E718 | Cameron McLain, Giant Ventures On Why Europe Needs to Own the Stack

0:00Welcome back everyone to the European VC podcast. Today we're going to explore a shift that is quietly redefining how Europe builds companies and maybe even how we define ourselves. For the past decade, impact has often sat on the sidelines of venture, important but also a niche. Cameron McLain and the team at Giant Ventures have taken a very different view, that the most valuable companies of the next generation will be built not despite global challenges but because of them. But recently that idea has evolved. In their latest thinking, Cameron and the Giant team introduced what they call the European stack, a vision for rebuilding the core infrastructure of Europe across energy, manufacturing, and financial systems.

0:37Not as public projects, but as venture-scale companies. Not as ideology, but as necessity. So in this conversation, we're going to talk much more about what used to be called impact, but is now being reframed as sovereignty, competitiveness, and whether Europe can actually own the systems we depend on.

0:57Cameron McLain:This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured. Cameron, let's start at the beginning. Tell me everything about building Giant from the start and how your thesis has evolved from then. Thanks for having me, by the way, Andreas. It's great to be here and a big fan of the podcast. So, yeah, we found a Giant back in kind of 2020 with a clear vision that we felt the biggest, most important companies of the next era would be built by solving some of the big, hairy problems that we face. as a planet. And we felt that there was room and need for a venture firm that was hopefully as ambitious, as bold, as connected as some of the venture capitalists on Sand Hill Road, but truly mission-driven at its core and very aligned with the underlying missions of the entrepreneurs and the companies they were building.

1:44So that was the vision and mission back then. It's the same mission and vision today in many ways, but I guess some of the language we use to describe the problems that the entrepreneurs are going after has evolved, but that really has stayed the same. So what Giant's about is backing Giant ideas. We want to partner with truly purpose-driven entrepreneurs who are leveraging frontier technology to build some of the really important systems of civilization. So energy, healthcare infrastructure, the financial rails. And yeah, we endeavor to be the best partner we can be to those entrepreneurs building those companies.

2:19Cameron, I have a word in my script here, which is called impact washing. We are seeing a bit of that and have seen that for a long time. Maybe you can talk a bit about why it's worthwhile building and backing companies with a purpose and it not being immersed in everything and still not also being impact washing, but actually being meaningful to talk about. Well, yeah. I mean, in many ways, we have never used the word impact to describe giant. We've always used the word purpose-driven. Though we do track the impact of the companies that we back, we would think of ourselves as a purpose-driven venture firm.

2:51And I personally think it's an incredibly strong thesis and worldview from which to deploy capital, because in my view and in my experience, the best entrepreneurs are missionaries. They're not opportunists and they're not mercenaries. Of course, you can make money that way. And that has been done. But the people who build the really enduring companies are missionaries. Commitment to that purpose allows them to run through walls where others would stop. I think backing purpose-driven missionaries who have a long-term view, want to solve really hard problems, tackle some of the biggest problems in the biggest markets, are going to build some of the most enduring companies.

3:25And they're going to be a real lighthouse for talent. Talent is really what I think separates the good companies from the great companies. But that's the giant view of what purpose is and how we think about the impact of the companies and the products that we're helping bring to life. I think the Venn diagram of companies that we want to back are those that are going to build huge financial value, but also have really longstanding, deep and wide impact at global scale from the companies that we back. That's why I think we've done a good job. Another defining characteristic of you is that you're transatlantic by nature.

4:04You're U.S. and you invest both places. You're very active in both markets. Can you talk a bit about how that's shaping you? Sure. So I guess a bit of background on me. I mean, I'm a Californian father, Danish mother, born and raised in the UK, spent about 10 years in the US and also married California from San Francisco. So I guess those are my influences. I think in some ways, the axis and the kind of presence of giant is very much through the Nordics, through the UK, and then into the US, particularly the coast of New York and California. So I like to think we We bring together the best of California optimism, ambition, innovation, the best things that come out of that state, which are truly incredible.

4:45And, you know, a kind of Nordic perspective on sustainability and long term thinking and perhaps egalitarianism. And of course, I've got to give a shout out to my partner, Tommy, who's a full Brit and so brings a good healthy dose of British Stoicism as well. But I think combining the best of those cultures is a very powerful combination. And we've got Swedes on the team. We've got Danes on the team. We've got Americans on the team. We've got some Africans on the team. We've got people from all over Britain on the team. And I think that makes for a very potent combination. But I also think it helps you have a unique perspective on the view.

5:18And also, I think our network has been pretty powerful in helping companies scale across the Atlantic. So I think it's been a core part of who we are. I think some people are sometimes confused as to where we are located. But we're headquartered in London. And I think a lot of the best innovations across all kinds of different types of activity happen when things collide. So I think we like to think we're kind of colliding those things together. Cameron, I want to ask you, speaking of collision, we're at a very special time in the ecosystem. And you're talking about the European stack in your latest quarterly letter.

5:58And we should dive into that. Now you talk about the fusion of Californian roots and Danish slash European roots. I'd love to ask you, how do you think about this moment in time that we're in? Because a lot of the people that are talking about things like the European stack and European resilience are at the same time feeling to me very anti-American. Yeah. And I think that that's personally, I think it's pretty unfortunate characteristic. And I think it's not very sustainable. and I think it's also disregarding the nature of venture. But I'd love to hear your take on this and then we can debate a bit back and forth.

6:36Yeah, I don't take a political view on it. I think America, we're going to take a broad historical view and over the long history of the last 50 to 100 years, America has been a great ally to Europe. And I'm an American, I'm half American, I hold a US passport. For me, it's not about in any ways being anti-American and we wouldn't subscribe to that view. but I think it is about building some independence and strength in the European ecosystem so it can be a valuable partner in the world. So that's what when we're talking about the European stack, European resiliency, that's the framing we take.

7:11I think it's important and as much as is possible, I hope the US and Europe continue to be great allies and great collaborators. But we need to, I think, be realistic about the new geopolitical realities of the world and build for a future that we all want to live in. I think there's kind of three big things that have changed or have happened in the world that I think kind of are important, at least to our framing, of understanding the opportunity from a venture perspective. The first is technology has continued to become more and more of the economic backbone of the world. If you kind of think back 20 years, like there was IT departments, right?

7:45People sold into IT budgets, information technology. Technology has become more important economically, geopolitically, and I guess socially to our lives. So the second is, you know, we've moved, I think, from an era of globalization, of very much free trade to a new era, which who knows how long it will last for, which is more around kind of spheres of influence. That world has changed, right? People are looking to have important elements of, you know, what they view as geopolitical sovereign stacks being built by themselves, particularly China and the US. And I think the third thing that's happened over the past maybe five years is that there's always been a power law in venturing technology, if you look back to Intel and all the way up to Facebook.

8:28But I think it's gotten even more intense and extreme over the last couple of years. I think we see that with Anthropic. We see that with SpaceX. And so all of those things kind of tied together means that if you are not building some of the foundational layers of the technology stack, you will not have economic control. And so we've got to move to an area of kind of mode of thinking where we were optimizing for efficiency. And now we have to, I think, optimize to some degree for resilience because the rest of the world has done that. So stuff like cloud, payments, energy, AI, if we don't have some skin in the game building some of those foundational elements in the stack, I think it's going to be a tough place to be.

9:06And we want Europe to be generating wealth, to be generating value, to be in a position where it can deliver on some of its goals and intent and values. Cameron, you've been a bit of a deep tech firm ever since you started. I'd almost say that you're in a dream position because you've been a deep tech firm before it started getting really sexy and everyone wanted to be. You're now coming up on fund three to be announced very soon. And like, tell me a bit about how you've seen deep tech evolve and maybe also you as a firm, how it sets you apart from the generalists that are now moving into deep tech versus a firm like yours that from its get go, you said this is about the foundational technologies and the heavier types of technologies.

9:56Yeah, I mean, it's funny you said, because I think we never like considered ourselves, quote unquote, a deep tech firm. I think we just followed where we felt the most exciting entrepreneurs were building. And I noticed about a couple of years ago, maybe five years ago, that many of the most exciting entrepreneurs were leaning into kind of deep tech spaces. And maybe that's because the problems that, you know, they were looking to solve needed deep tech. Maybe it's because software got too easy or less defensible. But, you know, we followed the entrepreneurs and we did make a kind of distinctive decision about three or four years ago to push into some more frontier tech elements because we felt that's where the opportunities were, and that's where we were getting excited by.

10:35So I think it does position us well. I mean, you said it, not me, but I think historically, there has been less of that in Europe. It does position giant well. And I think there is amazing deep tech talent in Europe. I think that's the other thing. The technological scientific talent is as strong, if not stronger, in Europe than it is in the US. And so if you can help that talent realize its potential and its commercial opportunity and connect them into US capital markets, I think that's a huge opportunity. But again, I just come back to first principles. We're looking to back purposeful entrepreneurs, leveraging frontier tech to rebuild systems of civilization.

11:08And that's going to involve not necessarily software moving photo apps. It's going to involve trying to build some pretty complicated things, but there's a great moat when you succeed in that stuff. So I'm really bullish on Europe's potential to build those types of companies. I think ASML is like a great example of that. I think it's an area that Europe can really lean into. And, you know, we'll continue backing companies like Cusp AI, you know, AI materials here in the UK, Matter, you know, Sentient Factories, you know, I think there's some great stuff going on in Germany as well. So it's an area I'm super excited about.

11:42And if you are listening and you're a deep tech entrepreneur building this space, please, please get in touch and keep us top of mind. Cameron, now I want to dive a bit into this thesis of the European stack. I'd love to ask you to open that up for us. Tell us a bit about why it's different from just talking about deep tech as an example or talking just about impact as its own and finance as its own and so on. Yeah, well, sort of what I said is if you don't control the stack layers, you're renting your economy to some degree if you don't own the infrastructure. If we don't have some skin in the game for energy systems, for control and coordination layers like stable coins and cloud, if we can't produce things, we really are, I guess, at the dependency and whim of others.

12:36And if we also don't have some participation in these technology layers that are going to be the predominant drivers of value creation and GDP growth, it's going to be very hard to maintain the welfare system that Europe has today. Because what seems to be emerging is that more and more of the GDP of the global economy is going to be driven by these kind of foundational technologies. And so I think it's an exciting opportunity for Europe. I think there's a wake-up call, right? But I think it's an exciting opportunity, and Europe is very well positioned. Let me ask you about a specific type of opportunity that I've had a difficult time wrap my head around, and that is replacing American stack with European stack, because there's not much innovation or venture innovation in rebuilding AWS on European rails.

13:28But on the other hand, it does need money, it does need investment, and it will be a very big opportunity. So maybe that is a venture play. Can you talk a bit about that? Tell me how I should be thinking about that. Yeah, we're back to a company called Everop. We're invested there, which is endeavoring to build the sovereign stack, cloud stack for Europe. And there's some other companies doing exciting stuff in that space. So I don't know. I push back on you a little bit that there's no innovation there. AWS obviously is a great product, but it was built 20 years ago. So I think reimagining the cloud to be truly AI first is happening right now.

13:58And there are some companies doing that. It's obviously one of the biggest markets in the world. And I think it's only going to continue to grow, right? as more and more things come online. So I think the way I take that view is, I think it is a venture scale opportunity. You're obviously tackling an established market, which comes with its own challenges and very well-funded and very capable players in the hyperscalers. But I think there is a good portion of the European market which should be on a sovereign stack because if you don't, you have real vulnerabilities. And that's kind of probably not acceptable to certain entities, right?

14:34Perhaps not to intelligence agencies or key healthcare infrastructure. It doesn't mean everyone in Europe should be moving to a sovereign stack. I think a lot of them will be happy sticking with AWS, but I think there's still an opportunity there. I knew that with Avroca, and it's a big thing in Denmark that we're trying to weed out all the Microsoft, all the Google stuff, especially Microsoft, obviously. How should people think about it? Like, how do you, because as you said now, it is a different thing to be, like from being in complete blue ocean new frontier technology versus going into a market that is heavily owned by the hyperscalers already.

15:10How should companies, how should founders building in this space, seeing that there's an opportunity, but also knowing that I'm going up against the biggest guys? How should they think about it? How should investors think about it? How do you yourself? Well, in the classic startup wisdom and venture wisdom, which I think still holds for the most part, is to find an overlooked niche in a fast growing market that others don't realize yet is going to be huge. Obviously, this kind of goes against that. And so I think the way you build the company in these kinds of sectors does differ from the traditional kind of Paul Graham, YC approach, but you find your lean startup and all the rest of it.

15:48So I think the advice for people building in established markets is twofold. One, I still think you need to figure out your wedge, even if you are taking on this big, big end goal. And usually there nearly still is always a wedge where the fast water is moving. And you've got, again, that fast moving water where there is real customer pull and try and figure that out along the way to the bigger vision. I do think if you are tackling some of these bigger players, you do also just need to raise more capital than historically. So I think you've got to raise a very big seed or series A from the get-go to capitalize the company to be able to build a product which is you know at par or very close to it in you know your your specific um segment that you're going after and i think that is what we're seeing kind of in the broader venture ecosystem these days right there is this move to these very large rounds where investors are willing to take that risk of underwriting a you know an unproven product and company with a very big round because they think the outcome is so big and because people are kind of reverting, I guess, to the idea that capital is a moat.

16:49I'm skeptical that capital is a long-term moat for any of these companies, but we seem to go in cycles of believing that as we do in the blitzscaling era with Uber and Lyft and what have you. Cameron, everything sovereignty right now is very sexy because there's a lot of pull from the customer's side and a lot of also pull from just society seems to be going this way. And for that reason, it's sexy to invest in and sexy to be building in. And people are also looking to build their careers. and doing stuff like that. It's purpose-driven for many. So for many, it makes a ton of sense to be doing.

17:20That also all comes with the fact that there's a lot of government subsidization and government programs to help this movement come along. Yeah. Sometimes what you see when that happens is that we end up building leaders that maybe should not be built or build out segments that shouldn't be built at all. How should people navigate that both as founders and as investors? Yeah, so I don't think the states should buy. The states should never try to build innovation, in my opinion. They should buy it. Europe has an unfortunate tendency to over-regulate and over-coordinate, and that doesn't really work that well.

17:58But where the government can play a really phenomenal role is as a buyer of first resort for some of these technologies, and as a regulator to kind of create a fair playing field. I think what the U.S. does very well is the U.S. is very involved as a buyer. So if you look at some of these, obviously SpaceX is a great example, right, where NASA and the U.S. government was the sole customer for about five, I think maybe the first five or 10 years of the company's existence. And that has now allowed it to deliver its product in a cost-effective way to the commercial market now and have a huge moat.

18:32So that's what I think where government can play an important role, but then making it just easier to build businesses, making it easier for the VC startup ecosystem to take nonlinear bets and build companies at scale and across Europe, recruit talent. That is the way to do it. We should not be building sovereign companies by government. I want to be super clear about that. That has never worked from what I know, from my perspective. That is not how innovative, fast-moving, enduring companies are built. but government can play an important role in setting the playing field to create the incentives to go build those companies i think that's a super important distinction and whoever yeah has the right the right the right people to call in in in the in the eu government should make that super clear um but there is there is obviously a role for it but yeah well i asked question because you do see a lot of investors that are talking about the need to wean off sometimes deep tech founders from public money because we have such powerful programs in Europe that sometimes founders and teams and entire companies can end up being almost more geared towards the soft funding landscape than the customer side.

19:53Interesting. And obviously it's more more problematic in some spaces than others. And some would also say it's a characteristic of the founders. And if that is wrong, then there's nothing you can do to stay out of it. I think it's much better if the government is not funding the companies directly, but acting as a buyer of the technology. I think that's the difference, right? And I think probably a lot of what we see in Europe is direct funding. And so that creates, I think, the wrong incentive because you want to be funded by investors who think you're going to build a huge company and you want to be joined by employees you think you're going to build a huge company but the government acting as a buyer of the technology to create demand in the market and allow you to you know bring the cost curve down that i think is is the right way to to go about it um i think dependency like that's probably unfortunately a bit of a cultural thing in the year maybe we see a bit more of like this expectation of support on certain things from the government but that would be my take do you think that do you think what do you think do you think it's do you think that's the reality too much dependency i think we're creating it in some places and i think many of our programs are very complex so you gotta build uh you gotta be quite attuned to the soft funding environment to be able to navigate it efficiently and that's not always the most effective use of resources of a startup i'm always like i'm saying i'm doing a podcast i'm trying to get the wisdom of investors here yeah there will be people wanting to peel out pull out my hair that doesn't exist anymore for saying what I just said because they would say no it's been absolutely instrumental to us and yes it is in some cases but I also know a lot of investors that are saying well I am seeing a lot of startups that I don't invest in and where this is the case that there's a lot of soft funding having gone into it and it's been an interesting research project but I can't bag it as a financial investor and those are the companies that I don't think we hear that much from because they end up dying or they end up not really going anywhere and then you have a lot of successful soft-funded businesses that do make it and those then we hear how that that soft funding was instrumental to their success and yes it was but you also have a graveyard of of companies where the venture community ended up saying no we're not interested you're seeing that with a with the EIC's program as an example, there's not a very great track record, honestly, on being able to attract the private capital to their public commitment.

22:29Well, I think at the end of the day, you need an incredible entrepreneur to drive the vision to life, right? And without that drive, without the tenacity, the greatest science will probably never be commercialized into a great company. But I think just one thing important to you, and then we move on, but I think the early stage is not the issue and there's a lot of funding at the early stage and particularly uh i think it's it's at scale right it's these large at scale contracts for instance in space again in in the u.s these are hundreds of millions of dollars worth of contracts at scale for these companies and so i think we need to think bigger you know we need to think more ambitious we need to think like what does this look like at scale not necessarily you know how do we how do we um you know have a have a thousand flowers bloom because i think actually we do a pretty good job of that at this point um across Europe.

23:20Cameron, let me ask you about the pillars of the European stack, so to say. You're pointing specifically at energy manufacturing and digital financial infrastructure. You don't have LLMs. You don't have space there. Can you talk a bit about why those three are the hallmarks for you? And as an example, LLMs and space is not. Sure. I mean, LLMs could have been on there. Space could have been on there. I think space is super important. And right now it's entirely dominated by the US and China. Order of priority for Europe, I wouldn't put it number one. LLMs, you know, I think the kind of, that's also pretty, obviously, could have been on the list.

23:58I would say in its current formation, I think we have lost the current LLM race. I think people like Yann LeCun have really exciting different approaches. You know, his world model view, which takes kind of a more cognition-driven approach rather than just kind of a pure statistical approach, maybe like a complete game changer. but I would say to some degree in terms of like the classical LLMs as understood by open AI and tropic I think it would be very hard to catch up with them at this point just in terms of capital talent business models but I think what Europe could do in a pretty exciting way is take some of these open source LLMs and integrate them into kind of you know European the European stack and that could be pretty interesting because some of those open source models are almost as strong performative as the you know closed source models in the US so that's one extra area I think I think also specific applied applications of LLM.

24:50So I think to materials, for instance, I mentioned Cusp AI. Now the company we've backed called Zyme is doing something similar for enzymes. I think Europe will really thrive and excel on applied AI for specific verticals, particularly when there's a scientific element, because obviously we've discussed the very strong scientific roots of the continent. But I chose those three because I think of them as the key input and coordination there. So energy is energy. I mean, life is energy, right? So without energy from an economic perspective, there's no economic activity in the modern world. And if we can create clean, abundant energy in Europe at a low cost, I think it would be incredibly stimulative to the economy.

25:34And if we can do that internally as a continent, it will give us a huge kind of advantage in producing things or in generating the energy needed to run AI models. And I think, as we're seeing with the current geopolitical situation at the moment with Iran, having some degree of internal energy production is incredibly important. and the more it can be self-generated through renewables, all the better, right? All the better for the climate, all the better for the world, but also all the better for our economy and for our resiliency. And I think the focus on energy is only going to increase over the next 10 to 20 years.

26:13I mean, the projections of the energy consumption from data centers is astronomical. I think last year, 5 % of global energy was used by data centers, something like that. And it's set to expand pretty drastically. So we need to have control of our energy production to make things, to be able to drive AI, to be able to drive a clean climate future as well. And I think Europe's really well positioned to do that. We've got one of the largest deployments of renewables globally in terms of solar and wind. And that's fitting pretty well for us. So we've got a company called Flower out of Sweden, like many of the climate tech unicorns coming out of Sweden.

26:46Yeah, they've built a vertically integrated energy flexibility product. And the idea there is really just to be able to provide clean energy baseload to European companies. And they're doing a fantastic job for seeing that vision. The second sector, I described manufacturing. Well, I think it was Palmer Luckey, the founder and CEO of Anderle, who said, if you don't make things, you don't control them to some degree. And I think that is, there is an element of truth. Again, coming back to the original thesis that we spoke about, about, you know, we've had this move from free trade, comparative advantage towards, you know, geopolitical spheres of influence, we do need to be able to make things.

27:22And I think the Europe's incredibly well positioned to do that as well, because we have a fantastic history of manufacturing, you know, whether it's BMW or Siemens or what have you. And so in a world where the form of production is moving to a much more iterative, you kind of set up where you know we've got software at the core you know we've got automation taking place we've got real-time iteration i think being able to make things will be will be yeah it's essential and then the cloud and the kind of underlying stablecoin rails i consider that kind of the control and coordination there because you know everything runs pretty much on cloud these days there's very little in the world that isn't connected looking forward 10 years or three years, there'll be very little in the world that isn't intelligent now, where as we move from the world of connection to intelligence, which is kind of always how I think about the transition from the internet era to the AI era.

28:16And if we, again, don't have some control over that control area, there's a choke point where people can just basically turn you off. And I think stable coins is something that's not spoken about enough within a lot of circles across Europe because stablecoins are the future of financial rails. And it's programmable money. It's a very intelligent way to create demand for your currency, demand for your treasuries, and essentially lower your cost of borrowing, right? Because what stablecoins are backed by is sovereign debt typically. And so as people purchase more of your stablecoins, they purchase more of your sovereign debt.