Tom Hulme & Stan Boland: Lessons from Jensen Huang & How to Fix the UK Tech Ecosystem

20 trillion dollars of value created in the last 50 years in building decacorns in the US. The UK has created two, about 170 billion of value in the UK. So the lack of capital crimps the ambition of companies, and therefore the best founders go to the states. We need to flood the UK with venture capital.

The biggest challenge is for every one good founder, you need five or 10 world-class operators, and I think that's the biggest gap for us. If you look at Oxford, Cambridge, Imperial, they're only graduating between them about 500 computer scientists or roboticists per year. We should 5x that number. If you graduate in an engineering or computer science or something here, you should have stapled to your graduation certificate a Tier 2 visa ready to go.

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Guys, I am so excited to make this happen. Uh, two of the smartest people I think in European and UK venture and startups, so I want to start with a little bit of context, Stan, if we start with you and then move to Tom. Uh, I love listening to you speak about the UK and where we are. What's the background as to how you got here and just the quick one-minute intro on you?

Yeah, so I joined a company called Acorn, which is a computer company based in Cambridge, um, back in 1997. Uh, it owned this thing called ARM, 40% of this company called ARM, so I helped get ARM public, um, and then figured out what to do with Acorn, set up a chip company outside out of Acorn, which got venture funding for, uh, raised $30 million of capital and sold that company to Broadcom for about 640 million, um, about a year and a half later. This amazing deal. Um, did a second deal in the chip space, which I built a company and sold that to Nvidia, um, and did uh a third deal which was in the AI space. So I've I've serially founded and ran and then sold companies, raised about $330 million in venture capital and sold them for about 1.3 billion. So so that's kind of what I've been doing for the last like 25 years is doing that.

Well, I'm following just to learn from Stan. That's the reason I'm here. John, what about you?

Uh, so look, I I won't give a a long bio, just a really quick one. So I helped set up GV in Europe the year you started 20C in 2014, and so we've now done over 50 companies we've invested in, uh, 12 countries. Uh, we just broke through half a billion dollars in the UK alone with our investment in isomorphic last week and passionate about making the sort of European ecosystem as vibrant as possible. So keen to discuss that.

So I want to discuss it in the way that we're going to kind of cite the problems and then cite the solutions. I don't want to be Debbie Downer and just do the problems, but I want to be also pretty granular on the solutions. I think for me the biggest problem is actually talent supply and not being a magnet for the best developers in the world to have as London or the UK anymore, where I think it maybe once was. Do you agree that we have a fundamental talent problem today in the UK?

Uh, I think we got a bit of a talent problem in the UK. So I don't think we're the magnet that we were or that we could be. Um, I think it's quite interesting actually if you look at where talent is being born in like AI across Europe and you look at where it lands in terms of where it stays, actually the UK is minting about the same talent it's keeping, uh, but that is a net net actually. Um, so we're losing talent to the US, um, and we're actually recovering some of that from other parts of Europe. So net net we're about the same actually, but we could be 10x better frankly. Uh, so I think that's the key point is that you know we ought to be making the UK the magnet, the place to set up a company in Europe actually, and all that talent that is leaving the UK and leaving other parts of Europe to go to the states, we we ought to be capturing it and building companies here. Um, so so we we I'd say we're losing a bit of it.

Yeah, I think of it in like engineering talent, and then I think of it in founding talent. How do you think that differs like as you said that net net for like deep AI engineers? I think my worry is actually do we actually have the founder supply that is exceptional that maybe other countries do, and that's the difference that I think about from my perspective.

So I completely agree. I think we're rate-limited. I think it's the biggest rate limiter actually is supply of founders and supply of operators. The great thing about founders is they'll smash through walls to build stuff. Uh, so you have Melanie at Canva built, you know, built that business in Perth, Australia, no right to build a $50 billion business in Perth, but it can be done. If you gave me the choice to have more uh Nicholas Zenstroms or Demis Habises or Stans, I would absolutely take that. I think you know it could only be a good thing. The biggest challenge is for every one good founder you need five or 10 world-class operators, and I think that's the biggest gap for us. That's the rate limiter to Stan's point. If I just look at engineering talent, we've got three of the best 10 universities on the planet here. If you look at Oxford, Cambridge, Imperial, they're only graduating between them about 500 computer scientists or roboticists per year. We should 5x that number. There's a huge demand. I don't see why we aren't increasing it, and then to Stan's point, we can do a better job of actually making it appealing to come into the UK for the most entrepreneurial talent and maybe retain the talent that does study here and becomes expert.

Yeah, and the there's two big exporters of talent in the world. I think one is China, one is India, um, and the majority of the graduates there are decided to go and work in the states frankly. Um, so even if they come to university here, they're typically not staying actually. They come here actually with pretty much no intent of staying, and in fact, we're not really welcoming them, welcoming them either really. So yeah, so if you if you graduate in an engineering or computer science or something here, you know, you should have stapled to your graduation certificate a Tier 2 visa, um, and rights to stay and a right to bring your family across as well and just make the UK the place that people want to come actually, um, is what we should be doing.

I love that. Can I build on that? I um I think you become what you measure, and the government are measuring a lot of kind of lagging indicators. I was inspired, we invested in Stripe in 2017, and one of the things that struck me is the Collison brothers were tracking a KPI, they were tracking the number of Series A companies that transact online that they actually, you know, that are using Stripe, and the number was phenomenal. It was like high 80s percent. Taking Stan's idea, our government should be actually looking and seeing at the people that are graduating, what is the percentage that are choosing to stay? That is the leading indicator, like great founders focus on leading indicators, not lagging.

Totally agree with you. You mentioned there attaching the Tier 2 visa to the graduation ceremony ticket. Is there anything else that we could do to make sure we have a high talent retention number for great engineering and founding talent?

I I think the second big factor is money actually, which I'm sure we're going to go and talk about in a second actually, but money is there's no structure to this. Yeah, I think money is the great attractor of talent as well. So yeah, part of the reason that people will come to the UK, come to London or the golden triangle is the fact that they can get funded here. Um, they they can not just get funded pre-seed and seed but Series A, Series B, Series C, growth phase as well, and in fact, keep the company here. So um, and yeah, I think the the the kind of constraints that come from lack of capital, um, I think is also a factor, and um, so so the model in the UK has really been let let's build early-stage companies, let's get them to a certain point, and then let's flip them to America, and and uh, and I think a lot of founders might be thinking why don't I just skip that first stage and why don't I just jump on a plane and form the company in the US actually?

Why do you think we have a lack of capital in the UK?

I I disagree with you, so I'm intrigued why you think we have a lack of capital.

Well, I think you just need to look at the numbers. Um, you know, the the numbers, uh, say that, um, I think in last year because the model I think to copy is the US. I mean, you so the the US is is just so obviously successful in technology, uh, 20 trillion dollars of value created in the last 50 years in building decacorns in in the US, uh, the UK has created two, um, uh about 170 billion of value in the UK. So so it's like two orders of magnitude off the US, um, so so the US I think is a model to copy, and the um I think if you look at how much venture capital was raised by US VCs last year, it was about 76 billion raised in the US, um, pro rata to population, the UK should be 15.4 billion, um, the UK funds raised 3.7 billion last year, so we're short about 12 billion in venture capital.

I absolutely hear you, but as a day-to-day venture investor on the ground trying to find companies and great people to invest in, there is simply not the supply of entrepreneurs. If I were to keep my bar as high as it needs to be to build great companies to deploy that money, I think the there is a chicken-egg situation here. So you know, traditionally the way to think about this is that you know you create this, um, you create this momentum of building successful companies. The idea is that capital flows to places it gets a return, therefore you you create a track record of building companies here, and capital will flow to the UK, and that's the causality. I think the causality actually is the other way around, um, and the causality is that if we put capital in place here, great companies will rise to the occasion and and and supply of companies will come, and the the reason I say that is that there's a country you can look at where this is true, and that country is China, um, and so 20 years ago, China's got, you know, pretty much nothing really in technology, and and the Chinese studied the US model and it put huge amounts of capital in place, and now China is clear global number two in terms of technology. You look at you look at the amount that's invested in AI, for instance, I mean it's there's only two countries really investing in AI, US and China, and the European investments are diddly squat. You almost you almost can't see them; they're that small, um, and that um and you net result being we got a very successful Chinese tech sector. Um, so I I I actually think that you know by the lack of capital crimps the ambition of companies, and therefore the best founders go to the states, and that we we end up underachieving really. Um, so I I think that's fair.

I would just maybe make a caveat that I think the goal should be that the best capital gets concentrated in the best companies. Like China's an amazing example, you get concentrations of talent and then concentrations of funding taken to an extreme there. I think one of the data points that makes this so difficult is none of us, I would think that all companies should get funding, uh, and the the real challenge is if you ask any founder, and by definition at seed stage maybe the majority shouldn't get funding, when they don't receive the funding they think it's a funding gap. So I don't think what we should be doing is necessarily just sort of evenly distributing capital across the whole market. I actually think that's damaging for talent concentration as well. Instead, we should have sophisticated people that say these are the companies that can win, these are the companies that can actually absorb more capital because the founders are great, they're not going to be over-capitalized, they'll then bring in the best people, and maybe they can just be more ambitious.

Yeah, I I've got a good example of this actually. There's a a company I've invested in, uh, called Wordware, um, so a good name check for them, but uh, there's two guys, uh, studied, uh, computer science in Cambridge, um, could have set up a company here, uh, could have raised probably 5 million on a 20 pre, uh, could have built a really, it's basically, um, a set of tools for LLM prompt engineering, um, but they went to San Francisco instead, um, they end up raising 30 on a 220 post. This is Philip Kazer, this is Philip.

Yeah, yeah. So those investors are expecting them to build a business worth 2 to 3 billion. Yeah, so 10x. Um, so uh so that stratospheric raising of expectations, um, is part of the US playbook. Um, I think those investors are expecting him to build a 10 billion business. We on a 10% ownership, you need a billion dollars. Yeah, okay. Yeah, so even even better, um, but the fact is they've got the capital to do it really as well. So so this cranking up of expectations and the provision of capital behind founders with energy and enthusiasm, I think it does work. I mean, it's part of the US playbook.

I completely agree, Tom, that it's concentration that really matters really, and the ability to put a large amount of money at the right point behind founders that have the energy and intellect and the um pivotability and the coachability, I think is absolutely critical really, and uh, it's the bit that is sort of missing I think in the UK and in Europe as a whole actually.

I don't think we need more money. I'm seeing every day the most inflated prices, and it's just because you see this concentration of capital to obviously good people like your Wordweares where you can get a five on 30, five on, and then Lightspeed and General Catalyst come in, and suddenly it's six on 80, and it just goes nuts. I see now complete removal of lick prefs, and it's because we don't have the supply, the capital concentrates and just inflates in a way that's much more so than the US, and I so I think we have this fundamental talent problem, and then we have a narrative problem which is based around behavior of venture investors in Europe, which is if you speak to Philipe, uh, Philip, he'll tell you that like it was super fast in the US, they totally got me, they were gave me a great experience, and in Europe it takes weeks, the partners aren't here, and they're slower. We have a very bad customer experience for founders in Europe, which I think makes it a less attractive funding product than the US.

I think that's certainly true, but but my my solution for that would be, um, let's increase the amount of capital here, and the best founders will seek out the best VCs, the best VCs will generate outsized returns, and they'll be able to raise the next round of the next capital basically. So you will gradually, may hopefully quickly, ratchet up the performance essentially of venture in Europe actually.

The thing that has scared me historically when people have talked about, for example, government investing in startups is I think it's an incredibly difficult thing to do. I think VCs take, I don't know if I'm any good at it still because the feedback loop is probably a decade, it's like the worst learning loop ever, and so the important thing is to make sure that if there is more capital in the system, it's deployed by the experts, correct, and they can sort of really see that kind of compound.

Completely agree. It'd be an absolute disaster for government to be making direct investments in companies, I think because there's there's there's no way they can do it. I think success, I mean, I mean if we want to get really spicy though, and Tom's seen my Twitter, and I give not many shits anymore, um, like most of the BBB's portfolio is just dire. Like

Yeah, no, they're funds investing. I mean, the these funds should not be in existence. Like the question is, do you have a right to win? Do you have a right to find companies, pick them, win them, help better, and the majority are honestly dire, and they will not do well. Government money will be wasted, and I think I get both of what you're saying, but I think then if you're like, well, I want this to go to truly gifted individuals who will invest it wisely, well, then we should see real concentration of capital to three to five players in the UK because honestly, I think that's only the amount that's very good, and I think probably Tom, if I push you, you would agree.

Couple of quick reactions: firstly, I don't think it needs to just be uh to players in the UK, it can be global funds. I think you have some of the best, and the second thing is uh the best funds have proven themselves for multiple vintages now, uh, they're oversubscribed, but I would hope that the UK, UK plc could get into those funds, but there's no way, like that's the question, calling a spade a spade, there's no way they could get into Excel, Index, or any of the brand names. That's the question.

Yeah, well, I would say that there's um firstly, no large fund of funds has ever lost money. So yeah, so so I think from a from a investment perspective, I think you know government ought to be willing to take a much bigger risk on funds investments here in the UK. I think BBB puts something like $424 million a year into funds investments, which is a drop in the ocean compared to the 15.4 billion that we ought to be investing. So yeah, so yeah, that number needs to be like 10xed in my view, um, and and then secondly, I think I think there is a venture talent pool that can be energized. I think below partner level in a lot of these firms, there are a bunch of people who are principal level whoever who could be interested and willing to run a new fund and would do a bloody good job at it actually. Um, and I also think that we're at a time when uh US partners would consider coming to Europe if the capital was available, if we could because here, you know, there is there is talent in Europe, and valuations are lower. If you could put the money in place, um, then I think you know not only would we have some homegrown talent we can release from venture firms, but I think we could also imagine, you know, some of the leading partners in US firms coming to London or or or UK to to basically get this economy really moving actually.

Sometimes in my head, I think how many friends do I want to lose in one single show? Um, my question to you, I mean, I I don't agree that prices are better here honestly, like for the best companies, for your Wordwises, if they were to stay, they're just super high, they're so inflated. I think just a quick thought on

No, no, I so if I look at where we sit today, some of the best deals are overpriced. I think it's often because they're the ones with the traction, uh, and they're therefore somewhat derised, and I think there's two things that make this a really difficult thing we to answer. We talked about lagging indicators. The first is we're basically trading against or we're working against sources of capital that were raised in the past, like these are not brand new funds often, and often they were raised in zero. The cost of capital has gone through the roof, like given the current interest rate environment, I think that's going to get worse if anything. The fact that a lot of these funds are giving out so many stock grants, you basically need to hit 20% IRR to break even. These numbers are really high. So that's the first thing. I actually think there's probably going to be less money in the market for venture, uh, in two years than there is today. It's kind of a question for us, and then the second thing is classic machine learning. I think we're overfitting to history. I don't think we know what the biggest companies look like going forward, and so it's very difficult for me to just say that actually the sort of returns profile that funds got from investments 10 years ago are going to be the ones they looked like before. My belief is that AI is creating a real power law far more than we've ever seen before, and so the job to be done is going to be be in those handful of global champions. If you look at I think uh Israel is an interesting example for us at the moment. Amazing story recently, the Whiz acquisition, 32 billion, that's like 7% of Israel's GDP, uh, a lot of that is actually flowing back to Israel, and it will create this multiplier effect. That business was basically built in five years. It was assembled without actually a clear sort of uh problem identified. They just got a world-class team, and they really well capitalized the business on day one. I think the businesses we want to build look more like Whiz, and so concentrate capital into the best founders. Can that be done from the UK or Europe? Hell yes. What we do often at the moment is we say be close to your customer, we say go to the US because the market size is roughly an order of magnitude bigger than it is in the UK. We're not saying give up the US market, absolutely go to the market, but build a global business on day one.

Yeah, I think that's right. Yeah, I I think it's almost pointless building a sort of number three or number four in the marketplace today. So if if we're going to undercapitalize businesses and build businesses that are number three and number four, I it it's not what we need because those businesses have got no choice but to be sold to US companies. We're never going to create companies here that stand up on their own two feet and generate the jobs growth and the diffusion of wealth that the country desperately needs really. So so so I think yeah, we've got to concentrate on companies that could be global number one or global number two, which does require big checks to be written to those companies at the right point.

Um, can I give another example of this where I think actually because we are in a way we've got a problem that we're subscale in the way we've described it at the moment? I agree with that. The other place we could sort of uh that I think our uh relative size hurts us is in the sort of, you know, the subscale pension funds, for example. You've got 90 local pension funds actually. A policy that I was really excited about that uh the chancellor I think mentioned last year is this idea that they should be aggregated so that they can have a world-class investment office, so they can do something like Yale. Like when I do LP calls uh for emerging talent, thanks, dude, you're very welcome, Tom. Had to do like 10, I think it was more literally, I just told you about the 10. No, I did do a few, and the thing that's stunning about the US firms and then the sec the really I think more sophisticated ones here like Welcome Trust, just phenomenal investors, is they understand the power law, they understand they got to build relationships for the long term, uh, and they can actually have world-class analysts inside those firms, and you can't expect a tiny fund to do that. So this idea that we might aggregate 90 local pension funds in the UK to enable them to think more like Yale rather than just replicating the asset split, I'd be really excited about.

I thought it was so interesting you said that it doesn't make sense to build these like three or four tier players in a market because I've been in venture for 10 years now, a lot of the job has been like, oh well, it's like HR platform X, but in Europe it's Y for Europe, and actually you can build billion-dollar, two-billion or three-billion-dollar companies on the back of that. Where can the UK and Europe then be a number one market leader and beat the US and China?

Well, I I think you if you think of it as a stack from like semiconductors

And hardware up to sort of applications layer. Um, then uh, I think it's easier for Europe to think about building at the bottom of the stack or at the top of the stack actually. Um, I think it's quite hard for Europe to sort of build in the middle of the stack. Um, so, so, so I think AI application companies that solving a particular problem, particularly if there's a sort of defensive moat that exists in Europe, obviously a good place to sort of start. Um, um, and um, and and then I think at the bottom of the stack, I mean, um, I think something that's attached to the metal, so semiconductors that are solving a particular problem happen to be somewhere where we have the expertise to do that, and it happens to be a B2B sale where we get paid for the value of the architecture that we put down and the utility it delivers. Um, and and so I think it's it's easier to think top and bottom of the stack as the places that we can build those companies actually. So it's not necessarily where we're focused on, but it is kind of where we should be focused. Whereas I think if you're building some middleware layer or some tools layer, I think it's a little bit easier to imagine doing that in the States I think than doing that here.

I think the interesting thing with Stan's argument, I, I really agree with it. I like the idea of focus and specialization. One of the things that concerns me is just this idea that we can be experts at everything. Instead, I think we have to say actually, let's let's have understand our unfair advantages. If, for example, and I agree with it, the bottom of the stack, the infrastructure layer is somewhere we can be world class, we've certainly got the technical talent, then I think we have to build the whole ecosystem and structure it and say actually, in this one location we're going to be effective. We have then have to do second order things like we have uh the probably the highest electricity or energy costs uh in the whole of the western world in the UK. That just does not enable you to do a great job of this; it doesn't even enable you to do a great job of training foundation models. Like if the blended cost of training a large language model is 20% energy, we're already kind of losing. So the important thing is to say actually, what are we going to be world class at and where are we going to be, and we have some advantages. Like one of the things that's interesting, we've done it in this conversation, it's easier to sort of aggregate everything at the national or continental level. In truth, we should be honest that London is incredibly diff different, for example, from the rest of the UK. Building a startup in Europe is doing it on ultra hard mode. We've talked about it before, but actually if you do it in London, it's slightly easier mode at the moment because of the talent because it's where the investors are. So we have to start to just acknowledge that, lean into it, and actually have this pockets of specialization. I think yeah, I think that's right.

I mean, I wasn't so much thinking by the way of uh of building lots and lots of data centers on a on expensive energy cost because that would be nuts right now, obviously, but I was more thinking about the the chip design layer. So not even chip fabrication, but you know, chip design, which is where 75% of the value in the semiconductor space is. Is what Nvidia is, what Qualcomm is, what Broadcom is, all basically semiconductor design companies that basically sell chips, but they get them fabbed by TSMC or whatever. Um, so that that's the model that you know we we ought to be playing in. We have something like 2% of that global market in Europe. It's insane, honestly. Um, so yeah, so in the fabulous space, so so we we we we must be building successful fabulous companies I think, and Europe has got the, in fact the UK um in in in Bristol as it turns out happens to have this full custom microprocessor design capability that stems 20 30 years ago from the creation of InMos, which is kind of unique actually. There's there's only probably two places in Europe you can do that, and Bristol happens to be one of them. Um, so so I think it's I think it's plausible to build companies in this space that are global winners, and yet you're right um uh that we do need to put much larger checks into those companies, but that's the reason why we need more venture money here is to be able to write those checks.

It's interesting you said about the cost of energy. I was speaking to the CEO of one of the largest data providers in the world or data center providers in the world, and he said, "Harry, in the US, my energy costs 4%; in UK, if I set up today, it's going to be 17% in total." And I was like, "I get it." That I did not know, you know, I was pushing pushing pushing. He said that. I'm like, "All right, fine, you do you." My question to you then is like, when we look at that and we look at the money that's needed to fund that, where does that money come from? I I understand your argument around the scale and the scale of cash needing to change. How do we fund the 450 million that BBB does invest to whatever we want to call it, 2 billion, 3 billion, 4 billion?

Um, yeah, I well firstly, I think I think the money, the Europe has a lot of money actually. Um, so I guess the first thing to say, so Europe's got a lot of money in obviously in pensions. We talk a lot about pensions. Got a lot of money in family family offices um that are sort of locked up all over the place actually. So Europe actually is not capital short; it's just not investing in this particular asset class. Um, um, so the job I think of BBB is to create that asset class at speed and and to play an enabling role in doing that essentially. So, so my yeah, you my suggestion would be that we get the government to increase the amount that British Business Bank, and we may need to uprate the quality and talent in BBB to be able to do this, but BBB puts like 4 billion a year in um and would um would require like a 50/50 funding ratio. So the GPs have to raise matching money. Um, otherwise, yeah, BBB doesn't participate, but it can be 50%. Um, so so if I want to create a billion dollar fund, I know I'm going to get half a billion from BBB, and I've got to raise the other half a billion essentially. Um, so raising the funding ratio to 50/50 would be a good start, and and then I think we've got to be creative, um, which which I guess is another call to action for BBB about how we we split the fees and split the carry between the different LPS in the fund. So so at the moment there's a lot of hand ringing and anguish about the fact pension funds won't pay a 2% fee um and uh and I would say fine, you know, let's do it on a half% fee then. Um, but but but in but instead, you know, the the carrier that the partners have is higher, and and quit proquo is the BBB might pay a 3% fee and the carrier for the partners is lower. Um, but net net we still at 2 plus 20. So so let's be creative about how we do it, and let's flex to the job is to bring the capital in and make it mesh with public money to mint these large funds that can write these big checks that allow us to play seriously in some of these sectors that are basically capital intensive and winner takes all, and and that's that's kind of what we need to do I think to sort of pull ourselves out of the out the the nose dive that the country is currently in.

I think where would we get that money from? Oh well, we the the government has created its own fiscal freedom to do this actually. Um, so the the government uh is able to treat any investment in BBB money as being not borrowing, not public spending. Um, so it forms part of public sector net worth, and it doesn't count as current spending because because the argument is, and I think this is correct, that you know what we're doing is building up a financial asset on the government's balance sheet. So so if you did this consistently over like 10 years, you'd have 40 billion on the government's balance sheet of uh fund of fund investments in venture um that you the the worst performing fund of funds generate maybe 6% IRR, the best performing generate mid-20s, so always higher than gilt yields. Um, and and and I would say you could go even further, you could say like in 10 years' time we got 40 billion on the public balance sheet, why don't we make an offer to the public? Um, why don't we offer it to individual pension plans to invest in this stock? Um, so yeah, so we could we could create like a that fetcher moment really where you privatize, but but you know, people in their 20s and 30s should be owning assets in the future of the country actually; they should be owning those assets, and it should be should be recycled into making the country more successful competitively, and technology is the place to put it obviously. Um, so so that's kind of what we ought to be doing.

I do see it as investing. We're talking about infrastructure projects. We look at Germany's trillion dollars. I think it's incredibly important. Uh, I like the idea that we have a kind of intellectual infrastructure investment that you're describing. The big thing to design around, and it sounds like you've started to think that through, is the adverse selection bias. My biggest fear because there's such a power law of returns, what you don't want to do is just end up with the worst investors making the worst investments. And so you know, placing an emphasis on those maybe first, you know, supporting perhaps first-time funds, solo GPs initially to get going could make sense, but it's incredibly important for the UK taxpayer to get into the best funds, and so I do believe there are there's got to be incentives that UK PLC can provide so that the best funds that Harry describes actually are excited to take money from that BBB fund of funds. But Tom, do you think do you think um if we put such a system in place and we made it plausible feasible for GPs to go raise like half a billion or a billion dollar fund here, um do you think we'd get partners in US firms with a strong track record to consider coming to London to basically raise a fund here because it can be done here? Um, and you know they could build it, and and you could also imagine that you know there'd have to be some conditions on those funds if if BBB is going to fund them, like half of the money or whatever's got to be invested in the UK. Uh, but but you you could imagine somebody's trying to set up a startup in say Stog or something, the core could be, "Well, we'll fund it, but you got to move to London, and we'll fund it." So I think the answer is yes, but again it sort of speaks to specialization and sort of I guess um the question for me would be in what areas would you get the best people saying it's worth me doing that, and it's not going to be in you know it wouldn't be necessarily in digital health where the UK has one major customer, none else. It would be in places like fintech where we have a good track record uh because we're in a great position sort of globally at this point. That's why we've done a disproportionate number of fintech investments. Defense I think is an interesting area at the moment where you know we're going to have to look more to 3% of GDP spend in defense, so there'll be areas where I think actually very smart rational people would make that call, but there's others where it would be a harder stretch, like consumer where it doesn't really make sense to like be outside one of the biggest markets.

Why do you think defense is different to health? I think in defense you still have one primary buyer here really, which is obviously the MOD, and then you have very splined and fractured buyers which is the rest of Europe, and each wants to have their own dominant uh domestic provider. So disclaimer, I'm a reservist, as you know, so this is something I'm really passionate about, and I'd say there's three things happening at the moment uh that make it significantly more interesting than it has been in the past. The first is very smart people are interested in doing it because they think it's right. There are people like our peers that are interested in doing defense companies because for the first time they actually think there's existential threat. Second thing is actually while you do say uh you're right there's maybe a single buyer, it's it's more complicated that in the UK we have multiple services, we have multiple regiments within each, each is a potential customer, and they're being forced to innovate at the moment uh for the final reason which is to some extent we are on the you know we are on geopolitically we are close to a war zone at the moment, and we have a point of view in that war. We occasionally have some of our armed uh servicemen at risk. I think those three things together mean that actually when you look at Anduril in the US and they had a recent round, eight billion dollars, overscribed, it shows you there's an appetite of people and capital to go in there. I think the UK has interesting talent. Uh, the UK is playing its part in Ukraine at the moment. It's an amazing place to test new technologies, and I think it's an opportunity to build next generation primes here. So as a category, I think defense uh in Europe is an important one at the moment, and there's probably what two to three trillion going to be spent over the next five to eight years in Europe in defense actually, and and all all layers, not just final product but like components, and there's lots of layers here. I think agree. And then I do think it's that will forge some dual use technologies. Like if you look out there at the sort of the biggest defense companies, you could argue that DJI is one of them at the moment. And actually I think you'll see the same thing in reverse; some of the technologies, whether it be cyber or maybe it will be uh UAVs, drones, I think you'll start to see they'll have other applications outside military.

To what extent is it when we think about kind of amazing companies you mentioned, and there we've mentioned some other amazing ones in the US, there is a market for them to go public, there is a liquidity market that is much more vibrant in the UK. We have the London Stock Exchange where a lot of people throw a lot of criticism, and people choose to not list on the London Stock Exchange. To what extent do we need local domestic liquidity markets or are we in a global world where you can just go to NASDAQ?

Yeah, I've thought about this a bit actually. I I I think it's a supply problem again. Um, so so I I think u the lack of like tech companies in London, there's only one London listed tech company worth more than 10 billion, and that is Sage, and Sage is like a 30-year-old ERP company. So so which is I mean it's it's a very nice company, but it as a as an output of the 20 billion a year that we pump into tech in the UK to have one company worth 10 billion on the stock exchange is not a great outturn really. Um, so so whilst the US has minted 20.5 trillion of value in its tech companies, we've minted about 100 billion over that period of time so in tech. So yeah, so yeah firstly, let's accept it's not good. Um, but I think the problem is supply actually, is that companies grow to a certain size, they're stunted for all sorts of reasons. You know, it could be quite early on the cap table's broken, they hire the wrong people, the wrong product market focus, but it could also be lack of swinging for the fences, lack of money to swing over the fences actually, and net result being companies just have to be sold uh to typically US buyers, so they never get to the point where they're into growth and they're capable of being IPO. So there's not a big pipeline of companies coming through that could be IPO. There's a handful in fintech maybe, uh but apart from that, not not very many. So so I think it's a it's a supply problem actually, and I think that's that's why it's really important I think that we grow the amount of capital here, and it's UK capital that is patient and will put the money in, and we can fund the companies all the way through to eventually going public, and then I think I think it will be natural to list them yeah where there's a market for them, and and I think that could be London, it could be NASA, it could be wherever is suitable for the company. Agree. Definitely supply problem doesn't help. If we had much many more much bigger companies, we wouldn't see it.

I give two other reasons. So the first is a sentiment problem. Like I I have not spoken to anyone for months that is positive about LSE or listing, and it whether it be valuation or it be perceptions about um the for example the product itself because of the stamp duty driving down liquidity, and I'm afraid these stories are kind of like SEO for our minds. We hear the story, we remember them, and there's just a negative sentiment about it. So most good companies are getting a more kind of open to the US, and they're getting courted very effectively; they have the red carpet rolled out for them. So that's the first one, sentiment problem needs to be turned around. I mean, you interviewed Julia Hogget, uh don't know your point of view, but you know the sentiment isn't great. The other one I just point out is I think it's an easy thing to measure that doesn't mean it's the best thing to measure actually, if I'm completely honest. Given the choice between uh picking where a company's HQ is or where the bulk of the employees are or where the IP is generated or where it's listed, I'm taking the first three; they're way more valuable. I know that they're kind of interlin uh but the most important thing is where is the sort of economic driver and where are the employees and that value creation. And so you know if we do have a period where the very best UK and European companies end up listing uh in the US, I think that's okay as long as we have a great kind of platform of big value generation here, and I think it'd be it'd be okay if the ownership of those companies when they go public is predominantly here in the UK um because because I I really think we've got to set a national goal here for wealth creation. I mean, the UK really, it's clear you just look around, and the country is getting poorer really, so and we can't afford all the services that we want.

So what do you mean a national goal for wealth? Like like if you if you take the yeah firstly I think tech and innovation is really the engine of economic growth here; there's no other engine that we can rely on, so it it's that um and and if you look at the US has created this 20 trillion of value over the last you know 20 30 years in new tech companies, UK 0.1 trillion. So um so we're we're yeah pato; we should be about 4 trillion; we should have created and we've created 0.1 trillion, so we're about 4 trillion short of where we should be. So I think we could set a goal to say look, what if in 20 years we set a national goal of creating 4 trillion of wealth in tech? Um, so yeah, so um and so yeah, so that obviously that's that's a sort of escalating growth of value. So yeah, so let's say at year 10 the goal is half a trillion um and and and thereafter you know the you know we grow from that point. So growing half a trillion is already quite a big goal for us yeah, given that we've only created 100 billion right now um and that uh but it also sets the mindset for saying what what are we going to have to invest to do that, what what these companies look like, how much capital are they going to need? They're going to need about 100 billion of capital to do that really realistically. Um, and you think okay, that 100 billion, where's it going to come from? Um, well, yeah, it's going to be something like 10 billion a year is what we got to put in additional to what we're currently doing, and that's roughly the gap in our venture. Um, so so so I think I think if you could find a way of putting more capital to work, we can end up growing that half a trillion in 10 years and 4 trillion over 20 and fill the fill the hole in terms of putting more capital to work and encouraging that SEIS EIS has been very effective in terms of encouraging more direct investing from individuals. When I look at my cap table today or you know LP list today, 85% of dollars maybe 90% of dollars are from the US for me. And I'm I'm so thrilled and honored to have them, but it is slightly not alarming but I think about it that you know I think we'll do very well, and I think our funds will make a lot of money, and all of that will go straight to the US, and that doesn't thrill me for my grandparents who have pensions and my mother's got pensions and everything around us in the UK. Is there anything that could be done to unlock the huge amount of family office corporate pension fund money to invest directly into funds, whether it's an SEIS for funds and the EIS for funds, cuz otherwise they're not freaking moving?

I think I think the the BBB role I spoke about earlier I think is critical to this actually, is you if you look at where the money came from in the US, you look at the distribution of where that money came from, it's pretty evenly spread across endowments and family offices and pension funds, insurance companies and so on. So it's not just pension funds actually; there are other sources of capital that we need to energize and create, but but yeah, we don't have we don't have the endowment fund pool which is we don't have the endowment fund, that's true, but we do have more family offices. I think there's a lot of old there's a lot of money here. Um, there's 1100 family offices in London. Blimey, yeah, it's a lot. Yeah, so I met every one of them, um, so which is why I think we need a energized BBB actually, which is creative about the structuring of deals to bring those people in to to structure them in a way that makes it easy for them to participate in this illiquid 15-year asset class really, um where the fee structure and the carriage structure works for them and works for BBB, so you'd end up with LPS that are 50% the national balance sheet and 50% UK-based pension endowment family offices and and insurance companies. So I think I think that is the job actually of BBB is to do that. Do you want listen? I I spending more and more time with politicians now, um and they're all just terrified of getting fired, and they're all just terrified of headline risk, and when I listen to you I'm like, great, great, I see all of this, but then I see the Daily Mail headline which is about how your taxpayer dollars are going to fund Tom or Sarah's venture fund where they have a Porsche and a nice house in Hampstead, and the concent concentration of wealth on your taxpayer dollars. Do you think we're actually being reasonable by thinking we can do that?

Share my concern around that headline risk. Uh, it is definitely a challenge. I think uh so I I definitely see the the challenge, um but I I I actually think we've got to make the case really for why the UK needs to change really. I mean, yeah, the the I mean clearly we're not really fulfilling our potential right now; clearly we got a lot more to achieve actually, and yeah, and and it's about raising everybody's sights to build this country to be the best it can be really, is is let's build this value that is kind of

Missing in tech? Um, yeah, because it's not in any way coordinated right now. You know, this 2030 billion a year that we pump in at the front end—per annum in tech—so like 150 billion over a parliament in university funding for science and tech in SEIS, in EIS, in VCTS, in R&D tax credits and patent box, and uh, and so on. All those things, you add them up, um, and what's coming out the pipeline is what? Nothing really. Um, so yeah, so there are some people making some wealth along the way, but that's not what we want. We're not achieving a national goal really.

Um, so I think, I think if we say, let's let's do this together as a country, let's build this value, and let's yet energize people, then that, yeah, it's clear to me that active money is is the way to go. Passive money is not the way to go. Um, so an active money means, yeah, when things are going well, investors double down; when things are not going well, they kill it. I mean, so yeah, and we've got to be courageous enough to do that really. And that does require—I mean, VCs require opex cover, don't they? So you you've got to basically fund them really.

I think two two ideas that Stan's thoughts remind me of. Uh, so the first is, I one of the things I admire about Sequoia is that their meeting rooms, I think, are named after their LPs. I think that's a really interesting thing to remind everyone who they're in the service of. And I think one of the challenges we have in the UK is we perhaps don't celebrate entrepreneurs as much as we might if we were able to say to those entrepreneurs they can tell the story about the wealth they've given back, whether it be through BBB or another vehicle. I actually think the public would see more of the value they're creating.

The second story I think about is the Norwegian Sovereign Wealth Fund—extraordinary business. Uh, if you look at their sort of ownership at the moment, it's mind-blowing. But the other thing they do is they effectively have a stock ticker so that everyone can see in real time what that sort of national wealth is. They have a literal stock. I interviewed him, and he's literally like, you know, the happiness of the country does go up and down dependent on the ticker. Exactly. So this is all about just reminding society that actually some of these great entrepreneurs are building business in society's service. I think that's what we've not—great idea actually. We if we if we have this like four trillion goal, it'd be a great idea to have a national ticker as we climb our way towards it, wouldn't it? And I think it would glue uh, culture and society a bit more than perhaps you have at the moment where it's perceived to be haves or have-nots. Yeah, I think you're right. It's a communal goal to reach together.

Um, you mentioned Norway there. Norway innovated in their tax uh, system, uh, and they seem to misunderstand that kind of models are variable and that when you change a certain tax rate, uh, you will see, you know, people leave. Um, we've seen the removal of non-doms. I'm really worried about this every single day. I have friends saying, "Hey, I'm leaving. I'm leaving." "Why are you staying?" To what extent is the removal of non-doms a massive problem impacting the future of the UK? I so look, I um, I think this is one of those classic cases of whether you want a sort of principled approach or a pragmatic approach. I'm a pragmatist. If I uh, I do see the brain drain. I recognize it, and I do see that many of the people I know well that have chosen to leave have left. They were also incredible angel investors. They uh, employed a bunch of people, and so do I think everyone should pay equal tax? Yes, in principle, but practically speaking, I would rather that talent was in the UK. I mean, I am seeing some exceptions to that. I heard about a billionaire VC who, you know, I think has moved to the UK recently. You do get some movement back in the other direction, but I would take seriously again leading and lagging indicators. I would take seriously the leading indicator of some of the non-doms leaving. Yeah, and I I it looks honestly like the, you know, one of the challenges with the UK is this this tug of war between principles on the one side and practicality on the other. You know, the the the principles have been: you remove non-dom status, change inheritance tax rules, you change capital gain tax, put fees on private schools, and and then assume that everybody's going to be happy to stay. Really? I mean, yeah, that that I just think that's too much actually, and the the impulse on the system is too much, and and that we are shooting ourselves in the foot really.

So so I agree with Tom that in principle, as a sort of UK taxpayer, I'd like everybody to pay the same taxes, but um, but I recognize not everybody's in the same starting point, and people do come to the country with existing wealth really, and it can't be fully right to then seek to tax that, and to so so therefore there has to be some provision for that. I think that makes it possible for people to stay here and so on. So um, and I think it's also part of this thing: look, if we're serious about building the country to be a country that clearly wants to win, then we better fix this as well actually. Well, this is where like, for me, like pandering—Trump—Trump's pragmatism, which is like the Labor government's desire to pander to traditional left-wing policies, is destroying a pragmatic approach to wealth creation and wealth sustenance because all of the things that you said—inheritance tax, cap gains, schools—is bluntly going pandering to traditional left-wing policy and and probably don't even make economic sense—for the absolutely zero economic sense. I mean, listen, I I interviewed—I can't say it live on air, but I'll tell you afterwards—um, great uh, one of the most famous politicians in the country the other day, um, and they said, "We have to get rid of the treasury because they do not have variable models, and so they literally have static models which say if you increase the tax rate to X, you will get Y." Oh wow. They do not have any variability to what happens with important export of anything. God. And and that is why their numbers say we should do this. Oh god. Fascinating, huh? Yeah, that's not good. It's terrifying. Um, but it worries me.

Great. Do you believe the multiplier effect? Because I always get the pushback whenever I'm on social. I'm like, "Listen, it is great having non-doms. They spend in restaurants, they hire people, they buy homes, they spend in shops." Do you buy it, or do you think that actually trickle-down economics is a lie that we continuously—I I there's bountiful trickle-down economics, but but there is also this need for fairness as well, and and I think it is just a balance that we got to strike between the two. Um, so yeah, so you people that um, don't enjoy a privileged tax status and pay full taxes uh, sitting in the same restaurant as people that do enjoy a privileged status, I mean, that's also not right. So yeah, so we got to find a balance between the two is is how to how to sort of you make it feasible for people to stay here and not be penalized, um, but at the same time try to be as fair as possible as a country as a whole, because we need to we kind of need to hold hands together on this actually as a nation. So so we need you—both people that have come from outside the UK and people inside the UK—to feel we're on a shared mission together really. And uh, so that it's got to be somewhat fair at the same time, and I just think the balance right now is probably swung too far in the opposite direction, and that we're we're actually making it much harder to do that.

I'm a strong believer in a sort of Keynesian multiplier effect, and just in our small world of tech—it's the only bit only sort of part of the economy I know much about—I see it on a daily basis. Like angel investing in GoCardless, if I look at some of the other angel investors in that business, they were non-doms. They were actually Europeans, some Americans. The founders of that business built an important company for London, employing hundreds of people. One of the founders left and built Monzo. Um, another founder has left and is a VC at another firm in London. If you look at the number of senior talent in GoCardless that has gone on to create other businesses—amazing alumni there—it's an an incredible multiplier effect. And so that's what we're saying actually: you've got to have those initial sort of pockets of innovation and growth, and then I do think you get this real multiplier. And the good news is businesses are growing faster than they ever have before, so I think those cycles will happen quicker—quicker—previous it might be five or 10 years that you start to see the best uh, senior operators come out and build a company; now it might be 18 months, 24 months.

Is there any change with SEIS and EIS? Yeah, I think a lot of these EIS funds are not very effective, um, and VCT funds are not very effective. Why is that? I agree with you, but I don't know why, because uh, the quality of investment managers is quite low, um, and because they feel they've done a good job if they get anywhere close to just returning capital. Um, so instead of saying, you know, "Here's here's here's an investment, and you know, go swing for the fences," is that, you know, "For God's sake, don't lose it." You so you take the low-risk return, and and you flip the company as quickly as you can and get—if I get 80 cents on the dollar back, I'm happy. And in fact, all the returns are somewhere between 80 cents and $1.20 on the dollar. I mean, it's ridiculous. So so I think those funds are freaking disaster really. Would you get rid of them? I'd get rid of them. Yeah, and I think there's a there's a lot wrong actually with the UK tax system that is maintaining too many zombies, I think, in the UK. Like what what? Well, the most obvious is R&D tax credits, which um, is deeply unpopular—for me to say—go as a as a founder and a CEO, I'd never say this by the way, um, but as as somebody who's not currently a VC and who's not currently running a company, I'm free to say what I think is true, um, which is that um, you know, we we're currently investing about $7.5 billion a year in R&D tax credits—per annum—in 55,000 companies—per annum—in the UK, um, so and you there is no quality check if you like on the value that's been created there. All you have to do is prove that you spent the money on something you can loosely classify as R&D, and you get a check from the government. Um, so yeah, so this is classic helicopter money. Um, yeah, so passive money goes to good and bad, and I think if you're going to be brutal, you'd say that either goes to companies that don't need it or it goes to companies who shouldn't have it. Um, um, but um, but in my view, it would be much much much better to take that same amount of money and put it into funds and put it into active venture, um, and that way, you know, when things are going well, you double down; if things are not going well, you kill it really. And you know, so we do end up tying up national talent and national treasure in companies that are never going to be successful globally that limp on from year to year, living on R&D tax credits and uh, and yeah, so so I'd much I'd much rather see in venture—much rather see valuations go up actually—um, um, which I know as a VC probably not very keen on hearing, um, but but I'd much rather see that because you we end up with the same dilutive effect uh, as as we get this like free money from the government every year. So um, but but I think you, by being actively managed, we get to recycle our limited amount of talent and our limited amount of capital into companies that are really going to make a difference really. And uh, that is one thing we can do.

I say unsurprisingly, I think uh, tax credits are pretty important. What I hadn't thought about—because I have a sort of biased view of just higher-growth companies at the early stage of their life where you're investing in the future—I like in the same way as I like your point about EIS and ESCIS, because I just think about angel investors. For angel investors, I think it makes sense. Yeah, but like to your point actually, just on the R&D tax credit, what I don't see is these kind of zombie companies that have been claiming it for a decade and actually aren't necessarily building for the future. So maybe uh, we should start to take into account time, like they do in the US with capital gains tax, and start to actually maybe taper off R&D tax credits to avoid what you're describing. Yeah, we we're running at roughly 2x the rate of the US. Um, so so I think you—if you look at four big differences between the US and the UK: one is uh, the attention to talent and the need to sort of keep people in the country; um, the second is the quality of mentoring—very early stage needs to be ratcheted up a lot higher here, and it can be. I think it just needs more coordination; um, the third is the excess of props in the UK for companies that are not making it that limp on forever; um, and the fourth is the massive shortfall—which again, I don't feel I've got quite the agreement I expected—the massive shortfall in capital that I think we just need here actually. We need to really, we need to flood the UK with venture capital. That's what we need to do.

Oh my—my takeaway from this show is that we just need to put Stan in for the BBB lead and just let him run it. I mean, like, that's—that's—not sure I'm a banker to be honest. I think you'd do a brilliant job. That's why you're qualified. You're literally—interesting. You mentioned the mentoring there, and you said there are ways that we could do it. How do you think we could do it and increase that level of mentoring? I agree with you, and one of the things we do is just whenever I think we're making investment, we will bring in often other founders from our network, people that we've worked with before, and the value-add from those people—partly because they've got experience, partly because they're paying it forward—is unbelievable. So I I totally agree. I always say to founders like, "Never have a minimum check size for amazing angels." There's some who can only do 5K or—I mean, some at 1K, and you can do that with Angel Syndicates. Like that is just as valuable, and often they'll give more because it means more to them. And so I really always push on that. Obviously, we have Project Europe now, and I spend a lot of time with Kitty, the CEO. Congrats. Thank you. We love it. That is very kind. Um, I'm so pleased that you're in it, Stan. You're not allowed—Tom's—Tom can't be—no, he's not—it's not stopped asking me about it for a year. Yeah, yeah, Tom's heard it all.

My question, too, is: Kitty always tells me that the biggest enemy of talent in the UK is quant funds. And I was like, "I'm sorry?" And she goes, "Yep, quant funds. They go to the universities, maybe—maybe this is a private conversation—Kitty's going to kill me, but let's roll with it—quant funds go to universities, they source the best talent, and they throw 250K at them straight away. Uh, so the best engineering talent is just going straight to quant funds, and quant funds are much better recruiters than anyone else." How many people work in quant funds though? Is it is it a big number? I mean, I I I a member of our family works at a quant fund actually, and who's who's paid a lot of money, I think, to do something very similar. So but there can't be that many people, so it can't be the biggest drain on talent. Maybe not, but probably a thousand, which is two years of full computer science and robotics graduates, which is quite a lot. I mean, a thousand more in the ecosystem would probably be a pretty significant needle mover. I there's definitely competition from that for this from the smartest quants. I think one of our jobs is to make startups even more appealing—celebrate the successes, actually show the alternative. I think EIR, like the sort of entrepreneur relief, is a wonderful example of something that can maybe tip that balance, because often the economics from a quant fund—income tax—so I think things can be done.

What would you do with entrepreneur relief to make championing entrepreneurship better? I' I'd expand it. Um, I would—it's what—it's limited to like a million quid or something—from—it was taken down exactly—which to me, given the amount of time and effort that people are spending—I understand that for those that don't know, entrepreneur relief is what, and what does it mean? Entrepreneur relief is the ability for you to get preferable tax treatment if you've grown a company. And I actually think the idea of making for entrepreneurs maybe capital gains exempt would maybe tip that balance when you're comparing against quant funds if that's the competition.

I do just want to touch on the wider world around us uh, in two ways: one is the US, and the other is China. Again, this wonderful politician that I interviewed the other day said, "Ah, you know what? We were an afterthought uh, for the US, and now we're not even that." And I guess my question is, in a wider world perspective, what does not even being an afterthought mean for us and what we need to do? We do actually have, as Tom was saying, universities that are global-grade universities. I mean, Cambridge is not that different to Stanford—um, maybe a little bit smaller, bit less funded, but the quality of research that we're doing here is as good. So we so there is raw talent here. I do think I do think London is a a really great city actually, a great place to live and work actually. I mean, it's probably probably the best city this side of the of the Atlantic, and arguably the best city in the world actually to do this. So so so I think it's a great place.

Do you think London's got worse? Everyone says the crime, the lack of public services, or the poor quality of public services. You know, I think London will revert back to London in the 70s, which is grim—it's gloomy, it's no growth. Well, it could if we let it, but um, yeah, I I think it's it's possibly not as shiny and smart as it was, but I actually still think it's a pretty good city actually, and there's lots of good things to like about London. Are you concerned that Labour will let it get to that deplorable state in the next four years? I don't think they will, but I would like to see them move more quickly on policy changes and action than they're currently doing. That's certainly true, um, but I think they, you know, I think they will listen and change actually. Um, so I'm optimistic about our ability to get change. I think London's a special place, and I feel lucky if I compare uh, living here to other places. Just it's the sort of multiculturalism, the diversity, but actually, just it's an interesting place to live. The fact that I can jump on a Lime bike, come over to do this in the afternoon, I could have a meeting at Number 10 uh, shortly thereafter, I could go to the European headquarters of a big brand. I could do that all on a Lime bike. It would take five flights to do it between those stakeholders in the US. So actually that proximity effect, I think, adds a real richness to life. So does it have its challenges? Yes. Uh, but there's an incredible pool of talent, so I think the kind of petri dish for continued growth is there.

My word, if that's a standard afternoon, you're a very important person, aren't you? Jesus Christ. I just popped down to Number 10. I popped down to like a global CEO—only sightseeing. Wow. That's—I was mainly sightseeing. I just barely managed to get through the emails. Well, well, Lime Bike is—Lime Bikes is actually a portfolio company, so I'm just driving up the revenue—just constantly cycling around on it. Yeah, exactly. I'm going to expense it to your show. Thank you so much. I'm going to get Brad to sponsor it. Uh, that's amazing. Uh, final one before a quickfire: China is changing faster than ever. Tom, you said before when we were walking around the block that China is the thing that you've changed your mind on. Yeah, I've changed my mind on China a lot. So uh, I think strategically they're in an amazing position for the obvious reason, which I think actually more countries are more open-minded to working with them given what's happening in the world, but I think there's a less obvious reason, and that is uh, partly as a result of DeepSeek, but more broadly, we've learned a lesson in the last 12 months, and that is that actually foundation models can be distilled relatively quickly. When I was on your show—show—last time, I talked about how foundation models were sort of going to be the fastest depreciating assets in human history—like weeks—it's almost days now. And so if you live in a world where the foundation models uh, commoditizing really quickly, then you say where does the value accrue? And I think the value accrues at the application layer. So we're invested in companies like Synthesia in London or Harvey in the US at the application layer, and then I actually think it um, accrues to in hardware as well. And if I look at hardware, China is so much better than the rest of the world at manufacturing and hardware and value-add, and I think those devices are actually going to be the conduit for commoditized AI. So in that world, I've probably gone from thinking, you know, been excited about the US dominance on foundation models to some extent, to thinking actually maybe the value is going to accrue also in the hardware layer, and that's somewhere that I think we're playing catch-up. Yeah, and I think I I I I completely agree with it actually. I think actually it's the hardware layer is just sitting just above the semiconductor layer, um, and and actually think the one that we can play in is the semiconductor layer, but I I do agree with—I think China is in a really good position partly because it has done this like very significant continuous investment in startups and in venture over the last like 20 years. And as a result, if if you look at a if you look at a a blob chart if you like of uh, of what investments going into AI and you color code it for US, you color code it for China, you color code for Europe, it's basically US and China and these tiny little dots of Europe actually. Um, so I mean, Europe is really missing. So so it is kind of US with China sort of chasing uh, its tail actually. And um, and and uh, but I also think the sort of geopolitics of America trying to dislocate itself from the rest of the world um, will put China in a much better position actually as well—geopolitically. So I think Europeans are going to be much more open to uh, to to working with Chinese companies and doing business in China than they were even a year ago actually. Um, so so I do think I do think things are changing, and it's probably not good for the US actually, but that's that's what I think is happening.

Do you think we should be open to doing business with them? I do actually. Yeah. I mean, I I've sold a company to Huawei actually, so I spent about—I only spent about a month working for them. I have to say, because they didn't give me authority to buy a box of pencils after they bought the company service, so it was it was interesting. This is a country that doesn't allow our companies in there. They put their companies in ours. They acquire data on all of our consumers. We don't know where it goes. Every single piece of data that a Chinese company has, the Chinese government has authority to acquire at will. Yeah. I

Think all that's probably true, but but also they are commercial as well, so you can do business in China. So you, when I ran this chip company, actually our biggest customers were in China. So our biggest customers were Huawei and ZTE, uh, and yeah, and it was easier to get them to do a deal with you to sell product to them than it was a kind of US company or a European company, cuz you know they they, you know, you had to negotiate pretty hard on price and stuff. But but nevertheless, they were willing to engage, and we built some really good relationships with them, and in a personal level, I think people are actually pretty decent people, and you know, I think that you can do business with them. The Chinese state is something different that you got to obviously be wary of, but but I think I think there's a lot of scope actually for us to to do a lot more business in China than we're currently doing.

Do you agree? If I look at the talent and the areas that they have decided to focus on, they're all important—uh, battery technology. BYD is a force to be reckoned with; DJI is a force to be reckoned with. If I look at Deep Seek and the—Do you—Sorry, you mentioned BYD. Do you not worry about the Chinese subsidization of their car industry and what it's doing to the European car markets? I mean, the German car market is being destroyed by BYD and Chinese cars, and it's because the Chinese government are subsidizing between 20 and 30% of their car production. Well, feels a little bit unfair. Is is it is it subsidizing BYD? Is it BYD itself? I mean, there's variable different ranges, but it's anywhere between kind of eight and 25. It's certainly cornered the market in some of the rare materials that are necessary for batteries, and so, and I think it's got scale and it's got ability to compete really. So so in that sense, but I mean the German car industry has got other challenges. So one of the other businesses I sold was to to Bosch actually, and so I'm sort of vaguely aware of what it's like working in a large German company, um, and you know they they have their own challenges.

Did you buy your own pencils? Uh, not really. I'm not the fourth acquirer, so he can buy a rubber. I love stationary. Yeah, I absolutely love that. Uh, listen guys, I want to move into a quick fire. So I say a short statement, you give me your immediate thoughts. That sound okay? Okay. So, uh, Stan, what do you believe that most around you disbelieve? Um, I think that things like R&D tax credits ought to be curtailed, and we should put the money into a lot more venture. Is the is a really unpopular thought actually, um, but I still think it's right. Um, mine would be, I think I keep hearing people talking about the first one-person billion-dollar business is already created. I think that's absolutely ridiculous. On the one hand, companies are growing faster and more efficiently than ever, like Bolt, new $40 million revenue run rate in three months; they're going to grow incredibly quickly. But I think we've seen distillation of foundation models; we're going to start to see distillation of business models, businesses. And so I would expect these really successful businesses to get copied ridiculously quickly. So I think this idea that you're going to have a sort of moat that enables one person to deliver billion dollars of revenue a year is a myth.

What is the distribution of value in the foundational model landscape in 5 years? So my big one here is that I've changed my mind. I thought uh, OpenAI was a foundation model company; I now think it's a consumer company. It's at a 12 billion run rate or something. So my thought here would be uh, it's going to aggregate to the application layer, and brand is really important. They signed up a million ChatGPT users in an hour last week, it was announced. Brand is incredibly important; uh, the application layer is important; and then I think hardware, as I mentioned, is important. This is one of the things, reasons we invested in Nothing. We believe they've got 7 million uh, devices out there that are potentially conduits for their AI. Yeah, I I I think that might be right, Tom, that the value is is going to be balanced up at the application layer, but I also think at the hardware and semiconductor layer below, because I think it's it's sort of plausible because LLMs are not the end of the story here in AI. Yeah, so there are some obviously some big limitations of what LLMs are going to be able to do, so there's more innovation to come, and that's going to change models; it's going to change the math that we got to do and so on, um, and that um, but some of the things that are going to be concept, we we're still going to be doing very large matrix vector multipliers at high speed in silicon, and I think yeah, that's the sort of thing I think we can build you competitive long-term advantage in here. So I think there would be value accruing, even more value accruing to competitors to say Nvidia. I think will be big, and I think at the application layer, exactly as you say, I think you know there'll be value accruing there.

How about inference at the edge as well? I mean, that's something you understand better than me. Yeah, they're lighter these models, more and more could happen on device. Yeah, that's true. I mean, yeah, but with that is coming a lot more sort of chain of thought reasoning, a lot more test time compute, so the the token generation is still going up actually, um, so I still think there's going to be a large amount of silicon required to be able to do sort of high-performance inference even at the edge actually. So so there's a lot of scope I think in inference. You know what I just can't get, I can't get how if we all appreciate the shift in focus from training to inference, how Jensen and Nvidia are just sitting there going, "Ah, well, we're going to get screwed because actually our architecture means that we're not optimized for inference." That is not happening. Jensen is not just a fine, we'll just enjoy the training era while it lasts. So help me understand where am I missing this? They are making a bunch of architectural changes to GPUs to make them better and better inference. So there there is a lot of architectural change going on there. It's obviously not a big surprise to see if we saw Jensen starting to adopt and reinvent himself as an in-memory compute company. I mean, that wouldn't really surprise me actually that he he'll be working on that. So whether he does that organically internally or he does it through some sort of acquisition, it remains to be seen really, Phil, but I think that it's certainly it's certainly likely that you know he's got the resource and he's got the cash to be able to sort of move the organization or build an organization in pretty much any area he wants. And one thing about Jensen—I spent about a year and a half working for him—is he he he he definitely paying attention to and listening to the market, and uh, he's got very big ears and and and tracks what's happening with enormous study. So I I I I do think we've got to expect them to be tracking in the direction towards being more efficient at inference.

What's your biggest takeaway from working with Jensen? Firstly, he's a good human, um, so so that's good. I think that we got, you know, one of the world's richest people is actually I think a good person, um, so that's good, um, and uh, uh, he is however a bit of a control freak, um, so you know, many would be the time we're just about to give a sort of presentation to a major customer, and Jensen wants to go through the deck, and we'll change product name, schedule, pricing, uh, uh, and resources and everything on the fly, like with like 10 minutes to spare before the meeting. So so he's he's he's quite hard to work for in terms of his desire to have command of detail and to be in control of the most important variables in the company, but in a way as a sort of founder, I do sort of respect that actually. It's just you. So so within Nvidia, we used to have a Jensen at the top; we had a layer of people whose job was to buffer everybody else in the company actually, and so this buffer layer would deal with Jensen, which is great, a human shield, a human shield, and there's the people below that could actually get on with stuff actually, um, so uh, so it was uh, but I mean I I obviously I like the guy, and he's he's he's incredible communicator. We always hear of his—I don't have direct, you know, the direct reports, I have so many of like 50 or 60, and it sounds great when you hear him say it for the 50 or 60; we never hear from them. Is it good for them? Um, well, I mean it's a I mean it is a sort of it's a it's a brutal culture, I'd say. Yeah, it is. Yeah, but in a way that is not malevolent, um, so if it's possible to imagine, um, so yeah, so he will tear people apart in public, um, on stuff that they've not got command of or he thinks they're wrong about, and he he will like rip them to shreds and uh, leave them uh, whimpering in the corner to lick their wounds, um, um, but um, but I I think he I think he he then sort of forgets it, um, and and hopes that the exercise will have resulted in some improvement in the way the person thinks and acts. And so so that yeah, so that it's not it's not for everybody, that that style of management, um, but honestly, you've got to admit it's worked, um, so so he's uh, he has done an amazing job, unbelievable job.

Would you buy OpenAI at 300 billion? Yes, no, why? Yes, why? Yeah, uh, so I think if you look at it as a consumer business, I think it has extraordinary momentum, and it's only just started integrating Moes. So historically there's been no switching cost, one of the most important powers of a business, but now people have started using it; I actually think the memory is helping people stick. So if I just look anecdotally at my kids at school, uh, for them LLMs are ChatGPT, so they're very well placed now. Do I think that my mother on the other end of the age spectrum, same thing? Yeah, they own brands, so it's incredibly powerful. I um, it doesn't mean I think it's the best uh, Gen AI investment, but if I was sitting independently, do I think it's a good investment now when your downside is somewhat protected and they're at a 12 billion run rate, let's say it's a 20 times forward uh, multiple, I think it's a reasonable place to put money. Yeah, yeah, and I I I think a lot of the demand on these uh, foundation models is going to be through APIs by um, application software that are basically sort of and you those APIs are going to be driven by you latency and performance of the model and so on, and things like Claude um, are as good if not better than um, OpenAI's models, um, and that um, and that given this demand will for agents that are basically calling APIs will be driving a lot of demand here. It's it's not obvious to me that the consumer chat interface is the winning interface really. It seems to me that the API interface and the application calling agent calling might be a bigger interface, so I'd probably put the money elsewhere. Both good answers. Would you? I would. Yeah, I would. I I always love businesses where everyone thinks it's kind of reaching the top and then actually it's just actually reaching escape velocity. I think the same with actually Revolute right now, whereas like people think 45 billion or 60 billion new round is pricey. I I would buy the out of Revolute right now, but I totally agree with you in terms of just introducing the modes and the memory. I think is so important. You go back to where they remember what you did past; I'm always doing past searches; I'm always going back there, and actually I do—it's so funny—for every single show I put the prompt in to Grock Plexity, um, OpenAI. You can buy and hold one public stock for 10 years, which one do you—I mean, I I'm so uh, concentrated in tech, I'll avoid tech stocks and say uranium ETF. So I um, I have concerns that before I I have concerns about costs of energy for productivity. I think climate change is real; I think the best source of energy going forward is nuclear uh, fusion and potentially fission, um, and SMRs are going to be important. I think it's the uh, predictable cleanest energy source we have. I not betting on one individual company; that's difficult to do. So I think if I take an ETF in uranium, uh, I might enjoy the upside of the market because it'll be needed. Love that. What's yours, Dad? Um, yeah, I probably would avoid tech as well, actually, uh, the same reason, um, uh, probably Rolls-Royce actually, um, uh, because I do think defense is going to be a big kicker in terms of demand, u, so the air engine business, um, and um, and I mean it's actually gone like a rocket this year anyway, that stock. I mean, it's gone like 3x this year, um, but I actually think we're at the beginning of a journey, and I think it could be much bigger because as a European air engine vendor, I think it's going to see high demand actually. Yeah, and you might catch fission as well. You might fusion, fusion, fusion. Yeah, no fusion.

You can snap your fingers and change one thing about the UK tech ecosystem; what would you change? Well, I think flood it with venture capital. I mean, seriously, I think that's the thing that will the one lever that we can pull that will make a big difference is that uh, everything else will take time and stuff, but but I do think a lot flows from capital availability. I love that. I would say um, sentiment at the moment. I think there's more—this question is being asked so much it becomes a drag. What's the most underinvested but exciting area today? Yeah, you Tom, you do this for a living; I'll go hardware. I think if you take a hardware company out to market, the people, investors' immediate response is, oh, that's really hard. But the paradox about venture capital is you need it to be difficult to be valuable; you need to be contrarian and right, and I think hardware is a place you can do that at the moment. A huge amount of value will accrue there. I'd go the level below semis. I think semiconductors, um, that that fit into the hardware that Tom's talking about. Which politician do you most respect and admire and why? View specialization. Yeah, so I'm going to stick to the UK, um, so um, at the moment I say none of the current government really fill me with enormous uh, enthusiasm. I think Patrick Valance is a useful uh, uh, guy who's trying his best to sort of yeah, make an impact on the UK. So I think, but he's not really a politician, he's but he is doing the job of a politician right now. Um, I do I do think in the in the current government, um, I think Darren Jones I think has got the potential to be great. Final one, guys. 10 years' time, where is the UK, one, and how many 10 billion-dollar companies will we have on the LSE then? Yeah, I I think we will get the UK pointed in the right direction. So um, so I I I think it will require some government embracing of the challenge and a lot more communication by government on what what we're going to do and how we're going to do it, um, but I I I I think you know we're approaching a point, we're about a year into this current government, four years to go to the next election, yeah, things have not gone well, um, I think it's fair to say, and yeah, and I think we're we're approaching a point when they've got to recognize a change and make some changes, and I think we are going to see some changes that will be positive. And assuming that happens, I think in in 10 years' time, I think we will be on we will have achieved this 500 billion dollars valuation in tech, and the UK will be seen as the magnet in Europe in which people come to kind of build these companies, um, so that's what I think we're going to achieve. So I'm an optimist. I think um, sometimes the best companies grow from adversity. I think partly because of the concentration of talent, they'll just aggregate more than they have. So I don't know, 1999 was it Salesforce, and then you have Airbnb and Uber in 2008. I think we'll look back and the companies that are most impactful in the decade will have grown in the UK, and they won't be names we know today because these companies are growing faster than ever, so they'll be AI native, incredibly fast-growing businesses, and it's not clear to me they'll list at all. If you look at the trend direction there, we spent a lot of time assuming listing makes sense, but some of our best portfolio companies like Stripe aren't listing anytime soon, and they're finding ways to deliver liquidity. So I wonder whether we'll even be talking about whether they did or didn't list in the UK. God, that's opening up a can of worms. I mean, you spend another two hours on that. But I cannot thank you both enough for joining me. It's been such a fantastic discussion, honestly. There were two people that I most wanted being YouTube cuz I think it's such a different perspective you both bring, so thank you so much for doing it. Thanks for inviting us; we've enjoyed it. Loved it, really fun. Thanks a lot. Amazing guys, thank you so much.