William Leonard
Ladies and gentlemen welcome back to the Atlanta Startup Podcast. I’m William Leonard, your host and investor here at Valor Ventures, a leading seed-stage venture capital firm in Atlanta, Georgia. Today, I’m really eager to sit down with AJ Piplica, founder and CEO of Hermeus. AJ, welcome to the podcast.
AJ Piplica
Hey, thanks. Well, glad to be here.
William Leonard
Awesome. Aviation, aerospace, and hypersonic aircraft. I feel like it’s going to be the basis of what we’ll be centering our conversation around today. I’m really eager to jump in and discuss that more with you. But before that, I want you to take the reins here and share the AJ Piplica story with our audience. How did you end up making your way into the world of aerospace and aviation?
AJ Piplica
I’ll try to go with the Reader’s Digest version of the story, but hopefully a little bit of color along the way. I’ve always been interested in building things. Growing up and playing with Legos, Connex, and erector sets, and everything. I built a couple of RC airplanes and things. I think it was an air show in High Sierra in middle school at MacDill Air Force Base in Tampa. I saw the C5 Galaxy flying, which is like a building of an airplane. It’s a huge, huge plane. It just kind of boggled my mind that they could fly, just like it broke my brain. I want to work on these kinds of things in the future. As a kid, you liked Star Trek, Star Wars, and those kinds of things. We’re not quite flying around the stars as much as science fiction would. We’d like it to be but still a ton of advancement to be had in the aviation side of the world. I decided to go to Georgia Tech, after high school, and major in aerospace engineering. To be honest, I didn’t really know what that would bring. I know I like to build things. I knew I liked things that fly. Got a chance to learn about obviously, all the underlying physics and everything. The tribes, design, and operations of aircraft, spacecraft, and helicopters, and everything. I had a couple of internship experiences, spent a couple of semesters down at NASA Johnson Space Center, got to work on some shuttle missions, and got to work on some of the new Lunar Lander designs that were being done at the time. Those are pretty exciting. Got into some computational fluid dynamics work and so forth. That kind of gave me a pretty strong basis for how I wanted to apply what I was learning in school. From there, I had an opportunity to work at a small conceptual design company here in Atlanta and that’s kind of where I got my professional start. A good match between the skills that I had built up and what the company needed at the time. After grad school, I joined the company full time and had an opportunity to kind of have an entrepreneurial experience. So take a company that was being built within this small company, and kind of see what I could do with it so that company ended up doing pretty well. It was called Generation Orbit. We started the company to develop a small satellite launch vehicle and pivoted pretty early on toward hypersonic flight testing and built that company up to about 20 people. We’re working with the Air Force. We actually got an x plane designation for the vehicle. We were working on the X 68. That was super exciting. That’ll be in the history books forever. Toward the end of 2018, I saw a couple of different things that were kind of pushing myself and my co-founders to kind of step out on our own and go do more around hypersonic flight. We saw the dual-use nature of the technology. Obviously, there are some good defense and military applications of it that we’re seeing today. But there are also commercial applications of it when you have reusable, hypersonic aircraft. We saw an interesting set of timing around some of the government markets for that kind of stuff, that technology being sufficiently mature to actually go build some of these things. And then on the private capital side, we saw lots of money looking for new big swing aerospace projects to go into that weren’t watch vehicles or satellites. It was kind of a tough decision to leave the company that we were at but we had a good plan that we hashed out after we left, and we kind of jumped off a cliff together and tried to build an airplane on the way down, and then here we are.
William Leonard
Wow, that is a really interesting story. Aerospace and aviation have been, I guess, top of mind for you since you were a kid, and now you’re able to live that reality, every single day. That’s great, man. 2018 was really your first step towards building permits, you know, what are you all practically doing? I would love for you to give our listeners that overview as well.
AJ Piplica
The big picture, long-term vision of why we started a company and what drives everything we do here is to speed up the global transportation network. We’re doing that by building Mach 5 Passenger Aircraft. Five times the speed of sound, so significantly faster than the Boeing we have today, about two and a half times faster than the Concorde was when it was around. It’ll kind of take the world and really make it smaller. It’ll bring the East Coast of the United States and the west coast of Europe. It’ll make them accessible within about 90 minutes. It kind of takes the whole world and makes it a lot more regional to the point where like New York and London are closer than, you know, London and Paris are today by train. When you kind of look at the societal implications of speeding up transportation networks, we’ve seen it a number of times in history. When Rome built out their roads network when we switched from sail power to steam power and marine shipping, and in trying to build out their high-speed rail infrastructure in the late 20th century, each of those indices was accompanied by significant social and economic growth, like multiple single-digit points in the GDP of the entire regions that were affected. If you’re able to speed up the global transportation network by five times, that comes out to something like $4 trillion a year of new economic growth that’s spread out across the world. We’ve got obviously a lot of other challenges to solve as a species, and we’re gonna need some kind of resources. They’re able to extract from your own productivity to be able to solve those problems, whether it’s climate change or other things. We haven’t seen a change in the speed at which the world moves since the 1950s and the dawn of the jet age. I think there’s a lot of pent-up demand and productivity that’s out there that really requires something like what we’re doing to go unlock.
William Leonard
No, that is so true. I think your historical examples about Rome and how transportation was sped up, and how that really translated to commerce being more efficiently facilitated across the globe are really interesting. I can see on the video here, you’re in a large warehouse setting. Are you all building the aircraft components here in the metro Atlanta area? What does the supply chain for you all look like?
AJ Piplica
One of the unique things about how we set up the company is to be vertically integrated. You don’t see that very often in the airplane world, but you have certainly seen it over the past 10-15 years in the rocket world and the satellite world. It’s something that has to do with aircraft that go really fast, it’s kind of really difficult to draw a line between where the engine stops and the aircraft begins, much more difficult than with slower aircraft. That’s key to the strategy that we’re taking here. Not only are we developing the aircraft, all the avionics, the software, but also the propulsion systems and the engines which have a lot of different components to them. Generally, if things are available off the shelf, we’ll pull them off the shelf. We don’t want to reinvent the wheel for things to work. But if we’re kind of moving outside the bounds of what’s been done before delving into custom components or modifying things that exist, all that work is done in-house. We have about 110,000 square foot buildings over here in Doraville. This is where we’ll be building, integrating, and doing some testing on our aircraft here over the next couple of years. We also have a test site over at DeKalb-Peachtree Airport called Site 27. That’s where we do all of our engine testing right now.
William Leonard
As we think about the future of travel, we think about autonomous vehicles, we think about the Virgin Hyperloops of the world, we think about just general hypersonic travel. Practically, how far away are we from being able to fly from London to New York in less than 90 minutes or that shorter timeframe? How far are we from really traveling like this day-to-day?
AJ Piplica
I think we’re about a decade away. That might seem like a long time. But in the aerospace world, it’s actually quite fast. There’s obviously a lot of technical challenges associated with moving 20 people across the Atlantic Ocean, and in 90 minutes from the propulsion side to the airframe side to the internal cabin environments and everything. You can’t solve all these challenges at once. You have to do things kind of incrementally, bite off certain chunks, and go do that. That’s kind of how we set up our roadmap over the next 10 years, is to really focus on being hardware rich to building hardware, integrating it, testing it, learning from all the problems that you find. When you actually put hardware and software together, that’s kind of what drives what the real problems are, that actually kind of sets how a system is actually going to work. The faster that you can figure out what those are, the faster you can iterate and solve them, and so forth. Its approach is pretty similar to how SpaceX approaches development for complex systems. I don’t know if it’s going to be quite as hardware-rich as a Starship right off the bat but we’ll hopefully see one day. We’ll start out by building an engine that can operate from not moving on the grounds and Mach 5 at 90 to 100,000 feet then we’ll build an aircraft around that engine, go fly it and ensure that it works. Get up to Mach 5 and get back, then scale up from there to a point where we can actually cruise up there and kind of continue iterating and scaling until it’s got an aircraft that’s big enough to carry 20 people across the Atlantic in 90 minutes.
William Leonard
10 years, it’s not too long, but it’s not an immediate term, I’d say. That’s interesting. I don’t know if you know the answer to this question but Delta, they’re an Atlanta-based airline. What is the likelihood that we see hypersonic planes being adopted among commercial airlines like that? Is that something that is maybe 20-30 years away? Or is that something not likely to happen?
AJ Piplica
I think that should be commensurate with when the aircraft is ready. You obviously have to buy down the technical risk. And then, of course, you have to get through FAA certification, which is going to be a very interesting and unique problem set. You have to work everything in parallel, you can’t just kind of build the aircraft, then certify it, then try to get it out of the airline. I think part of that iterative process is getting your earlier aircraft that we have in our roadmap up and flying and operating and solving problems for customers so that people kind of get used to the idea that hypersonic aircraft aren’t science fiction. They’re something that actually exists, they’re used. They’ll be autonomous, so they won’t have people on board for a while and some of the early iteration. That’s kind of a different approach to buying down the tech risk. By the time the passenger aircraft is ready and certified, there’ll be operators, you’re ready to bring them into their fleets. A couple of keys there, early interaction between the manufacturers and the operators, so that you get the manufacturers, have a good understanding of what the operational constraints are and how they need to be thinking about design from an operator’s perspective. And then, of course, kind of getting everybody used to and getting the public used to adopting a very new modality of travel and we just haven’t had any in a long time. I think other places in the kind of high-speed mobility space right now, supersonic aircraft, and things like that. They’re also kind of in development right now. United Airlines just signed a big deal with Boom Supersonic. I think it’s pretty clear that the leading airlines in the country and I’m sure it’ll spread more globally as technological progress continues to be made. They’re seeing the reality of the inevitability of speed. Being something that can be very important as a differentiator in their fleets going forward. Not every route is going to fly with a supersonic aircraft, but the long ones that are overwater probably are, and probably will be for some time. I think over the next decade, you’ll see progressively more and more interest in buying and involvement from the operators. Not just companies like ours, but others who are out there developing high-speed aircraft.
William Leonard
I honestly can’t wait, man. I think it would be an invigorating experience to ride on an aircraft traveling that fast. That’s really interesting. I guess shifting gears here a little bit, you started Hermeus back in 2018. You’ve been building for some years now. What have you learned along the journey of building a startup, particularly in the aerospace and aviation industry?
AJ Piplica
There’s so much so like, obviously, building a deep tech, frontier tech, or hard tech startup is incredibly capital intensive, and you kind of set up not only your product development plan but kind of the financial sustainability of the company as it grows and takes on larger technical challenges. How you kind of play those two things together is incredibly important. A piece of feedback that we get occasionally is like, “How are you guys going to pull this off without a billionaire founder?” The only way that happens is if you have intermediate markets for the products that you’re developing to kind of buy down that overall tech risk. SpaceX analogy again, so SpaceX was founded to make humanity a multi-planetary species. The first step is going to Mars. But you can’t start with that. You can’t just raise a bunch of money to put people on Mars. They had, obviously, a bunch of technology that had to get developed. But with each piece of technology along the way, Falcon 1, Falcon 9, Falcon Heavy, now Starship and Starlink, each of those kinds of tech de-risking products, all had markets. They built a very strong financial foundation in the company to the point where their access to capital started to get to the point where they can actually go fund the development of the final pieces of the puzzle, to accomplish their overall vision so much in the same way for us. The early aircraft that we’re building in our roadmap has a wide range of use cases, mostly mainly in the national security space. But with those, we’ll be able to solve some really unique and very important challenges for our customers. On top of that, building the financial foundation, that’s going to be necessary for the company to bridge that valley of death in funding that’s going to be asserted to get to the end of the detail and roadmap. I think that took a lot of iteration to kind of figure out how exactly to do that. We’re in a really good space now. Another thing, I think that was a really, really important learning experience for myself and my co-founders were kind of how to communicate. All four of us are engineers, and we communicate in a very distinct and idiosyncratic way as a lot of us engineers do. When you’re interacting with other folks who kind of come from your backgrounds, or kind of similar perspectives, it’s kind of comfortable. You kind of speak the same language. Now, when you’re talking with customers and with investors, it’s completely different. It took a lot of learning to kind of figure out how to communicate with investors and so forth and kind of retrain our brains. But I think, kind of after getting through that, we’re in a much better space now and work with the different audiences that we have to work with.
William Leonard
I think something interesting you touched on was how capital intensive this industry is. And as you know, we have a lot of listeners on this podcast who are aspiring founders or active founders who are likely building in a similar industry, maybe not aerospace and aviation, but their industry requires a lot of capital to get the business off the ground. Do you have any insights, tips, and tricks on how you can really navigate getting the capital that you need to sustain the business at an early stage when there’s such a prevalent pressing need for capital at seed series A rounds?
AJ Piplica
I think with any deep tech startup, it really comes down to this kind of cycle that you have to get going and then scale. You need to have a good enough plan to build some hardware and de-risk some of the techs in the real world. With that, usually, if you’re able to get the initial amount of seed capital to go demonstrate something new that works, that you own and that ideally, you can start bringing in revenue around, then you kind of have this machine going where you build some tech, you raise some money, you build some tech, you bring in some revenue around that, and then you leverage the new markets that open up into your next round of capital, which is a larger set of tech risks that you’re going to buy down with that and a larger set of markets and so forth. That just kind of keeps going and going and going until you reach your eventual goal. It’s certainly not an easy thing to do. It’s to build something out in the real world. Getting to hardware quickly is super, super important, not just from the kind of tech de-risking side, but from actually building products that people are going to use. There are plenty of other hurdles that people have to deal with, whether it’s regulatory or otherwise. But yeah, I think getting that cycle going as early as possible is really key to being able to scale when you don’t have a very wealthy founder that can put in tens of millions of dollars. Maybe at the beginning, really getting to revenue is key, because obviously, the more funding rounds that you kind of go through before you get to revenues, and more dilution that you’re going to be taking as a founding team, and as employees and everyone. That’s kind of the key to the whole thing is ensuring that with every dollar of equity capital that you’re bringing in, you’re able to scale that into recurring revenue at larger and larger scales going forward.
William Leonard
That’s great advice. Taking a step back here to the macro outlook on things, Richard Branson, just went to space earlier this week. Jeff Bezos is set to go next week. You think about Virgin Hyperloop, how they had some successful tests, I believe in 2020 of last year. What is your take on the aerospace and aviation industry? Why are we seeing this huge push towards this another space race, more emphasis on accelerated travel? Why are we seeing this? How’s it going to really unfold over this next decade or so?
AJ Piplica
We’re in a Renaissance period right now in aerospace and it’s not just launching vehicles in space and satellites. It’s airplanes, electric aircraft, Urban Air Mobility, vertical takeoff, and landing. All of these areas are seeing massive, massive private investment going into there. I think that’s really the key. For a very long time, the vast majority of funding that went into aerospace was government-based. I think the kind of sea change that we’re seeing which has really been propelled by the space community from the launch side and the satellite side of saying, “Hey, look, we’ve had this massive change in microelectronics and software that is allowing commercial companies to move much faster than they’ve ever been able to in the past and do so much more per dollar that’s been put in.” The markets on the downstream end are growing and growing and growing, whether it’s for launch services, or for data services coming off the satellites, or international travel. The markets for international travel today are massive relative to what it was when Concorde came in. It’s something that’s significantly, simply changed. I think all of those things and of course, battery technology has kind of, I don’t know if there’s a Moore’s Law equivalent for batteries yet. But they’re certainly improving in energy density at a pretty steady clip. We’re seeing it in the automotive sector and in other places and you put all these things together, the technology pieces, the private funding pieces, and the markets. That’s really what’s driving this Renaissance that we’re in right now. The next decade is going to be a wild, wild ride. We’re not going to recognize how humanity moves in 10 years, because it’s going to be massively different. Hopefully, a lot better for the vast majority of the people on the planet. I think the fact that there just has been so little revolutionary change, we’ve seen obviously a lot of improvement in efficiencies and things like that for the way that we move around today, but there hasn’t really been a lot of new vehicles and things that we’ve gotten certified and put out there into the commercial market. It’s an incredibly, incredibly exciting time. Honestly, sometimes you get asked, “If you could go live in one decade, what would it be?” If he asked me like 10 years ago, I might say, the 1920s, or the 1950s. But now, it’s the 2020s. Our generation now has an amazing opportunity to write the script for where humanity goes for the next 50 years. A lot of it’s going to be moving around the planet a lot, it’s going to be moving off the planet to which is so fantastic and exciting. We’re really going to be pushing the boundaries and the frontiers of what we’ve seen before, then we’re gonna learn so much. There’s almost not a better time to be alive.
William Leonard
I think coining it a modern-day Renaissance period is very appropriate. You mentioned you’re seeing a lot of innovation around the downstream services as well like data launch services, for the listeners out there who were interested in aerospace and aviation, maybe they’re a Georgia Tech grad, or somebody looking to break into this space or build in this space, do you have any identified areas of innovation that you would like to see that are maybe key components to your business that could potentially be built upon?
AJ Piplica
Sure. Probably the single biggest thing in aviation is sustainable aviation fuels. Decarbonizing aviation is something that’s at the front of a lot of people’s minds. It’s kind of a big-ticket item on the climate change agenda, even though it only makes up 2% of global emissions, relative to ground transportation which is huge, manufacturing is also huge but it’s very visible. Here’s something that I think is going to see a lot of change. How we’re going to decarbonize aviation in the near term. We’re not going to see long-range electric aircraft for a while. The energy density on batteries just isn’t there yet. I don’t see us putting nuclear reactors on airplanes anytime soon, either. But fuels that are kind of zero net carbon, whether biofuels or carbon capture based fuels. I think that’s really going to be the near-term means of really reducing the carbon footprint from aviation. Because, yes, you can attempt to do it by saying, fly less. But along with flying less comes having significant impacts on society and economies and everything. I think the solution really has to be around figuring out how to fly right and better for the world as a whole. I think that’s probably the most poignant area that I would see. Beyond that, I think, people working in high-speed aircraft, it’s not like you can go through a senior design and go build a hypersonic aircraft. You just can’t finish. It’s really hard to do and takes a lot of time. There’s not a lot of people who have had experience designing, building, and flying anything that flies in those kinds of flight regimes. Mark Lewis, he used to be a chief scientist in the Air Force. He astutely pointed out that the number of people in the United States who have tested hypersonic vehicles is fewer than the number of Bengal tigers in the world. That means that in order for us to be successful, and in scale not just what we’re doing at Hermeus, but for the country as a whole, can add to breed a new generation of engineers that have these skill sets and interests. Because it’s a really exciting time to be able to do that. You’re either entering or coming out of universities, who maybe had a similar outlook to what I did when I came in, which is like, “Airplanes are cool, but they look the same as they did a while ago and there’s that kind of thing really, really different and new.” Well, there really is. I think that that’s super exciting and it’s going to kind of open up a new wave of students coming in and building careers around this kind of stuff.
William Leonard
Yeah, I love that. Like you mentioned, we have seen a big push for the reduction of carbon emissions. I think what you said is right in line with that. Interesting. As we wrap up this episode here, AJ, is it fair to assume that you are from the metro Atlanta area? You’re a native?
AJ Piplica
No, actually. I was born in New York but grew up in Florida. I moved down to the Tampa Bay area when I was like six. I grew up there and then came up here when I went to Georgia Tech in 2005. I spent the past 16 years or so here, so not quite as long as I’ve been to other places but almost there.
William Leonard
Gotcha, gotcha. I was gonna ask, what impact do you think building your business here has had on the success of Hermeus? How has Atlanta been pivotal to the growth of your business as far as would you say?
AJ Piplica
I think we’ve gotten this question from the very beginning. We were out in Silicon Valley, pitching the company, and in the early days, people were like, “Why are you doing this in Atlanta? Why aren’t you doing this in LA, or Seattle or San Francisco?” You know, big aerospace hotbeds and there are some pretty unique competitive advantages that we have being here in Atlanta. Number one is being on the East Coast, there are a lot of people who kind of want to work in the cutting edge of aerospace but don’t necessarily want to live on the west coast. I know in my graduating class from Georgia Tech, there was maybe a couple percent that actually stayed in Atlanta, because there’s just kind of a dearth of advanced aerospace stuff. You’re either in Houston, Ohio, Florida, California, Washington State. That’s kind of a vacuum where there’s a mass amount of talent coming out of places like Georgia Tech, and other universities here in the southeast that really want to stay here. But you know, if you want to go work at the best aerospace company, 10 years ago, I was like, “Well, I’m going to go to SpaceX, California.” Making sure that people have options here on the East Coast is huge. But aerospace is an incredibly important part of the economy of Georgia. We’ve got the biggest airport in the world here. We’ve got Delta Airlines headquartered here. We’ve got UPS headquartered here. Lockheed Martin obviously has a big facility and then you got Gulfstream down in Savannah. I wouldn’t necessarily call it a kind of an advanced aerospace hotbed, but it is kind of an operational airspace hotbed for sure. I think that offers a massive competitive advantage. Obviously, the cost of living relative to places out in California and on the west coast is significantly better. Atlanta is a great city, whether you want to live in town and hang out on the beltline all weekend, or live on a farm, you can do both of those things and still build hypersonic airplanes. It’s really a great spot.
William Leonard
Yeah, I agree. You mentioned the talent. You mentioned the people who are wanting to live here and build here. I think that gives you a lot of just significance when you are able to grow up, be educated in this region, and actually build something that’s super innovative and game-changing here as well. It’s not overly saturated like we would see in Seattle, in LA, or in San Francisco. I think that’s a really interesting point there. This is one of the most compelling podcasts I’ve had, man. I’ve never interviewed somebody in this space before. It was really a masterclass by you, I say, on understanding this and really giving our listeners the overview of why and how hypersonic travel is going to change the world and really improve commerce and people’s lives. I think this is really interesting. AJ, I appreciate your time this afternoon joining me and hopefully, we can do this again.
AJ Piplica
This has been super fun. I really appreciate the opportunity to come to share the story of where we’ve been at Hermeus and where we’re going, and hopefully, we can be flying folks across the Atlantic real fast in the not-too-distant future.
William Leonard
Yeah, I’m looking forward to it, man. Take care, AJ.
Lisa
Thank you for listening to the Atlanta Startup Podcast. You know, we’re not just a podcast, we’re a community, and we’d love to see you at one of our digital or physical events, go to valor.VC and sign up for an event that makes sense for you. We have events for founders and the investors who back them. Another event you might enjoy is Startup Runway. The Startup Runway Foundation is a Valor organization that provides $10,000 grants to founders who are women or people of color building next-generation software products. Applications are free and we’d love to hear from you at startuprunway.org. And as always, thank you so much to the organizations that make this podcast possible. Not only Valor Ventures, but also Write2Market, a tech marketing and PR agency in Atlanta, Georgia, and the Startup Runway Foundation and Atlanta Tech Park Valley’s headquarters, and also headquarters for over 100 local entrepreneurs, building global businesses. See you next week. Please bookmark the podcast and join us.
