E405 | This Week in European Tech with Dan Bowyer, Mads Jensen, and Andrew J. Scott

0:00Welcome to Upside. I'm Dan Boyer and with Mads Jensen, we're both VCs at SuperSeed where we back early stage technical teams transforming how the world works. That's right. We meet every week to unpack what's happening at the intersection of tech, venture and business in Europe. Whether you're a founder, investor or just curious about the forces driving our future, you're in the right place. Just remember, this is not investment advice.

0:40this show is not investment advice and the hosts of this episode may be invested in the funds and companies featured and today we've got the beautiful andrew scott is a little bit stressed so we're going to de-stress him and talk about some very sticky topics. Maybe we can distract your brain with some... Well, we're going to start with a really, I think, a happy story. I think a positive story about IPOs that may revive London. Now, the backstory here is that last year, we only saw six IPOs in London, 23 the year before that. The most ever, just for some context, the most ever we've ever seen in London is 136 in 2014.

1:22But we've got at least, and I've did a little bit of a scouring across the social web, it looks like we've got at least 13 that we know are making noises about listing this year. So hopefully we can get back on track. Now Mads, what was your initial take on this story? I think it puts a lot in context for us. We talk about Europe and the UK and what we need to do to drive and create more value here for us. And as she said, 2024 was the worst year on record for London IPOs. It was even worse than 2009. And it follows 2023, which at that time was the worst year on record. That followed 2022, which had also been at that time the worst year on record.

2:08So we've had three record-settingly bad years in a row. and the city is in abject pain the bankers they were miserable last year and it's not i can't hear any violins for that one well it's it's interesting you say that and and of course it's easy to deride them but you know the flip side is you know part of what makes london great is the city because it's a place where we can do deals we can raise capital you know having those capital markets it was super important thing if they wasn't there where would you ipo No, I totally agree. And also, I think people don't quite fathom the fact that you've got this draw up.

2:46So we obviously all invest at early stage. We need this growth capital. And then we need these listings, venues to draw up and then recycle. I think it's something that maybe the ecosystem doesn't talk about enough. We need that full financial stack, that circularity that goes all the way through. Sorry, I interrupted you. Full lifecycle. Full lifecycle. So the good thing, as you say, is we now have a pipeline of companies that have rented to IPO. Maybe a little bit disappointingly, many of them are spinoffs rather than startups that have grown to IPO status. There are a few good ones in there between.

3:20It's not that there's anything wrong with a spinoff. Yeah, Unilever ice cream isn't the most sexiful thing I can think of. It's not. It's not. And to make our mark on the world, we've got to have an ecosystem that enables founders to start and build and scale companies and then IPO them to the world. And so the question is, why don't we have more? What's missing? We need a great company, then we need investors that can back them. And we've seen amongst UK asset managers a preference for maybe the smaller preference for UK equities in the past. We talked about pension reform on the show here before.

3:56And I think it'll be a really, really important thing for us because for founders who come to the UK and start companies that want to build into IPO, there's got to be the last, you know, the ultimate buyer, right? Everything we do in venture capital, which is the public markets. So there's still some work to do. But listen, let's take the wins. If 2025 is going to be a year where we have more IPOs and more activity, that's going to be a good thing. And Lord Hill's reforms, nothing has come to pass after he published some reforms back in 21, I think. Nothing has come about, effectively, he had four or five major bullets, which are all around creating more fluidity and enabling a little bit more, I was going to say, risk averse action.

4:44I don't know if it's the right turn of phrase, but it looked like he was trying to come up with some ways to make listing much more attractive in the UK. But nothing has happened on that reform bill yet, has it? No one has done anything. We've got to be careful in the UK that we don't take sort of a holy and a thou approach to everything. There was almost sort of a time when we said, oh, we're the best in the world at corporate governance. We're the best in the world at ESG. We're the best in the world at all these wonderful things that, you know, oftentimes maybe don't add value. AI safety, AI regulation.

5:15Yeah, add value to companies and actually create friction that just makes it a lot less attractive to list here. And then firms just go somewhere else. And it could take a little bit of time for some of this stuff to ripple through. I think some of Lord Hill's proposed reforms may be slightly less bureaucratic to list in the UK. So that's good. That removes some of the friction. But we also need the capital. We also need asset managers to actually invest in companies. And so that's the other side. So there's still work to do. Andrew what's cooking on the IPA front with you is anything on your mind I mean it's it's well I'm an early stage investor so what do I know about IPOs but you're genius my man genius we know everything we're VCs we know the lot seriously it's always been a bit daffling to me why the city you know the traditional financial institutions in the UK hate tech you know and then technology is the future of everything so So luckily, I think there are people at London Stock Exchange who get it and are passionate about the space.

6:13People like Neil Shah is very active on Twitter. I think he's head of tech and primary markets. But we do need some regulatory changes. I'm definitely no expert in the public space, but sort of the free float requirements around the minimum portion of shares that can be publicly traded. I think there was some issues around the dual class structure allowing Lord Hill's reforms, I remember that he was looking to make it more attractive for founders to retain control 100 % we know what levers to pull but we're back to this issue of inertia and the government just needs to force these changes and people need to get behind it, we all know what needs to happen it's just a matter of making those changes and biting them Is it government?

6:57Is it not like the regulatory bodies or other Sure, but the government has huge arguments, right? And if the full waste of the government want to make that happen, I'm sure it will happen. To the point about the companies, you've got like Zopa, I think, you know, three billion in loans on the balance sheet, but obviously Revolut, like millions of customers. So the companies are there. The question is, will they choose to IPO in London on a NASDAQ or somewhere else? I think the only thing that's interesting about, you know, if you look at the list of companies, is a lot of them are fintech. You've got to ask the question, why is that?

7:32And I think that's because if you look back at 2016 with the Financial Conduct Authority, the FCA, did a number of things. They created the regulatory sandbox that allowed startups to access their products in a controlled environment. You had the open banking regulations that encouraged competition. And there was a sort of surprisingly pro-innovation stance from the FCA and the government, which made London ultimately arguably the global center for fintech. That's why we had all these challenger banks long before the US and the banking system in the US is a mess. So I think one of the learnings from that for me is that it's sad that then the opportunity is being lost with blockchain and crypto.

8:13We have not seen the same approach. We had that approach. We relaxed the regulations. We put in initiatives that would help startups. and it's a bit baffling why they haven't taken the same approach with lighter touch regulation for venture capital funds either it's just a no-brainer so i think it demonstrates on the positive that government policy can really impact success and regulatory policy change for the uk startup ecosystem and they need to create policy which removes friction for entrepreneurs and the market will kind of do the rest right so i'd love to see that happen Yeah, I mean, we're going to stay on government and public-private melding because I want to talk about that massive topic of, what was it called?

8:58The long-name plan was, is it the AI Opportunities Action Plan, I think is the full title. So this in effect is a, I mean, when you break down how many initiatives are underneath this one plan, I counted over 50. And this is Keir Starmer driving public and private energies, companies, individuals to get together and effectively push AI as a national agenda. and I don't even know where to start with this because there are so many topics to unpack. I think just to throw in one soundbite that I read at the end of the AI Opportunities Action Plan, it was business as usual is not an option. So this is a soundbite from the official.gov website.

9:57I saw this first with Matt Clifford, who's part of our crew and we know him reasonably be well. So Mads, where did you want to start on this behemoth of a topic? Well, first of all, I want to start by congratulating Matt for pulling together what I think is a really, really great piece of work. I provided a little bit of input to it back in fall. But I think lots of effort has gone into creating what is a very important action plan for us to try and do things differently. We're not going to take a leadership position in any of these spaces if we don't make some concerted effort to do that so i think this is really massively ambitious right i mean the the scale of this thing is just massively ambitious which immediately makes english people or british people go oh it's never going to work and be all cynical and um so but it is incredibly ambitious yes yes it is uh some great things i think there's a recognition of the importance of government as a customer we always talk about grants and grant money.

11:04I think the most important thing government can be is a great customer for technology companies. And so the plan creates this new structured scan pilot scale public sector framework to enable the public sector to adopt more AI and do that in a smart way. So I think that's really, really good. There's a smart emphasis on then scaling successful pilots nationally. So start small and then find ways to scale things up when they work. So I love it. Instead of taking sort of this, you know, slightly, you know, concrete approach of everything is going to be baked into massive national RFP processes that then derail.

11:41It's much more nimble. I think that's great. There's also a recognition of the importance of creating more data sets. So that includes something I think is really smart. For example, leveraging BBC data to create more national data for British AI companies. the plan is perhaps a little light of some of the details in some of these areas, but there's some great ideas there. And I think maybe something that could be done is it could create a little bit more guidance on where the funding needs to come from to create some of these data sets. And there are also some questions around copyright rules.

12:19So for example, if we take really the national treasure that is the BBC archives, and we turn that into a public data said is there a way to provide that on advantageous terms to homegrown ai companies and as opposed to just you know freeing it up to the whole world so so that there's some questions there maybe that need to be looked at but there is an acknowledgement that data is vital and i think that's that's great now if we then look at where i think you know some of the areas of where the plan probably could go further be the most successful we can be we have to attract the very best founders in the world and that's not just something we're making up if we look at the u.s you know you have Sergey Brin you have Elon Musk you have Jensen Wang Jerry Yang you had even from Europe you have Pierre Omidyar from eBay and the Collison brothers that founded Stripe right from Ireland so amazing seen people from all over the world migrated to the US to start companies there.

13:19And for the UK to compete, we have to be a talent magnet. I think we're doing some of that, but we need to do much more. And if we look at some of the areas where I think we can do more, so the tax situation in the UK is reasonably attractive now in terms of capital gains for entrepreneurs, but there is a weak fiscal outlook and that could possibly make people be a bit worried about where this is going to head. is the government really going to keep taxes where they are going to that they're going to increase them but like also if you want to be an ai superpower in other words you want to win you you don't want to be reasonably attractive you don't you don't win by being reasonably attractive you win by having the most um uh attractive cap gains policy for entrepreneurs that's how you win because otherwise they won't get off their ass in paris you know paris is biting at our tails in Europe in terms of the startup ecosystem.

14:12And although there is still more capital in London, it's trending in the wrong direction. And Brexit has really shot us in the foot. So we need to be doing everything we can and leveraging the potential that Brexit gives us outside of the confines of EU regs in order to make it more attractive. So I'm afraid, you know, I don't think reasonably attractive is going to cut the mustard. Yeah. And I think that's a fair a position to take that i think you're absolutely right about brexit which is the other thing you need as a founder is you need access to talent and we can talk to the councilman all about visas and visa this and visa that nothing's gonna beat the freedom of movement we had which is always there was something in there about this approach there was something that's what i'm saying you can talk to the council come home about visas but nothing will ever beat freedom of movement And the best thing we can do right now for UK tech is to enable this European youth mobility scheme.

15:05If we just say everybody below 30 can come to the UK and work, it's going to make it so much easier for European techies and founders to come to the UK and set up. Just do it. Don't stop talking about it. Just do it. I love that. I think it's great. It did. And then the third thing is access to funding. And funding is super, super important. There is a great VC ecosystem in the UK, but we don't have capital to go all the way. And we talked earlier about the IPOs. We have to be serious about enabling more equity money, more pension money to be funneled into not just venture capital, but also the IPO markets.

15:42So it requires a complete change in philosophy about, Andrew, to your point, how we think about tech in the UK. And I think if we can get those things right, so the taxes you point out, the talent and the access to capital, we can really make the UK a super attractive destination for founders. And that's what we should aim to do. I was trying to work out where the money was coming from, because one of the massive investment aspects around this whole initiative is the infrastructure piece. and I found a few English companies, they were mainly in the South, it looked like there was about 12 billion going into infrastructure projects, so AI infrastructure projects.

16:27And I was trying to work out how much government investment is going to come in and I couldn't find any concrete figures about how much is going to be. I've read the 10-year plan and I couldn't find any hard and fast numbers. But it looks like there's some reasonably big checks, being written by a relatively small number of infrastructure companies. Does anyone know anything more about that? What do you mean by infrastructure, like for roads and bridges? No, I'm talking about data centers, tech hubs. But effectively, it was mostly data centers with the companies that I found. And it looked like there was a big chunk of change going in.

17:03But I couldn't drill down as to what was being built exactly where. it's a bit like these AI, what was it called? AI growth zones. They're looking at developing regions where it's going to be much easier to collaborate, get access to compute, be part of this kind of public private meld. But I couldn't, and the first one is in Cullum in Oxfordshire. And I couldn't, I couldn't quite read in the paper what that meant. Is that a town? Is that just the number of tech hubs? Is that a region? Is there going to be some kind of tax breaks? Is there going to be, how is that going to work as a, what was it called, an AIGZ, an AI growth zone?

17:47So I know this is the first kind of pilot area, region, whatever it is, and I know they're going to open some more. But then I immediately went into the fear bracket of, are they just going to try and then make it very equitable and fair and put them kind of where they're not really needed, but to try and increase employment or look after local communities? but obviously they need to be based wherever there's massive amounts of energy access because that's the main thing that AI infrastructure needs. That'll be the policy pressure is you spread the gold around and we saw this with UK space board program and then there was literally a few million pounds there was peanuts and then they took ages to issue multiple licenses and then we still don't have a medium to heavy launch capability in the UK.

18:31They've got a bunch of space boards like why don't we just focus on one? Let's get one working. Let's just get one. And that would actually be the only heavy launch space port in Europe because they're the ones from French Guyana run by ESA. So, I mean, there is a danger that the funds they do find get spread too thinly. And I think there's also a lack of acknowledgement of some, when you talk about infrastructure, some basic needs which could improve the whole of the GDP, not just the ability to create an AI company. Will this place in Column actually have a working mobile signal? I can be in central London and I get no data.

19:10I'm serious. This has happened to me. This happens to lots of people. I go from Cambridge, which is Silicon Fenn, down to land on the train. I can't work because the Wi-Fi on the train is crap. You can't hold a telephone call because there's no signal. During COVID, I went all the way down from Rome, all the way down the West Italian coast, all the way down to Sicily. I didn't have broken 4G once all the way. i worked perfectly my way i can't go 40 minutes from london to cambridge and work so there's some basic infrastructure issues yeah fair enough the trades are going to be nationalized now it's going to be much better some more public private initiatives oh my goodness hey listen i'm not going to be a cynic i think the other thing that i was um when i read um matt's content around this and then did some research and read the proposition.

20:00I thought this is our time to back this and be positive and not be British about this. I think this is incredibly ambitious and obviously well thought through. And my sense is that people like us should get behind this and find ways to support and encourage and be positive and do more. So every fiber in my body is telling me to be a cynical old man. I'm not going to do it. I'm going to be incredibly positive. No, 100%. And look, to echo Matt's point, I mean, it's great that Matt Tifford's been leading on this. You know, I spoke to Matt and Alice 15 years ago when they were coming up with a yes, and they've just hit it out of the park, right?

20:42And he knows as well as anyone the challenges of building venture businesses. So broadly, the short answer is it's all pretty good stuff. I think the challenges as with any government recommendations or action plan is how do you move the Leviathan, which is the British state, to focus around this singular policy goal, which is a huge policy goal. To your point, there are lots of initiatives. And the only way you become an AI superpower is if all policy is optimized towards that goal, not just these initiatives. So let's write, I mean, we could run down the list really quickly, right? If you look at the sort of the content first page, you've got like four big areas.

21:16It says, be on the side of innovators. So is the government policy on the side of innovators? Well, they've increased national insurance for employers with no carve out for tech or AI companies. So that's a no. They've increased cap gains, another no. They've trashed the entrepreneur's relief, which is now called business asset disposal relief, with the lifetime allowance going down from 10 to 1 million. And they've increased tax and venture capital returns for GPs. So I'd like to see immediately all those reversed for AI companies. There you go. That's a big... then immediately we're back to where we started before that budget came in.

21:50So at the moment, I'd say universally, you know, number 10 and Keir Starmer might be on the right path, and I absolutely applaud what they're doing and what Matt's doing. It's amazing. But number 11 is currently not on the side of the innovators. And then we look at investing, becoming a great customer. I think the initiative and the plan is pretty interesting. And actually here I've got some hope because I think there is a huge, there's pressure from the military, there's pressure internally in government to be able to procure things better. And there's some good templates. Like the U.S. government's got something called OTAs, which is other transaction authorities.

22:25And companies like Pantheer and Anderin and Shield AI have all used these. And it allows the government to enter into flexible, non-traditional contracts for research and prototyping and production. So, like, we need something simple on that. And then Matt, you touched on this, Nancy touched on this, of course, you know, crowd in the capital and tenant. Well, kind of cover the capital. There's not enough, right? There's too little late stage capital coming online too slowly. And I think the number one reason our startups flip to the US and the number one reason the companies' portfolio flip to the US is access to that later stage capital.

23:05You know, you can access the US market by opening an office there. You don't need TopCo in the US. But if you really want the big bucks, you've got to go native and if we want national sovereign capability over ai that means the company can't become a us top guy so to your point only about ipos we need a radical plan to solve that problem you know the mansion house compact is a great start but we need to put fire under that um hugely and then visas is a no-brainer mads completely agree with you just let anyone in another 30 who wants to work or at the very least anyone who's got an ai qualification or works in an AI company, you just make it super simple to get off a boat and come and work wherever they're from.

23:47Then the last thing that you've got, build on UK strengths and catalyze emerging areas. I mean, the National Data Library is super exciting to a point. I think we've got some enormous data sets, not just the BBC, but what about the NHS? That's the biggest data set, any medical data set in the world. But it's stuck on somebody's laptop. But it's highly fragmented. It's highly fragmented. And so again, there's an argument to say we should get around up here. Maybe you should say if you want free treatment, then the default is you give up your data. Anonymized, but you give your data up. Instead of opt-in, it should be opt-out.

24:24And the second problem is who's going to manage it? If you remember the big IT program, which I think was back in 2002, it cost$6 billion, I think. Oh, much more. 12 overran it the budget was 6 billion it overruns 12 billion and then 10 years later they scrapped it yeah that was just one of the contracts mp fit was a massive massive catastrophe but yes yeah and that's what happens if you get if you get bt or accenture or someone to run it so then the question is who do you get to run a project like that and the answer is you know you need a spacex or even maybe a google or somebody right um so you know we should we should we should dig someone out and find we need Elon Musk to set up a department of doubt and convince that's a good idea.

25:10Who is the British Elon? Is it you, Mads? Are you the British Elon? Should we put you forward? I think the point I was trying to make earlier is the American Elon came from South Africa. And we have to be a talent, Matt. We have to get the best and the brightest here wherever they come from. I'm going to go sideways. I want to talk about Company of the Week, which is a super weird, sideways, colossal biosciences rewilding mammoth bringing backing weirdy beardy so mads this is this is yours it's quite it's quite a cool thing tell us more it is it is so cool so colossal biosciences are effectively looking to make well not quite jurassic park but almost jurassic park real So one of their primary initiatives is the resurrection of the woolly mammoth.

26:02So basically, they are leveraging CRISPR gene editing technology. And the plan is to integrate mammoth-specific genes into the DNA of Asian elephants. The Asian elephants, they share approximately 99.6 % of their DNA with the woolly mammal. But don't we share 96 % of our DNA with a banana? And maybe they will make us into bananas. Who knows? But before that, before they go there, they will try and bring this woolly mammoth to life. They also have projects to look at the Tasmanian tiger and the dodo bird that has been extinct for several hundred years. So, of course, this raises lots of questions.

26:47What are the risks? What are the moral and ethical questions? and play card, all that stuff. And you know where I stand in all of this. I am completely unapologetic that we should pursue all this stuff. I think it's super cool. And I think we must try and do these things. And I think it just, it opens so many opportunities and it's so exciting. And I hope that they manage. And then of course, yes, we should also talk about the risks and we should talk about how to do it in a sensible way. But I was just very, very excited when I learned off colossal biosciences. I think they are. I was reading this and I just kept kind of asking myself why.

27:27Why? Why did it? And I thought, you know, what is kind of cool is the, once we get this technology right, the ability to maybe unwind or unravel some of the, I was going to swear then, but some of the unpleasantries that humanity has imposed on the planet is possibly not a bad thing. And I'm sure if we ever did become a multi-planetary species, these kinds of technologies are quite useful. And I think it's also worth saying that 99 % of everything that's ever lived on this planet has become extinct. So they've got obviously a massive back catalogue if they wanted to go down that path. Andrew, have you got any thoughts on rewilding and bringing back the woolly mammoth?

28:11I mean, life science is definitely not my area of expertise. That said, coincidentally, I was talking to a founder just earlier this week about molecules which are chiral, which means they have a mirror image. And listeners may remember the thalidomide drug back in the day, which was a terrible tragedy for many. And one of the reasons that mistake was made is because people assumed that these molecules that had a mirror image, they behaved the same way. And thalidomide, its chirality was important because one side was effective in doing what it was supposed to do. The other side, the flipped side of the molecule, the mirror image, was actually toxic, which caused all the problems.