoClouds.

Defense tech, we think, is the new trend. And defense tech, we believe, is an AI trend. The governments around the world and sovereigns are investing in AI. We'll talk about that. And we're entering a multipolar world. We've been transitioning towards that world, and you can see in multiple different ways.

So I'm really excited to have Dan here. Dan, as a Marine, he's an American patriot and a hero, served in the Armed Services Committee in the House at the RAND Corporation as well, one of the more preeminent think tanks too. And he was one of the earliest VCs to focus on defense tech.

So Dan, let's start off with your experience. When was the first time you went to Ukraine after the conflict broke out? 

Speaker1: And j- just to cue off your observation about trends, I actually want to draw a little bit of a contrast from... I moved up to New York City in 2018. I, I'd spent a year in the Pentagon and was real excited about the coming wave of tech and the impact that was gonna have.

So I move up to New York City, start meeting [00:04:00] founders, start talking to investors, and I start talking to people about a thesis I have around the, the coming wave, and like, why this is gonna be really important. And everyone in 2018 is telling me, "That's just not a thing, Dan." Fast-forward to 2026 VC, #VCLifestyles in in 2026.

I've been to Ukraine twice this year already, and one of my colleagues is badgering me to, for us to go back again. Yeah I'll maybe start with talking about what I think was one of the more lear- interesting learning experiences. So we were, we're doing some diligence on this, this company called D-Force, Ukrainian British Ukrainian defense tech company.

And so we wanted to go talk to who we thought was gonna be the most important commander, the most important end user in the space. So this was a, a guy named Magyar, is his call sign. It means The Hungarian. He's the commander for Ukraine's unmanned systems forces. So they've actually established a whole new military branch just for unmanned [00:05:00] systems.

While we were talking with one of these other companies about the future of warfare and how things were gonna evolve, talking to this former prime minister of Ukraine, and he says, "You know who you should really talk to is Magyar." So the next day I get a call, show up in this parking lot. Someo- somebody drives me off down to another city.

We meet up with somebody else in a random parking lot outside just like a used car salesman lot. We drop all of our electronics. We get in the van. The windows are blacked out, painted out, so we have no idea where we're going.

Speaker2: Do they put a bag on your head at all anywhere there or...?

Speaker1: It's redundant, right? They're like one, the one bag's enough. Put a 

Speaker2: bag on the car. 

Speaker1: Good. Yeah. We get out, we're clearly underground. We're clearly in a something that looks like a bit of a burned out building. We go a few levels deeper, and we pass through this hallway, and it has plaques for the, the names of the fallen all around it.

We walk into their combat operations center, and they have both friendly and adversary drones hanging [00:06:00] from the ceiling to keep forefront in their minds what they're doing. The operators themselves are, many of them are dressed in civilian clothing. There's about 200 screens lining the walls where they're observing current operations.

And then we get introduced to Magyar. Magyar on day one of the war back in 2022, he was a grain trader, had no military background. He he enlisted, became a platoon commander, and with- within within a few several months, he ends up getting promoted, and he creates this, this unit called Magyar's Birds.

And it's the first unit that's really mastering the integration of unmanned systems and really creating a a, a kill chain, right- ... for very rapidly both developing and employing these capabilities out on the battlefield. And at this point today they're responsible for about 30% of the effects on the battlefield with less than 3% of the total personnel for Ukraine's armed forces.

So 

Speaker2: when you say they're responsible for 30% of the defense, does that [00:07:00] mean budget- Effects ... people? Oh effects operations. 

What is the- 

Speaker1: Destroyed enemy- 

Speaker2: Oh, wow ... 

Speaker1: objects- 

Speaker2: Oh, wow. Gotcha ... and people. There's always a euphemism in war. I guess effects is the euphemism. We 

Speaker1: can be straightforward. 

Speaker2: What is kill chain? How do you define that? Is 

Speaker1: that- So kill chain, it's it's how you go about... and sometimes people will talk about an effects chain, speaking of- 

Speaker2: Okay ... 

euphemism. Yeah. Yeah. 

Speaker1: It's ability to sense and then make sense of what's happening on the battlefield and then action it.

Speaker2: Gotcha. Gotcha. Is that- So we're gonna talk about the various geopolitical theaters around the world, the technologies that are coming online. What does the US Department of War focus on? There's a lot to get into here. So you were on the ground early in Ukraine, and did you have a thesis on sourcing technology?

What was... What compelled you to go there? 

Speaker1: Yeah. In tw- in 2023 I was ha- having a beer with a, a fellow investor who had previously served as well. He's a former Army Special Operations aviator. And by the second beer, he's like, "You know what? I'm going to Ukraine in a month. You wanna come?"[00:08:00] 

And I'm like I guess I can, actually. I'm not in the Marine Corps anymore. I'm not working for the Department of Defense, not working for a big, stuffy think tank. I can just decide to do things." 

Speaker2: You're clearly not married. You don't have kids, I presume. 

Speaker1: Oh, no, I've got four kids.

Oh, 

Speaker2: wow. Oh, wow. 

Speaker1: That's- Well, I can decide to do things, then I can get tr- in trouble later. 

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