Scaling Europe
00:12:23 · Laura Connell
[00:12:23] S1: industrialization process phase we're in, in Europe, there's quite rightly been a kind of global interest in participating in driving some of that growth. And so yes, US investors are increasingly active, but also APAC investors and The Middle East, right? And so you're seeing just across the board, more global interest in participating just from an investment perspective and for kind of purely financial return, well, purely from a financial return perspective, if you will, because the opportunity set is there and I think it's kind of uncontroversial now. I think the second big driver is back to this point around European and global resilience, because there has been this fragmentation geopolitically, and we're seeing this play out across kind of critical value supply chains, value chains for key technologies. There is also a broad based understanding that actually there is an urgency to building out different networks and hubs of critical infrastructure that, if you're based in Singapore, you may be able to rely on via Europe as well as The US. So there's also a kind of real political urgency around sovereignty and resilience, right? Which has been well documented and is not specific to Europe. So what's interesting is you see that almost play out in the mindset of founders who are trying to build these companies. A lot of them want to build global syndicates of investors. They want to have their European investor. They want to have The US investor, APAC investor, your MENA investor to try and really replicate the kind of fragmentation they're seeing on the procurement front and the interest they're seeing. So I think The Exploration Company is a very good example of that. It was incredibly valuable to the company to have experienced US investors as well as other international investors coming into the round.
00:14:03 · Sebastian Johnson, Laura Connell
[00:14:03] S0: Yeah, really interesting. It's an amazing company and I feel like there's, from a personal perspective, I'm always so happy to see when it's like a big European VC lead a growth route or later stage round, because yeah, I think we're leaving so much opportunity or value on the table by letting some of this value accrue into the hands of the regions. [00:14:23] S1: Definitely. I think maybe, you're absolutely right there to say there's a little bit of frustration in that if you look at the size of these rounds and the proportion of the rounds, the share of the rounds that European investors can take, what the biggest limitations is the size of the growth funds, right? And if you look at the average growth fund, venture growth fund in Europe versus The US for argument's sake, we are relative to the opportunity set, which is, in our estimate, there's a kind of $860,000,000,000 Euro gap in Europe in the next ten years to scale growth stage companies. We need to scale growth funds that can address that without which, as you say, yes, you could perhaps price and need things, but you're going to get a much smaller share of the pie. And obviously that has implications from a governance perspective and therefore from an IP localization perspective, from a talent perspective, everyone's reasoning about the strategic uses of capital for the political reason I mentioned before.
00:14:23 · Laura Connell, Sebastian Johnson
[00:14:23] S1: Definitely. I think maybe, you're absolutely right there to say there's a little bit of frustration in that if you look at the size of these rounds and the proportion of the rounds, the share of the rounds that European investors can take, what the biggest limitations is the size of the growth funds, right? And if you look at the average growth fund, venture growth fund in Europe versus The US for argument's sake, we are relative to the opportunity set, which is, in our estimate, there's a kind of $860,000,000,000 Euro gap in Europe in the next ten years to scale growth stage companies. We need to scale growth funds that can address that without which, as you say, yes, you could perhaps price and need things, but you're going to get a much smaller share of the pie. And obviously that has implications from a governance perspective and therefore from an IP localization perspective, from a talent perspective, everyone's reasoning about the strategic uses of capital for the political reason I mentioned before. [00:15:17] S0: And I want to touch on this article that you wrote last year. You kind of co authored an article alongside the founder of Corti, which is another one of your investments in an amazing company coming out of that is Copenhagen. The article is about like, I think it was titled Why AI's Next Phase Belongs to Infrastructure and I think you published it almost a year ago. [00:15:37] S1: Yes.
00:15:37 · Laura Connell, Sebastian Johnson
[00:15:37] S1: Yes. [00:15:37] S0: Can you give maybe like a quick overview of that article and maybe any reflections of thoughts that maybe where you were right or where you were wrong or just like any changes of views on what's happened since?
00:15:48 · Laura Connell
[00:15:48] S1: Yeah, absolutely. I think one of the things that's clear is that the barrier to entry into building at the application area is basically none these days. And the biggest bottleneck to broad based technological adoption specifically to really realize the promise of generative AI has been cost and latency depending on the job to be done. And so, and as well as the criticality of the job being done from a regulatory perspective. And of course, I'm thinking about highly regulated industries like healthcare, which Corti is obviously addressing, but also meeting kind of sovereign deployment requirements. And so there we're talking about, we really need to reason about what's the nature of the infrastructure that needs to be built to support the deployment at scale in a way that is cost effective, of course, but it also meets the requisite criteria from a risk and sovereignty perspective. And so this is not just a European story. This is proof that, of course in Europe, you know, we have a pretty high bar in terms of GDPR and the like, but this is a problem that touches on IP leakage and sovereignty globally. So there is a kind of broad based topic around how we build infrastructure that really addresses the needs of different types of deployments and different data requirements, etcetera. And I think there, given the hurdle to building in Europe is higher and not to put lipstick on a pig, so to speak, but that does force founders to build with a level of scrutiny that they can then pass forward out globally. Now where I was wrong or the things are still to be played out is it's still unclear whether or not the solution necessarily needs to be kind of locally owned. And so I think really the emphatic point here is we're not looking for European founders to build just to address the European problem. This has to be a kind of global perspective and a global based ambition, trying to solve some of the issues I mentioned.
00:17:46 · Sebastian Johnson
[00:17:46] S0: And that feels like a common theme among some of the companies that you've backed, like the The Exploration Company, Corti Physics, these are companies that are building, it feels like a sort of European way and quite a different type of company than some of those coming out of America but fundamentally global markets, globally huge markets are there any other things that connect the type of founders that you backed or the companies that you backed that sort of pulls you in and I think those three are relatively deep tech in different ways But is there something that gets you particularly excited about certain companies?