Building Innovation Hubs: The UK & Beyond

0:00The Olympics just ended, but that doesn't mean our coverage has. Because building a strong nationwide athletics program is a bit like trying to build a strong innovation hub. In that, you know what ingredients might help, but it's not always clear what moves the needle. And, just like in athletics, we're countries double down on their best sports, like the approximately $50 million grant system the Team USA allocates more to gymnastics than over Handball, countries also make strategic decisions on where they invest, hoping to create thriving innovation hubs. So in today's episode, we direct our attention to the UK and try to break down which ingredients not our most.

0:40This episode was originally published on our sister podcast, Web3 with A16Z. So if you're excited about the next generation of the internet, find Web3 with A16Z wherever you get your podcasts. for now over to Sonal to properly introduce this episode and guest.

1:02Welcome to Web 3 with A6 and Z. I'm Sonal Chaksi and today's episode is all about innovation around the world at both a systems and at a people level. So we discuss not only what does and doesn't work in making certain places become hubs of innovation and economic growth, but also Also discuss what makes Entrepreneurial Talent, the nature of ambition and helping people find their path, and more broadly navigating risk, reward, and dynamism in different regions, including London and Europe. My special guest is Matt Clifford, who's played an important role in the London Entrepreneurial ecosystem.

1:35I actually had Matt on the OG A6 and Z podcast back in 2015, so we also discuss what's changed since then to now, as well as new ways of funding breakthrough R &D, tech trends of interest, and more. For more context, Matt is the chair of Entrepreneur First, which he co -founded with Alice Bentink over a decade ago. He's also the chair of the UK's Advanced Research and Invention Agency, or ARYA, and before this episode is recorded. Matt was also the Prime Minister's representative for the AI Safety Summit, which he helped organize at Bludgley Park, the historic home of computing in the UK, and then after this episode was recorded, Matt was appointed by the UK Secretary of Science to deliver an AI Opportunities Action Plan to the UK government.

2:16This was just announced a few days ago. Anyway, it's all fitting and exciting because we recorded this episode live from Andrews and Horowitz's first international office in London, which we opened late last year, for more on our efforts and other content from and about there, go to a6nzcrypto .com slash UK. As a reminder, none of the following should be taken as investment legal, business, or tax advice. Please see a6nz .com slash disclosures for more important information, including a link to a list of our investments. Now onto the episode. Matt, welcome. It's great to be here. It was great to be back.

2:52You were just saying. Yes, I was about to say you, we did a podcast together. You were on this podcast on our last run in Rocha, which was 2015. And you were one of those of very first time we met in person. Who was? I mean, we've been going a while now, and we'll probably talk about this, how the underneath our system has grown. But our initial thesis, which we're, you know, remain very dedicated to is that the world's missing out on some of its best founders. You know, in Silicon Valley, if you're an ambitious and smart, it's the most obvious thing in the world to start a company. Right. In Europe, that's still not true.

3:25If you go around Oxford or Cambridge or in Pirocology, any of these great universities and you say like, you know, what are those smart, most ambitious people want to do? Yeah, more and more, it's on the agenda, but it's still probably banking, consulting, you know, big companies. I don't know how you describe EF for entrepreneur first, as a product. We call ourselves the thing we've layered on after a long thought of iteration is that we're a talent investor. We invest in people before they have companies and help them go through that like zero to one journey. We're taking people who purely on the basis of who they are, we think we want to make a bet on.

3:58I like that you're saying that you're a talent investor. I mean, VCs and other, any actually creatives, anyone would say that's their job is invested in talent. And that's an art not a sign. Yeah. Yeah. Why do the market better take a lot of inspiration in building your firm from talent agencies. Yeah, that was inspired by Michael Overt. Exactly. He was an advisor early on. And you know, we have a sort of similar view that almost like the world's most talented and vicious people need agents. I mean, like quite how we frame it. It's really fascinating because you said you're not an agency. Neither are we because actually the model obviously was talent focused, but it was more about a network and network of networks, which is how we used to think a little bit.

4:36I mean, I don't know if that was ever formally how it was described, but at least for my perspective, I used to think of A6 and C when I joined in the early days, which is now a decade ago as a network of networks. And that was where the OVITS model came in, which is how do you sort of give back, like continue cultivating talents in that way, growing people even before they want the thing or even helping them. So it's not transactional. Exactly. And a lot of what we talk about is our team's job is to go out and find extraordinary people who are still Third Wing out what to do with our lives. My co -founder Alice and I, you know, we started our career as management consultants.

5:10We were in the Kinsey and in many ways it was a really great experience. But like, if you say, like, why did you end up there? It wasn't because at six years old I was running around the kitchen. You're like, Mommy, Mommy, I want to be a management consultant. You know, it was just like, it was the path. It was what people did in whatever it was, 2008 when I graduated. And so, you know, our view was, if you really want to move the needle on like increasing the supply of great founders, you can't wait for them to to figure out that that's the obvious path. You have to create a path. And that's what one of us been about from the beginning.

5:41One of the things that we think about a lot is the nature of ambition and how it's very culturally determined. Ooh, let's talk about that. What I mean by that is it's not all ambitious people have the same vision of how to realize their ambition. That's absolutely true. And so it would be the craziest thing in the world to try and force people to be entrepreneurs. We have quite a big team now around the world, They go out and they find people who are clearly extraordinarily talented, but at the very start of that journey, we typically focus on people early in their career, sometimes like, you know, while they're at university or equivalent.

6:12And you know, their job, yes, obviously, is to help them think about startups and, you know, if they want to be able to stop bringing them into our community and help them do that. But their job is not to push where it's not right. It's to genuinely be almost like a career counselor, like an actual, like someone whose interest is shared with the person. And so, you know, one of the things that we believe, like, you know, if you like, our theory of change is that if you can, like, actually, intervene at a point where people are trying to figure out, like, how do I have this talent? How I maximize my impact in the world.

6:45And you can show them this path of entrepreneurship and show what's possible. Then actually, that will increase the supply of grape founders and then grape companies in the world. So I do want to pick up a little bit on two threads. One about this, what you said about the nature of ambitions, something you think about a lot, but also what you said about this culturally determined aspect of it. And that, to me, suggests some of the structural context, the surrounding context that supports entrepreneurship beyond the individual. So let's split it up into the people and then the surrounding kind of context and ecosystem.

7:12So on the surrounding context and ecosystem, one kind of obvious thing, this is something we talked about a lot. And the early day in the A6Z podcast, I recorded a lot of episodes with like Iranian entrepreneurs and various people around the world. and it was really fascinating how the risk tolerance is very different culturally in different regions. And one thing that I think is so cliche, but it is true for a reason, is unique about Silicon Valley, is there is a tremendous tolerance. I don't wanna say the word failure because I hate veering into failure porn. I think that's the wrong way to, it's like actually failure sucks always.

7:46Oh my God, well I hate when people feel your Friday and failure this, like yes, of course, normalize, talking about it, recovering, repairing, but don't like glorify failure for God's sake. Everyone wants to succeed. But what's really interesting about it is that there is like this forgiveness and recovery and resilience that whereas in certain cultural regions and areas, there's almost like a punishment or a feeling of self hatred if you don't succeed. This is even beyond individual level. I'm talking about like culturally. It says, yeah, totally. So I think there's two things. One is attitudes to failure.

8:21But I think this also like, what is valued? Like, what is esteemed? And I think the really special thing about Silicon Valley is this idea that if you're in Silicon Valley and you tell someone you're a founder, that immediately has a set of connotations that are... You're right. ...almost exclusively positive. It's very legible. People know what you mean. People can read that as a sign that you are ambitious. That's right. When we saw it on some of us, There was this slight sense that if you said you were a founder, those are euphemism for you are unemployed. And so actually, I think the cultural meaning of entrepreneurship is one of the biggest sources of leverage you have, just like making it like, this is a thing that smart, capable and vicious people do.

9:04And it's a vehicle for changing the world. It's such a powerful idea to give you a really concrete example. Because I think like, you know, from the UK and the US, like, you know, similar enough systems that it really resonates. But you know, the first international office we opened was in Singapore. And in Singapore, the number one career path for this most ambitious people is to go be a civil servant. As a result, the government's Singapore is probably one of the most effective and efficient. That's so interesting. I didn't know that. Yeah. It's actually the opposite in so many other places.

9:34I've just been serving in government. Right. Actually, the people have been amazing. But I would say like, as a result, The cultural value of entrepreneurship in Singapore, it's just been very, I think it's been harder to sort of like create the sense that like, if you say you're a founder, you're doing something that's as like legitimate as prestigious as your friends that have gone off to be. Yes, you know, we should talk for a second about why entrepreneurship for a minute because it seems like an obvious thing, like what are we talking about? This is a show, the startup focus, we're both startup focused cultures, but actually it's not obvious.

10:08It's not obvious. I mean, if I were telling a policymaker, I think they know this, but like the reality is like startups represent innovation. They're an engine of growth. They create jobs. They create their generative. They're not extractive. They're not just taking the stable what you already have that's established. They sent you up for the future. I mean, there's so many, there's layers and layers of why this matters. They're just a kind of hit on that. But to your point, so I have to ask you this, then I don't want to be stereotypical. But of course, there's going to be some generalizations just kind of understand this.

10:37but my impression of London, I'm born in the United States, but my grandparents settled in London. This is in the 70s before I was born. And the impression I got from culturally is that there's kind of, like not always a classist, but very much a credentialist society. Like you care very much about what school you went to. And I think that could be true in some ways, the Silicon Valley, but people kind of don't really care what school you went to or what you did. Would you say that is true today? Do you think that's evolving? And I'm bringing this up because you mentioned this point about what value that certain words and these concepts signal So I'm curious for your perspective there You know, I wanted the essays that I wrote when we're early on in the app that was trying to talk to this I called don't be a badge collector I think I probably wrote that about the time I was first on the podcast Yeah, it's held up pretty well And you know what I was saying is like I think there is a cultural or a general temptation, let's call it, in the UK, to be like, I'm gonna work really hard to get into the best university I can, so I can get the best graduate job I can, so I can, one of the biggest risks for smart people, I think, is that you get into a mode where success is measured by whether you make your boss look good.

11:47And that success is measured by whether they make their boss look good and sing like, all the way up, what you're actually doing. So you're point about, you know, you mentioned like, the thoughts are a positive some game. There's a risk in a lot of career tracks. I'm not saying you're not creating value, but your actual goal is to win the upward political battle within whatever bureaucratic structure you're in. That's what I don't want to say. Political, I mean, small p. I mean, this can be a big corporate, so it can be in whatever. I think what's beautiful about startups and the reason I spend more or less my entire career helping people build them is that they're ultimately all about what you can do for other people.

12:27That's fantastic. We're framing it. You only succeed if you build something that is so valuable that someone else will pay for it. Yes. You cannot win in any other way. There is no boss to look good, to make it look good. There is no grading scheme that some teacher is going to tell you got an A on. It's like, comes down to this very starting. Did you do something for someone else that they thought was so great? They wrote you a chat. That's right, and it is not people pleasing because often you're going against established convention. You're often budding your head or punching through an industry that is not exactly a new way of doing things.

13:01I'm just thinking of my former partner, Martín Casado, and the enterprise team when he was doing software -defined networking, he was punching against very established old school methods for what networking looked like that was very hard -word -based. And so it's like you have to literally punch like you're completely going against all conventions. So the bar is so high to actually prove that that value is that. And I do think that I sometimes think, you know, one of the challenges we face today is that if you are smart and ambitious, it's now so easy in some senses to find a comfortable path that is about making your boss look good all the way through a career and acquiring like money and influence and prestige, but actually maybe never really doing something that creates It's an almost amount of value, you know?

13:52And it seems, now that you say it, it seems so obvious, but it's really not. Like just a pause on the idea, when you're doing a startup, you're building something that other people want and need. That's a really profound idea. On that note, it's also very fascinating because of the economics of startups, because usually if you're working for a company, you were talking about you and Alice being at McKinsey, consulting, people think they're making good money, you know, but you're really captive to your salary. You're not actually, the wealth is not generative. And one thing that I find really powerful about startups is that startups are the ones that innovated on the idea that employees can have a share of the returns on the work they do.

14:33So even though you might be building a product for customers and consumers that people want, if you succeed, you know, it can also be go to nothing, obviously. That's the very real risk. But if you succeed, there can be very real gains for the people who put things in, especially for those that took a risk early on. I don't know how the options and economics work in UK startups, but that is I think a defining feature of Silicon Valley in the early days. And so I just wanted to point that out because it's actually resonant to what you said about not only pleasing people and being captive, but you're also helping other people and then actually creating value that for them, please, too.

15:07They're always increasing the size of the pie for everyone in some form. So I mean, not to be cliche, but that's very true. You know, in a way, I think there's like, there's a really important and sort of ethical point here, which is that founders, yeah, they can make a lot of money, but they only get to capture value that they create. That's right. And, you know, I think that that is actually a really important idea. And I find, you know, again, we focus mainly on people early in their career when we're working with founders. And, you know, I just think that idea really resonates with people that, you know, they, yeah, they of course they would like to be successful, but they wanna do it within a framework where they feel they like create something.

15:43Of course, I mean, And it's like otherwise it's just gambling. Or extraction. Extraction, exactly. It's like value, adverse is value extraction. Yeah. Exactly. You know, it's funny because it's also, you know, I'm going to get like political, at all political, but just like in terms of capitalism, stakeholders, people having a voice and empowerment. I saw this list, it periodically makes us round on Twitter of like people like the most wealthy families in Europe and that list of the top five has not changed over centuries. Yeah. which is crazy because that just means this generational wealth passing along whereas in the United States, that list is, I mean granted it's a younger country, but at the same time, like, it's like the list is changing constantly.

16:25Like the top 10 wealthy people, the top five wealthy people, and again, it's not about the money, I don't want to make that the focus, but just pointing out that when you think of this dynamism, this thing that a culture can change, be advanced, add new value, startups can be generative, it's just really interesting to me because a lot of the people I started up made, like most of the people are not access to old money. Right, and I think, again, no one wants to be political, but actually the thing that I think is non -pots is an, and everyone can agree on is that, actually the thing we need is positive some games.

16:57Oh, 100%. You know, the thing, you know, like different people have different views on, you know, like how we tax wealth and you know, but the bit that everyone can agree on is, if people, what we want to reward in society is people that are creating valuable things. We don't want to reward extraction. And you know, one of the beautiful things about Stopsis, they can't extract, they've got to create. And I think it's just something very valuable about that. I'm very powerful that actually I see people across the political spectrum sort of, you know, kind of get in behind. Yes, I agree. On this note though, we're talking about the structural contact right now before we move to the individual.

17:31So let's add a little rigor to that, what does an ecosystem mean? Because I know that can be very buzzword. I've studied entrepreneurial ecosystems for a very long time. cover them for valentine as you know. And you know, including like interviewing all these different people throughout the world who are experts on this. Like what an ecosystem needs. And a couple of themes emerge. One, you obviously need talent. You need really strong universities and research ecosystem. You also need for the people that hate to admit this government support. So the other thing is there's a really important balance between top down and bottom up.

18:02And on the bottom upside, you obviously need communities of entrepreneurs because there have been as you know, many experiments including planned cities, planned innovations, where people are trying to do these centrally planned top -down innovation initiatives, they never work, ever. There have been many, many, many over the years and not one has worked. Some argue Singapore, that's a different unique complex case and I don't know if it's as quote entrepreneurial. It's a successful nation state, but that's a separate thing. So that's one aspect. Secondly, on the top -down side, you obviously need enabling conditions like respect for property.

18:33In the US, we talk about respect for property rights. It can include respect for intellectual property. It can include support such as funding like DARPA in the United States, which fund the internet, things like that, supportive pro -innovation policies. So the bottom -up side is a community, the top -down, and obviously the talent that comes in the form of universities because universities are drivers of research and innovation. So now, on your point about this science and technology side, talk to me about what you think is happening uniquely in London because we're sitting here. Yeah, I mean, so you mentioned DARPA, you know, my sort of side hustle, aside on from the first is I'm the non -executive chair of ARIA, which is a new government backed, well, government funded R &D funding agencies, based on DARPA, basically.

19:20So what is ARIA's deformed? ARIA stands for the Advanced Research and Invention Agency. I know what you're talking about. Yeah, so it's being given, I guess in US terms, about a billion dollars to basically fund break through R &D, there might otherwise not get fond of it. So really trying to take some of what worked at DARPA, in particular this idea of this program manager lab model, empowering brilliant scientists with visions to just go out and build the networks and coalitions of researchers to realize that vision in a way that's like all about, actually a lot of things we've already been talking about, it's about ambition, it's about incentives, it's about alignment, all these things.

19:58And you know, one of the things that's been really striking to me in the sort of roughly year that we've been up and running is one, just the depth of the scientific talent across the whole UK. So not slandered or not started in Cambridge, but truly across the whole country. Two, it's almost like two struggle words, but like the yearning for something like this. Well, when you look at, you know, like, why does Arya need to exist? You know, we do a ton of great science in the UK and actually, you know, I'm lucky to have been involved in a lot of the science funding Organizations that exist, but I think one of the challenges is that with scale comes, you know, sort of more bureaucratic approach, right?

20:41And so if you're trying to run science funding for a whole country, of course you need to like show value for money for taxpayers And you know, you need to sort of have a lot of process, but the consequence of that is not UK thing and there's a global thing. And you know, people like Patrick Carlson and others have written about like the challenges of where science has got to. I think of it as a career ambition and a sense of problem. So if you go talk to like incredible post -docs across the UK, across the US, and you say like, what's your most ambitious idea? And they tell you. And then you say, cool, so you working on that?

21:13They're like, no, you're like, why not? Like, you know, if they're, and you're like, well, because I need to get this next publication, which needs to get this many citations, because then I'll be able to get my next grant. And if I do that, then one day I'll be able, in 10 years, to get my own lab. And then, you're like, wow, this is crazy. We have some of the greatest minds of that generation, playing a bit like the making a boss look good game. This is the making the grant maker's happy game. That's exactly the same thing. I'm so glad you brought that up because this is important. So I want to break down a little bit more about what you're saying because, you know, a lot of people have tried different forms of like, how to fund R &D and do it in a way, an industrial R &D is what you're talking about.

21:50And in a way that's efficient, and a lot of the lessons learned here, which I think are fascinating. So one, you mentioned the concept of a program manager. For those that don't know, like DARPA had these famous model where they had program managers. And it's quite fascinating, because like one example is Regina George, and she went to Google later on. But I remember being at Xerox Park when her group funded, and this is public advanced manufacturing initiative, and like reconfiguring manufacturing, and all these different things. And there's so many different interesting things about it, because one, there's, first of all, many of these initiatives can be very multidisciplinary, which universities are not well set up to do, where people are very siloing their departments.

22:25And so having these grants can sometimes be like kind of these umbrellas for different disciplines to come together, including across multiple universities. Yeah, I was going to say multiple universities and some of these even different sectors. So like universities and stall tops. That's right. And nonprofits. Totally. Like one example was back in the day, we did like content centric networking. Like, it was like, you know, various types of things. So that's one interesting thing. The second thing, this is a very little known fact that people don't know about this model is and I remember being fascinated by this when I was working with my colleagues like helping them out with some stuff at SRI who were thinking about this, which is Stanford Research International and they're very very very famous for getting lots of research grants and different things.

23:04It's fascinating because most people when they think of government funding and program managers, they think of it as being as a one -way model where government gives money, program manager allocates it. Someone has a strong point of view and it goes A, B, C, D. It's actually much more non -linear and interactive than that, where you actually have smart scientists informing the program managers for what proposals they want to see, because actually the word and the grant making businesses, if you're bidding on an RFP request for proposal, by the time it comes out, you're too late. You should be shaping what proposals are coming out in the first place.

23:40And that is a two -way dialogue between government and universities. And that's a big part of how R .I .R. is working and planning to work is that, but hopefully in an extremely transparent way, which is say, here is an area that we're excited about. Well, we think there is a thesis before we, like, make grants, before we do an RFP, we You want to like workshop this with people that have like a really broad range of views on it. That's right. So that we know like, you know, what are the things we should be looking out for? You know, I mean, it's again, there's a risk of a cliche, but you know, so much of the challenge of this stuff is you don't know what you don't know.