E455 | This Week in European Tech with Dan Bowyer, Mads Jensen, and Andrew J. Scott

0:00Welcome to Upside for the real stories behind the headlines affecting European venture. Joining today is Andrew from 7 % with Mads and myself from SuperSeed. I'm Dan. This week, we're looking at the latest news from across Europe. New cash inflows into European funds, but how meaningful are they really? Food tech breakthroughs, antitrust challenges here and over the pond, plus what's next for AI's big tech crew.

0:28Tear down this wall. It's more than just an alliance. This is a union of values. Let's start acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. Gents, how are you? Andrew, what's the latest with you and what's caught your eye in the news this week? I'm pretty good, zipping between Lisbon and London as usual. But a couple of quick stories I saw. There was a Series B round of 80 million euros for Noxtur. I'm not actually sure how you say the name properly. Noxtur in Berlin, which is a legal AI startup. And it's funny because I was just talking to someone yesterday about how I think lawyers are definitely not going anywhere because the number of people I see using ChatGPT and other legal documents that are not then checked by lawyers, as we know, AIs are imperfect at the moment.

1:26And I suspect in a couple of years' time, We're going to see a whole bunch of legal cases involving AI, LLM written contracts. The law firms and the lawyers, I think, are safe for their jobs for some considerable time to come. Second thing I saw in the UK, which is fantastic news, is the changes to regulations for drones, which means by 2026, fingers crossed, drones will be able to be used beyond line of visual sight. And that's great news for things like drone delivery, NHS drug delivery between NHS hospitals, lots of cool stuff. So really glad to see that stuff moving because it's a way for the UK to get ahead of the curve.

2:08And that has a trickle down effect on growth in those startup sectors. Do you think we'll see grocery deliveries by drone? Yeah, I don't. To house? Do you? I don't. I get sight to sight. So I get the point sight to sight. So major deliveries and emergency deliveries from one point to one point. But I can't see my loo roll being delivered to my door by drone. I think it will depend where you are. So it's going to be efficiency of route. So if you are somewhere back and beyond down a winding road that takes an hour to drive, even though it's four and a half miles long, I suspect drones will be a great way to deliver to those outlying areas.

2:49Mads, what's new with you? Well, as you know, I'm just back from Japan. Had a great trip there. It's such a fascinating country. I've been wanting to go for so many years. And it was just lovely to travel there and really see just what a beautiful place it is, both the country and the people. And then one of the things that caught my eye was homegrown AI super company, Wave. They've just inked an agreement to go into Japan and do exciting things there. Wave, obviously, great AI business founded by Alex Kendall and M.I. Schar in 2017, inking last year the largest Series C ever in UK history,$1 billion.

3:31They're developing a foundational model that's the same way you could say as OpenAI and Anthropic, but this is just for autonomous driving. Unlike Tesla, that's building a model to drive their own cars, the idea with Wave is that you build this model for other automotive makers to use so they can compete with the likes of Tesla. Distribution. Exactly. And so Wave, they've just inked an agreement with Nissan as the first major customer. So they're going to be big in Japan. And that is, of course, very exciting. Was that the reason for Tesla's FSD launch in Austin, Texas? I read this week, it feels like it's a little bit of chicken and cat and mouse because Tesla have now said that they're going to launch their FSD full self-driving product, which means they'll hopefully be able to unlock all of their cars that have this function listed.

4:25So maybe that was in response to that news. I think Tesla is still well ahead. The rollout for the agreement with Nissan is not until 2027, and that's just for level two. And they're targeting level four by 2030. So, you know, although I know Elon, he's had sort of multiple rolling go live dates of his full self-driving. Since 2016. This stuff has had a tendency to be pushed out a bit. But Europe just really needs this, you know, without credible autonomy in automotive. Our automotive sector is toast. And I think Wave is a great, you know, really has a great shout there. Also, we've seen a great increase in over 10 % increase in trade in the last year, I think it is, or 23 to 22 and since between the UK and Japan.

5:12And that seems to be an increasing trend. Was that one of your little learning nuggets from your Japanese trip, Andrew? It was pre-research, actually, before I went. But there's been a general shift. And I think that was partly triggered by the big change between the US and Japan and the F-35 deal. They didn't try. There was a disagreement between Japan and US around how much access they would have to technology and technology transfer. And that precipitated a change a few years back. I think the industry has tended to follow. There's been a real resurgence. Definitely, you can feel a real resurgence and excitement between UK and Japanese trade when I was there.

5:49anyway staying with tesla so i saw this week that musk is stepping back from doge and that's not euro news but it caught my eyes so tesla's profits down 71 sales down 20 in q1 so he's getting back into focus mode over at tesla which makes complete sense i'm sure shareholders over there are pretty bloody miserable um would you buy no i would never buy tesla shares i would never i would never buy tesla shares and i would never buy a tesla um but then i'm an emotional creature i make very emotional decisions i'm not always sure are sensible or smart i think much to mads's chagrin irritation i'm an emotional creature and i think he's an absolute tool so absolutely not but each to their own there's also a tunnel being built the one one for you mads so there's a there's a scandy tunnel being built from denmark to germany which looks very interesting and love to see that it's going to be 11 miles opening in 2029 and yet another report which we're not going going to dig into this week but the deal room european tech update looking back over over q1 so a few simple points that caught my eye so early stage is stable but pre-seed is on a slight decline it has been for about five years health tech is the biggest winner raising 4.8 billion dollars which is nearly twice as much as the next sector in the list which is fintech and european i thought this is quite interesting european startups raised 40 percent of their funding from foreign investors so non-europeans no great surprise but i thought it was quite interesting.

7:11So with the instability in the US, will we see more of this to discuss later in the pod? Okay, right, we're going to kick off with the main docket. So here was a couple of stories that came up this week about clients massively repositioning their portfolios to Europe. And I thought this is quite an interesting topic to discuss how much of this money is real, how much of it is going to stay in Europe? Is it going to be a continuing theme and trend? So since Trump's tariffs, we're seeing a lot more reposition, you know, cash coming in. So Amundi, which is Europe's largest asset manager with an AUM of 2.2 trillion euros, sorry, says clients are massively repositioning to Europe.

7:53They've got record inflows into European ETFs in the first quarter of 25. So this is a massive cash inflow. Investors have directed a record 10.6 billion in, which is a sevenfold increase compared to the same period last year. Same as of last week, European equity funds recorded net inflows. Is the EU's increased defence spending under the Readiness 2030 plan making Europe more attractive to investors? ECB interest rate cuts, which we're looking for more this year compared to the Fed, is that making Europe more attractive? And according to Bank of America's fund manager survey, this is the largest rotation of capital since their surveys began in 99.

8:37So there's a lot more money coming in. Will it stay? What's happening? How much of it will come down into our world? How much will it get into startup, if at all, if that will happen? Mads, you've got some more insights and thoughts on this. Do you want to kick this one off? Look, so some questions. You raised some good questions. Is this about patriotism or is this just really a rational reaction to US turbulence? And it may be a kind of a mix of the two. I I actually think if you want to look at kind of patriotic investing, I think probably some of the cases and stories coming out of China might be more interesting because there you literally have examples of sort of people saying, like, I've never invested in the stock market before.

9:17I'm so effed off with what's happening and kind of the rhetoric coming out of the U.S. that I've started to put money into stocks just to support Chinese companies. Is there some of that in Europe? Maybe. I think it was Benjamin Graham who used to say, kind of legendary investor, that in the short run, markets are voting machines. But in the long run, they're weighing machines. And I think fundamentally what this comes down to, look, if we want Europe to succeed, we've got to build great companies. We've got to build these amazing next-gen AI businesses like a Lovable or a Wave or a Helsing or an Isomorphic Labs So some of these other amazing companies that I see sort of shooting to the top right now.

10:01And frankly, this is what gets me the most exciting, not so much kind of a month-to-month cash flow one way or the other, because that feels much more transient to me. Andrew, flashing the pan, meaningful, what do you reckon? It's a great question. You know, how much of it is short-term repositioning, so a tactical move. Due to the volatility, how much is sort of a long-term permanence? I think it's really unclear. The globalization trends may decide this in general, as Mads suggests. I don't think it's just isolated between Europe and US. I think it's fantastic that European investors are backing Europe.

10:39But is it to do with this general trend of friend-shoring and economic nationalism? Is it to do with a better alignment on ESG as the US has gone the other way and some of these big institutions do still have policy frameworks on the ESG. And you could argue that some of the European opportunities are better aligned to that. But I wonder if you see some extremely positive earnings calls in the US, whether it will attract the money back. So I'm a bit skeptical, but equally, I'm quite positive. This resurgence of, well, not even resurgence, actually, is it? It's actually, we've just not really had this sort of European nationalism before or patriotic readjustment.

11:30And we'll see if it sticks. I hope it does, because I think I've long been a proponent on this podcast that Europe needs to stand on its own two feet, pay for its own defence, and we need to back ourselves. It's our biggest problem for our own economies and for the European wider economy is our own self-confidence. So I hope it stays. Make hay while it shines, right? So I think there will be an overhang. But like you say, Andrew, I'm sure that money will follow the money. So I think there will be an overhang. So hopefully it will stick. Talk about sticking. We're going to get sticky in the kitchen.

12:01I want to talk about food tech. Lab-grown meat has recently kind of fallen out of favor. It's not been that cool for a while. We almost had an AI winter. We almost had a kind of a lab-grown or a food tech winter. Not so short, not so long even. but there have been a few breakthroughs. So Professor, I'm going to get his name wrong, Shoji Itakuchi from the University of Tokyo. I should have given that one to you, Mads. You'd have probably done a better job than me on this name. He's got a bioreactor that holds living cells in a gel and feeds them oxygen and nutrients. And he's created 11 grams of chicken, which is about two centimeters by one centimeter.

12:37So getting nutrients from oxygen, getting nutrients and oxygen through the cells is the hard thing to do. But they reckon they'll see lab-grown chicken on the shelves for humans within 10 years, which is great. However, I have to shout out to three other European startups. So Meatly, they launched their Chick Bites, which are dog treats from cultivated chicken cells earlier this year. Munich-based startup Miriam Meat has successfully developed a pig fillet in the lab without the need for genetic modifications, which is a big deal. And 3DBT, a UK business, has also recently created a pork steak.

13:12So human food will soon be on the table, I reckon. Also this week, we're seeing reports of space-grown food. So Lab Grown in Space, a European space agency project, is assessing the viability of growing lab-grown food in low gravity, higher radiation environments, and on other planets. Now, Andrew, I know you play with some of these spacey, food techy things. Do you reckon this is a place where startups can, or more startups can play? What's your take on this new lab-grown and space-growing food play? Yeah, we had a company actually, Sci-Fi Foods, that sadly got bitten by the VC bubble going bust.

13:53And it all comes down to the cost of production. So the cultured meats all require a specialized growth media, many of which are pharmaceutical grade and they're prohibitively expensive. And Sci-Fi Foods had a strategy where it was going to blend lab-grown meat at a relatively low production cost compared to competitors with regular meat and produce a blended product that was subsidized. They couldn't raise a large enough funding round when the VC bubble went bust. And they were going to rejig back to an R &D shop to really focus down on getting these cell cultures and growth media, the cost, low enough.

14:34It didn't happen. So I think it's a timing issue, actually, that there are lots of different companies producing lab grown cheese and chicken and fish and red meat. I think it will definitely happen, but it's a matter of when. And it all comes down to actually when can you produce the stuff cheaply enough? You know, you've got to get down to a comparative cost of traditionally grown regular meat, which is what, five to ten dollars a kilogram, I guess. So, yeah, until that happens, we're not going to see it mass market. I've never really been a fan of the plant burgers and stuff. They're not good for you.

15:13They're highly processed. Yeah. Yeah. I mean, regardless of taste, they're just not good for you. So I think we will see this step change. But until we can get that cost down, it's not going to be on your shelves, however good it is, mass produce. And Mads, you and I, you've always said to me, and I've kind of always gone with this, We will solve energy and we will solve this kind of lab-grown meat, as in we won't see the mass murder of animals in these food processing plants. We've kind of always kind of said similar things. Energy is going to be solved and food is going to be solved. What's your take on this food tech push forwards?

15:53Is it going to stay? Are we going to get to see lab-grown meat in the shops, do you think? I thought this announcement was really, really exciting. Obviously, as you and Andrew are saying, lab-grown meat is not new. I think it might be worth taking a step back and just recalling the process. So you take existing cells and then you put those cells in sort of a nutrient-rich soup within a bioreactor, sort of a big vat. And then you put some scaffolding and some conditions in place that allow these cells to grow into actual three-dimensional tissue from just sort of single cells. And the challenge really has been how to grow proper chunks of meat rather than what you might call ground meat.

16:35Andrew was talking about mixing some of this newfangled artificial meat with some existing meat to get to something that feels like proper food. And what they've solved here, the scientists, is really how to make the chunks, which is, of course, such a big part of the challenge. And this was this fixing the delivery of oxygen and the nutrients. So all parts of the tissue get that. And that's what's enabled them to grow this real chunk here. And why is it important? Well, you talked about the plant-based stuff. Protein is essential for growth, for repair, for thriving of our bodies. And the issue with plants is that it can be difficult to get enough of the complete amino assets, proteins that are complete enough that they give us all the nutrients we need.

17:20And then there might be a taste issue as well. And on the other hand, you have animal protein, which is tasty, but super polluting. and some people would say maybe not so ethical. If you look at beef alone, so there's 100 kilograms of CO2 related to producing one kilogram of beef. Chicken is just a tenth of that, but chicken farms, even those are not the nicest places in the world and maybe not for the chickens either. So there's kind of this context, right? One kilogram of beef is the equivalent of driving 400 kilometers in a car in terms of emissions. And then you have the methane issue and everything else.

18:00So I think the lab-grown meat is super, super exciting. You know, you have cultivated cells. You don't have to butcher any animals. You reduce pollution. Land use today. So 77 % of farmland today is associated with livestock. But only 18 % of the calories that come out of that come from that farmland. So there's a massive imbalance. So I just think there are so many things that weigh towards being able to find better ways to make this protein that we like and that, you know, in some ways you could say we need. And so I think that this is very, very exciting. I think that agriculture, as we know it today, will disappear within 20 to 30 years.

18:41I think it's just a question of hitting the right inflection point on the S-curve, and then I think it will all change. So this is a small step, but it looks like a step in the right direction. Will we see more investment now going into this layer of food tech? And will we see more startups coming out because of these steps forwards, do you think? We might still be a notch early. I think where you're going to start seeing the big money is, as Andrew says, when we get ready for scaling up. And we're not there yet. There's still more stuff we have to figure out, right? I mean, with the best will in the world, 11 grams of chicken does not a meal make.

19:19so there's there's more it's kind of foundational nugget is it it's a small nugget don't don't buy your fries just yet okay so still still a step a step forwards but still a way to go and i was reading about all of the different scaffolding techniques that they use and why it's okay for animals why why chick bites has launched the dog version is because the scaffolding is fine for dogs but it's not so healthy for humans so i think there's still some way to go it feels a bit self driving cars ish that it's always this 10 years out but we'll see and just for those that may not be may not be as well versed the scaffolding is what makes the the meat mimic real meat texture so the marbling that how it feels when you bite it you have to use plant-based solutions or collagen or synthetic materials to actually allow those cells to grow within that scaffolding and that's all that's all expensive and there aren't there aren't highly scalable solutions for that yet along with the cell lines you have to create, creating immortalized cells that grow fast, safely, and predictably.

20:22So there's a long way to go, actually, on the R &D side. I think there are some timing questions there. But I agree with Mads, but we'll definitely get there, and we'll get there in our lifetime. And it may be 10 years, maybe realistic. Okay, well, let's hope so, because like you say, Mads, it's a pretty grim world if you're a chicken, a cow, or a pig. So I'm going to conflate a couple of stories here because OpenAI is interested in buying Chrome from Google. So there's an antitrust case going on in the States. There's always some kind of antitrust in the news, either in Europe or in the States.

20:57The US Department of Justice is looking to require Google to restore competition in online search as part of this antitrust case, i.e. sell Chrome. Now, ChatGPT's head of product, Nick Turley, says OpenAI would be interested in buying it. Why wouldn't they? an interesting coup for Microsoft as well. So OpenAI is in buying mode. In 24, it acquired Rockset, which is a search and database analytics firm to enhance real-time data processing for its AI products like ChatGPT, plus Multi. They also bought Multi, which is a remote collaboration tool to bolster its enterprise toolkit. But its biggest acquisition, a la cursor lovable, could be the windsurf at the AI-powered coding assistant.

21:38They're looking to buy that for$3 billion dollars hasn't gone through just yet a little bit of a note here is the open ai fund is also an investor in cursor so there's a little bit of an antitrust challenge within within that that purchasing bucket so two questions for the room really do antitrust cases like this make sense over there or here and secondly what is the future for open ai and these foundational models companies are they going to go vertical become an app store stay focused on core models because feels like they have to do something plus. So Mads, I don't know where you want to start with this, but can you kick this one off?

22:14One of the foundational tenets of antitrust policy is you're not allowed to use a monopoly or a strong market position in one domain to create a monopoly in another domain. And that sort of all seems fair. We want reasonable competition. Regulators and governments are trying to enforce that. And there are some really, really interesting cases to show that it works. It works phenomenally well. We'll come back to whether that's fair or not. In the 70s, IBM was subjected to very, very severe antitrust investigations from the Department of Justice. As colleagues I spoke with that have been around at the time sort of said, look, they had whole sports halls just filled with documents.

22:57They had to retain every single document produced. It was in a time before everybody had their own PC. So kind of 12 years of that brought the company to a position where when the time came to design the PC, they were so scared of being accused of any breaches. that rather than using kind of what was their DNA, which was to make everything in a proprietary way, they bought components off the shelf saying, well, then they can't blame us of violating antitrust. And that is what enabled eventually Compact to reverse engineer the bias. And then, of course, the clone makers to take over and bring IBM to its knees.

23:3515 years later, you had the case again with the DOJ going after Microsoft, really pushing them to the point where in the end, Bill Gates, he said, I just don't want to be part of all these depositions anymore, handing over to Ballmer. They lost focus, and as a consequence, they lost mobile. And so it really works. I mean, if you want to kneecap these big companies, just subject them to endless depositions and force them to change their business models, and it will break them. And the question is, is that what we want to do with Google right now? I would posit maybe this is not the time or the place.

24:14OpenAI stole a march on everybody when they launched ChatGPT. Google wasn't ready. It took them a year to get ready. And in the meantime, OpenAI is now so far ahead in terms of AI use. And of course, this is translating to search traffic. So in some ways, you might say, well, OpenAI or ChatGPT has only got 1 % of the search market today. but you think about what that one market is, 1 % is. I don't use Google search anymore. Many of us in our industry, we don't. And I think to some extent, we are a little bit in the vanguard here. Google still has most of the high value searches. So when somebody needs to search for travel or buying a new car, many people still revert to Google search, which is of course why they can still make a lot of money on search.

25:04and their results came out yesterday were really, really strong. But the winds are blowing in a very clear direction here. Yeah, AI is killing SEO. Absolutely killing it. And so is this the time when the company is already on the back foot to then take one of the jewels, which is the Chrome browser, and hand that over to the main competitor? It doesn't seem like government's role here to now favor OpenAI and say, you should be the new champion. Let the guys fight would be my preference. I think, you know, I love what OpenAI is doing. I want Google to be a strong competitor, not to be handicapped this way.

25:45I think a judge already found in 2023 that Google used default agreements to stifle competition. And so the big fear is that Google will try and replicate its search monopoly in AI. And so stepping back as a user, I guess, of all these products and tools, a lowly user, one of billions. The frustrating thing is that if you want the best feature set and greatest convenience, there's a natural tension between monopolies or highly integrated systems such as Google Workspace where you have tight integration between AI, your documents, your search, your file system, your browser, which creates fantastic sort of seamless operation and feature set and functionality and productivity versus competition driving change and innovation.

26:33Because can you imagine if we were still stuck with Microsoft today owning the web browser and AI? I mean, we'd all be talking to a paperclip. First of all, it would be terrifyingly bad. And I don't know if you've used Microsoft Office recently, but every time I use it, I wince. It's so painful and clunky. And Google came along and moved the needle. And so there is always this cyclic tension between enabling innovation and access to move things forward and sort of enabling companies to provide the optimal set of features so that I can be productive. And I just think that's a really interesting tension that we're always in this cycle.

27:16So maybe, to your point, Mads, maybe just having these antitrust cases is enough to just kneecap, annoy, irritate, slow down. So maybe just the process itself is enough. Yeah, and this is, I think, the key point. I'm all in favor of some speed bumps. I mean, clearly they shouldn't abuse their monopoly position, at least not too much, right? You've got to sort of keep them honest. Yeah, what's smart business? What's smart business and what's abusing a monopolistic position? Exactly, exactly. But you then take that to the ultimate conclusion that you start breaking up companies. I'm not sure consumers will win from that breakup anyway.

27:50And I don't know that then just awarding OpenAI, if OpenAI gets Chrome, I mean, that will, if not kill, then it will handicap Google's ability to continue that search business in an extreme way. So it feels like a huge, huge step. It doesn't seem like a reasonable remedy. I could work out why Nick Turley from OpenIL was even in the hearing. Maybe it was a kind of a more open industry insiders review. I have no idea. Sorry, Andrew, I interrupted you. No, I was just going to say, I think it's about access and choice. You want these companies to continue to innovate and bring their huge R &D teams to bear to launch products which otherwise would be extremely hard to roll out from a standing start as a startup.