Saul Klein: The top investor in promising businesses

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0:41We look forward to seeing you there. Who is the biggest investor in promising businesses in the UK and Europe? According to new research on Dealroom, it's the London-based venture capital firm Phoenix Court, which was founded by Sol Klein and is still led by him today. To work this out, Dealroom looked at the number of unicorns that a venture capital firm has invested in. That's a business with a valuation of more than$1 billion. But it also looked at the number of businesses that venture capital firms have invested in with annual revenues of between$25 million and$100 million, which it described as colts.

1:16And it also looked at businesses with revenues of more than$100 million, which it called thoroughbreds. In other words, this research looked at not just the businesses with big valuations, but those that are already generating substantial revenues.

1:37I'm Graham Ruddick and in this episode of the Business Leader Podcast, we're going to speak to Sol Klein about how to build a business, his story in the venture capital industry, and why he talks about the revenues that a business generates rather than just the valuation, which in the venture capital industry is actually quite unusual. Before he went into venture capital, Saul Klein co-founded Love Film, the UK rival to Netflix. But let's start this story with Saul Klein as a budding writer in the early 1990s. For his first job, he joined the Daily Telegraph, and that gave him an introduction to Silicon Valley and the internet.

2:11If I'm honest, I was more interested in being a writer of non-fiction, or fiction rather than of non-fiction. So I think when I was in my teens and when I was at university, I wrote poetry, I wrote plays, I wrote short stories, none of which are very easy to get paid to do. So I thought, OK, well, maybe someone will pay me to write. And, you know, being a journalist, you get paid to write. So no one wanted to do that either. So the only job I was able to get after university, because in the early 90s, the economy was in pretty bad shape, actually, even for graduates, was working at a newspaper, but not on the editorial side, but on the commercial side.

3:05and that's where I joined the Telegraph as my first job out of university. But yeah, my aspiration was to be a real writer, was to be on that side of the fence. When did you decide that actually that wasn't what you were going to do? Well, I decided to move on from the Telegraph after we put the Telegraph online, which was in October 93. It was the first, I think. We were the first, I still say we, we were the first newspaper of any kind of, you know, mainstream newspapers to go online. So, I mean, the big thing we would say at the time is we went online the week before the San Jose Mercury News, which, of course, no one's ever heard of the San Jose Mercury News.

3:54But it's effectively, you know, it's the Hammond High for Silicon Valley. So, you know, we felt like, whoa, you know, this newspaper where I think we lost half a million readers a year to death because the readership was so old was the first, you know, newspaper brand to go online. And that was in October. And in the December I was I went out to make my first visit to Silicon Valley. I had no idea what San Jose was, you know, heard about it in a song. And me and my colleague, we went to visit this company called Mosaic Communications. And the day we went to visit them, there were like 20, 30 people on University Avenue in Palo Alto.

4:45We walked in. It's like no one looks up. You know, they changed their name to Netscape. And we met with their chairman and founder, this guy Jim Clark. and the co-founder and CTO was this guy, Marc Andreessen. And, yeah, we came back. We were so excited. We wrote this big white paper for the then CEO of The Telegraph, a guy called Dan Colson, who worked for Conrad Black, who later was more famous for being in a Canadian jail. And we said, you know, we've got to invest in Netscape because the Internet is going to be the printing press for the 21st century. And sort of the feedback that we got from Dan, who was the group CEO, was, listen, we've had a PR hit for putting the Telegraph online.

5:35You know, Murdoch's cut the price of the newspaper, the price of newsprint's going down. You know, you guys go back to whatever you're doing. And I thought, no, I mean, I'd just seen what Palo Alto was like. And I thought, you know, this is what I have to be doing. And I, you know, basically had been going and talking to our advertisers at the Telegraph, you know, who were often in Canary Wharf, like Ogilvy's, et cetera, and saying, this is going to be the Internet. This is going to be interactive media. You know, you'll have videos in your ads. You'll be able to click on them. The Ford dealerships will be able to take registrations, et cetera.

6:21and i was approached by you know the woman who was running ogilvy and me the media which became mindshare and she said look all of our clients are asking us about the internet when you kind of basically walk across canada square and come join us and i kind of felt like you know telegraph didn't want to do any more um and my boss at the time a guy called steven grobina who then went on to kind of run TMT at Apex. And he was very nice about it. He said, look, you know, you're very good at starting fires, you know, and this one may keep going. And actually, you know, 30, 35 years later, I still work with Stephen.

7:06But, yeah, I mean, that's kind of, I didn't really, the idea of being a journalist or a writer kind of stopped with the internet i guess and just getting involved in that if you're starting your career again today or if it was a if you were recommending things to a younger version of you would you say to take the same path or would you say to go straight into to the venture capital investing world well i mean firstly i've got three kids one of whom just did his a levels and has left school our daughter is doing her a-levels this year and our son just turned 11 last week so you know i kind of had great advice from my dad pretty early on and from from other you know other mentors and i think i remember actually at the telegraph being there steven grabena was the ceo at the time and Murdoch cut the price of the times to 10p which sounds crazy right and newsprint prices were going up so you know it was obviously a a market share grab and the telegraph I think we had to let go a hundred plus people and it was you know I just left university I was like 22 23 three is like pretty scary to see all of these people I'd worked with day in day out for the last few weeks months years let go I was lucky not to be let go I remember like calling my dad up and saying you know what's going on and he said listen you know it's terrible but things like this happened and you know it's a great learning experience it's not your business but you know know it's something to to look at and learn from and then i remember you know one of the people i met early on in san francisco saying to me you know and this was again very early days of the internet he created one of the world's first digital agencies i think he now runs omnicom's global digital business um and he was saying to me like learn as much as you can in the room that you're in but you know if you keep exploring the room you know maybe you'll come to a door and if you open that door you know it's a door to another room and if that room looks interesting like walk into it and keep walking and that's always been my attitude is like if i can learn something new every day i feel like that's a good place to be and so you know my advice still to myself as well as to you know younger versions of myself kids or kids the kids is you know just put yourself in a position where you're really learning and working with people you can learn from and ideally in environments that have you know a lot of room for growth and you know just keep exploring and keep pushing the boundaries i was very lucky with people like steven with my boss at actually Ogilvy's Mandy Pooler to just always have managers who kind of encourage me to to push and explore and to never feel like any decision I was making was final as long as I was keeping learning and I still feel like that's a good recipe for our era you know people talk about AI and you know same way they talked about the internet's like it's going to change everything what are we going to do and people are going to lose their jobs businesses are going to shut down etc etc and i think you know if you put yourself in places where you can learn and you're open and you're curious those are always good places to be and you know that's the advice i give people and i mean as in terms of venture capital i never intended to be an investor i had no idea what venture capital was i mean on some level i still don't because you know it's an industry that's constantly evolving and reinventing itself as it should because you're kind of we're investing in the future and i don't think there's any straight path into the industry even though you know the industry today is night and day from what it was 30 35 years ago when i first heard about it and joined a startup that had an investment from a vc and i like what is a vc I'd never heard of that when I was in London.

11:42Most people still have it. Now let me give you a quick overview of Sol Klein's career. He moved to the US and worked for a startup that was eventually bought by Microsoft. This gave him an insight into how the American tech giants were operating. In the early 2000s, he came back to the UK and launched a DVD rental business called Video Island. This would go on to become Love Film, the UK's answer to Netflix. Saul Klein was chief executive of Love Film, and it was eventually bought by Amazon for hundreds of millions of dollars in 2011. Saul Klein had actually left Love Film in 2005 to join Skype, attracted by the idea of joining a new pioneering tech company.

12:22However, he left Skype following its takeover by eBay, and this was when he turned to the venture capital industry full-time, joining Index Ventures. When I came back to the UK in 2002, I mean, there was a terrible time economically and especially a terrible time for the Internet. We'd kind of like had this sort of in the late 90s, massive hype and then massive crash. You know, a couple of people came out alive in the UK, like Brent and Martha. But, you know, everyone else was kind of wiped out. Similar phenomenon, albeit at 10x the scale in America. So I'd kind of experienced the American version of it.

13:07And I came back to London because, you know, my wife and I had just got married and she was living in South Africa and I was living in New York. So we kind of decided London was a good place to be. You know, my family was here. It's much easier to stay in touch with her family who was still and still do live in Joburg and Cape Town. But, you know, I mean, there was kind of like everything was in the doldrums here. and i loved movies i'd always loved movies i'd seen netflix in the u.s no one wanted to invest in internet companies because everyone's like oh those stupid kids you know thank god they've all gone all of the internet you know every everyone was kind of dancing on the grave of the internet in the early 2000s like it had gone and so actually one of the few consumer businesses that people could appreciate or understand was effectively a uk european version of netflix because netflix was public you could point to the numbers it looked and smelled like a subscription business and people understood subscription businesses because sky was just doing well and you know mobile phone operators like vodafone were doing well and it's like you could explain it to an investor and so you know i thought like what the hell my wife thought you know we just got married i was crazy and you know i i partnered with someone who had been the producer of bend it like beckham so he had relationships in the movie industry because needed to get access to a library You know, I kind of felt like I'd had enough experience of the startup world as an entrepreneur, as an operator, and even as an investor by that point in the US that's actually, you know, giving a go here, albeit with something that was easy for people to lock onto was worth doing.

15:10And, you know, I was very fortunate that my friend who had met in the 90s in Boston, Danny Reimer, you know, had moved back to London at the same time to start an office for index in London. Because at that point, there was only one office for index in Geneva. And, you know, Video Island was the first investment that Danny made coming back here. And, you know, I was talking to someone I'd known for a long time. he obviously knew consumer internet you know as an analyst he'd taken netscape public he'd taken amazon public and we just kind of gone with it so video island became love film yeah i think 2005 you see you stood down 2011 eventually i think it sold it sold to amazon um to that 2005 when why did you decide it was time it was time to move on and how do you look back at love film now do you think it could have been netflix without amazon do you think i mean it was an incredible success story what what what happened is there an alternative history history where it's still independent today it's interesting you say that because i was actually thinking about it in the last day or two because so much of of why love film became a part of amazon is and this is like 20 years ago still reflects the story that's playing out today, you know, in the UK and Europe about we sell too early, we're bought by American companies, we never have access to public markets.

16:43You know, I was doing an event that Will Hutton hosted at the LSE the other night and, you know, it's about the lack of scale-up capital in the UK and Europe. You know, we've got 800 companies in the UK now doing over 25 million in revenue that are venture backed, which is like crazy. At Love Film, we were doing 100 million plus in revenue, 10 million in profits, and we had a couple of million subscribers. And, you know, we were told by the investment banks, you can't go public unless you're profitable. And then, you know, we had Amazon as a shareholder because, you know, we had actually acquired their DVD rental businesses in France and Germany because they had given it a crack.

17:33And it was very interesting because, you know, we had this guy on our board, Greg Greeley, who ended up going back to Seattle. I mean, he was, I think, at the time, the CFO of Amazon Europe. But he went back to Seattle to sort of start Prime. and he always used to say to us oh you know you don't want to go public you don't want to um be profitable you want to invest for growth you know all of this is going to move to streaming soon i mean we all need that and we've got to like really invest and you know this is the way amazon think the way our investors thought and the way the market thought is like you know and the way our chairman thought and the way our non-execs thought was, you know, you have, even though we were doing 100 million in revenue and 10 million in profit, like, you know, that's what you have to do to go public in London.

18:32And, you know, we ended up selling at that point, you know, we probably sold for four or 500 million plus or minus dollars. And Netflix was worth about 10 billion at the time. What's Netflix worth today? Probably 300 billion. But at the end of the day, you know, we'd held Netflix off once, by the way, they came to the UK and then retreated. But, you know, their balance sheet, never mind, we knew that people like Google were going to get into this business. They had YouTube, you know, when the potential buyers for Loveful were not just Amazon. Amazon were the insiders. They were the fox in the henhouse.

19:15You know, we also had YouTube, Google. We had, you know, HBO. You know, there were a lot of people who sort of understood the value of the assets that were not domestic. But, you know, when I think about how much money people like even domestic media companies like Sky and BT ended up having to invest in commissioning original content and again we all knew this was going to go from streaming to original content no one other than it ended up being daniel eck and spotify had the appetite to sort of really scale their businesses in that way so i think you know we we we we got out at the right time and the reason i moved on was i mean for two reasons and this has also stuck with me for a long time is like I always think you should look yourself in the mirror and say you know if someone else can do the job that I'm doing better than me then it's probably time for me to do something else and if there are five or ten people who can do the job that you're doing better than you it's definitely time for you to go somewhere else or at least consider it unless you really want to learn the next part of the journey so for me you know I'd learned what it was like to go from zero to 200 people from you know when i left love film we weren't doing 100 million in revenue we were doing 10 million in revenue i'd raised 10 20 million and and for me like as an operating executive as a ceo i'd learned a lot i'd work with two great co-founders well when when we merged with sweet and select alex chesterman william reeve so you know when danny reimer came to me and said hey you know i'm thinking of investing in this company skype you know nicholas is moving to london how will you meet them and i met these guys and you know the most interesting tech company product not company i'd seen since netscape and you know nicholas said you know i would meet with him once a month to support him on marketing because that wasn't like my thing and you know eventually he said to me you know why didn't you come over and join us and i said well you know i'm brought on the founder and see this company that you know love film but i realized that there were other people around me who could do the job as well as me if not better and they're also skype was just like you know like a not a once in a lifetime opportunity because i'd seen stuff like that before but probably a generational opportunity on this side of the pond and so you know I for most people I took a demotion I went from being a CEO to a VP of marketing and went to work with necklace because he said to me you know I want an executive team of founders and entrepreneurs because you know we're trying to grow something really fast and do something different.

22:18The godfather of the UK tech scene. That's how Saul Klein has been described. His background since the 1990s in building his own businesses and working in venture capital means he is ideally placed to offer a view of what it takes to scale up a business and whether UK businesses can really take on the US tech giants. Saul Klein points to Spotify as an example of how a European business can take on the US. So I'm intrigued to ask him, How much has the ecosystem changed in the UK since he started out? And what does it take to scale up a business? I mean, it's night and day, right? If you just look at the raw numbers, which is why it's both frustrating and exciting in equal measures.

23:02You know, today there are 800 companies in the UK that are venture backed doing over 25 million in revenue. the size of the venture market just in the last decade has increased 12x plus or minus 20 billion a year the enterprise value from 2013 to 2023 has increased 13x to like 1.4 trillion from like 110 billion so when i was at loveville when i was at skype you could like literally name the companies doing 100 million in revenue on one hand. Now there are 200 of them. And the cohorts of 25 to 100 million is 600 companies. So, I mean, we're now in the world's second or third best innovation economy.

23:55We still have some of the same problems, which is our domestic investors seem unable to recognize that we're in the world's second or third best innovation economy, our public market, you know, is still not attractive to, you know, those companies. So, you know, some things have stayed the same, but the facts on the ground in terms of like the number of these companies is, you know, like three, 400 X what it was 20 years ago, you know, which is remarkable. And the idea also that I think for people leaving school or university, that entrepreneurship or joining a startup is sort of a viable and actually not even viable, like compelling career path.

24:51I mean, you know, I was very lucky. I grew up with a dad who was an entrepreneur and with a grandfather who was an entrepreneur and you know so when i said to my parents when i was 23 you know i'm gonna leave wpp and go join this six-person startup in boston they're like you know go for it they weren't like you know what the hell are you doing so you know i recognize how privileged and lucky i was but i think you know that's a much much more common phenomena these days in a similar situation today and i guess this is playing out a little bit in ai a love film versus a silicon valley giant like netflix today could the european slash uk business compete with the silicon valley business well i think you know this is where i brought so much respect for daniel ak and spotify i mean spotify absolutely i mean look at spotify you know this is a hundred billion dollar you know digital media business i mean they did it it's possible but you know you have to have outlier founders you know daniel is an outlier founder and you have to have a product that is world class which he did and we did at skype but you also have to have like access to capital at scale um and again i think you know all of those ingredients are coalescing now but there's absolutely no reason why we can't and we won't and we will have companies that you know are equate to and possibly eclipse you know companies that have come out of silicon valley what makes him an outlier founder what are the characteristics that have that allowed spotify to do what it did well i mean i was lucky to first meet daniel i mean we were seed investors in a business that he was previously at called stardoll where he was the cto and you could already tell you know he was a brilliant product person and a brilliant engineer and then you know the thing that was really resonated with me because we saw when i was at index you know the Spotify pitch at the seed stage, at the Series A, at the Series B.

27:10You know, we didn't invest at the seed. We didn't invest at the A. I think we were very keen to invest at the B. But by that point, it was too late. And I think XL did that round. But throughout, you know, he had this, and I think, you know, it's still true, you know, this kind of maniacal focus on making this incredible products you know that gave people an experience of music that you know no one had really had before including by the way and these are sort of the small details that matter like the latency or the speed at which you know you'd click and you'd listen you know i think this is also you know what differentiated say a product like google from all of the other search engines is it just worked really fast and the result was incredible.

28:03And I think, you know, that kind of product and engineering DNA, where it looks magic, but to actually make that work and to have the focus is exceptional. And then also his tenacity and resilience. I mean, I remember the first time he showed us Spotify, you know, it kind of felt like this was an incredible house that had no furniture in it because he had no licenses to the music. So we're like, OK, amazing. But, you know, you've got no licenses to the music. So it's like, you know, I'll get the licenses to the music. And I think he came back the next time we met him. It's like, yeah, I've got the licenses in Sweden and in Norway and in Denmark.

28:48And I'm like, great. I've got licenses in the Nordics. No, no, no. But like the telcos are paying me because they want to offer streaming. So I got, it's like, come back when you got them in the US. And by that time, it was too late. He was playing a 20-year game with like maniacal focus. And, you know, that's what, I mean, I'd seen, you know, almost never outside of Silicon Valley or Seattle. Because, you know, like Microsoft, also Amazon, good places to learn and observe. And, you know, obviously that's what we look for. I mean, we talk about, you know, looking for the outlier founders who are capable of riding 20-year-plus waves or, you know, the surfers picking the surfers who can ride multi-decade waves because, you know, it takes that long to build a$100 billion business.

29:51As I said at the start of this episode, the venture capital firm that Sol Klein founded and leads is called Phoenix Court. Phoenix Court is home to a collection of different investment funds, including Local Globe, Latitude and Solar. These funds were invested in fast growing and promising businesses across the UK and Europe that you will have heard of, including Monzo, Multiverse, Tide, Wise, Motorway, Zoopla and many more. Saul Klein is so optimistic about the businesses emerging from the UK and Europe that he's coined the phrase New Palo Alto to describe the area covering the UK and Northern Europe.

30:27This is meant to demonstrate the potential of the area to take on Silicon Valley in the US. I mean, it started as a bit of a joke five years ago when I was sort of looking at a five-hour train ride from King's Cross and saying, look, if you looked at the cities that are a five-hour train ride from King's Cross, obviously Paris is two and a half hours away, even Amsterdam is four hours away, Edinburgh is four or five hours away, Cambridge, Oxford, Manchester, Bristol, Leeds, etc. If you aggregated that five-hour train ride, that super cluster, what would the economic value of it be? How would you size it?

31:15So I think, again, huge population, some of the world's top universities, 110 billion of annual IT spend, some of the greatest industrial cities in the world, you know, Eindhoven, Philips, ASML, you know, Manchester, Leeds, you know, some of the cultural capitals of the world, Paris, London. some of the academic capitals of the world, Oxford, Cambridge, you know, if you put all of that together, you know, how did that stack up against Palo Alto or old Palo Alto, the Bay Area? And, you know, it turned out like across a whole number of like important metrics, it wasn't that bad. And then I started to sort of look at it compared to other places in the world.

32:08And it turns out that after the Bay Area, Nipal, so if you look at the inputs of innovation, so availability of capital, and then people like IP, human capital, as the two core inputs of innovation and the outputs that kind of exits and value, which are obviously lagging indicators, you know, this is the second best innovation cluster in the world. a head of New York, head of LA, head of Boston, head of Beijing, head of Tokyo, head of Tel Aviv. And, you know, the more we've kind of sat with it, the more we've looked into the data, you know, the more I think that's taken hold. And, you know, what was also obviously important to me is, you know, sitting in the neighborhood that we're sitting in, where Paris is two and a half hours on the train and Brussels is less and Amsterdam is four hours on the train in a post-Brexit UK where obviously politically we were meaningfully disconnected and it was tearing us apart domestically and I mean the relationships at a political level with Europe were you know nowhere were on the floor, you know, recognizing the fact that London and Paris were still connected and London and Amsterdam were still connected and the UK was still connected and we were still trading and investing in one another's companies and co-investing with one another.

33:50I mean, to me also, you know, was a hedge against the future because I think, you know, what I know about this business is things play out over the long term and my bet was over time we would recognize that we didn't hate our neighbors or at least you know we would recognize we've been trading with the French for a thousand years literally and the Belgians for a thousand years and the Dutch for a thousand years you know we've had some of their kings and queens they've had some of our who fought a lot of wars we go at it on the football pitch on the rugby pitch but you know, at the end of the day, were neighbors.

34:26And so, you know, it gave for me a little bit of integrity to the neighborhood. And I think, you know, increasingly that's true. You know, I was at the Elysee over the summer, and I'd say, you know, their president and our prime minister didn't need Ukraine to find common ground. And, you know, I think it's another example to me of like the ground under our feet is incredibly fertile in terms of science technology engineering innovation all the inputs you know we've actually now got to a place at the early stage where we've got as much capital in new palo alto maybe more than the bay area but at the scale up stage which is where companies really turn from love films into netflixes you know or skypes into metas.

35:25And, you know, we're massively starved of capital. We're like 50 billion a year light. And, you know, that became a little bit of a obsession for me in the last four or five years, especially with the policy lens on is that, you know, why is it that we still won't invest in ourselves? Other people will invest in us, but we seem incapable of investing in ourselves, not just domestically but regionally. You know, if the evidence wasn't there, you know, these 800 companies in the UK doing over$25 million in revenue or 700 in EMEA doing over$100 million in revenue, saying, well, okay, these are just nice stories.

36:05But these are facts now. Who can and should fill that funding gap? Well, I mean, I've said almost ad nauseum now, both through the advice I've been giving through the Prime Minister's Council for Science and Technology since 2021, then we did a follow-up in 2022, then we did a letter to the Chancellor in 2024, that, you know, in the UK, we've got 800 companies doing over 25 million in revenue. they are across every sector of the industrial strategy they are representative of all five underlying technologies that desits through ukri puts money into ai semis quantum engineering biology future networks they're spread across the uk by the It's not just all, you know, London.

37:06In fact, Leeds has more cults and thoroughbreds than Cambridge, which might surprise some people. So does Edinburgh. So does Manchester. You know, Oxford and Cambridge do fine. But, you know, this is a UK growth story and we have six trillion pounds that is being invested on our behalf. By our, I mean, as citizens and as savers by what's known as the Mansion House Group, who, you know, invest our pensions for us, who take their balance sheets as insurance companies and invest in assets. 1 % or less of that 6 trillion, including cash ISIS, is going to our innovation economy. Now, if our innovation economy, no disrespect with Spain's or even France, because like those 800 companies here of France, Germany, Sweden and the Netherlands put together, were not one of the best in the world.

38:14you could say, okay, I get it. You know, you guys are investing in other innovation economies. They're not even doing that. So, you know, what we need to see is the mansion house and the city. And this has been clear to me since I came back in 2012 from Israel is that, you know, So the underinvestment in innovation in the UK is not actually coming from Whitehall, who actually I've seen in 13 years straight working with, you know, many different flavors of governments in Whitehall. You know, conservative, coalition, labor, you know, there is unanimity and consensus that innovation is part of a growth economy.

39:07I think, you know, to be fair to multiple chancellors, including this one, you know, the conditions for capital flowing into the system. You know, the chancellor, I think, has more than doubled the allocation to the British Business Bank in the latest spending review. The chancellor has doubled Jeremy Hunt's commitment from the Mansion House group. They gave Jeremy Hunt 5 % of assets under management by 2030. Rachel Reeves got it up to 10%. You've got Torsten Bell doing pension fund reform and consolidation. So, you know, you've got the government spending more on digital transformation through DCIT, through the NHS.

39:58You've got all of the announcements happening this week about, you know, investment in AI infrastructure. what we need to see now is domestic institutional investors and the footsies step up to the plate can i ask carfers something do you believe that there's no sort of lack of innovation here in the uk there's no i don't believe it because i i don't want to argue about words but as an english graduate and as a writer or a wannabe writer words matter it's not i believe it there is evidence evidence this is not a kind of a debate anymore there is a set of evidence which we can choose to accept or ignore and do you think there's an inherent challenge for uk businesses and management and their ability to scale up or do you like you know how many of these companies are now at 100 million you know venture backed 130 i mean how many at 500 million how many are at a billion i I mean, we in our portfolio have 54 companies that are generating over 25 million in revenue.

41:08We've got 26 that are doing over 100 million in revenue. We've probably got five or 10 that are doing over a billion in revenue. Of course they can scale up. They need capital, though, to grow. The public markets, you mentioned them a few times already. Does that have to be the answer? Or are we already seeing a world where actually the private and venture capital market is evolving so far that businesses, I mean, there's a queue of businesses in the UK who in days gone by would have floated by now, Revolut, Monzo to name but two. They're not floating because the public markets here pose a challenge.

41:42Does public markets have to be an answer or do you think there's a solution that involves something else? They have to be part of the solution for two reasons. One, they are still the best form of liquidity for businesses. And that's not just about people getting out of the business. It's about, you know, having access to capital at scale so you can grow and you can invest. So, you know, the public markets are still an incredible venue for that. But, you know, something that has been decades in the making is the growth of the private markets. So the private markets, you know, by 2030, 2035 will be 60 trillion.

42:30So, you know, if I had had a conversation back in the mid 90s when I was in Boston with a banker about going public, I mean, I was sitting in conference rooms writing S1s. ones, you know, which are filings to go public, when we were doing$5 million in revenue. Amazon was doing like$50 million in revenue when it went public. So the fact that we have 800 companies just in the UK doing over$25 million in revenue, which used to be called small caps, and out of those 800 small caps, 10 % of them will become mid caps. And out of those 80 mid caps, 10 % of them will become large caps. The fact that, you know, we have no liquids or no accessible public markets globally other than two, both of which are in New York and both of which will need to do half a billion in revenue to go public is a major structural global challenge.

43:31It's not just a London challenge, but it's exacerbated by the fact that if you can raise, I mean, obviously opening eyes at the extreme end, like a 30 billion private round. and when's the last time you saw a 30 billion ipo never i mean you know saudi aramco maybe alibaba was like i know three billion five billion i mean that's an anthropic round these days it's like it's a double a mistral round so you know the combination of of private markets getting a lot bigger, I think it's bad news, right? Because, you know, unless the people who are allocating capital on our behalf for our retirement understand how to play the private markets and certainly our domestic and regional pension funds and insurance companies don't, you know, as retail investors, you know, we're delegating authority on our investments to the mansion house and they're like in other you know everyone has their vote for invention house tibby etc you know who's going to look after our our retirements you know unless we all move to canada or australia or singapore peter kyle the new business secretary in the uk has said the uk government wants to help create the country's first ever one trillion dollar company in other words, the UK equivalent of Amazon, Apple or Google in the US.

45:01So what will it take for this to happen? What needs to change in the short term and long term? Look, I know, you know, successive secretaries of state, successive chancellors, successive prime ministers always use, you know, whether it's when are we going to get out to Google? When are we going to get our trillion dollar company. We've got 800 companies. And as I said, if we keep investing in our innovation economy, well, actually, if we start investing in our innovation economy, then we will get some of these companies. It's just a matter of time. That's just the way cohorts work. But if we starve them of domestic capital, if we don't create a regulatory environment that allows them to innovate.

45:52If maybe even more importantly, we don't work out how to procure at a public sector level and at a FTSE level from these companies, they will never get there. And so it's not, in my view, a valuable aspiration. The hard work, having created the right policy conditions. And I think the chancellor has done this with the spending review, by giving more money to the British Business Bank, and National Wealth Fund is well-funded, by doubling the Mansion House commitments, by pushing forward on pension fund reform. When Peter Kyle was in DCIT, he oversaw the creation of Rio, the Regulatory Innovation office that, you know, Patrick Balance is overseeing and David Willits is chairing.

46:48There's lots of good work going on around procurement. And obviously, for the NHS to become digital, we have to figure out how to do procurement. So, you know, I'm kind of, I'm sorry to say, optimistic in terms of what conditions the government has put into place with Treasury, with DCIS. Jonathan Reynolds did a great job on the industrial strategy. And obviously, Peter Kyle is now taking that on. It's great news that Patrick Vallance is now not just looking after science, but looking at energy, because energy is like a massive, massive input, obviously, to any kind of growing economy. We're only a year in, but I think, you know, 150 billion pounds, I'll say it again, 150 billion pounds to play for in this parliament that has been either allocated by Treasury to its arm's length bodies in the British Business Bank, well, DBT's arm's length bodies, Peter Kyle's arm's length bodies, British Business Bank, National Wealth Fund, and then the Manchin House commits.

48:04If you just put those two things together, you get about$150 billion, not just in growth equity, but probably even more importantly in the real assets, the infrastructure, the real estate, the data centers, the manufacturing facilities, the transport links that these 800-plus companies need to scale up. So it's not just about venture capital. It's about real estate, infrastructure, transport, energy. we now need to be checking every quarter every half year every mansion house is that capital flowing because you know the plumbing is there the bath is in the bathroom now we just need to see the water coming through the taps and seeing the front line in the way that we do with these 54 companies and others we know that the water is not flowing through the taps and the only people in the mansion house who are actually allocating capital at scale in the last three years is M &G with their Catalyst program.

49:09And the only other people who are doing it are the British Business Bank and the National Wealth Fund because they have to, because otherwise they're not going to get any more money from treasurers. Last question. You mentioned right at the start, 1993, with the Telegraph, you're over in Silicon Valley and you come across this company called Netscape. Where are we today in the AI story and the cycle? We look at technology waves over 50-year periods. And I say that because if you think about the semiconductor wave, it started in the early 70s and 54 years later, you know, we're still riding a semiconductor wave.

49:50and many of the world's largest companies are semiconductor companies, NVIDIA, Broadcom, TSMC, and many of the other top 10 companies either make or design their own semiconductors, Apple, Microsoft, Google, Meta, etc. So, you know, our observation is that if the wave is profound enough, it's going to play out 50 years or more. Second big wave, 94, 95, the internet. arguably still playing out last time i checked next big wave cloud 2006 2008 or percentage of smes using cloud software what's cloud's penetration globally early days mobile i mean actually you know also 2006 2008 pretty ubiquitous so on one level ai has been you know going on since the 50s and certainly the the spin out i joined in in boston in the mid 90s was an ai spin out it was called agent sync and we created autonomous agents i was looking one of the press releases we wrote in 94 i mean i can send it to you be like it literally reads like an agentic ai press release so i mean we would say this era of ai started maybe 10 15 years ago with deep learning obviously deep mind the sort of the the early proponents of that but taking work that jeff Hinton, who is a Brit, but no one wanted to back his work here.

51:32So he went to Toronto to do it and then to Google. So I'd say, you know, we're 15 years in to AI, this wave of AI. And we, we believe that it's not proven that it's more than a 50 year wave, but it's likely. So it's probable and you know one of the reasons which i think again people don't pay enough attention to is why did why does it feel like ai came so fast and you know it came so fast because it built on semis which is a 50 plus year wave nvidia that built on the internet distribution six billion people use cloud you know as you did the deal with open ai hyperscale compute blah blah blah and then you know we got it on mobile so you know these four waves compound on top of one another so you can go from zero to 800 million monthly actives in what feels like you know nanoseconds But it's sort of building on the shoulders of giants.

52:42And that's, in a sense, what's so interesting about innovation is when you look at sort of future waves, you know, which obviously we're always looking 20 years out or possible waves like blockchain, quantum, robotics, genomics. Again, when you can layer on those technologies on these technologies or waves that are already, the infrastructure is already there, the change can be very, very rapid. But I think, yeah, I mean, just simply on AI, I mean, obviously, and we see this across, I think we've got 50 plus companies in our portfolio that one could think of as AI companies from semiconductors.

53:27like, you know, we were investors in Graphcore, investors in, which is kind of cloud-based AI semis, investors in a company called Halo, you know, which is edge-based AI semis who've been investors in faculty for 10 years, you know, Clio, which is sort of AI first, fintech, healthcare. I mean, you know, it's pervasive, you know, And we see this with faculty, who at this point, I think, are probably one of the most experienced applied AI companies in the world. They've done probably over 500 large-scale enterprise deployments in the last decade. and you know what i don't agree with the mit reports and i don't think it really is from mit and it's kind of been taken down a peg or two by kevin werbach who's a great professor at wharton but you know the the notion that only five percent of ai is in production versus in pilot you know we would absolutely agree with so i think there are still 95 percent of people and businesses and governments are playing with ai maybe only five percent are actually you know using ai in production and the reason why is because the technology is not very mature the models are built on one dimension text they're not multimodal and that one dimension of text that they're built on are built on the internet and 80 % of the internet is literally crap.

55:05So if that's what we think should take over from human intelligence and chief compliance officers and chief risk officers and chief security officers are going to allow their market cap or their governments to be run by large language models, I think we need to sort of take the heat out of that. But at the same time, people are rapidly innovating, recognizing those challenges.

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