0:00

20 trillion dollars of value creates in

0:02

the last 50 years in building decoins

0:04

in the US. The UK has created

0:06

two, about a hundred and seventy billion

0:09

of value in the UK. So the

0:11

lack of capital crimps the ambition of

0:13

companies and therefore the best founders go

0:16

to the states. We need to flood

0:18

the UK with venture capital. That's what

0:20

we need. If you graduate in an

0:23

engineering or computer science or something here,

0:25

you should have stapled your graduation certificate

0:27

a tier two visa. This is 20

0:30

VC with me, Harry Stebbings and state

0:32

is a special show as we sit

0:34

down with two incredibly special people. The

0:37

UK to put it mildly. It's not

0:39

in great shape. And so I wanted

0:41

to do an episode with two phenomenal

0:44

minds to clearly analyse the problems that

0:46

we face and then break down very

0:48

specific and granular solutions. So joining me

0:51

in the hot seat, we have Tom

0:53

Hume, General Partner at GV, where he

0:55

leads all GV's European investing, joining Tom

0:58

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have now arrived at your destination. Guys

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I am so excited to make this

4:11

happen. Two of the smallest people I

4:14

think in European and UK venture and

4:16

startups. I want to start with a

4:18

little bit of context. Stan if we

4:20

start with you in their moves Tom

4:22

what's the background as to how you

4:24

got here and just the quick one

4:26

I didn't show on you. Yeah, so

4:28

I joined a company called Acorn, which

4:30

is a computer company based in Cambridge

4:32

back in 1997. It owned this thing

4:35

called Arm, 40% of this company called

4:37

Arm, so I helped get Arm Public

4:39

and then figured out what to do

4:41

with Acorn, set up a chip

4:43

company out of Acorn, which got

4:45

venture funding for, raised $30 million

4:48

of capital and sold that company

4:50

to Broadcom for about $640 million,

4:52

about a year and a half

4:55

later. did a second deal in

4:57

the chip space which I built

4:59

a company and sold that to

5:01

invidia and did a third deal

5:04

which was in the AI space.

5:06

So I've serially founded and ran

5:08

and then sold companies, raised about

5:11

$330 million of venture capital and

5:13

sold them for about 1.3 billion.

5:15

So that's kind of what I've

5:17

been doing over the last like

5:19

25 years is doing that. So

5:22

look I won't give a long

5:24

buy, I just a really quick

5:26

one. So I helped set up

5:28

GV in Europe the year you

5:30

started 20 feces in 2014. We've

5:32

now done over 50 companies, we've

5:35

invested in 12 countries, we just

5:37

break through half a billion dollars

5:39

in the UK alone with our

5:41

investment in isomorphic last week and passionate

5:43

about making the European ecosystem as vibrant as

5:45

possible. So keen to discuss that. So I

5:48

want to discuss it in the way that

5:50

we're going to cite the problems and then

5:52

cite the solutions. I don't want to be

5:54

Debbie Downer and just do the problems, but

5:57

I want to be also pretty granular on

5:59

the solutions. I think for me the

6:01

biggest problem is actually talent supply and

6:03

not being a magnet for the best

6:05

developers in the world to have as

6:07

London or the UK anymore where I

6:09

think it maybe once was. Do you

6:11

agree that we have a fundamental talent

6:13

problem today in the UK? I think

6:15

we've got a bit of a talent

6:17

problem in the UK, so I don't

6:19

think we're the magnet that we were

6:21

or that we could be. I think

6:24

it's quite interesting actually, if you look

6:26

at where talent is being born in

6:28

like AI across Europe and you look

6:30

at where it lands in terms of

6:32

where it stays, actually, where it lands

6:34

in terms of where it stays, actually,

6:36

and we're actually recovering some of that

6:38

from other parts of Europe, so net

6:40

net we're about the same actually, but

6:42

we could be 10x better. So I

6:44

think that's the key point is that

6:46

we ought to be making the UK

6:48

the magnet, the place to set up

6:50

a company in Europe actually and all

6:52

that talent that is leaving the UK

6:55

and leaving other parts of Europe to

6:57

go to the state. We ought to

6:59

be capturing it and building companies here.

7:01

I think of it in like engineering

7:03

talent and then I think of it

7:05

in founding talent. How do you think

7:07

that differs? Like as you said that

7:09

net net for like deep AI engineers,

7:11

I think my worry is actually do

7:13

we actually have the founder supply that

7:15

is exceptional that maybe other countries do.

7:17

And that's the difference that I think

7:19

about. From my perspective, so I completely

7:21

agree, I think we're rate limited. I

7:24

think it's the biggest rate-limiter actually, is

7:26

supply of founders and supply of operators.

7:28

The great thing about founders is they'll

7:30

smash through walls to build stuff. So

7:32

you have Melanie at Canberra built, built

7:34

that business in Perth, Australia. No right

7:36

to build a $50 billion business in

7:38

Perth, but it can be done. If

7:40

you gave me the choice to have

7:42

more Nicholas Zensstroms or Demis Hasabes, I

7:44

would absolutely take that. It could only

7:46

be a good thing. The biggest challenge

7:48

is for every one good founder you

7:50

need five or ten world-class operators. And

7:52

I think that's the biggest gap for

7:55

us. That's the rate limiter. To stand's

7:57

point, if I just look at engineering

7:59

talent, we've got three of the best

8:01

ten universities on the planet. here if

8:03

you look at Oxford Cambridge Imperial, they're

8:05

only graduating between them about 500 computer

8:07

scientists or roboticists per year. We should

8:09

5X that number. There's a huge demand.

8:11

I don't see why we aren't increasing

8:13

it and then to stand point we

8:15

can do a better job of actually

8:17

making it appealing to come into the

8:19

UK for the most entrepreneurial talent and

8:21

maybe retain the talent that does study

8:23

here and becomes expert. Two big exports

8:26

of talent in the world, I think.

8:28

One is China, one is India. And

8:30

the majority of the graduates there are

8:32

deciding to go and work in the

8:34

states, frankly. Even if they come to

8:36

university here, they're typically not staying actually.

8:38

They're coming here actually with pretty much

8:40

no intent of staying. And in fact,

8:42

we're not really welcoming them either, really.

8:44

So yeah, so if you graduate in

8:47

an engineering or computer science or something

8:49

here, you should have stapled to your

8:51

graduation certificate, a tier two visa and

8:53

rights to stay. and a right to

8:55

bring your family across as well and

8:57

just make the UK the place that

8:59

people want to come actually is what

9:01

we should be doing. I love that.

9:03

Can I build on that? I think

9:05

you become what you're measuring and the

9:07

government are measuring a lot of kind

9:10

of lagging indicators. I was inspired. We

9:12

invested in Stripe in 2017 and one

9:14

of the things that struck me is

9:16

the Collinson Brothers were tracking a KPI.

9:18

They were tracking the number of series

9:20

A companies that transact online that they

9:22

actually, you know, that are using Stripe

9:24

and the number was phenomenal. It was

9:26

like high 80% taking stand's idea. Our

9:28

government should be actually looking and seeing

9:30

at the people that are graduating indicators.

9:32

and like great founders focus on leading

9:35

indicators not lagging. You mentioned that attaching

9:37

the Tier 2 visa to the graduation

9:39

ceremony on that ticket. Is there anything

9:41

else that we could do to make

9:43

sure we have a high talent retention

9:45

number for great engineering and founding talent?

9:48

I think the second big factor is

9:50

money actually, which I'm sure we're going

9:52

to go and talk about in a

9:54

second actually, but money is... There's no

9:56

structure to this. Yeah, I think money

9:58

is the great attract... of talent as

10:00

well. So, yeah, part of the reason

10:02

that people will come to the UK,

10:04

come to London, or the Golden Triangle

10:06

is the fact that they can get

10:08

funded here. They can not just get

10:10

funded pre -seed and seed, but series A,

10:13

series B, series C, growth phase as

10:15

well. And in fact, keep the company

10:17

here. The kind of constraints that come

10:19

from lack of capital, I think is

10:21

also a factor. So the model in

10:23

the UK has really been, let's build

10:25

early stage companies, let's get to a

10:27

certain point and then let's flip them

10:29

to America. And I think a

10:31

lot of founders might be thinking, why don't

10:33

I just skip that first stage? And why don't

10:35

I just jump on a plane and form

10:37

the company in the US actually? Why do you

10:39

think we have a lack of capital in

10:41

the UK? I disagree with you. So I'm intrigued

10:43

why you think we have a lack of

10:45

capital. Well, I think you just need to look

10:47

at the numbers. The numbers say that I

10:49

think in last year, because the

10:51

model I think to copy is

10:53

the US. I mean, yeah, so the

10:55

US is just so obviously successful

10:57

in technology, $20 trillion of value created

10:59

in the last 50 years in

11:01

building decacorns in the US. The UK

11:03

has created two, about 170 billion

11:05

of value in the UK. So it's

11:07

like two orders of magnitude off

11:10

the US. So the US I think

11:12

is a model to copy. And

11:14

I think if you look at how

11:16

much venture capital was raised by

11:18

US VCs last year, it was about

11:20

$76 billion raised in the US pro

11:22

-rata to population. The UK should be

11:24

$15 .4 billion. The UK funds raised $3

11:26

.7 billion last year. So we're short

11:28

about $12 billion in venture capital. I

11:30

absolutely hear you. But as a day -to

11:32

-day venture investor on the ground, trying

11:35

to find companies and great people to

11:37

invest in, there is simply not the

11:39

supply of entrepreneurs. If I were to

11:41

keep my bar as high as it

11:43

needs to be to build great companies

11:45

to deploy that money. There is a

11:47

chicken egg situation here. So traditionally, the

11:49

way to think about this is that

11:52

you create this momentum of building

11:54

successful companies. The idea is that

11:56

capital flows to places, it gets

11:58

a return therefore. you create

12:00

a record of building companies here and

12:02

capital will flow to the UK

12:04

and that's the causality. The causality actually

12:07

is the other way around. And

12:09

the causality is that if we put

12:11

capital in place here, great companies will

12:13

rise to the occasion and supply of

12:15

companies will come. And the reason I

12:17

say that is that there's a country

12:19

you can look at where this is

12:21

true and that country is China. And

12:23

so 20 years ago, China's got pretty

12:26

much nothing really in technology and the

12:28

Chinese studied the US model, put huge

12:30

amounts of capital in place. And now

12:32

China is clear global number two in

12:34

terms of technology. And you look at

12:36

the amount that's invested in AI, for

12:38

instance, I mean, there's only two countries

12:40

really investing in AI, US and

12:42

China. And the European investments are

12:44

diddly squat. You almost can't see

12:46

them that small. And net result

12:48

being we got a very successful

12:50

Chinese tech sector. So I actually

12:52

think that by the lack of

12:54

capital crimps the ambition of companies

12:56

and therefore, the best founders go

12:58

to the States and that we

13:01

end up underachieving really. I think

13:03

that's fair. I would just maybe

13:05

make a caveat that I think

13:07

the goal should be that the

13:09

best capital gets concentrated in the

13:11

best companies. China's an amazing

13:13

example. You get concentrations of talent and

13:15

then concentrations of funding taken to

13:17

an extreme there. I think one of

13:19

the data points that makes this

13:21

so difficult is none of us I

13:24

would think that all companies should

13:26

get funding. The real challenge is

13:28

if you ask any founder and by

13:30

definition at seed stage, maybe the majority

13:32

shouldn't get funding. When they don't receive

13:34

the funding, they think it's a funding

13:36

gap. So I don't think what we

13:39

should be doing is necessarily just sort

13:41

of evenly distributing capital across the whole

13:43

market. I actually think that's damaging for

13:45

talent concentration as well. Instead, we should

13:47

have sophisticated people say these are the

13:49

companies that can win. These are the

13:51

companies that can actually absorb more capital

13:53

because the founders are great. They're not

13:56

going to be over capitalized. They'll then

13:58

bring in the best people and maybe they can

14:00

just more ambitious. Yeah, I've got a good

14:02

example of this actually. There's a

14:04

company I've invested in called Wordware,

14:06

so a good name check for

14:08

them, but there's two guys studied

14:10

computer science in Cambridge, could have

14:12

set up a company here, could

14:15

have raised probably five million on

14:17

a 20 pre, could have built

14:19

a really, it's basically a set

14:21

of tools for LLM prompt engineering,

14:23

but they went to San Francisco

14:25

instead. They ended up raising 30.

14:27

on a 220 post. This is

14:29

Philly, Kuzhira. Is it Philip? Yeah.

14:31

So those investors are expecting them to

14:34

build a business worth 2 to 3

14:36

billion, so 10X. That stratospheric raising of

14:38

expectations is part of the US playbook.

14:41

I think those ambassadors are expecting him

14:43

to pull it. 10 billion. Or maybe

14:45

a 10 billion. It's spark. On a

14:48

10% ownership, you need a billion dollars.

14:50

Yeah, okay. So even better. But the

14:52

fact is, they've got the capital to

14:55

do it, really, as well. So this

14:57

cranking up of expectations and the provision

14:59

of capital behind founders with energy and

15:01

enthusiasm, I think, does work. I mean,

15:04

it's part of the US playbook. completely

15:06

agree Tom that it's concentration that really

15:08

matters really and the ability to put

15:10

a large amount of money at the

15:12

right point behind founders that have the

15:14

energy and intellect and the pivotability and

15:16

the coachability I think is absolutely critical

15:19

really and it's the bit that is

15:21

sort of missing I think in the

15:23

UK and in Europe as a whole

15:25

actually. I don't think we need more

15:27

money. I'm seeing every day the most

15:29

inflated prices and it's just because you see

15:31

this concentration of capital to obviously good people

15:34

like your word wears where you can get

15:36

a 5 on 30 5 on and then

15:38

light speed and general catalyst come in and

15:40

suddenly it's 6 on 80 and it just

15:42

goes nuts I see now complete removal of

15:44

lick prefs and it's because we don't have

15:46

the supply the capital concentrates and just inflates

15:48

in a way that's much more so than

15:50

the US and so I think we have

15:52

this fundamental talent problem and then we have

15:54

a narrative problem which is based around behavior

15:56

of behavior of venture investors in Europe which

15:58

is if you speak to Philippe. Philip, he'll

16:00

tell you that like it was

16:02

super fast in the US, they

16:05

totally got me, they gave me

16:07

a great experience, and in Europe

16:09

it takes weeks, the partners aren't

16:11

here, and they're slower. We have

16:13

a very bad customer experience for

16:16

founders in Europe, which I think

16:18

makes it a less attractive funding

16:20

product than the US. I think

16:22

that's certainly true, but my solution

16:24

for that would be let's... increase

16:27

the amount of capital here and

16:29

the best founders will seek out the

16:31

best VCs. The best VCs will generate

16:33

outsized returns and they'll be able to

16:36

raise the next round in the next

16:38

capital basically. So you will gradually, hopefully

16:40

quickly, ratchet up the performance essentially a

16:42

venture in Europe actually. The thing that

16:44

has scared me historically when people have

16:47

talked about, for example, government investing in

16:49

startups is I think it's an incredibly

16:51

difficult thing to do. I think VC's

16:53

take, I don't know if I'm any

16:55

good at it still because the feedback

16:58

loop is probably a decade. It's like

17:00

the worst learning loop ever. And so

17:02

the important thing is to make sure

17:04

that if there is more capital in

17:06

the system it's deployed by the experts

17:09

and they can sort of really see

17:11

that. compound effect. It'd be absolutely disaster

17:13

for government to be making direct investments

17:15

in companies I think because there's no

17:17

way they can do it I think.

17:20

I mean if we want to get

17:22

really spicy then Tom seen my Twitter

17:24

and I give not many shits anymore

17:26

I most of the BB's portfolio is

17:28

just dire. Like, you know, their fund

17:30

of funds investing. I mean, these funds

17:33

should not be in existence. Like, the

17:35

question is, do you have a right

17:37

to win? Do you have a right

17:39

to find companies, pick them, win them,

17:42

help better? And the majority are honestly

17:44

dire. And they will not do well.

17:46

Government money will be wasted. And I

17:48

think I get both of what you're

17:51

saying, but I think then if you're

17:53

like, well, I want this to go

17:55

to truly gifted individuals who will invest

17:57

it wisely. 5 players in the UK.

17:59

because honestly I think that's only

18:02

the amount that's very good. Probably,

18:04

Tom, if I could agree. Couple

18:06

of quick reactions. First, I don't

18:08

think it needs to just be,

18:10

to play as in the UK,

18:12

it can be global funds. I

18:14

think you have some of the

18:16

best. And the second thing is,

18:18

the best funds have proven themselves

18:20

for multiple vintages now. They're oversubscribed,

18:22

but I would hope that the

18:24

UK, UK PLC could get into

18:26

those funds. But there's no way

18:28

they could get into that brand

18:30

names. That's the question. Yeah, I

18:33

would say that there's firstly no

18:35

large fund of funds has ever

18:37

lost money. From a investment perspective,

18:39

government ought to be willing to

18:41

take a much bigger risk on

18:44

fund of funds investments here in

18:46

the UK. I think BB puts

18:48

something like $420 million a year

18:50

into fund of funds investments, which

18:52

is a drop in the ocean

18:55

compared to the 15.4 billion that

18:57

we ought to be investing. So

18:59

yeah, that number needs to be

19:01

like 10X. in my view.

19:03

And then secondly, I think

19:06

I think there is a

19:08

venture talent pool that can

19:10

be energized. I think below

19:12

partner level in a lot

19:14

of these firms, there are

19:16

a bunch of people who

19:18

are principal level, whoever, who

19:20

could be interested and willing

19:22

to run a new fund

19:24

and would do a bloody

19:26

good job at it actually.

19:28

Because here, you know, there is

19:30

there is... talent in Europe. Valuations are

19:33

lower. If you could put the money

19:35

in place, then I think we, not

19:37

only would we have some homegrown talent

19:39

we can release from venture firms, but

19:42

I think we could also imagine some

19:44

of the leading partners in US firms

19:46

coming to London or UK to basically

19:48

get this economy really moving, actually. Sometimes

19:51

in my head, I think, how many

19:53

friends do I want to lose in

19:55

one single show? My question, I don't

19:57

agree that prices are better here, honestly.

20:00

Like for the best companies for your word

20:02

was if they were to stay, they're

20:04

just super they're so inflated. I think

20:06

just a quick thought on, no, no, I

20:08

so if I look at where we

20:10

sit today, some of the best deals

20:12

are overpriced. I think it's often because they're

20:14

the ones with the traction and they're

20:16

therefore somewhat de -risk. And I think there's

20:18

two things that make this a really

20:20

difficult thing to answer. We talked about

20:23

lagging indicators. The first is we're basically trading

20:25

against or we're working against sources of

20:27

capital that were raised in the past.

20:29

Like these are not brand new funds often

20:31

and often they were raised in Zerp. The

20:33

cost of capital has gone through the roof,

20:35

like given the current interest rate environment, I

20:37

think that's going to get worse if anything.

20:39

The fact that a lot of these funds

20:42

are giving out so many stock grants, you

20:44

basically need to hit 20 % IRR to break

20:46

even. These numbers are really high. So that's

20:48

the first thing. I actually think there's probably

20:50

going to be less money in the market

20:52

for venture in two years than there is

20:54

today. It's kind of a question for us.

20:56

And then the second thing is classic machine

20:59

learning. I think we're overfitting to history. I

21:01

don't think we know what the

21:03

biggest companies look like going forward. And

21:05

so it's very difficult for me

21:07

to say that actually the sort of

21:09

returns profile that funds got from

21:11

investments 10 years ago are going to

21:13

be the ones they looked like

21:15

before. My belief is that AI is

21:17

creating a real power law far

21:19

more than we've ever seen before. And

21:21

so the job to be done

21:23

is going to be be in those

21:25

handful of global champions. If you

21:27

look at Israel is an interesting example

21:29

for us at the moment. Amazing

21:31

story recently. The Wiz acquisition,

21:33

32 billion. That's like 7 %

21:35

of Israel's GDP. A lot of

21:38

that is actually flowing back

21:40

to Israel. And it will create

21:42

this multiplier effect. That business

21:44

was basically built in five years.

21:46

It was assembled without actually

21:48

a clear sort of problem identified.

21:50

They just got a world

21:52

class team and they really well

21:54

capitalised the business on day

21:56

one. I think the businesses we

21:58

want to build. look more like

22:00

whiz and so concentrate capital into the

22:02

best founders. Can that be done from

22:04

the UK or Europe? Hell yes. What

22:06

we do often at the moment is

22:09

we say be close to your customer.

22:11

We say go to the US because

22:13

the market size is roughly an order

22:15

of magnitude bigger than it is in

22:17

the UK. We're not saying give up

22:19

the US market, absolutely go to the

22:21

market, but build a global business on

22:23

day one. I think that's right. I

22:25

think it's almost pointless building a number

22:27

three or number four in the marketplace

22:29

today. If we're going to undercapitalize businesses and

22:31

build businesses at number three or number

22:33

four, it's not what we need because

22:35

those businesses have got no choice but

22:37

to be sold to US companies. We're

22:39

never going to create companies here that

22:41

stand up on their own two feet

22:43

and generate the jobs growth and the

22:45

diffusion of wealth that the country desperately

22:47

needs really. I think we've got to

22:49

concentrate on companies that can be global

22:51

number one or global number two, which

22:53

does require big checks to be written

22:55

into those companies at the right point.

22:58

Can I give another example of this

23:00

where I think actually, in a way

23:02

we've got a problem that we're

23:04

subscale in a way we've described it

23:06

at the moment. I agree with

23:08

that. The other place that I think

23:10

our relative size hurts us is

23:12

the subscale pension funds. For example, you've

23:14

got 90 local pension funds. Actually,

23:16

a policy that I was really excited

23:18

about the Chancellor I think mentioned

23:21

last year is this idea that they

23:23

should be aggregated so that they

23:25

can have a world -class investment office

23:27

so they can do something like Yale.

23:29

Like when I do LP calls

23:31

for emerging talent. Thanks, dude.

23:33

You're very welcome. Tom had

23:35

to do like 10. I

23:37

think it was more legit.

23:39

I just told you about

23:41

the 10. No, I did

23:44

do a few. The thing

23:46

that's stunning about the US

23:48

firms and then the really

23:50

I think more sophisticated ones

23:52

here like Welcome Trust, just

23:54

phenomenal investors is they understand

23:56

the power law. They understand

23:58

they've got to build relationships

24:00

for the long term and

24:02

they can actually have world

24:04

-class analysts inside those firms

24:06

and you can't expect a tiny fund to do

24:08

that. So this idea that we might aggregate 90 local

24:11

pension funds in the UK to enable them to think

24:13

more like Yale rather than just replicating the asset split

24:15

I'd be really excited about. I thought it was so

24:17

interesting you said that it doesn't make sense to build

24:19

these like three or four tier players in the market

24:21

because I've been in venture for 10 years now. A

24:23

lot of the job has been like, oh well it's

24:25

like... at HR platform X but in Europe it's Y

24:27

for Europe and actually you can build billion dollar two

24:29

billion or three billion dollar companies on the

24:31

back of that where can the UK and

24:34

Europe then be a number one market leader

24:36

and beat the US and China? Well I

24:38

think if you think of it as a

24:40

stack from like semiconductors and hardware up to

24:42

sort of applications layer, then I think it's

24:45

easier for Europe to think about building at

24:47

the bottom of the stack or at the

24:49

top of the stack actually. I think it's

24:51

quite hard for Europe to sort of build

24:53

in the middle of the stack. So I

24:56

think AI application companies that are solving a

24:58

particular problem, particularly if there's a sort of

25:00

defensive mode that exists in Europe, but obviously

25:02

a good place to sort of start. and

25:04

then I think at the bottom of the

25:07

stack I think something that's attached to the

25:09

metal so semiconductors that are solving a particular

25:11

problem happened to be somewhere where we have

25:14

the expertise to do that. and it happens

25:16

to be a B to B sale where

25:18

we get paid for the value of the

25:20

architecture that we put down and the utility

25:23

it delivers. It's easier to think top and

25:25

bottom of the stack is the places that

25:27

we can build those companies actually. So it's

25:30

not necessarily where we're focused on, but

25:32

it is kind of where we should

25:34

be focused, whereas I think if you're

25:36

building some middleware layer or some tools

25:38

layer, I think it's a little bit

25:40

easier to imagine doing that in the

25:42

state, I think the interesting thing with

25:44

Stan's argument. I really agree with it.

25:46

I like the idea of focus and

25:48

specialization. One of the things that concerns

25:50

me is just this idea that we

25:52

can be experts at everything. Instead, I

25:54

think we have to say, actually, let's

25:56

understand our unfair advantages. If, for example,

25:58

when I agree with it, the bottom

26:00

of the stack, the infrastructure layer is

26:02

somewhere we can be world class, we've

26:04

certainly got the technical talent, then I

26:06

think we have to build the whole

26:08

ecosystem and structure it and say actually

26:10

in this one location we're going to

26:12

be effective. We then have to do

26:14

second order things like we have probably

26:16

the highest electricity or energy costs in

26:19

the whole of the Western world. in

26:21

the UK. That just does not enable

26:23

you to do a great job of

26:25

this. It doesn't even enable you to

26:27

do a great job of training foundation

26:29

models. Like if the blended cost of

26:31

training a large language model is 20%

26:33

energy we're already kind of losing. So

26:35

the important thing is to say actually

26:37

what are we going to be world-class

26:39

at? and where are we going to

26:41

be? And we have some advantages, like

26:43

one of the things that's interesting, we've

26:46

done it in this conversation, it's easier

26:48

to sort of aggregate everything at the

26:50

national or continental level. In truth, we

26:52

should be honest that London is incredibly

26:54

different, for example, from the rest of

26:56

the UK. Building a startup in Europe

26:58

is doing it on ultra-hard mode. We've

27:00

talked about it before, but actually if

27:02

you do it in London, it's slightly

27:04

easier mode at the moment, because it's

27:06

where the investors are. We have to

27:08

start to just acknowledge that, lean into

27:10

it, and actually have this pockets of

27:13

specialization, I think. I mean I wasn't

27:15

so much thinking by the way of

27:17

building lots and lots of data centers

27:19

on the expensive energy. I understand that

27:21

would be nuts right now obviously. I

27:23

was more thinking about the chip design

27:25

layer, so not even chip fabrication, but

27:27

chip design, but chip design, which is

27:29

where 75% of the value in the

27:31

semiconductor spaces is what invidious, what Qualcomm

27:33

is, what Qualcomm is, or basically semiconductor

27:35

design companies that basically sell chips that

27:37

they get them fabbed by TSMC or

27:40

whatever. That's the model that we ought

27:42

to be playing to be playing in.

27:44

We have something like 2% of that

27:46

global market in Europe. It's insane, obviously.

27:48

So in the fabulous space. So we

27:50

must be building successful fabulous companies, I

27:52

think. And Europe has got, in fact,

27:54

the UK, in Bristol, as it turns

27:56

out, happens to have. this full custom

27:58

microprocessor design capability that stems 20, 30

28:00

years ago from the creation of in-mos,

28:02

which is kind of unique actually. There's

28:04

only probably two places in Europe we

28:06

could do that, and Bristol happens to

28:09

be one of them. I think it's

28:11

plausible to build companies in this space

28:13

that are global winners, and you're right,

28:15

that we do need to put much

28:17

larger checks into those companies, but that's

28:19

the reason why we need more venture

28:21

money. here is to better write those

28:23

checks. It's interesting you said about the

28:25

cost of energy. I was speaking to

28:27

the CEO of one of the largest

28:29

data providers in the world, or data center

28:31

provides in one. He said, Harry, in the US,

28:34

my energy costs 4%. In UK, if I set

28:36

up to date, it's going to be 17% total.

28:38

And I was like, I get it. That I

28:40

did not know. You know, I was pushing, pushing,

28:42

pushing. He said that. I'm like, all right, fine.

28:45

You do you do you. My question to you

28:47

then is like, when we look at that and

28:49

we look at the money that's needed to fund

28:51

that, where does that money come from? I understand

28:53

your argument around the scale and the scale of

28:56

cash needing to change. How do we fund the

28:58

$4.50 million that BBB does invest to whatever we

29:00

want to call it, $2 billion, $2 billion?

29:02

Well, firstly, I think the money, Europe has

29:05

a lot of money actually. So it's the

29:07

first thing to say. So Europe's got a

29:09

lot of money in, obviously in pensions, we

29:11

talk a lot about pensions, so it's got

29:14

a lot of money in family offices that

29:16

are sort of locked up all over place

29:18

actually. So Europe actually is not. capital short,

29:20

it's just not investing in this particular asset

29:23

class. So the job I think of BB

29:25

is to create that asset class at speed

29:27

and to play an enabling role in doing

29:29

that essentially. So my suggestion would be

29:31

that we get the government to increase

29:33

the amount that British Business Bank and

29:36

we may need to operate the quality

29:38

and talent in BB to do this,

29:40

but the BBB puts like four billion

29:42

a year in and would require like

29:44

a 50-50 funding ratio. So the GPs

29:46

have to raise matching money. Otherwise, yeah,

29:48

BB doesn't participate, but it can be

29:50

50%. So if I want to create

29:52

a billion dollar fund, I know I'm

29:55

going to get half a billion from

29:57

BB and I've got to raise the

29:59

other half. half a billion essentially. So

30:01

raising the funding ratio to 50-50 would

30:03

be a good start. And then I

30:05

think we've got to be creative, which

30:07

I guess is another call to action

30:09

for BBB, about how we split the

30:11

fees and split the carry between the

30:13

different LPs and the funds. So at

30:15

the moment there's a lot of hand-ringing

30:17

and anguish about the fact pension funds

30:19

won't pay a 2% fee. and I

30:21

would say fine yeah let's do it

30:23

on a half percent fee then but

30:25

instead you know the carry that the

30:27

partners have is higher and quid pro

30:30

quo is the BB might pay a

30:32

three percent fee and the carry for

30:34

the partners is lower But net, we're

30:36

still at 2 plus 20. So let's

30:38

be creative about how we do it

30:40

and let's flex. The job is to

30:42

bring the capital in and make it

30:44

mesh with public money to mint these

30:46

large funds that can write these big

30:48

checks that allow us to play seriously

30:50

in some of these sectors that are

30:52

basically capital intensive and winner takes all.

30:54

That's kind of what we need to

30:56

do, I think, to sort of pull

30:58

ourselves out of the nose dive that

31:00

the country's. currently in I think. Where

31:02

would we get that money from? The

31:04

government has created its own fiscal freedom

31:06

to do this actually. So the government

31:08

is able to treat any investment in

31:10

BB money as being not boring, not...

31:12

public spending. So it forms a part

31:14

of public sector net worth and it

31:17

doesn't count as currently your spending because

31:19

the argument is, and I think it's

31:21

just correct, that what we're doing is

31:23

building up a financial asset on the

31:25

government's balance sheet. So if you did

31:27

this consistently over like 10 years, you

31:29

know 40 billion on the government's balance

31:31

sheet of fund investments in venture, the

31:33

worst performing fund of funds generate maybe

31:35

6% IRR, the best performing generate mid-20s.

31:37

So yeah, so yeah, so always higher

31:39

than guilt yields. And I would say

31:41

you could go even further. You could

31:43

say like in 10 years time, we

31:45

got 40 billion on the public balance

31:47

sheet. Why don't we make an offer

31:49

to the public? Why don't we offer

31:51

it to individual pension plans to invest

31:53

in this stock? So yeah, so we

31:55

could we could create like a Thatcher

31:57

moment really where you privatize, but people

31:59

in their 20s and 30s should be

32:01

owning assets in the future of the

32:04

country actually. They should be owning those

32:06

assets and it should be recycled into

32:08

making the country more successful competitively and

32:10

technology is the place to put it

32:13

obviously. So that's kind of what we

32:15

ought to be doing. I do see

32:17

it as investing. We're talking about infrastructure

32:19

projects. We look at Germany's trillion dollars.

32:22

I think it's incredibly important. I like

32:24

the idea that we have a kind

32:26

of intellectual infrastructure investment that you're describing.

32:28

The big thing to design around, and

32:31

it sounds like you've started to think

32:33

that three, is the adverse selection bias.

32:35

My biggest fear, because of such a

32:37

power law of returns, what you don't

32:39

want to do is just end up

32:42

with the worst investors making the worst

32:44

investments. And so placing an emphasis on

32:46

those maybe first, supporting perhaps first-time funds

32:48

solo GPS initially to get going could

32:51

make sense but it's incredibly important for

32:53

the UK taxpayer to get into the

32:55

best funds yeah and so I do

32:57

believe there's got to be incentives that

32:59

UK PLC can provide so that the

33:02

best funds that Harry describes actually are

33:04

excited to take money from that BB

33:06

fund of funds. But Tom do you

33:08

think do you think If we put

33:10

such a system in place and we

33:13

made it plausible, feasible for GPs to

33:15

go raise like half a billion or

33:17

a billion dollar fund here, do you

33:19

think we'd get partners in US firms

33:21

with a strong track record to consider

33:23

coming to London to basically raise a

33:26

fund here because it can be done

33:28

here and yeah they could build it.

33:30

And you could also imagine there'd have

33:32

to be some conditions on those funds if...

33:34

BB is going to fund them like half

33:36

of the money or whatever's going to be

33:39

invested in the UK. But you could imagine

33:41

somebody trying to set up a start up

33:43

in say stock goal or something. The call

33:45

could be, well, we'll fund it, but you

33:47

got to move to London and we'll fund

33:49

it. So I think the answer is yes,

33:51

but again, it sort of speaks to a

33:54

specialization. The question for me would be in

33:56

what areas would you get the best people

33:58

saying it's worth me doing that? it wouldn't

34:00

be necessarily in digital health where the

34:02

UK has one major customer none else.

34:04

It would be in places like FinTech

34:07

where we have a good track record

34:09

because we're in a great position sort

34:11

of globally at this point. That's why.

34:13

we've done disproportionate number of FinTech investments.

34:16

Defense, I think, is an interesting area

34:18

at the moment where, you know, we're

34:20

going to have to look more to

34:22

3% of GDP spend in defense. So

34:24

there'll be areas where I think actually

34:27

very smart rational people would make that

34:29

cool, but there's others where it would

34:31

be a harder stretch, like consumer, where

34:33

it doesn't really make sense to like

34:36

be outside one of the biggest markets.

34:38

Why do you think defense is different

34:40

to health? I think in defense you

34:42

still have one primary buyer here really

34:44

which is obviously the MOD and then

34:47

you have very splinted and fractured buyers

34:49

which is the rest of Europe and

34:51

each wants to have their own dominant

34:53

domestic provider? So disclaimer I'm a reservist

34:56

as you know so this is something

34:58

I'm really passionate about and I'd say

35:00

there's three things happening at the moment

35:02

that make it significantly more interesting than

35:04

it has been in the past. The

35:07

first is very smart people are interested

35:09

in doing it because they think it's

35:11

right. There are people like our peers

35:13

that are interested in doing defense companies

35:16

because for the first time they actually

35:18

think there's existential threat. Second thing is

35:20

actually while you do say you're right

35:22

there's maybe a single buyer, it's more

35:24

complicated that in the UK. We have

35:27

multiple services, we have multiple regiments within

35:29

each is a potential customer. and they're

35:31

being forced to innovate at the moment

35:33

for the final reason which is to

35:35

some extent we are on the geopolitically

35:38

we are close to a war zone

35:40

at the moment and we have a

35:42

point of view in that war we

35:44

occasionally have some of our armed servicemen

35:47

at risk I think those three things

35:49

together mean that actually when you look

35:51

at Andrill in the US and they

35:53

had a recent round eight billion dollars

35:55

oversubscribed it shows you there's an appetite

35:58

of people capital to go in there.

36:00

I think the UK has interesting talent.

36:02

The UK is playing its part in

36:04

Ukraine at the moment. It's an amazing

36:07

place to test new technologies and I

36:09

think it's an opportunity to build next

36:11

generation primes here. So as a category

36:13

I think defence in Europe is an

36:15

important one at the moment. And there's

36:18

probably what two to three trillion can

36:20

we spend over the next five to

36:22

eight years in Europe in defense actually

36:24

and in all layers not just final

36:27

product but like components and there's a

36:29

lot of layers here I think agree.

36:31

And then I do think it's that will

36:33

forge some dual use technologies. If you look

36:35

out there at the sort of the biggest

36:38

defense companies you could argue that DJI is

36:40

one of them at the moment and actually

36:42

I think you'll see the same thing in

36:45

reverse some of the technologies whether it be

36:47

cyber or maybe it will be UAVs, drones.

36:49

I think you'll start to see they'll have

36:51

other applications outside military. To what extent is

36:54

it when we think about kind of amazing

36:56

companies, you mentioned Andrew, we've mentioned some other

36:58

amazing ones, in the US there is a

37:01

market for them to go public, there

37:03

is a liquidity market that is much

37:05

more vibrant. In the UK we have

37:07

the London stock exchange where a lot

37:09

of people throw a lot of criticism

37:11

and people choose to not list on

37:13

the London stock exchange. To what extent

37:15

do we need local domestic liquidity markets

37:17

or are we in a global world

37:19

where you can just go to NASDAQ?

37:21

Yeah, I've thought about this a bit

37:23

actually. I think it's a supply problem

37:25

again. The lack of tech companies in

37:28

London, there's only one London listed tech

37:30

company worth more than 10 billion and

37:32

that is SAGE and SAGE is like

37:34

a 30 year old ERP company. It's

37:37

a very nice company but it is

37:39

an output of the 20 billion a

37:41

year that we pump into tech in

37:43

the UK to have one company worth

37:46

10 billion dollars on the stock exchange

37:48

is not a great So once the

37:50

US has minted 20.5 trillion of value

37:52

in its tech companies, we've minted about

37:55

100 billion over that period of time.

37:57

So firstly, let's accept it's not good.

37:59

But I think the problem is supply

38:02

actually is that companies grow to a

38:04

certain size, they're stunted for all sorts

38:06

of reasons. It could be quite early

38:08

on the cap table's broken, the higher

38:11

the wrong people, the wrong product market

38:13

focus, but it could also be lack

38:15

of swing over the fences, lack of

38:17

money to swing for the fences, actually

38:19

a net result being companies just have

38:22

to be sold to typically US buyers.

38:24

So they never... get to the point

38:26

where they're into growth and they're capable

38:28

of being IPO. So there's not a

38:30

big pipeline of companies coming through that

38:33

could be IPO. There's a handful in

38:35

FinTech maybe, but apart from that, not

38:37

very many. So I think it's a

38:39

supply problem actually and I think that's

38:42

why it's really important I think that

38:44

we grow the amount of capital here

38:46

and it's UK capital that is patient

38:48

and we'll put the money in and

38:50

we can fund the companies all the

38:53

way through to eventually going public. where

38:55

there's a market for them and I

38:57

think that could be London, it could

38:59

be NASA, it could be wherever suitable

39:02

for the company. Agree, definitely supply problem

39:04

doesn't help if we had much, many

39:06

more, much bigger companies we wouldn't see

39:08

it. I give two other reasons. So

39:10

the first is a sentiment problem. I

39:13

have not spoken to anyone for months.

39:15

is positive about LSE or listing and

39:17

whether it be valuation or it be

39:19

perceptions about for example the product itself

39:21

because of the stamp duty driving down

39:24

liquidity and I'm afraid these stories are

39:26

kind of like SEO for our minds

39:28

we hear the story we remember them

39:30

and there's just a negative sentiment about

39:33

it so most good companies are getting

39:35

a more kind of open to the

39:37

US and they're getting courted very effectively.

39:39

They have the red carpet rolled out

39:41

for them. That's the first one. Sentiment

39:44

problem needs to be turned around. I

39:46

mean you interviewed Julia Hoggett, don't know

39:48

your point of view but the sentiment

39:50

isn't great. The other one I just

39:53

point out is I think it's an

39:55

easy thing to measure. That doesn't mean

39:57

it's the best thing to measure. Actually

39:59

if I'm completely honest. given the choice

40:01

between picking where a company's HQ is

40:04

or where the bulk of the employees

40:06

are or where the IP is generated

40:08

or where it's listed, I'm taking the

40:10

first three. They're way more valuable. I

40:12

know that they're kind of interlinked, but

40:15

the most important thing is where is

40:17

the sort of economic driver and where

40:19

are the employees and that value creation?

40:21

And so, you know, if we do

40:24

have a period where the very best

40:26

UK and European companies end up listing

40:28

in the US, I think that's okay.

40:30

as long as we have a great

40:32

kind of platform of big value generation

40:35

here. And I think it'd be okay

40:37

if the ownership of those companies when

40:39

they go public is predominantly here in

40:41

the UK. Because I really think we've

40:43

got to set a national goal here

40:45

for wealth creation. I mean, the UK

40:48

really, it's clear you just look around

40:50

and the country's getting poorer really. And

40:52

we can't afford all the services that

40:54

we want. So what do you mean

40:56

a national goal for wealth? Like, firstly

40:59

I think. Tech and innovation is really

41:01

the engine of economic growth here. There's

41:03

no other engine that we can rely

41:05

on. So it's that. And if you

41:07

look at the US has created this

41:09

20 trillion of value. over the last

41:11

20-30 years in new tech companies, UK

41:14

0.1 trillion. Yeah, pro rato we should

41:16

be about 4 trillion we should have

41:18

created and we've created 0.1 trillion. So

41:20

we're about 4 trillion short of where

41:22

we should be. So I think we

41:24

could set a goal to say look

41:26

what if in 20 years we set

41:28

a national goal of creating 4 trillion

41:30

of wealth in tech. That's a sort of

41:33

escalating growth of value. So let's, let's say

41:35

year 10, the goal is like half a

41:37

half a trillion. and thereafter we grow from

41:39

that point. So growing half a trillion is

41:41

already quite a big goal for us, given

41:43

that we've only created a hundred billion right

41:46

now. But it also sets the mindset for

41:48

saying, what are we going to have to

41:50

invest to do that? What these companies look

41:52

like, how much capital are they going to

41:54

need? They're going to need about a hundred

41:56

billion of capital to do that really realistically.

41:59

And you think... okay with that hundred

42:01

billion where's it going to come from

42:03

well yeah it's going to be something

42:05

like 10 billion in the years, what

42:08

we've got to put in additional to

42:10

what we're currently doing. And that's roughly

42:12

the gap in our venture. So I

42:14

think if you could find a way

42:17

of putting more capital to work, we

42:19

can end up growing that half a

42:21

trillion in 10 years and four trillion

42:24

over 20 and fill the hole. In

42:26

terms of putting more capital to work

42:28

and encouraging that, SEIS, EIS has been

42:30

very effective in terms of encouraging more

42:33

direct investing from individuals. When I look

42:35

at my cap table today or you

42:37

know, 85% of dollars, maybe 90% of

42:40

dollars are from the US for me.

42:42

And I'm so thrilled in order to

42:44

have them, but it is slightly not

42:46

alarming, but I think about it that,

42:49

you know, I think we'll do very

42:51

well and I think our funds will

42:53

make a lot of money and all

42:56

of that will go straight to the

42:58

US. That doesn't thrill me for my

43:00

grandparents who have pensions and my mother's

43:02

got pensions and everything around us in

43:05

the UK. Is there anything that could

43:07

be done to unlock a huge amount

43:09

of family office, corporate pension fund money

43:12

to invest directly into funds, whether it's

43:14

an SEIS for funds in the EIS

43:16

for funds, because otherwise they're not freaking

43:18

moving. The BB roll I spoke earlier

43:21

I think is critical to this actually

43:23

is if you look at where the

43:25

money came from in the US, you

43:28

look at the distribution of where that

43:30

money came from, it's pretty evenly spread

43:32

across endowments and family offices and pension

43:34

funds, insurance insurance companies. So it's not

43:37

just pension funds, actually, pension funds, insurance

43:39

companies. So it's not just pension funds

43:41

actually. There are other sources of capital

43:44

that we need to energise and create.

43:46

But we don't have the endowment fund

43:48

offices in London. Yeah, it's a lot.

43:50

I met every one of them. Which

43:53

is why I think we need an

43:55

energised BB actually, which is creative about

43:57

the structuring of deals to bring those

44:00

people into a way that makes it

44:02

easier for them to participate in this

44:04

illiquid 15-year asset class really, where the

44:06

fee structure and carriage structure works for

44:09

them and works for BBB. So you'd

44:11

end up with LPs that are 50%

44:13

the national balance sheet and 50% UK-based

44:16

pension endowments, family offices and insurance companies.

44:18

So I think that is the job

44:20

actually of BBBs to do that. Spending

44:22

more and more time with politicians now

44:25

and they're all just terrified of getting

44:27

fired. and they're all just terrified of

44:29

headline risk. And when I listen to

44:32

you, I'm like, great, great, I see

44:34

all this, but then I see the

44:36

Daily Mail headline, which is about how

44:38

your taxpayer dollars are going to fund

44:41

Tom or Sarah's venture fund, where they

44:43

have a Porsche and a nice house

44:45

in Hampstead, and the concentration of wealth

44:48

on your taxpayer dollars, do you think

44:50

we're actually being reasonable by thinking we

44:52

can do that? And you share my

44:54

concern around that headline risk. challenge I

44:57

think so I definitely see the challenge

44:59

but I actually think we've got to

45:01

make the case really for why the

45:04

UK needs to change really I mean

45:06

yeah the I mean clearly we're not

45:08

really fulfilling our potential right now clearly

45:10

we got a lot more to achieve

45:13

actually and yeah and it's about raising

45:15

everybody's sites to build this country to

45:17

be the best it can be really

45:20

is is let's build this value that

45:22

is kind of missing in tech yeah

45:24

because it's not in any way coordinated

45:26

right now you know this 20 30

45:29

billion a year that we pump in

45:31

the front end per annum in tech

45:33

so like 150 billion over a parliament

45:36

in university funding for science and tech

45:38

in S-E-I-S, in E-I-S, in V-C-T's, in

45:40

on-D tax credits and patent box and

45:42

so on. All those things you add

45:45

them up and what's coming out the

45:47

pipeline is nothing really. So yeah, so

45:49

there's some people are making some wealth

45:52

along the way but that's not what

45:54

we want. We're not achieving a national

45:56

goal really. So I think if we

45:59

say... Let's do this together as a

46:01

country, let's build this value and let's

46:03

energise people. It's clear to me that

46:05

active money is the way to go.

46:08

Passive money is not the way to

46:10

go. And active money means when things

46:12

are going well, investors double down. When

46:15

things are not going well, they kill

46:17

it. So yeah, and we've got to

46:19

be courageous enough to do that really.

46:21

And that does require... I mean VCs

46:24

require OPEC's cover don't they so you've

46:26

got to basically fund them really. I

46:28

think two two I... deers that stand

46:30

thoughts remind me of. So the first is

46:33

one of the things I admire about Sequoia

46:35

is that they're meeting rooms I think are

46:37

named after their LPs. I think it's a

46:39

really interesting thing to remind everyone who they're

46:42

in the service of and I think one

46:44

of the challenges we have in the UK

46:46

is we perhaps don't celebrate entrepreneurs as much

46:48

as we might. If we were able to

46:51

say to those entrepreneurs they can tell the

46:53

story about the wealth... they've given back, whether

46:55

it be through BBB or another vehicle, I

46:57

actually think the public would see more of

47:00

the value they're creating. The second story

47:02

I think about is the Norwegian Sovereign

47:04

Wealth Fund, extraordinary business. If you look

47:06

at their sort of ownership at the

47:08

moment, it's mind-blame. But the other thing

47:10

they do is they effectively have a

47:13

stock ticker so that everyone can see

47:15

in real time what that... sort of

47:17

national wealth is. They have a literal

47:19

stock. I interviewed him and he's literally

47:21

like, you know, the happiness of the

47:23

country does go up and down depend

47:26

on the ticker. Exactly. So this is

47:28

all about just reminding society that actually

47:30

some of these great entrepreneurs are building

47:32

business in society's service. I think that's

47:34

what we've lost sight of. If we

47:36

if we have this like four trillion

47:38

goal, it'd be a great idea to

47:40

have a national ticker as we climb

47:42

away toward it wouldn't it? And I

47:44

think it would glue culture and society

47:46

a bit more than perhaps you have

47:48

at the moment where it's perceived to

47:50

be haves or have nots. You mentioned

47:52

Norway there. Norway innovated in their tax

47:54

system and they seem to misunderstand that

47:57

kind of models are variable and that

47:59

when you change... a certain tax rate,

48:01

you will see people leave. We've seen

48:03

the removal of non-doms. Every single day

48:05

I have friends saying, hey I'm leaving,

48:07

I'm leaving, why are you staying? To

48:10

what extent is the removal of non-doms

48:12

a massive problem impacting the future of

48:14

the UK? I think this is one

48:16

of those classic cases of whether you

48:18

want a sort of principled approach or

48:21

a pragmatic approach. I'm a pragmatist. I

48:23

do see the brain drain, I recognise

48:25

it and I do see that many

48:27

of the people I know well that

48:29

have chosen to leave have left. They

48:32

were also incredible angel investors. They employed

48:34

a bunch of people and so do

48:36

I think everyone should pay equal tax?

48:38

Yes in principle, but practically speaking I

48:40

would rather that talent was in the

48:43

UK. I mean I am seeing some

48:45

exceptions to that. I heard about a...

48:47

billionaire VC who you know I think

48:49

has moved to the UK recently you

48:51

do get some movement back in the

48:54

other direction but I would take seriously

48:56

again leading and lagging indicators I would

48:58

take seriously the leading indicator of some

49:00

of the non-doms leaving. Yeah, it looks

49:02

honestly like the, you know, one of

49:05

the challenges with the UK is this

49:07

tug of war between principles on the

49:09

one side and practicality on the other.

49:11

The principles have been, you remove non-domp

49:13

status, change inheritance tax rules, change capital

49:16

gain tax, put fees on private schools,

49:18

and then assume that everybody is going

49:20

to be having to stay really. I

49:22

mean, yeah, that I just think that's

49:24

too much, actually, and the impulse on

49:27

the system is too much, and that

49:29

we are... shooting ourselves in the foot

49:31

really. So I agree with Tom that

49:33

in principle as a sort of UK

49:35

taxpayer, like everybody would pay the same

49:38

taxes, but I recognise not everybody is

49:40

in the same starting point and people

49:42

do come to the country with existing

49:44

wealth really and it can't be fully

49:46

right to then seek to tax that.

49:49

So therefore there has to be some

49:51

provision for that I think that makes

49:53

it possible for people to stay here

49:55

and so on. And I think it's

49:57

also part of the... thing look if

50:00

we're serious about building the country to

50:02

be a country that clearly wants to

50:04

win then we better fix this as

50:06

well as you. Well this is well

50:08

like for me like pandering Trump Trump's

50:11

pragmatism which is like the Labour government's

50:13

desire to pander to traditional left-wing policies

50:15

is destroying a pragmatic approach to wealth

50:17

creation and well sustenance because all of

50:19

the things that you said inheritance tax

50:22

cap gains schools is bluntly pandering to

50:24

traditional left-wing policy. And probably don't you

50:26

make economic sense? It makes it absolutely

50:28

zero economic sense. I mean, listen, I

50:30

interviewed, I can't say it live whenever,

50:33

but I'll tell you afterwards, one of

50:35

the most famous politicians in the country

50:37

the other day, and they said, we

50:39

have to get rid of the treasury,

50:41

because they do not have variable models.

50:44

And so they literally have static models

50:46

which say, if you increase the tax

50:48

rate to X, you will get Y.

50:50

God. And that is why their numbers

50:52

say we should do this. Oh God,

50:55

that's not good. It's terrifying. Do you

50:57

believe the multiplier effect? Because I always

50:59

get the pushback, whenever I'm on social,

51:01

I'm like, listen, it is great having

51:03

non-doms. They spend in restaurants, they hire

51:06

people, they buy homes. spending shops, do

51:08

you buy it or do you think

51:10

that actually trickle down economics is a

51:12

lie that we continuously... There's banterism trickle

51:14

down economics, but there is also this

51:17

need for fairness as well and I

51:19

think it is just a balance that

51:21

we've got to strike between the two.

51:23

People that... don't enjoy a privileged tax

51:25

status and pay full taxes, sitting in

51:28

the same restaurant as people that do

51:30

enjoy privileged status. That's also not right.

51:32

So we've got to find a balance

51:34

between the two is how to sort

51:36

of make it feasible for people to

51:39

stay here and not be penalized, but

51:41

at the same time try to be

51:43

as fair as possible as a country

51:45

as a whole. we come and need

51:47

to hold hands together on this actually

51:50

as a nation. So we need both

51:52

people that have come from outside the

51:54

UK and people inside the UK to

51:56

feel we're on the shed. admission together

51:58

really and so that it's got to

52:00

be somewhat fair at the same time

52:03

and I just think the balance right

52:05

now is probably swung too far in

52:07

the opposite direction and that we're we're

52:09

actually making it much harder to do

52:11

that. I'm a strong believer in a

52:14

sort of kinesian multiplier effect and just

52:16

in our small world of techs the

52:18

only part of the economy I know

52:20

much about I see it on a

52:22

daily basis like angel investing in go

52:25

cardless if I look at some of

52:27

the other angel investors in that business

52:29

they were Nondoms, they were actually European,

52:31

some Americans, the founders of that business.

52:34

built an important company for London employing

52:36

hundreds of people. One of the founders

52:38

left and built Monzo. Another founder has

52:40

left and is a VC, another firm

52:43

in London. If you look at the

52:45

number of senior talent in Go Cardless

52:47

that has gone on to create other

52:50

business. It's an incredible multiplier effect and

52:52

so that's what we're saying actually you've

52:54

got to have those initial pockets of

52:56

innovation and growth and then I do

52:59

think you get this real multiplier. And

53:01

the good news is businesses are growing

53:03

fast. than they ever have before. So

53:05

I think those cycles will happen quicker.

53:07

Previous it might be five or ten

53:10

years that you start to see the

53:12

best senior operators come out and build

53:14

a company now. It might be 18

53:16

months, 24 months. Is there only a

53:18

change with SEIS and EIS? Yeah, I

53:21

think a lot of these EIS funds

53:23

are not very effective. Why is that?

53:25

I agree with you, but I don't

53:27

know why. Because the quality of investment

53:30

managers is quite low. and because they

53:32

feel they've done a good job if

53:34

they get anywhere close to just returning

53:36

capital so instead of saying here's an

53:38

investment go swing for the fences is

53:40

that you know for God's sake don't

53:42

lose it take the low-risk return and

53:44

you flip the company as quickly as

53:46

you can and get if it get

53:48

80 cents on the dollar back I'm

53:50

happy and in fact all the returns

53:52

are somewhere between 80 cents and one

53:54

dollar 20 on the dollar I mean

53:56

it's ridiculous so I think those funds

53:58

are freaking disaster really And I think there's

54:01

a lot wrong actually with the UK tax

54:03

system that is maintaining too many zombies I

54:05

think in the UK. Like what? What? Well

54:07

the most obvious is on the tax credits

54:09

which is deeply unpopular for me to say.

54:11

As a founder and a CEO I'd never

54:13

say this by the way. But as somebody

54:15

who's not currently a VC and who's not

54:17

currently running a company, I'm free to say

54:19

what I think is true, which is that

54:21

we're currently investing about $7.5 billion a year

54:23

in R&D tax credits for SMEs in 55,000

54:26

companies per annum in the UK, there is

54:28

no... quality check if you like on the

54:30

value that's been created there. All you have

54:32

to do is prove that you spent the

54:34

money on something you can loosely classify as

54:36

R&D and you get a check from the

54:38

government. So this is classic helicopter money. Passive

54:40

money goes to good and bad and I

54:42

think if you're going to be brutal you'd

54:44

say that it either goes to companies that

54:46

don't need it or it goes to companies

54:48

you shouldn't have it. But in my view

54:51

it would be much much much better to

54:53

take that same amount of money and put

54:55

it into fund. and put it into active

54:57

venture and that way yeah when things are

54:59

going well you double down the things that

55:01

don't go well you kill it really and

55:03

yeah so we do end up tying up

55:05

national talent and national treasure in companies that

55:07

are never going to be successful globally that

55:09

limp on from year to year living on

55:11

R&D tax credits so I'd much rather see

55:13

in venture much rather see evaluations go up

55:16

actually which I know there's a VC probably

55:18

not very keen on hearing but I'd much

55:20

rather see that because yeah we end up

55:22

with the same dilutive effect as we get

55:24

this like free money from the government from

55:26

the government every year so by being actively

55:28

managed, we get to recycle our limited amount

55:30

of talent and our limited amount of capital

55:32

into companies that are really going to make

55:34

a difference really. That is one thing we

55:36

can do. I say, unsurprisingly, I think tax

55:38

credits are pretty important. about because I have

55:41

a sort of biased view of just higher

55:43

growth companies at the early stage of their

55:45

life where you're investing in the future I

55:47

like in the same way as I like

55:49

your point about EIS and ESEIS because I

55:51

just think about angel investors when I think

55:53

about angel investors I think it makes sense

55:55

yeah but like to your point actually just

55:57

on the R&D tax credit what I don't

55:59

see is these kind of zombie companies that

56:01

have been claiming it for a decade and

56:03

actually aren't necessarily building for the future so

56:05

maybe we should start to take into account

56:08

time like they're doing the US with capital

56:10

gains tax and start to actually maybe taper

56:12

off R&D tax credits to avoid what you're

56:14

describing. Yeah we're running at roughly two X

56:16

the rate of the US. So I think

56:18

if you look at four big differences between

56:20

the US and the UK, one is the

56:22

attention to talent. and the need to sort

56:24

of keep people in the country. The second

56:26

is the quality of mentoring very early stage

56:28

needs to be ratcheted up a lot higher

56:30

here and it can be I think. It

56:33

just needs more coordination. The third is the...

56:35

excess of props in the UK for companies

56:37

that are not making it that limp on

56:39

forever. And the fourth is the massive shortfall,

56:41

which again, I don't feel quite an agreement

56:43

expected. The massive shortfall in capital that I

56:45

think we just need here actually, we need

56:47

to really, we need to flood the UK

56:49

with venture capital. That's what we need. My

56:51

takeaway from this show is that we just

56:53

need to put Stan in for the BB

56:55

lead and just let him run it. I

56:58

mean like that's not sure about that kid

57:00

to be honest. I think you'd do a

57:02

brilliant job. I qualified. You're high. You mentioned

57:04

the mentoring there and you said there are

57:06

ways that we could do it. How do

57:08

you think we could do it and increase

57:10

that level of mentor? I agree with you.

57:12

And one of the things we do is

57:14

just whenever. I think we're making investment. We

57:16

will bring in often other founders from our

57:18

network, people that we've worked with before, and

57:20

the value ad from those people, partly because

57:22

they've got experience, partly because they're paying it

57:25

forward, is unbelievable. So I totally agree. I

57:27

always say to founders, I never have a

57:29

minimum check size for Amazing Angels. there's some

57:31

who can only do 5k or I mean

57:33

the sum of 1k and you can do

57:35

that with angeles syndicates like it's just as

57:37

valuable and often they'll give more because it

57:39

means more to them and so I really

57:41

always push on that obviously we have project

57:43

Europe now and I spend a lot of

57:45

time with kitty the CEO congrats thank you

57:47

we love it that is very kind so

57:50

pleased that you're in it's done you're not

57:52

allowed Shewers, Kithi always tells me that the

57:54

biggest enemy of talent in the UK is

57:56

quant funds. And I was like, and she

57:58

goes, yep, quant funds. They go to the

58:00

universities, maybe this is a private conversation, Kithi

58:02

is going to kill me, but let's roll

58:04

with it. Quant funds, go to universities, they

58:06

source the best talent, and they throw 250K

58:08

at them, straight away. So the best engineering

58:10

talent is just going straight to quant funds,

58:12

and quant funds are much better recruiters than

58:15

anyone else. How many people work in quant

58:17

funds? Oh, is it a big number? A

58:19

member of our family works at a quant

58:21

fund actually, and who's paid a lot of

58:23

money, I think, to do something very similar.

58:25

So, but there can't be that many people,

58:27

so it can't be the biggest drain on

58:29

talent. Maybe not, but probably a thousand, which

58:31

is two years of full computer science and

58:33

robotics graduates, which is quite a lot, I

58:35

mean, a thousand more in the ecosystem would

58:37

probably be a pretty significant. Yeah. There's definitely

58:39

competition from that for the smartest quants. I

58:42

think one of our jobs is to make

58:44

startups even more appealing, celebrate the successes, actually

58:46

show the alternative. I think EIA, like the

58:48

sort of entrepreneur relief is a wonderful example

58:50

of something that can maybe tip that balance

58:52

because often the economics from a quant funder

58:54

income tax. So I think things can be

58:56

done. What would you do with entrepreneur relief

58:58

to make championing entrepreneurship better? I'd expand it.

59:00

It was limited to like a million quid

59:02

or something. Yeah, from it was taken as

59:04

down, exactly, which to me, given the amount

59:07

of time and effort that people are spending,

59:09

I understand. For those who don't know, entrepreneur

59:11

relief is what and what does it mean?

59:13

Entrepreneur relief is the ability for you to

59:15

get preferable tax treatment if you've grown a

59:17

company. I actually think the idea of making

59:19

for entrepreneurs' capital gains exempt would maybe tip

59:21

that balance when you're comparing against quant funds

59:23

if that's a competition. I do just want

59:25

to touch on the wider world around us

59:27

in two ways. One is the US and

59:29

the other is China. Again, this wonderful politician

59:32

that I interviewed the other day said, ah,

59:34

you know what, we were an afterthought for

59:36

the US and now we're not even that.

59:38

In a wider world perspective, what does not

59:40

even mean for us and what we need

59:42

to do? We do actually have, as Tom

59:44

was saying, universities that are global grade universities.

59:46

I mean, Cambridge is not that different to

59:48

Stanford. It may be a little bit smaller,

59:50

a bit less funded, but the quality of

59:52

research that we're doing here is as good.

59:54

So there is raw talent here. I do

59:56

think London is a really great city. Probably

59:59

the best city this out of the Atlantic

1:00:01

and arguably the best city in the world

1:00:03

actually to do this. So I think it's

1:00:05

a great place. You know I think London's

1:00:07

got worse. Everyone says the crime, the lack

1:00:09

of public services or the poor quality of

1:00:11

public services. I think London will revert back

1:00:13

to London 70s which is grim, it's gloomy,

1:00:15

it's no growth. Well it could if we

1:00:17

let it, but I think it's possibly not

1:00:19

as shiny and smart as it was, but

1:00:21

I actually still think it's a pretty good

1:00:24

city actually and there's lots of good things

1:00:26

to like about life. Are you concerned that

1:00:28

Labour will let it get to that deplorable

1:00:30

state in the next four years? I don't

1:00:32

think they will, but I would like to

1:00:34

see them move more quickly on policy changes

1:00:36

and action than they're currently doing. That's certainly

1:00:38

true, but I think they will. listen and

1:00:40

change energy. So I'm optimistic about our ability

1:00:42

to get change. I think London's a special

1:00:44

place and I feel lucky if I compare

1:00:46

living here to other places. is just it's

1:00:49

the sort of multiculturalism the diversity but actually

1:00:51

just it's an interesting place to live. The

1:00:53

fact that I can jump on a line

1:00:55

bike, come over to do this in the

1:00:57

afternoon, I could have a meeting at number

1:00:59

10 shortly thereafter, I could go to the

1:01:01

European headquarters of a big brand, I could

1:01:03

do that all on a line bike, it

1:01:05

would take five hour flights to do it

1:01:07

between those stakeholders in the US. So actually

1:01:09

that proximity effect I think adds a real

1:01:11

richness to life. So does it have its

1:01:13

challenges? Yes, but there's an incredible pool of

1:01:16

talent. So I think the kind of Petri

1:01:18

dish for continued. growth is there. My word,

1:01:20

if that's a standard afternoon, you're a very

1:01:22

important person. I'm huge, great. I just popped

1:01:24

down to number 10 and popped down to

1:01:26

like a global CEO. Only science? Wow, that's

1:01:28

mainly science. Gosh, I just barely managed to

1:01:30

get through the emails. Well, my bike is,

1:01:32

nine bikes is actually a portfolio company, so

1:01:34

I'm just driving up the revenue. Oh, yeah.

1:01:36

Just constantly cycling around on it. Yeah, exactly.

1:01:38

I'm going to expense it to expense it

1:01:41

to your show. That's amazing. Final one for

1:01:43

a quick fire. China is changing faster than

1:01:45

ever. Tom, you said before when we were

1:01:47

walking around the block that China is the

1:01:49

thing that you've changed your mind on. Yeah,

1:01:51

I've changed my mind on China a lot,

1:01:53

so. I think strategically they're in an amazing

1:01:55

position. For the obvious reason, which I think

1:01:57

actually more countries are more open-minded to working

1:01:59

with them, given what's happening in the world,

1:02:01

but I think there's a less obvious reason,

1:02:03

and that is partly as a result of

1:02:06

deep seek, but more broadly, we've learned a

1:02:08

lesson in the last 12 months, and that

1:02:10

is that actually foundation models can be distilled

1:02:12

relatively quickly. When I was on your show

1:02:14

last time, I talked about how foundation models

1:02:16

were sort of going to be the... Fast

1:02:18

is depreciating assets in human history, like weeks.

1:02:20

It's almost days now. And so if you

1:02:22

live in a world where the foundation models

1:02:24

commoditizing really quickly, then you say, where does

1:02:26

the value accrue? And I think the value

1:02:28

accrues at the application layer. So we're investing.

1:02:30

companies like Synthesia in

1:02:33

London or Harvey in

1:02:35

the US at the

1:02:37

application layer. And then

1:02:39

I actually think it

1:02:41

accrues to in hardware

1:02:43

as well. And if

1:02:45

I look at hardware,

1:02:47

China is so much

1:02:49

better than the rest

1:02:51

of the world at

1:02:53

manufacturing and hardware and

1:02:55

value add. And I

1:02:58

think those devices are

1:03:00

actually going to be

1:03:02

the conduit for commoditized

1:03:04

AI. So in that

1:03:06

world, I've probably gone

1:03:08

from thinking, been excited

1:03:10

about the US dominance

1:03:12

on foundation models to

1:03:14

some extent to thinking,

1:03:16

actually, maybe the value

1:03:18

is going to accrue

1:03:20

also in the hardware

1:03:23

layer. And that's somewhere

1:03:25

that I think we're

1:03:27

playing catch up. Yeah,

1:03:29

I think I completely

1:03:31

agree with that, actually.

1:03:33

I think actually the

1:03:35

hardware layer is just

1:03:37

sitting just above the

1:03:39

semiconductor layer. And actually

1:03:41

I think the one

1:03:43

that we can play

1:03:45

in is the semiconductor

1:03:47

layer. But I do

1:03:50

agree. I think China

1:03:52

is in a really

1:03:54

good position, partly because

1:03:56

it has done this

1:03:58

very significant continuous investment

1:04:00

in startups and in

1:04:02

venture over the last

1:04:04

like 20 years. And

1:04:06

as a result, if

1:04:08

you look at a

1:04:10

if you look at

1:04:12

a blob chart, if

1:04:15

you like of what

1:04:17

investment is going into

1:04:19

AI and you color

1:04:21

code it for US,

1:04:23

you color code it

1:04:25

for China, you color

1:04:27

code it for Europe,

1:04:29

it's basically US and

1:04:31

China. And these technical

1:04:33

dots of Europe, actually.

1:04:35

So I mean, Europe

1:04:37

is really missing. So

1:04:40

so it is kind

1:04:42

of US with China

1:04:44

sort of chasing its

1:04:46

tail, actually. And but

1:04:48

I also think the

1:04:50

sort of geopolitics of

1:04:52

America trying to dislocate

1:04:54

itself from the rest

1:04:56

of the world will

1:04:58

put China in a

1:05:00

much better position, actually,

1:05:02

as well, geopolitically. So

1:05:04

I think Europeans are

1:05:07

going to be much

1:05:09

more open to to

1:05:11

working with Chinese companies

1:05:13

and doing business in

1:05:15

China than they were

1:05:17

even a year ago,

1:05:19

actually. So I do

1:05:21

think I do think

1:05:23

things are changing. And

1:05:25

it's probably not good

1:05:27

for the US, actually,

1:05:29

but that's what I

1:05:32

think is happening. Do

1:05:34

you think we should

1:05:36

be open to doing

1:05:38

business with them? I

1:05:40

do, actually. Yeah. I

1:05:42

mean, I've sold the

1:05:44

company to Huawei, actually.

1:05:46

So I spent about

1:05:48

I only spent about

1:05:50

a month working for

1:05:52

them, I have to

1:05:54

say, because they didn't

1:05:57

give me authority to

1:05:59

buy a box of

1:06:01

pencils after they bought

1:06:03

the company. So it

1:06:05

was it was. But this

1:06:07

is a country that doesn't allow our companies

1:06:09

in there. They put their companies in ours.

1:06:11

They acquire data on all of our consumers.

1:06:13

We don't know where it goes. Every single

1:06:15

piece of data that a Chinese company has,

1:06:17

the Chinese government has authority to acquire at

1:06:19

will. Yeah, well that's probably true, but also

1:06:22

they are commercial as well. So you can

1:06:24

do business in China. So when I ran

1:06:26

this chip company, ISira, actually our biggest customers

1:06:28

are in China. and yeah and it was

1:06:30

easier to get them to do a

1:06:32

deal with you to sell product to

1:06:34

them that it was a kind of

1:06:37

US company or a European company because

1:06:39

they had to negotiate pretty hard on

1:06:41

price and stuff but nevertheless they were

1:06:43

willing to engage and we built some

1:06:46

really good relationships with them in a

1:06:48

personal level I think people are actually

1:06:50

pretty decent people and I think that

1:06:52

you can do business with them. The

1:06:55

Chinese state is something different, obviously be

1:06:57

wary of, but I think there's a

1:06:59

lot of scope actually for us

1:07:01

to do a lot more business in China

1:07:04

than we're currently doing. Do you agree? If

1:07:06

I look at the talent, the areas

1:07:08

that they have decided to focus on, they're

1:07:10

all important. DJ is forced to be reckoned

1:07:12

with if I look at deep seek in

1:07:15

the emergency. But do you not, sorry, you

1:07:17

mentioned BID, do you not worry about the

1:07:19

Chinese subsidisation of their car industry and what

1:07:21

it's doing to the European car markets? I

1:07:23

mean the German car market is being destroyed

1:07:26

by BID and Chinese cars and it's because

1:07:28

the Chinese government is subsidising between 20 and

1:07:30

30% of their car production. Feels a little

1:07:32

bit unfair. It's certainly corner the market in

1:07:35

some of the rare materials and history of

1:07:37

the batteries and so and I think

1:07:39

it's got scale and it's got abilities

1:07:41

to compete really so so in that

1:07:43

sense but in the German currency has

1:07:46

got other challenges so one of the

1:07:48

other businesses are sold was to Bosch

1:07:50

actually and so I'm sort of vaguely

1:07:52

aware what's like working in a large

1:07:54

German company and yeah they have their

1:07:57

own challenges and they buy your own

1:07:59

pencils though. So you can buy a

1:08:01

rubber. I love stationery. Listen guys, I

1:08:03

want to move into a quick file.

1:08:05

So I say a short statement, you

1:08:07

give me your immediate thoughts, that sound

1:08:10

okay. Yeah. Stan, what do you believe

1:08:12

that most around you disbelieve? Things like

1:08:14

R&D tax credit ought to be curtailed

1:08:16

and we should put the money into

1:08:18

a lot more venture is the really

1:08:20

unpopular thought, actually, but I still think

1:08:23

it's right. Mine would be I think

1:08:25

I keep hearing people talking about the

1:08:27

first one person billion dollar business is

1:08:29

already created I think that's absolutely ridiculous

1:08:31

on the one hand companies are growing

1:08:33

faster and more efficiently than ever like

1:08:36

bolt dot new 40 million dollars revenue

1:08:38

run rate in three months they're going

1:08:40

to grow incredibly quickly but I think

1:08:42

we've seen distillation of foundation models, we're

1:08:44

going to start to see distillation of

1:08:46

business models, businesses, and so I would

1:08:49

expect these really successful businesses to get

1:08:51

copied ridiculously quickly. So I think this

1:08:53

idea that you're going to have a

1:08:55

sort of moat that enables one person

1:08:57

to live a billion dollars of revenue

1:08:59

a year is a myth. What is

1:09:02

the distribution of value in the foundational

1:09:04

model landscape in five years? My big

1:09:06

one here is that I've changed my

1:09:08

mind. I thought Open AI was a

1:09:10

foundation model company. I now think it's

1:09:12

a consumer company. It's a $12 billion

1:09:15

run rate or something. So my thought

1:09:17

here would be it's going to aggregate

1:09:19

to the application layer and brand is

1:09:21

really important. They signed up a million

1:09:23

chat GBT users in an hour last

1:09:26

week it was announced. Brand is incredibly

1:09:28

important. The application layer is important and

1:09:30

then I think hardware as I mentioned

1:09:32

is important. This is one of the

1:09:34

reasons we invested in nothing. We believe

1:09:36

they've got 7 million devices out there

1:09:39

that are potentially conduits for their AI.

1:09:41

Yeah I think that might be right

1:09:43

Tom that the value is going to

1:09:45

be balanced up in the application layer

1:09:47

but I also think the hardware and

1:09:49

semiconductor layer below it's sort of plausible

1:09:52

because the LLLM is not the end

1:09:54

of the story here in AI. So

1:09:56

there are some, obviously some big limitations

1:09:58

on what Earlham's are going to be

1:10:00

able to do. So there's more innovation

1:10:02

to come and that's going to change

1:10:05

models. Since we've changed the math that

1:10:07

we've got to do and so on.

1:10:09

But some of the things that are

1:10:11

going to be concept, we're still going

1:10:13

to be doing very large matrix vector

1:10:15

multiplies at high speed in Silicon. And

1:10:18

I think, yeah, that's the sort of

1:10:20

thing that I think we can build

1:10:22

competitive long-term advantage in here. So I

1:10:24

think that the application. layer, exactly as

1:10:26

you're saying, I think there'll be value

1:10:28

crew in there. And how about inference

1:10:31

at the edge as well? I mean

1:10:33

that's something you understand better than me,

1:10:35

but they're lighter these models, more and

1:10:37

more could happen on device. Yeah, that's

1:10:39

true. I mean, yeah, but with that

1:10:41

is coming a lot more sort of

1:10:44

chain of thought reasoning, a lot more

1:10:46

test time compute, so the token generation

1:10:48

is still going up actually. There's going

1:10:50

to be a large amount of silicon

1:10:52

required to be able to do sort

1:10:54

of high performance. inference even at the

1:10:57

edge actually so so there's a lot

1:10:59

of scope I think what inference I

1:11:01

think the investment in inference has grown

1:11:03

like 57 times in the last year

1:11:05

that that rate we will probably continue

1:11:07

for a while you know what I

1:11:10

just can't get I can't get how

1:11:12

if we all appreciate the shift in

1:11:14

focus from training to inference how Jensen

1:11:16

and Invidia are just sitting there going

1:11:18

oh well We're going to get screwed

1:11:20

because actually our architecture means that we're

1:11:23

not optimised for inference. That is not

1:11:25

happening. Jensen is not just saying, oh

1:11:27

fine, we'll just enjoy the training ear

1:11:29

while at last. Help me understand, why

1:11:31

am I missing this? They are making

1:11:33

a bunch of architectural changes to GPUs

1:11:36

to make them better and better inference.

1:11:38

So there is a lot of architectural

1:11:40

change going on there. It's obviously not

1:11:42

a big surprise to see if we

1:11:44

saw Jensen starting to adopt and reinvent

1:11:46

himself as a in-memory compute company. I

1:11:49

mean that wouldn't really surprise me actually

1:11:51

that you'll be working on that. So

1:11:53

whether he does that organically internally or

1:11:55

it does it through some sort of

1:11:57

acquisition. it remains to be seen really

1:11:59

but I think that it's certainly it's

1:12:02

certainly likely that you know he's got

1:12:04

the resource and he's got the cash

1:12:06

to be able to sort of move

1:12:08

the organization or build an organization in

1:12:10

pretty much any area he wants and

1:12:13

one thing about Jensen's I spent about

1:12:15

a year and a half working for

1:12:17

him is he he's definitely paying attention

1:12:19

to and listening to the market and

1:12:21

he's got very big ears and tracks

1:12:23

what's happening with enormous study. So I

1:12:26

do think we've got to expect them

1:12:28

to be tracking in the direction towards

1:12:30

being more efficient at inference.

1:12:32

What's your biggest takeaway from

1:12:34

working with Jansen? Well, firstly, he's

1:12:37

a good human, so that's good,

1:12:39

I think, that we've got, you know,

1:12:41

one of the world's richest people

1:12:43

is actually, I think, a good person.

1:12:45

He is, however, a bit of a

1:12:48

control freak. Many would be the

1:12:50

time. We're just about to give a

1:12:52

sort of presentation to a major

1:12:54

customer and Jensen wants to go to

1:12:57

the deck and will change. product

1:12:59

name, schedule, pricing and resources and everything

1:13:01

on the fly like with like 10

1:13:03

minutes to spare before the meeting.

1:13:05

So he's quite hard to work for

1:13:07

in terms of his desire to have

1:13:09

command of detail and to be in.

1:13:12

control of the most important variables in

1:13:14

the company. But in a way, as

1:13:16

a sort of founder, I do sort

1:13:18

of respect that, actually. So within a

1:13:20

video, we used to have a, Gents

1:13:22

at the top, we had a layer

1:13:24

of people whose job was to buffer

1:13:26

everybody else in the company, actually. And

1:13:28

so this buffer layer would deal with

1:13:30

Gents, and which is great. A human

1:13:32

shield. And there's the people below that

1:13:34

could actually get on with stuff, actually.

1:13:37

But obviously, I like the guy,

1:13:39

and he's incredible communicator. We always

1:13:41

hear of his, I don't have direct,

1:13:43

you know, the direct reports I have

1:13:46

so many of like 50 or 60,

1:13:48

and it sounds great when you hear

1:13:50

him say it, but the 50 or

1:13:52

60, we never hear from them. Is

1:13:54

it good for them? Well, I mean,

1:13:57

it's a, I mean, it is a

1:13:59

sort of, it's a... cultural culture I'd

1:14:01

say yeah it is yeah but in

1:14:03

a way that is not malevolent so

1:14:05

if it's possible to imagine so yeah

1:14:08

so he will tear people apart in

1:14:10

public on stuff that they've not got

1:14:12

command of or he thinks they're wrong

1:14:15

about and he will like rip them

1:14:17

to shreds and leave them whimpering in

1:14:19

the corner to lick their wounds but

1:14:21

I think he then sort of forgets

1:14:24

it and hopes that the exercise will

1:14:26

have resulted in some improvement in the

1:14:28

way the person thinks and acts and

1:14:30

so so that yeah so that's not

1:14:33

it's not for everybody that that style

1:14:35

of management but honestly you've got to

1:14:37

admit it's worked so he's he has

1:14:39

done an amazing job. Would you buy

1:14:42

Open AI at 300 billion? Yes, no.

1:14:44

Why yes, why no? I think if

1:14:46

you look at it as a consumer

1:14:49

business, it has extraordinary momentum and it's

1:14:51

only just started integrating moats. So historically,

1:14:53

there's been no switching cost, one of

1:14:55

the most important powers of a business,

1:14:58

but now people have started using it.

1:15:00

I actually think the memory is helping

1:15:02

people stick. So if I just look

1:15:04

anecdotally at my kids at school, for

1:15:07

them, LLLMs are chatGPT. So they're very

1:15:09

well placed. Now do I think there

1:15:11

are my mother on the other under

1:15:13

the age spectrum, same thing. So it's

1:15:16

incredibly powerful. It doesn't mean I think

1:15:18

it's the best Gen A.I. investment, but

1:15:20

if I was sitting independently, do I

1:15:22

think it's a good investment now when

1:15:25

your downside is somewhat protected? And there

1:15:27

are a $12 billion run rate. Let's

1:15:29

say it's a 20 times forward multiple.

1:15:32

I think it's a reasonable place to

1:15:34

put money. Yeah, and I think a

1:15:36

lot of the demand on these foundation

1:15:38

models is going to be through APIs

1:15:41

by application software that are basically sort

1:15:43

of those APIs are going to be

1:15:45

driven by latency and performance of the

1:15:47

model and so on, and things like

1:15:50

Claude are as good, if not better,

1:15:52

than open AI's models, and that given

1:15:54

this demand. will have agents that are

1:15:56

basically calling APIs will be driving a

1:15:59

lot of demand here. It's not obvious

1:16:01

to me that the consumer chat interface

1:16:03

is the winning interface really. It seems

1:16:06

to me that the API interface and

1:16:08

the application calling agent calling might be

1:16:10

a bigger interface. So I've probably put

1:16:12

the money elsewhere. Both could answers. Would

1:16:15

you? I would. I always love businesses

1:16:17

where everyone thinks it's kind of reaching

1:16:19

the top and then actually it's just

1:16:21

actually reaching escape velocity. I think the

1:16:24

same with actually Revolute right now, whereas

1:16:26

like people think 45 billion or 60

1:16:28

billion in the New Orleans pricing. I

1:16:30

would buy the shit out of revenue

1:16:33

right now. But I totally agree with

1:16:35

you in terms of just introducing the

1:16:37

modes and the memory I think is

1:16:40

so important. You go back to whether

1:16:42

or remember what you did past, I'm

1:16:44

always doing past searches. And actually I

1:16:46

do, it's so funny for every single

1:16:49

show I put the prompt in to

1:16:51

Grock, PoplaxT, open AI, you can buy

1:16:53

and hold one public stock for 10

1:16:55

years. Which one you know? I'm so

1:16:58

concentrated in tech, I'll avoid tech stocks

1:17:00

and say uranium, ETF. I have concerns

1:17:02

about costs of energy for productivity. I

1:17:04

think climate change is real. I think

1:17:07

the best source of energy going forward

1:17:09

is nuclear fusion and potentially fission and

1:17:11

SMRs are going to be important. I

1:17:14

think it's the predictable cleanest. energy source

1:17:16

we have. I'm not betting on one

1:17:18

individual company, that's difficult to do, so

1:17:20

I think if I take an ETF

1:17:23

in uranium, I might enjoy the upside

1:17:25

of the market because it will be

1:17:27

needed. What's your stand? Yeah, I probably

1:17:29

would avoid tech as well, actually. Same

1:17:32

reason. Probably Rolls Royce, actually, because I

1:17:34

do think defence is going to be

1:17:36

a big kicker in terms of demand,

1:17:38

so the air engine business. And I

1:17:41

mean, it's actually gone like three X

1:17:43

each year. But I actually think we're

1:17:45

at the beginning of a journey and

1:17:48

I think it could be much bigger

1:17:50

because there's a European air engine vendor.

1:17:52

I think he's going to see high

1:17:54

demand actually. You can snap your fingers

1:17:57

and change one thing about the UK

1:17:59

tech. ecosystem. What would you change? Flood

1:18:01

it with venture capital. I mean seriously,

1:18:03

I think that's the thing that will,

1:18:06

the one lever that we can pull

1:18:08

that will make a big difference is

1:18:10

that everything else will take time and

1:18:12

stuff, but I do think a lot

1:18:15

flows from capital availability. I love that.

1:18:17

I would say sentiment at the

1:18:19

moment. I think there's more this

1:18:21

question as being asked so much

1:18:23

it becomes a drag. What's the

1:18:25

most under-investid but exciting area

1:18:28

today? Yeah, Tom you did this for

1:18:30

a living. I'll go hardware. I think

1:18:32

if you take a hardware company out

1:18:35

to market the people, investors, immediate responses,

1:18:37

oh that's really hard. But the paradox

1:18:39

about venture capital is you need it

1:18:42

to be difficult to be valuable. You

1:18:44

need to be contrarian and right. And

1:18:46

I think hardware is a place you

1:18:49

can do that at the moment. A

1:18:51

huge amount of value will accrue there.

1:18:53

I've got the level below sem. I

1:18:56

think semiconductors that fit into the hardware

1:18:58

that Tom's talking about. Which politician

1:19:00

do you most respect and

1:19:02

admire and why? Leekwaneu specialization.

1:19:05

Yeah so I'm going to stick to

1:19:07

the UK so at the moment I

1:19:10

say None of the current government really

1:19:12

fill me with enormous enthusiasm. I think

1:19:14

Patrick Valence is a useful guy who's

1:19:16

trying his best to sort of, you

1:19:18

know, make an impact on the UK.

1:19:20

So I think, but he's not really

1:19:22

a politician. I do think in the

1:19:25

in the current government, Darren Jones, I

1:19:27

think has got the potential to be

1:19:29

great. Final one, guys, ten years time.

1:19:31

Where is the UK, one, and how

1:19:33

many 10 billion dollar companies will we

1:19:35

have on the LSC then? I think we

1:19:37

will get the UK point in the right

1:19:40

direction. I think it will require

1:19:42

some government embracing of the challenge

1:19:44

and a lot more communication by

1:19:47

government on what we're going to

1:19:49

do and how we're going to

1:19:52

do it. I think we're approaching

1:19:54

a point, we're about a year

1:19:56

into this current government, four years

1:19:59

to go. next election, things have

1:20:01

not gone well. And I think we're

1:20:03

approaching a point when they've got to

1:20:05

recognize a change and make some changes.

1:20:07

And I think we are going to

1:20:09

see some changes that will be positive.

1:20:11

And assuming that happens, I think in

1:20:14

10 years time, I think we will

1:20:16

have achieved this $500 billion valuation in

1:20:18

tech and the UK will be seen

1:20:20

as the magnet in Europe in which

1:20:22

people come to build these companies. So

1:20:24

that's what I think we're going to

1:20:26

achieve. So I'm an optimist. I think

1:20:29

sometimes the best companies grow from adversity,

1:20:31

partly because the concentration of talent, they'll

1:20:33

just aggregate more than they have. So

1:20:35

I don't know, 1999 was its sales

1:20:37

force. And then you have Airbnb and

1:20:39

Uber in 2008. I think we'll look

1:20:41

back and the companies that are most

1:20:44

impactful in the decade will have grown

1:20:46

in the UK, and they won't be

1:20:48

names we know today, because these companies

1:20:50

are growing faster than ever. So they'll

1:20:52

be AI native, incredibly fast growing businesses.

1:20:54

And it's not clear to me they'll

1:20:57

list at all. If you look at

1:20:59

the trend direction there, we spent a

1:21:01

lot of time assuming listing makes sense.

1:21:03

But some of our best portfolio companies

1:21:05

like Stripe aren't listing anytime soon. And

1:21:07

they're finding ways to deliver liquidity. So

1:21:09

I wonder whether we'll even be talking

1:21:12

about whether they did or didn't list

1:21:14

in the UK. God, that's opening up

1:21:16

a can of worms. mean, spend another

1:21:18

two hours on that. But I cannot

1:21:20

thank you both enough for joining me.

1:21:22

It's been such a fantastic discussion. Honestly,

1:21:24

there were two people that I most

1:21:27

wanted being YouTube, because I think it's

1:21:29

such a different perspective you both bring.

1:21:31

So thank you so much for doing

1:21:33

it. Thanks for inviting us. We enjoyed

1:21:35

it. Thanks. Loved it. It's really fun.

1:21:37

Thanks a lot. I

1:21:40

mean, that was such a

1:21:42

special show for me to

1:21:44

do. If you want to

1:21:46

watch the episode you can

1:21:48

find it on YouTube by

1:21:50

searching for 20 VC. I

1:21:52

also want your feedback. Let

1:21:54

me know what you think

1:21:56

of having three together in

1:21:58

the studio. I really want

1:22:00

to do more of them.

1:22:02

And so if you like

1:22:04

them, let me know and

1:22:06

we'll make sure they happen.

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