Módulo 33 - DEFII Ateliê de Software

Good afternoon, gentlemen. First of all, I would like to extend my greetings to the military commanders, to the present military, teachers, students, businessmen, entrepreneurs who are here, scholars on this topic, and I would like to thank the invitation of the Southern Military Command through Colonel Moura to participate in this course of extension and initiation of Combate Blindage. I would like to say that it is a pleasure to be able to share the experiences about simulation in a scenario of innovative companies and talk a little about our journey in this medium.

So, I am from Rio de Janeiro, I was a soldier for 30 years and some of these years I was also a teacher and coordinator of higher courses in the area of ​​IT and in the area of ​​administration. During my time in the Army, I worked almost 80% of the software development period and managing IT processes in military organizations. But I also worked in the market in my spare time, developing and implementing IT systems in various places, in various cities where I served since 1984.

Currently, I have two companies, two startups, in fact, two small companies, ADEPT focused on software development for education and training such as simulators, serious games, computer-based training, CBTs, virtual reality, augmented reality, gamification, that is, we work with content development. And there is also Cresca, which is a platform for education focused on non-traditional methodologies, such as the bridge school, Montessori, school reinforcement, homeschooling. And with Cresca, in the 100-year program of Rio Grande do Sul, from last year, the last round, we were ranked 10th among about 1,500 startups in Rio Grande do Sul.

And to receive financial support for the development of various projects to scale the company and put the company on the market is what we are doing today. I am also a partner and investor of 5 startups, of which I am responsible for the management of innovation, IT management, software development and all this technology part. ADEPT was created when I joined the Army Reserve in 2014.

Our first product was the computer-based training of the tank, the Leopard 1A5 BR combat car. And this product in 2017, so in 2015/16 we developed this product, in 2015, and in 2017 it was recognized as a strategic defense product. And as a result of that, ADEPT became a strategic defense company, and I will talk a little more about it later.

So, our focus here is to talk a little bit about startups and how they fit into the model of defense supply. So, I will try to be a little comprehensive, talk only about simulators, which is our focus here, but I will try to talk a little more because I think it would be better for everyone to understand. First, we have to define what a startup is.

So, generally, people confuse startups with those technology companies, innovative companies, that stereotype of Google, where people work in any way, in panties, t-shirts, sitting on the floor, and when they want. But in reality, in Brazil, there was no legislation that defined what a startup was, so in 2021 the legal framework for startups was created, which defined this. So, today we have a concept, we define a startup.

And although there are still questions about this framework, it seems that it is being revised, but in any case, it is he who defines today, at the present moment, what a startup is. I am not a lawyer, but I talk a lot with lawyers to understand things, to seek information. And I will try to explain what a startup is from a legal point of view, but I think it has been suffering in the flesh for 10 years and also enjoying this reality.

In relation to this, it seems to me that he chose the path of the stones, as a colonel said, a friend of mine, at a fair where I presented DEF to him, "dude, with so many markets, you chose the two most complicated, defense and education". Then I answered him, "well, the name DEF, the company's name, means "challenge" and then I took it to the letter. So, we are there, in this footprint.

But let's give the definition of a startup. What is the legal framework for startups? The complementary law number 182 of 2021, what does it say?

That startups are business or business models, born or in recent operation, whose performance is characterized by the innovation applied to the business model, to products or services offered. Here we have two points, they are born in recent operation, new companies and with the innovation applied to these business models or products or services. So, this framework has some requirements to define a company as a startup.

One of them is the self-declaration of the company's construction document, that is, the social contract. So, it has to be written in the social contract that that company is a startup. The second item is that it has up to 10 years of registration in the National Register of Legal Persons or CNPJ, up to 10 years.

And it has to have a gross revenue up to R$ 16 million, in the calendar year, from the previous year, or R$ 1,333,334. 00, 1. 33 million multiplied by the number of months of activity in the previous calendar year, when there are less than 12 months.

So, it's a calculation that accountants like to do. Well, the purpose of the regulator, in this case, was to ensure that they had some subsidies, advantages, in an environment that was more advantageous for them. And these factors, and more specifically the self-declaration, are important because when we participate in transactions in regulated environments, such as a sale, let's say, of a simulator for the government, or for the army, for the navy, or for aeronautics, there are these government sales and registration.

A startup, as long as it has a self-declaration, can participate in different models, with fewer requirements, for example, it can participate in a regulatory model in which it can develop a certain activity in a regulated environment, in a simpler way, without the need to meet all the requirements that large companies usually meet. Or even if you are going to sell it to the government, for example, you can participate in a different registration model, in which we can provide this technology to a public body, in a test model, and then it can become an innovative public solution contract, which is this contract focused on startups. So, I'll talk a little more about this later, in more detail, but then I'll show you some benefits that should be considered, whether they will be used or not, and defined at the time of the company's constitution.

So, in our case, a company that wants to provide for the government and wants to access some advantages, should make a self-declaration and enter under the umbrella of the legal framework of startups. So, we understand what a startup is and what are the benefits. Self-declaration lasts up to 10 years and gross revenue up to R$ 16 million in the previous year.

So, in this case, following this legal framework of startups, DEF is not a startup, it does not have a self-declaration and it is already almost 10 years old. So, this is what the law says and this serves for me to receive incentives and some advantages. So, what will happen?

We are going to agree now, in our conversation, that in this presentation, when I talk about startups, I will be talking about startups that fit this model and small companies, micro-companies. So, in the style of DEF, which is actually a micro-company, and I will talk about these small companies, emerging companies, based on technology, companies based on technology, micro-companies, which are highly innovative and creative. And this is the technological innovation ecosystem that we currently have, since the law is from 2021 and we still do not have a consistent ecosystem around these requirements that the legal framework brings.

So, when I talk about startups and small companies, it is the ecosystem that exists today. So, I'm going to talk about the DEF case. As I said, DEF was born in 2014 and focused on software development for education and training.

However, when DEF was born, our focus was not on the production of simple content or educational games and such. Our goal was already the production of simulators, computer-based training, games, immersive and interactive technologies, with virtual reality, always looking for cutting-edge technology for education and training. We have an idea of ​​what we did, for example, in 2014, in the production of CBT from Leopard 1 to 5, we developed some modes with augmented reality, which at the time was a technology that was emerging, it was very incipient, and we put it in at that time.

Of course, later it was not, there was no pedagogical need for it and we removed it, but it was filled with augmented reality, and from then on we have been working with it, like now, with another perspective, with other resources and such. So, DEF has always had this DNA of innovation, almost all our efforts were focused on innovation. In 2015 and 2016, we invested almost 70% of our gross innovation in high-end products, and that made us go very fast.

And here is the first tip about startups, small companies in the defense industry, about the lack of duality. So, when we are focused on producing products for defense, we usually fall into the trap that, although the products are of high financial value, the projects are financially consistent, there is no recurrence. We work for projects, and usually the consultants and specialists who give us advice, consultancy, tell us to look for duality, look for recurrence.

However, for defense products, looking for duality is very complex. Usually, these products have confidentiality contracts and some restrictions on marketing. Let's take an example here, our first product, the Biopar CBT, was a product of a single client, duality zero, but it opened the door for us to develop an aviation CBT based on an education institution similar to our CENAI in Colombia.

We also developed other CBTs, but mostly with the contrast of confidentiality and without the possibility of selling to other customers. So, when it comes to duality, it is good to emphasize, and here we have business professors who undoubtedly understand much more about it than I do, and may even disagree, but I am talking about our experience. So, when there is a product with a focus on defense, a product for defense, as in the case of DEF, we cannot have duality in product.

What we have is a duality in the productive process. For example, we produce, and here I will not be a little modest, one of the best CBTs in Brazil. Our product is a reference, it was a reference, so much so that other suppliers could use our product as a base of knowledge for the production of theirs.

As stated by correspondents of technology and defense from European countries who met DEF here in Santa Maria, they declared that at the time they had not seen such an innovative company in such a well-produced CBT. I can say this because Colonel Moura, one of the organizers of this event, was present at this event in Tecnopark in Santa Maria in 2018. I believe that there was the first course of CMS Combat Simulation, and I participated in that event there, giving a lecture there, in 2018, I think it was 6 years ago, maybe it was the first one, I don't remember, I don't have a record.

So, what happens? So, despite having a very good product, well done, this issue of reliability for a defense company, right, it shouldn't be, it wouldn't be the product, but the process of production, which we do very well, although I can't sell the product, I can't sell the product to another customer, I have a production process that I took from him, and I have a product about him, so it would be like a production of a simulator, right, you developed a simulator for a combat car, you're not going to sell a simulator for a combat car to an industry, to a company, there's no way, but you have to appropriate this process of production from the technological base, right, and here I don't talk about technology, I talk about pedagogical technology too, in the production of our products and simulators. So, for small companies that want to produce simulators, the simulators, as well as the CBTs, have a cycle of development all over the world, they involve multidisciplinary teams, because of the production of the CBT, for example, we involve 15 to 17 people in the whole process, the production of the simulator, of course, depending on the simulator, we need more people, because we have the whole mechanical and electrical part, right, so more people are needed.

So, in addition to the recurrence, right, in addition to the recurrence, right, in addition to, sorry, in addition to duality, ok, the defense product also has no recurrence, it won't, I can't put a recurrence process on it, because the licenses don't contain this business model, at least not so much, ok. So, in the years of 2018, right, until the beginning of the pandemic, we produced several softwares for a partner that develops simulators, right, from the software, we developed the company Rotosimuladores, which sells automotive simulators, entertainment simulators, we work on other types of simulators as well, but with the pandemic, the market was more restricted and we are now, right, resuming production, ok. So, then, we started to apply our duality model, providing services to other companies.

So, another consideration that is important for us to talk about, right, for a startup that wants to venture into the defense market, in the technology area, which is what I know, right, the life cycle, right, of prospecting and selling to the armed forces is great for a startup, which sometimes depends on quick sales, right, to supply its cash flow. And when it seems that everything is right, that things, that things are going to work, that there is going to be a deal, there is going to be a commercial contract there, there is an exchange of commanders, many times, right, and we lose all investment in sales. And sometimes the priority of acquiring your product goes from number 1 to the last place in the line, the companies that are here, the big companies also know that, it also happens to them, right, but it becomes more serious for a startup, for a small company, because it's a matter of survival, right, it's an economic issue.

With the speed of technological growth, the ROI, right, the return on investment of products, has to be short, has to be paid, ok, and short space of time. Today, which is acceptable, the ROI, right, for a small company, a startup, is a maximum of two years, ok, so it's good, it's easy, we take the example of companies that produce games, for example, ok, just in the purchase expectation, the game is already paid. When the guys are producing to launch the game, several, several, distributors, customers and fans have already bought it, and practically the development is already paid when the software is launched.

The return is very fast, ok, so there are these, there are these gargles, right, I think it's important for us to talk about it, so that everyone, for those who buy these startups and small companies, understand this model and know where they are going, right. The other important aspect for startups, right, who want to access the defense market, is where to get money sometimes, right, for example, what we usually do is get advertising and promotion. Usually, right, at the national level, in the case of Cresca, we went for a state-level promotion, a small resource, a small resource, and then things went well.

But usually at the national level, when we go to the defense market, the alternative we usually have is FNEP, right. And we are already in several, with very interesting proposals, it has even appeared that the General Officers declared that the product was in the interest, it was in the interest of the Army, such an idea, and saying, and justifying, this we embody together, as proof, right, that it is an important product. And the problem with these editors is that it is usually in the second phase, right, of these projects, when we go through the first phase, we enter the evaluation phase, the potential for marketing, right, then an item comes in that is called scale, which is the capacity to market in an exponential way.

So when you have a defense product, this product is not exponential, right, when the FNEP evaluator, who I believe does not understand much of the defense sector, I hope you understand, right, he is more focused on the letter, right, and maybe that's his function. And when he sees that your product will be sold, and through the licensing law, for example, he declassifies, right, he doesn't score on this item, or give it such a low score that the rating is unviable, as you can see, it is unclassified there. So I have already presented products there that have a giant utilization potential, not only by armed forces, but by all orders of the police, for example, and it was declassified in terms of scale.

So there we see, right, that sometimes it is easier to compete there with an app, for example, right, have an app for dating and demonstrate that 20 million people will use this app, even with a low ticket, right, than to show that 10,000 licenses are marketed for defense at a very high license value, right, so there is a discrepancy there in the evaluation, right, and we hope that it will improve, right, as time goes by, right. Well, the good news for companies that want to produce simulators there focused on defense and simulators for training, right, is the existence of some mechanisms that didn't exist a few years ago, right, focused on innovation, such as the regulatory framework of innovation, law 13. 243 of 2016, right, which presents several instruments, right, to stimulate innovation, their main one is the technological risk, which allows the public administration agency to hire companies to produce products that involve market value, that is, lack of supply, right, and the level of uncertainty, high level of uncertainty, right, it means that it is a demand in which the solution is not known or is not available and involves a technological risk.

And in the case of simulators, this is very interesting, because the law provides a flexibilization, right, of deadlines and delivery characteristics, given the degree of flexibility, innovation and other things, right, so in relation to payment, it is also very interesting, even with unsatisfactory deliveries and even in successes, right, there is a provision of payment, since it is proven there that there was, we tried to do it, we are, right, there was no delay in the company, we worked on it and such, we just couldn't deliver because it's not technologically viable, so I'm talking in a legal way for everyone to understand, but I recommend that you consult these laws, right, so the 8666 law, the old one, was revoked, right, it was postponed until December 30, now this year, but it is practically dead, right, and it will no longer exist, this is the place we have the law of licensing and contracts, which is the 14,133 of 2021, which has some interesting things too, it's worth it for those who are interested to take a look, as the new modality, right, there is a new modality there of competitive dialogue, right, and in this new modality, there is the possibility of public power in the case of hiring large complex things, right, which is a case of simulators and some tools for training, right, great technical complexity or solutions that are not available on the market, so the public power can use a conversation, right, call the suppliers, use a previous technical conversation with the suppliers to identify the solution, this solution, I think it interests me or not, and propose or propose, even propose, right, develop a solution for demand, because from my point of view, it lends a qualitative feature, right, to the model, right, running away from the merely quantitative aspect that the old 8666 law is proportionate, right, and it gives the public manager the ability to create an innovative product, right, a product with higher quality, right, that meets his needs and there are also some other news that have arisen that we are interested in getting more information about these laws there, and then for the defense market we have the law 2,598 of 12, right, which is a law that aims to promote the industrial base of defense, this is more properly for companies in defense and defense companies, I will not go into much detail here, I will just quote because it is complex and it has several nuances there that we have to study more in depth, ok and another way for small companies to increase the defense market is by the law of good the law 11,196 that provides several possibilities for companies to invest and have a good margin of tax reduction, so access the law of good folder there, right, there are two folders there that have a lot of information, the links are in the videos here, well, I'm going to take a little break here, a little rest, right, you didn't keep the information, it's and I said that if someone wants to go deeper into these issues of the laws of incentives of the whole part of return on investment all that there is in these issues of the law of incentives and even more so, right, the issue of simulators, right, I have a book here for you, right, it's been four years I've been working on a personal project, it's a beautiful thing, it's not from the company and this year I can conclude and I'm releasing a book about simulators, the name of the book is simulators exploring all worlds is a book with a concept about training using simulators but it involves many important issues for example niches of use of simulators examples tips methodology of application I talk about several types of simulators simulator of industrials in medicine business simulators for defense also public security and others ok so there I give tips and opportunities demands and needs of the market what is a simulator how do I start the process how do I get I can demand this simulator ok and these more commercial issues there that I talked about how return on investment how to get the port of innovation is more detailed information there, right, so it's all there, it's on Amazon, and this week, right, I'm launching this book, taking advantage of the event, it's with 30% discount so if anyone wants to buy it, go there, take it, what the book is not about, what is not the book, ok, it's not about academic simulation, ok, it's not applied mathematics, physics of these books, we have several very good ones and I'm not going to talk about it, so it's with the simulators exploring all the worlds, ok, I didn't see it, I didn't find any in Brazil or Portuguese, ok, and it was four years of a lot of research and it's all condensed chewed up there this book has everything I would like to know when I started to learn in this sector are questions that I took a long time studying testing and experiencing so if you want to be there the link the link is here I'll leave it at the end of the lecture also down here and if you want to access it, take a look, ok, from today it's free 30% and you make good use of it, study it, there's a lot of information there, ok, so it's continuing, right, I've already rested now, let's go, let's go ahead, the personal relationship, so what I see between small defense companies, both in the simulator area and in the software for training is what I see, right, it's not about whether startups are willing, right, small companies are willing to work with defense and there are many, many ideas, many projects, there's a lot of cool stuff in this environment, there's innovation, but the question is if the armed forces want startups and small companies effectively producing for them, from my point of view, the armed forces have a vast intellectual and productive capital at their disposal, a vast ecosystem of companies and technological bases that, allied with the academy, can foster very interesting ministries, not only in education, but in various areas of interest to the armed forces. Let's start from the principle that for the healthy productive market, right, we have to have a healthy ecosystem, and what is the ecosystem, right, for example, if we put five tigers in a jungle, only five tigers loose in space, this will generate a highly predatory competition, in the same way it happens in the market where there are only large companies, giant companies, this is not an ecosystem, an ecosystem is formed by the little ones, by the small ones, by the medium ones, by the big ones and by the giants, so that the ones that are more in the center, the smaller ones, feed the ones in the external ones, in a peaceful coexistence, where everyone gains and feeds this system. So, when we talk about start-ups, small companies, technological bases, we are essentially talking about agility, creativity, innovation, and a strong P&D, right, or PDI, right, research, development and innovation, which is often lacking for large companies, ok, that's what's missing, right, what's missing is sometimes this agility, right, so what is often missing for a large company is this agility, this more agile, creative footprint, right, so let's imagine the market, let's not go too far, let's go two years from now, how will this technological market be?

And there is machine learning, large-scale satellite sensor access, contact lenses with microscopes, high-tech adapters, and so much more, so many other things that we don't even imagine. And who will own these technologies first, the big ones or the small ones? How many large companies, right, are already working with scenarios of self-created simulation by AI?

But there are already start-ups that are working with these technologies. So, let's continue, right, about the relationship between start-ups and defense, right, the big question we have to ask, right, and it's like the one you saw before, right, the chicken egg, right, there are no small companies operating in the area of ​​simulators and technology products for armed forces because there are no businesses, or there are no businesses because there are no small companies in the niche of simulators and technology for armed forces. I don't know the answer to the chicken egg, right, but to the last question I have, it's very particular, but it's what I've observed since 2014 in this market, right, almost 10 years now.

Several attempts to seek this approach have already been made, for example, including the Defense of Santa Maria, for example, from 2015 to 2017, if I'm not mistaken, which promoted the integration of companies, but it all went from seminars and trips, from one side to the other, right, that's it. The commercial and economic aspect that should guide an APL did not come, and another way to demonstrate this, right, to prove that you can see this, right, from 2013 to 2017, right, 2017, I participated in all the simulation training fairs in Brazil and South America, and I'm just going to talk about the simulation fairs of the army, the simulation fairs, from 2013 to 2015, we were around 10 or 15 small fairs, some developers like me and other representatives of the software, and in 2016 this number dropped a lot, so from 10 to 15 in 2016 it dropped, right, in 17 I was the only one of these small ones, and then it was not anymore, and I talked to the organizer of these events, right, a few days, and he told me that in the following years, from 2017, one or two, possibly in a few years, no small company was present, so the answer, right, that I have is that the armed forces, although we have many events around simulation and military training, do not attract and do not foment small companies, and when I talk about fomenting, I do not mean to provide fairs and events without generating business, companies are made to generate revenue, if there is no business, the companies move away. My company received visits from several military men every month, full of ideas and projects, I have folders, folders and notebooks full of projects that would meet many and many demands, but none of them have economic viability along with the armed forces, if there is no business, the companies pivot and move to other areas, but if this is bad, right, for the companies, because some have some companies have a vocation, the debt is essentially focused on defense, we have a vocation as well as others, so we have a vocation, ideas, great products for defense, but if it's bad for us, it's also bad for defense.