What will power European Dynamism?

Welcome to Path Founders, the new tech media title covering the entrepreneurs who code, the capital that backs them and the consequences. My name is Mike Butcher. Please do like and subscribe so we can continue to bring you this journalism. If you're in tech circles, you might have heard of the phrase coined a few years ago in the US, so-called American dynamism. But what about European dynamism? Is Europe finally moving from a place with an often invent important technologies that rarely capitalizes on them to a place that also builds and scales the companies that define the future? A new report from the European VC Red Alpine, together with the tech publication Sifted, argues that Europe's next wave will not come from copying Silicon Valley consumer internet playbooks, but from sectors where Europe has genuine structural advantages intelligent enterprise digital health new energy space biology and robotics. And there's a case for being bullish on this. Europe has deep research talent, strong universities, serious engineering culture, growing venture capital maturity and the rising sense of urgency around sovereignty in energy defense data and infrastructure. But the skeptical case is just as clear Europe still produces plenty of talent but too often fails to keep the biggest companies. So the real question is not whether Europe can innovate because it clearly can but whether Europe can convert that innovation into globally relevant success. Joining me now is one of the reports authors Sebastian Becker who's general partner at Red Alpine and the report is called European dynamism, appropriate enough. Sebastian, welcome to our path founders. Thank you, Mike. Thanks for having me. Right. So do you think that your use of the phrase European dynamism is designed to be deliberately provocative? Are you coming at it from the same angle as the as the as the culture in the US? Or do you think there's going to be something is there something different about this? Yeah, great question. So I think the US counterpart, I mean everybody reads what A16Z publishes has a strong I would say also political component with focus on infrastructure, on defense in the US. And you know, we just love the energy of this of you know dynamism, of the word dynamism. And we see it rather as a pivotal point for Europe where we have finally the chance to catch up because as you already said, we have the talent capital is opening up for companies and we are producing some great innovation here. So we really think this is describing this moment for Europe and the start of a new beginning. Okay, well you deep dive into six sectors, intelligent enterprise digital health, energy space, biology, robotics, why those particular sectors in particular? Yeah, I mean, what's currently happening is that you know, with AI, the software modes are radically eroding. And why because this is happening and many of you sees have deployed their capital in those areas, it's kind of a ticking time bomb. And what we believe is that the real modes either if you have you know, if you're in a software space, some unique data, you have distribution advantages that others don't have or network effects, or you move more on the scientific side of things where you have real signs backing those innovations up, you're producing hardware, which is hard to copy. And these sectors that we mentioned in the report, one, we have great talent and research for them in Europe and second, through the acceleration and AI as a catalyst, we see those areas getting a lot of momentum in the future. Right, but it still doesn't quite necessarily talk about the question of scaling. And tell us about how you think that Europe can scale the companies that it innovates with. Yeah, sure. I mean, the the biggest structure gap when you compare Europe to the US is that US has a way bigger market, you know, without borders and languages and culture differences. And they have more capital available. However, especially the capital piece is changing over time, we see now that I mean, all almost of the major US venture capital companies have now opened US and European offices are backing European companies. We see Deca Corns produced in Europe at an unprecedented speed. So I do think that Europe is now right now at the point where we not only create companies, but we can already scale them. Look at 11 labs, you know, it's a company that's used globally, but it's produced in Europe just as one example. Right, but 11 labs isn't what you might call sort of infrastructure or date tech. Is it or would you say it is? I would say that there at the forefront of of AI when it comes to, you know, language models and like those those those voices and they're producing something unique, which obviously the big labs are not managed to catch up yet. Well, that's that that is fair comment. Yeah. And Europe has also obviously produced some pretty serious AI companies, Mistral 11 labs, Synthesia 9 Fin and others. Do you think it has enough ambition and growth capital to build these trillion dollar outcomes? I mean, the ambition is definitely there and I admire every founder who who stays in Europe and and builds companies here and you know, I mean, we can always talk bad and say like, okay, the best tenant is leaving and I I don't have hard feeling of feelings for the founders and in the good people that say, Hey, I try my luck in the US, but what I'm seeing more and more is that people are deliberately building in Europe because they're saying, Hey, I love this continent. I have my education here. I want to build rebuild this continent again. And recently we it's not announced it, but we invested in a company where the founders are Europeans, they moved to the US, but now they're coming back because they say we have better talent and cheaper talent to build their company here. Right. And presumably also they've got the venture backing to do that as well. But do you think that there's going to be a sort of pivotal moment where some breakout European companies are able to invent kind of new new technologies just for a one-time better phrase that will stay in Europe because it's always such a big pull to to go abroad, isn't it? Yeah, no, it is definitely and you know, if you if you want to have my honest answer, if you want to exit at one point your company or digging into a very deep pocket doing an IPO or something, the capital markets in Europe are not there yet. And therefore at one point a company might search for a US market entry in order to build the capital markets story. And this might change over time, but at the moment this is the case, but it doesn't mean that you need to move the headquarters to the US. It just means that your product is would be better if your product is also working in the US. Right. Well, sticking down into some of the sectors you looked at, you had energy, space, robotics and also health. And do you think that Europe's regulatory environment may be an advantage in health and biology because companies are forced to build in the kind of regulatory setting here. It's quite you know, it's quite a high bar to achieve stuff here. And that to some extent powers you know, a new wave of companies and sort of a European dynamism show. I mean, that's a good question. In general, I'm totally opposed to any like, you know, unnecessary burdens, bureaucracy. However, when it comes to digital health, there are some points which could be could be an advantage because especially in Europe, the healthcare providers super-risk averse and having already you know, like a certain level of validation or certification helps them in order to adopt technology faster. Yeah, absolutely. And another aspect of this is energy. And we know that Europe made some pretty strategic mistakes on energy. It got to drunk on Russian gas and then of course, Russia invaded Ukraine and Europe hasn't really invested in nuclear. But your report is quite bullish on fusion technology. But the issue is though, of course, is that fusion is quite a long way off. Shouldn't we be doubling down on things like small modular nuclear reactors? Yeah, I think doing one thing is not necessarily saying and not doing the other. So, I think both technologies are worth exploring and backing. But what's happening right now, in fusion is super exciting. The saying in fusion is it's always like 20 years away, but at the moment, there are some things coming together. One is that, you know, we have already infrastructure built because of the ETA project. And in France, we have the And the scientists here, we have also the urgent demand from governments in order to find a solution for the energy problem. And thirdly, we have now this change of venture capitalists willing to back more, you know, hardware and more innovative problems. And this in combination with the advancement in AI and compute technology helps especially diffusion because right now it is possible, it becomes possible to simulate the magnet design in order to make such a stellarato that proximal fusion, for example, is building possible. And just the funny anecdote around the stellarato and those magnets is, so Princeton tried, I think, 20, 20 years ago to develop them themselves. But in the end, they abort mission and said like, we can't do it and we are not able to, but probably the Germans can. And that's what Germany did. So Max Planck Institute, they developed the Vendelstein 7X, which is now the base technology on what proximal fusion is building on it. It's really exciting. Well, yeah, that is true. But also, I think one of the fusion companies that was at Proxima or Marvel has actually building its first test reactor in the US. So there is also a problem there that I think you might find, whoops, my phone just went off. Now another aspect of the report is that you looked at space and you say that Europe's got an advantage in satellites, data, propulsion and even launch. And of course, also now defense infrastructure is now a big topic these days. There is no issue though. I think that should Europe concentrate on the kind of the guts of the satellites and those space technologies rather than launch because hasn't SpaceX won that game? I mean, SpaceX is a phenomenal company. We are also interested in that one. So I think they're doing a phenomenal job in pushing what's possible there. The problem is, if you want to launch something on American soil, you need to provide the government with the information about what you're launching, the plans, the technology behind it. And therefore, there is a real urge when you look at it from a sovereignty perspective to build our own launch capabilities, means for defense, but also for maybe other technologies that we want to protect and keep for Europe themselves. So I think yes, SpaceX is way ahead of the current launch capabilities when we look in Europe, but I wouldn't say that the game is lost and we shouldn't pursue our own. And there are some great examples, for example, is there aerospace who are on the good path and achieving that? You also delved into robotics and where Europe's industrial base looks pretty relevant actually for robotics. What's your thoughts about Europe's capability to develop robotics? Because we're seeing the robots coming out of China right now and they're pretty astounding. Yeah, no, just those robots, especially from China, those demos are insane if you look at them. However, you need to differentiate that these are scripted demos, right? So it's pre-programmed and you can, if you're something's pre-programmed and nothing is happening around them, you can move very fast and it looks really fancy. However, what's really tough is currently to build like real intelligence so that robots can move around and adapt to things that are happening around them. And this is not solved yet. This is also not solved by the Americans yet and we believe that on our software piece in order to build the brain for robotics, we have a pretty good shot. Are we the cheapest at the moment in producing those robotic hardware? No, do we need it to be probably not? Yeah, but we need to be able to deploy them. And just thought experiment, you know, we have so many industries that has their supply chains in Asia because it's cheaper to manufacture there. And when you are able to fully automate manufacturing factories, you can bring back a lot of this in Europe and produce it even cheaper because you have not the logistic costs and the risks behind it. So it's a big, big opportunity for Europe and we should go all in for robotics and industrial automation. Okay. And do you think that the European governments are up for that? I think why not? If you produce, you know, if you get, if you increase productivity, that means that we are heading back to GDP growth and that would be amazing. Yeah, true. Okay, right. Well, zooming out. If we have this conversation again in five years, what would you counter real proof that the European dynamism is more than a good narrative? Yeah. So I think what we need to show is that further capital is flowing into Europe so that we keep those and even increasing the pace in which money is flowing into Europe. Good would be if European money that is deployed in Europe is increasing massively. I mean, that would be a great success because then we are able to also finance our innovation, ourselves. If we see more decarcons and maybe they get a centricorn, that would be really, really amazing. Well, I think the report definitely makes for some good reading. It's got some great data in there and I commend it to everybody and I think Red Alpine will furnish people with the link to download it. But for now, Sebastian Becker, general partner at Red Alpine, thanks for joining Path Founders. [Music]