Brent Hoberman on UK tech post-Starmer: 'Are we going to tax everyone to high hell?'

0:01John Thornhill:Hello, and welcome to the Sifted podcast. I'm John Thornhill, Sifted's co-founder and columnist, and today I'm delighted to be joined by the serial entrepreneur and investor Brent Hoberman. Brent is one of the UK's most experienced and best connected tech operators. In 1998, he co-founded the travel site LastMinute.com, Britain's OG tech startup, if I can put it that way, which listed on the LSE in 2000 and sold to the US firm Sabre in 2005. Then in 2010, he co-founded the e-commerce brand May.com, which after he left, listed on the London Stock Exchange in 2021 at a £775 million valuation. The company went into administration the following year, demonstrating what a white-knuckle ride it can be building fast-growing tech businesses in today's volatile global economy.

0:52John Thornhill:Brent co-founded the early stage VC firm First Minute Capital, which has backed leading names in the European tech sector, including self-driving car company Wave, AI model builder Mistral, workflow automation provider N8N, and the popular meeting summarization tool Granola. Brent is also the co-founder and impresario of the London-based Founders Forum, a global community of entrepreneurs which recently hosted 300 unicorn founders at Soho Farmhouse. He also co-hosts London Tech Week, which has become a fixture of the UK startup calendar. And in February, as if he wasn't busy enough, he co-founded Enterprise Britain, a movement of entrepreneurs, business leaders and investors committed to growing the UK economy through entrepreneurship.

1:38John Thornhill:London Tech Week took place a couple of weeks ago, making this a great time to check in with Brent about the temperature of where the UK's tech scene is today, how he's approaching investing in AI, and what Europe needs to do differently to build significant companies. So Brent, welcome to the show. Thank you, John. We're talking just a few hours after Keir Starmer has resigned as Britain's Prime Minister, meaning we'll have had seven heads of state in just over 10 years. What's your reaction to that news? And how much does this political merry-go-round affect people like you trying to build a better UK tech sector?

2:16It's complicated. I think one part is the short-termism of our democracy is clear. So I think that's, you know, whatever one thinks of Starmer, one thing you can think, well, you know, should one have given him more of a go? You don't want people to be measured on short-term, you know, two-year cycles when it's meant to be a five-year cycle. And that's even too short anyway for most things to impact. So if we really are just, you know, looking at opinion polls all the time, and most of the commentary I've seen this morning is, Starmer was kind of doing okay, but he was really unpopular and opinion polls hated him, which doesn't feel like a good enough reason to throw someone out to me.

2:53I think one thing, though, is he clearly, you know, history will probably say he wasn't bold or particularly a risk taker. and I wrote an article for the times last week about risk-taking and that we are a culture of caution uh in a in an age of urgency and where risk-taking is is necessary so that's one thing I think for entrepreneurs the key thing is actually going to be who's chancellor and what's sort of painful is we don't know and I don't know how long it's going to take for us to know uh and why is it important because the chancellor is going to be the one is who is bluntly either pro-business or pro-socialism to be simplistic about it and entrepreneurs do not want to see somebody we do not want these constantly summers like we had a couple that we seem to have every summer before the budget it's like are we going to tax everyone to high hell and heaven and drive all the innovators and creators out do we have a government that really wants growth and is going to reward risk takers do we have a government who recognizes that the growth comes from attracting um brilliant people to the uk and brilliant talent and i actually think the Starmer government and Chancellor Reeves, Rachel Reeves, were actually starting to get that memo.

4:03So this is disappointing for entrepreneurs.

4:06John Thornhill:And there were several ministers in particular who said certainly kind of got that agenda, weren't they? There was Peter Carr, Kanishka, Jason's Lord Stockwood, all deserve call-outs for being labor values, but pro-business. So it shows it can be done. Yeah. So Burnham has been talking about wealth taxes, welfare redistribution, windfall taxes and so on, nationalization. That doesn't sound a very pro-entrepreneur agenda. What do you expect of him? No, I think it's quite scary. I think, again, the bit that's really hard to understand from the outside is, bluntly, how much of this is what these people actually believe or how much of it is pandering to the unions, pandering to the voters of Makerfield, who they think won't want a pro-business agenda, and how much of it is bluntly unrealistic for any government to put in practice.

4:56You know, we've seen the exodus from many of the sort of non-dom, inheritance tax, you know, wealth taxes and all of that. We've seen that this wasn't good for entrepreneurs in this country and wasn't good for growth either. so it it would it just seems maybe i'm too idealistic or too optimistic to believe that somebody would actually choose to put those policies that he talks about into practice and i know i have had conversations with people who i believe are advising andy burnham and they the ones i speak to obviously it's one of self-selection bias isn't there are advising him against this but i'm sure there are many people who are advising him to do it but then we have the bond markets that I think will get spooked if this agenda goes to massively tax and tax and spend and will harm growth.

5:49And then people won't see how we can repay our debt.

5:52John Thornhill:One person who is rumored to be advising him is Jim O 'Neill, who wrote a very good kind of startup scale-up report for Labour before the last election. So if they could revert to implementing a lot of the proposals in that, that would be a good thing, wouldn't it? yeah i had actually jim o 'neill lord o 'neill at our we had him in conversation with william haig the first time i ever i believe they ever met at our family office event two months ago and he he is always very interesting he's you know one thing i i he and i don't agree on he doesn't think it matters whether the non-doms and stuff leave but he obviously is pro-business and wealth creation he is saying that he does think we should bend the fiscal rules he's saying that publicly for more investment.

6:34I'm not an economist, so it's hard for me to understand what the reaction will be for that. But I kind of trust him on that. I think he does know his stuff. So I think if there are people like him advising, like that, of that caliber, advising Andy Burnham, I would be less scared. But equally, there are some pretty scary people in the photos with him from the recent days. Would you care to name names? No, they're pretty obvious for those following politics.

7:04John Thornhill:Okay. Let's come on to a kind of buzzier topic, if I can put it that way, London Tech Week and Founders Forum. And I read something about this, that there was quite a lot of swagger I found in a positive sense. You know, you had 300 unicorn founders there. There was a real kind of newfound confidence. We've had some amazing kind of AI companies raising money at significant valuations for their seed rounds. What was the kind of lesson that you took away from that rather hectic week? Well, I think, yes, pace and ambition. And I think the bit that's most gratifying, honestly, is when people leave, even amazing entrepreneurs leave that event and they say, you know what?

7:42The scale of my ambition has leveled up, you know, has gone up one more notch. Because I've seen that Anton of Lovable can get to 500 million ARR in 14 months since the launch of his product. So I think that's roughly right. So data like that, they've seen the momentum of Matty at 11 Labs and Alex Kendall of Wave. And so even those who are hitting much lower value, still amazing companies with a billion dollar valuations and stuff are saying, God, I need to try harder. I can do this. So I think there's that sort of optimism that Europe can do this. And people like David Silver of Ineffable, they're launching, raising a billion at five one of the largest seed rounds ever.

8:24So we're definitely seeing it's possible. I think what's clear is this, and sorry, I should also give a hand tip to Arthur Mench of Mistral, also there with CF Goldman, also with huge ambition. And what seems very clear is that everybody's so excited by European talent. And European AI talent, I know don't need to bore your listeners with why it's great. Everybody knows it's great. So we've got this talent that everyone's excited about. And then there's this debate about capital, where it's coming from. And we've got people like Herman Hauser talking with Ted Person of EQT, who's running the Scale Up Europe Fund.

9:01And that's the 5 billion fund going to EQT saying maybe they'll take it to 100 billion, you know, for European scale. So there's capital, there's more capital coming into the picture. And then the bit that I'm also very interested in because I think governments undercooked this. And it was a couple of people during the week who said this spontaneously. Vittorio Collao, who used to be CEO of Vodafone, and Matty of Eleven Labs, both said that one of the issues is European corporates and governments are not buying from European customers. And so this, I think, is an easy fix. We've obviously launched a platform called Founders Match, which is indeed to do this absolutely.

9:39The government have launched things like the Sovereign AI Fund, which is also set up to do this. There's a lot of talk about procurement changing. There's actually, I was reading about a startup from Europe that is a procurement platform for governments to procure from startups. And the EU are talking about this more and more too. So I think, you know, if we can move the needle on this, and the reason why it's important is that actually it might be the thing that makes companies move more out of Europe to the US than anything else. It might be more important than where your capital comes from is where your customers are.

10:12So I've heard of so many entrepreneurs saying, the reason I'm moving to New York or California or Texas is because my customers are in the States. And the reason is, again, it goes back to my obsession with risk-taking. It's because the people in these large corporates and the government procurement demand feel they will get fired for working with the startup and not for the big company. And in America, that's culturally different.

10:36John Thornhill:I mean, as you're alluding to, there's a lot of debate about kind of sovereign tech at the moment and in particular in defense tech where there's clearly a very high imperative to be sovereign do you think that's a good kind of exemplar as it were of this new kind of procurement policy that the european governments are going to have to buy european you know it's difficult we obviously had brian shrimp of anderel co-founder of anderel for those that don't know the 60 billion dollar u.s defense company he was at both of our events during that week and you know you don't want to say so i find myself i don't want to say to him, you know, people shouldn't buy from Anderle.

11:10If they can create a better product, they're still an ally. I think you have to worry, you know, now that the thing that Trump's put on the agenda, which is really unfortunate, is that we do have to worry about this kill switch idea, that actually there is an American president who actually might just put a kill switch on Europeans buying American or being able to procure from America. So you have to be able to negotiate from a position of strength. So that means dual track. So dual by dual track. I mean, yes, we need out, you know, Helsing's to be super successful, you know, which is obviously European successful drone company.

11:42But I don't, but I think we also need to be able to acquire from the US and both will make us stronger. And then you need, as it was Rishi Sunak arguing his article, that we do need companies, Rishi Sunak and others saying, we need to be able to negotiate. How else do we negotiate in position of strength? It's we need parts in the AI stack that we can switch off if they switch us off. And the obvious example that everybody cites is ASNL.

12:07John Thornhill:Yeah. And there are five layers really to the AI stack. There's kind of energy, chips, cloud, models, applications. In which areas do you think Europe can compete? Well, the obvious one where we're seeing it most is applications. And applications need AI adoption. So that's this AI adoption, diffusion debate. Can we be really fast at adopting technologies and companies. So, you know, I'd say similar. In our orbit, that would mean companies like, obviously, Lovable would be one for AI adoption. NA10, in a sense, because it's workflow automation, is also enterprise AI adoption. So those sorts of companies, Europe can lead in.

12:50I also think it's regulated industries where the disruption hasn't happened if we can get the regulations right. So health tech is an obvious one. Obviously, we've got this amazing asset of the NHS, but we're not using it very well in this tech space. And we've got the genomics database, all of these things that we just need to have the right privacy debates. I think we are being governments get too easily held by the sort of privacy zealots, bluntly, who don't think about the progress. It's sort of like, if more fields could cure blindness with some Google technology, in 99 % of people, 1 % of people complain about their data being shared.

13:24I think if you were going blind, you'd rather the data was shared. And I think it's really unfair that sometimes that part of the debate wins. And if Europe could get over that, we can do very well. And we're going to sort of have to, because the Chinese have got over it, the Americans have got over it. You know, we can't be a continent where we don't.

13:42John Thornhill:Where do you stand on the Palantir debate in the NHS? this? Look, I would love to see strong alternatives that are European. I think there was the French have signed up to this company. I can't remember the name of it, actually. I don't know if you can, John, but that they have signed up to an alternative to Palantir. I think every time you hear some of the Palantir's leaders, you think, look, the good thing is they are very smart. They attract incredible talent. I think we need, again, it goes back to that. I think we want to be able to compete. we need to learn about why is it how is it that palantir is attracting such world-class talent and part of that is this pace this risk-taking that makes it really attractive place to work and it's just we need more european companies have that sort of culture and it's bluntly it's a very aggressive culture it's un-european in in that sense but i think it would be easier to procure from those sorts of companies that are just unabashedly saying we have the best talent in the world working for us and that's the sort of talent you want to be solving problems with the NHS.

14:38Right.

14:39John Thornhill:Let's come on to risk taking, because you've written a column in the Times where you said the lesson of the week and of the age, the people who turn out to be right are usually the ones everyone first called crazy. And you wrote this in the same week, London Tech Week, but it was also the week that SpaceX went public at this astonishing valuation. So how can Britain support the crazy people? God, well, there's lots of ways. Obviously, we do it, to some extent people argue, and I think quite convincing, that we do it well at the very early stage. We do it with things like SEIS and EIS tax incentives, work a bit for that, although they tend to be slightly negative selection bias, dare I say it, in that it's not actually the really best companies because those ones do get funded early by top VCs and top angels who don't care about the EIS, SEIS.

15:28I think there are a series of other incentives. So the crazies, we want them to come to Europe and to the UK. So are we sending enough messages? And actually, I interviewed Peter Kyle at London Tech Week. And the great thing was he was speaking about boldness, aggressiveness, in terms of attracting talent, taking that message for it. And I said to him, this is sort of strange, because this is not a message that your party, Labour Party, was happy to say 18 months ago. But now it was happening. I'm using caution, because obviously everything's changing in government. But it was nice to see him say that and be so bold about that talent message, which is something I've been so energized and excited about, and why we also launched an immigrant talent prize during London Tech Week, Roots to Rise, for the best immigrant founders to say, look, we're the UK, we don't hate these immigrant founders, we want to celebrate them.

16:18So there's something about what are the tweaks on tax policy, and one of them, spoiler alert, would not be putting capital gains tax up to income tax. That I don't think would be a genius move to show we care and support entrepreneurship. And the thing people miss about that too is no one seems to be talking about inflation linking that. You could see it slightly more tolerable if anybody would at least say will inflation index it. But when you're not inflation indexing, then what's your real tax on that? It's actually much higher. So it's sort of crazy distortion and distorted versus all of our competitive countries.

16:53So that doesn't make sense. Risk taking for me also would be well there's one thing which is rewarding those and acknowledging celebrating those i remember the co-founder of enterprise written stephen fitzpatrick talks about in dubai you see that the sort of the founders on on billboards and this sort of thing actually we've just had you know bald didn't put that built-in europe thing where they put founders on billboards and stuff we need to celebrate the the great entrepreneurs more and make it i think also more local let's not just celebrate the really famous ones, but celebrate those that are achievable in local areas.

17:32And then we used to talk, I remember talking with Mervyn Davis about doing a map of the UK where you'd celebrate the guy who does the local shoe shop in his tiny town, you know, who built it up from scratch. And you'd celebrate that as something that's more attainable. So we need attainable entrepreneurship to be celebrated. And then on the risk taking, as I say, I think it's about governments and corporates taking risks with entrepreneurs would be great. And then it's about things like who in government celebrates entrepreneurship so i think we've had a bit of a void of that and and i actually i'd say almost surprisingly i don't think the conservatives were particularly good at that i don't think that anybody particularly compelling shouting about entrepreneurship it's kind of strange and i've said that i think there should be a you know some people hate the idea of ministers for everything but i think a minister for entrepreneurship a minister for talent these are two areas where if you had people that was their whole day job thinking about what is the best way to attract talent and what is the best way to promote entrepreneurship.

18:29John Thornhill:I think Alex, the pledge has done a very good job as a kind of promoter of entrepreneurship. Yeah, she's really vocal and punchy, you know, she's punchy, which is great. Yeah. I'm very intrigued as an investor by what is the right type of crazy. How do you assess that as people who are bold risk takers who want to change the world and people who are certifiable who you shouldn't touch with a bodge. Yeah, I think crazy means you listen a bit. Crazy good is you listen a bit. So you still, it was still, you know, one of my tiny bits, my anecdotes from way back when was we spoke to a guy, at the beginning of last minute, I spoke to a guy who ran a shop in Gatwick called Late Late Gatwick.

19:10It was what was called a bucket shop. It was a physical spot in shop in Gatwick and it went bust selling late, last minute stuff. And he was like, Brent, don't do it. it'll never work and you listen to people like you say okay why didn't it work what's different now why now what's different about my idea and you say okay the internet does change this it changes the cost structure changes the addressable market all of those things so you say okay you've taken some good advice and then you and i think now in a bigger picture it's more like the scientists who can say you know here's this thing i'm changing i'm doing some new use case of graphene in the brain?

19:44Why does that work better than anything else? And you think, well, nine scientists out of 10 might tell them they're crazy, but then you've got other legitimate people. So what we look for is people who get credibility somehow. It's not just them as the sole crazy person. It's that they're able to convince amazing people to work with them. They're able to get, maybe it's an advisory board of gurus. Maybe it's endorsements from their university professor. Take Alex Kendall. I spoke to Professor Roberto Cipola, a Cambridge vision professor, who taught Alex. And I spoke to him before we invested in Alex.

20:18And he's like, yeah, this guy's brilliant. So even if his idea was people thought very edge case, you know, the way he was going to do autonomous driving, at least people were saying, this guy's one of the best people we've ever worked with. And how do you rate that relative to the kind of market opportunity or the kind of business

20:36John Thornhill:plans that they have? I was very struck by reading Sebastian Maliby's biography of Demis Osalbis. how Peter Thiel's Founders Fund rated DeepMind back then as an A in terms of the team and an F in terms of the business model. And yet they still went ahead and invested. Yeah, we definitely have learned that the team is 99 % of it. And that where I've seen big mistakes from colleagues in investing are when they've looked at the addressable market. And I've used the example of Onfido before. The previous team I was with didn't do the Onfido deal, which, remember, started as background checking for the sharing economy.

21:12And you're like, that's a bit niche, isn't it? Just like background checking for Uber. How big can that be? And then I'm looking at these guys, Hussain and Eamon, saying, they're brilliant, they'll figure out a bigger market. And then they do KYC, know your customer for the banking industry. So their addressable market was not relevant at the beginning. So I think we've seen that time and time again. And actually, we saw it with a company that we were sort of priced out of, Odyssey, that just raised last week for a world model at over a billion. And when we saw it, it was just for the film industry.

21:45It was AI for the film industry. And then you're saying, okay, if the guys were good enough, they would work out something bigger. And now they've gone to this world model addressable market. So that feels like it's sort of becoming pretty much accepted wisdom, sadly, among the VC industry, that this TAM, total addressable market, is a bad way to look at things.

22:03John Thornhill:One of the ways that you're trying to address this kind of risk-taking culture is by founding Enterprise Britain. Tell us about that. What are you hoping to achieve through that? Yeah, we're hoping to have a government that's stable so we can talk to them for long enough. So, no, what we are, this is a collaboration being founders for him and Stephen Fitzpatrick. And we've got a brilliant CEO, Ava Barboni. And we have a great advisory board of lots of wonderful people who are very smart. And what we're trying to do is create a movement of entrepreneurs. We've had over 2 ,000 sign-up support for pro-business policies and pro-enterprise policies.

22:37So we're trying to address the three issues of ambition, capital, and talent. and act. And I think we might add, make it packed at some point, which you'd put pace on there too. And so there are policies that we actually have got Labour and the Conservatives to agree to. So they've supported the document we put out and they've said they sort of agree with everything in it. So there's a lot in there for people to digest. And I think how can we then, there's one thing about putting a position paper out there, which is not that great. You know, in other words, what have you actually done? Just published a document.

23:10Everybody published a document. So it's how do we actually make stuff from that document get actioned? And that's what I'm referring to. We need to have people in government that we can talk to and persuade. And bluntly, I think the next budget will be success or failure for us. It's like, can we get some of these policies into the next budget? And one of the things about risk-taking I should go back to is, and people have written about this, there was a good paper by, sorry, on Substack, it was one of the self-driving guys who wrote about it, but he was saying that something is about recycling of entrepreneurs.