In this conversation, Daniel Faloppa and Robin Wauters discuss the evolution of the European tech ecosystem, the challenges it faces, and the opportunities that lie ahead, particularly in deep tech and AI. They explore the importance of government support, the need for a shift in investment strategies, and the growing ambition of European founders. The discussion highlights the need for innovation to drive productivity and competitiveness in Europe, as well as the potential for deep tech to lead the way in the future.
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Takeaways
The European tech ecosystem has evolved significantly over the last decade.
There is a growing ambition among European founders, driven by role models and success stories.
Innovation is crucial for Europe to remain competitive on a global scale.
Investment in deep tech is a key opportunity for Europe.
Government support is essential for fostering innovation and scaling startups.
The talent gap remains a significant challenge for European startups.
The barriers to entry for SaaS have decreased, leading to increased competition.
AI is expected to change the dynamics of the tech industry significantly.
Collaboration and unification among European startups are improving.
The future of European tech will depend on how well it adapts to emerging technologies and market demands.
Chapters
00:00 Robin Wauters’ Journey in European Tech
07:52 The State of European Tech and Competitiveness
16:23 Investment Trends in European Startups
19:04 Ecosystem Development and Challenges
26:12 The Flywheel of European Scale-ups
28:20 The Talent Dilemma in Europe
29:15 Incentivizing Talent Retention
32:04 Harnessing Research for Startups
34:19 Deep Tech: Europe’s Competitive Edge
36:44 Navigating Ecosystem Challenges
38:31 Government’s Role in Startup Funding
42:48 The Future of Deep Tech Investment
46:42 AI’s Impact on European Innovation
52:41 The Changing Landscape of SaaS Investment
Transcript
Daniel Faloppa (00:00)
I think a great way to start would be to hear a little bit your history. You had such a big role in the European tech ecosystem and in European tech, but I don’t know the story. tried to Google it a little bit. There isn’t maybe much. It’s been a long time. So I would love to hear the story of tech.eu and your history as well and what brought you to start that, just as a way to start.
Robin Wauters (00:19)
Sure. First of all, thank you for the invitation. I really appreciate it. Pleasure to be here. So long story short, I started my career working in marketing for tech companies and media companies and started basically blogging about the new generation of entrepreneurs back then, which was called the Web 2.0 movement. And I would write about these startups and innovators on my own, essentially.
And then I was very quickly picked up by TechCrunch. So I spent a couple of years working for them as an editor from Europe, but working for the US side. And then I was the European editor for the Next Web for about a year and a half. And that’s when I started noticing that there was actually quite a lot going on in Europe. But it’s quite, as you know, Europe is quite a fragmented place. So they were happening all over the place, but nobody really knew.
what was going on. it was very difficult to create role models if you don’t know even what’s going on in your neighboring countries and the entrepreneurs that you have there. So with a couple of friends who were of the same opinion, we thought Europe deserved sort of a window to the innovation that was happening here for the rest of the world to see. And that’s when we started TechU, which is now about 11 years ago.
Yeah, we grew alongside the European tech ecosystem in the last decade, which obviously has come quite far, still a long way to go. But we grew the media company and market intelligence company, which I would call it as well, for the last decade alongside the ecosystem here.
Daniel Faloppa (01:41)
Yeah, yeah, yeah, that was quite a ride, imagine.
Robin Wauters (01:47)
That was interesting
to see because I remember when we started the European tech ecosystem wasn’t even really an ecosystem. It’s like a collection of ecosystems that didn’t really, there weren’t a lot of bridges in terms of investment or media or events. So all of that was still about to happen, but you could feel the momentum, right? So I think we got the timing quite right in hindsight, also quite lucky, but still, yeah, the timing was great.
Daniel Faloppa (02:09)
Yeah, I
I think we started more or less at the same time with Equidam, we started in 2012. So, you know, and the environment back then, I mean, there was a, we were kind of lucky. got onboarded onto the sort of equity crowdfunding wave, which was really like pioneering things here in the Netherlands and in the world even, because it was, I think it was before CrowdCube. It was before, you know, and that was bringing like startup investment a little bit out of this.
very, very small business angel networks. think the only thing that was existing back in the days was the business angel network was kind of the center of the early stage funding. And then a few VCs, but localized and still coming off of investing in maybe automotive or things like that. They were just starting to understand digital and yeah, very, very different environment.
Robin Wauters (02:56)
No.
Definitely true.
I do remember the early days when SeedCamp was already around and there was supposed to be like this European version of Y Combinator. But in the end, I think it became a lot more than that, right? Like it was what Europe needed at the time, sort of a network of international investors, know, mentorship driven, et cetera. You could see the beginning of these events as well. think Web Summit, Slush, they were just starting out at the time. So it’s very nice to see the evolution of multiple fronts at the same time in the last decade.
Daniel Faloppa (03:21)
Yep. Yeah.
Yeah.
Robin Wauters (03:30)
Good to see.
Daniel Faloppa (03:30)
Yeah. I went to see the first demo day of Rockstart in Amsterdam back in the days. And I think one of the first editions of TNW, had a booth. We managed to get a booth for a reasonable amount and we were there pitching equity. So what do you think? Well, maybe let’s close it. right now you left…
tech.eu, right? And you have some other ventures that you’re following still very much in the startup world. Maybe we can say two words about those and then we talk about European tech a lot.
Robin Wauters (04:01)
Yeah.
Sure. Very quickly. I sold TechU about three years ago to a Turkish media and events holding called WebRazi. I left about five months ago or six months ago, and then I took a sabbatical for a couple of months. And now I’m back at it. I started a mini boutique agency for strategic communication advice, particularly for deep tech scale ups investors, where I think Europe really has a bit of an edge, but we can talk about that later.
But I’m also helping part-time in an organization called Pulse Foundation, which is a nonprofit that’s, you know, its aim is to stimulate and promote entrepreneurship. And they have a program called Beyond, which is sort of an accelerator for tech scale-ups here in Belgium. So I’m helping them with their strategy and also quite active in Syndicate One, which is an early stage investment group. So it’s a fund, but it’s also a network.
that invest in very early stage Belgian founders. So a lot of things and a lot of hats, but I love to keep busy.
Daniel Faloppa (05:02)
Yeah. And we didn’t mention it, but Tech.eu became the center for European startups, European startup investments over its years.
Robin Wauters (05:12)
I would say
one of the centers, but yeah, definitely.
Daniel Faloppa (05:15)
That’s European modesty. One of the first things that we need to do is we need to try to shed off European modesty. I’m serious. It’s one of the things that when we want to communicate, especially we want to communicate internationally, we need to…
Robin Wauters (05:17)
Hahaha.
you
Fine, yes, we were the only one and the best one.
Daniel Faloppa (05:40)
talk on the same terms on those things. And we had this, you know, on our side for a long time. I mean, what we do in valuation is also related to communication in a sense. You want to communicate future and financials and stuff. And like we really saw different attitudes in different places. And sometimes in Europe, you you really need to give founders a little bit of a push to be more daring and, you know, go a little bit beyond. But let’s talk.
Robin Wauters (06:00)
Absolutely.
Yeah, think, mean, obviously
we’re going to have a bigger conversation about this, but I think part of that is because of our education system and the mindset in general, which is quite, you know, be humble, just work hard and, you know, safer later and make sure that the next generation is fine. And in the U S of course, in other places, you don’t really have that. You’re like, you know, work as hard as you can achieve your dreams, think big sell from day one, all of these things we, we lack. So I agree with you.
But they’re very, very difficult to change because it starts with education and it starts across generations and across geographies and cultures and regions. So very difficult to fix, but very much needed for sure.
Daniel Faloppa (06:46)
Do you think it’s just a matter of time? Like cultures go towards that or is it something that needs qualitative change?
Robin Wauters (06:51)
yeah. Yeah, I mean.
And this is just comparing 15 years ago when I started really writing about tech and 10 years ago when I started TechU, the level of ambition of European founders has grown so incredibly much. And because now they have role models and they have good example and best practices, they’re multiple times over founders and operators in scale-ups. So as the ecosystem matures, of course it has a knock-on effect. You have more ambition, you have more ambitious investors for that matter, you know, that are more comfortable with.
you know, investing big amounts at higher valuations. So yeah, it’s just an echo, it’s a flywheel that’s spinning, right? But of course it requires time, but it’s all going in the right direction in my opinion.
Daniel Faloppa (07:35)
Yeah, yeah, yeah, I agree. agree. Let’s talk a little bit about the stakes, right? I saw your presentation at ITAPA in Slovakia about the state of European tech. Like, what are the stakes nowadays to actually getting innovation right in Europe?
Robin Wauters (07:52)
Yeah. Thank you for watching the video, by the way. So I was in Bratislava last week to talk about not just the state of European tech, but the state of European competitiveness, which is closely related, of course. But one of the main findings in the research that I did to prepare for that keynote is, and we’ve all, we all know the Draghi report or at least heard of it. But I’ve read the Draghi report, you know, from top to bottom a couple of times, which is quite dense.
But it’s a very, very concerning picture that he paints because the productivity growth in Europe is basically grind to ground to a halt, right? Like it’s basically so bad that the gap with the US and China is becoming so wide and the level of productivity growth that we’re even projecting in the future is so incredibly low that this juxtaposition that you have with, you know, places like Silicon Valley and Southeast Asia, it’s just going to get worse, right?
So the only way out of that is to innovate and to invest in the things that you’re strong in, whether it’s decarbonization and energy on one side. He also talks about reinvigorating sort of the values that we have in Europe. But the main one is innovation, It’s investing in innovation, being quite bold and radical, that’s going to get us out of that. And on the other hand of that, you have the state of European tech that basically paints a quiet optimistic.
picture, right? Because they’re talking about the 10 years before the last 10 years, and then you can really see the evolution and the promising signs that you have in terms of valuation, money invested, ambition level, the amount of investors that we have in funds, but with, of course, also quite a few roadblocks and challenges and problems that we still have. So I was trying to combine both of these reports into one coherent talk. I hope I succeeded. But it’s quite interesting to me that
On a global level, you look at further than just tech, Europe is doing very, very poorly. Like really poorly.
Daniel Faloppa (09:50)
I really didn’t know where you were going to go with that. It could have been very, very poorly or very, very good. Yeah. In what respect?
Robin Wauters (09:53)
Yeah, I could have gone either way.
Yeah.
Well, you all know this cliche of like Europe is turning into an open air museum. It’s nice to look at, it’s nice to visit, but it doesn’t really matter anymore on a global scale. It has no influence, has no power. That’s of course the one extreme view. That’s not entirely true. But then you also have people saying, we’re still leaders in tech and we’re still global innovators and we still play. We’re still continuing in this race or we might win the race.
And between both of these, somewhere is the truth, And that’s what I’m trying to find out.
Daniel Faloppa (10:27)
Yeah, mean, it’s always,
yeah, for me, when you look at macroeconomic statistics, it’s always like the difference is between like growing at 2 % and 5%, right? Which still means that like 99 % of people are employed. still means like, you know, like the difference in like when we look at broad statistics, like, you know, it’s not huge. But then if you project that difference in productivity over 10 years, that’s where you get problems, right?
Robin Wauters (10:56)
Yeah. And
I think one statistic that I took away from Dagger’s report is that if productivity growth continues the way it is now, then by 2050, our GDP will essentially be the same. proportionally will stay the same, which is problematic because if you don’t grow, it’s like a bicycle. If you don’t pedal, eventually you stop moving and you fall. So it’s like, if you want to stay in the race, you have to pedal. You have to grow, you have to invest, you have to look for the next growth engines. And that’s…
Daniel Faloppa (11:07)
Yeah.
Yeah.
Robin Wauters (11:24)
Not really
something we’re doing quite well at the moment.
Daniel Faloppa (11:27)
Yeah. Yeah. And the comparison with others, right? So the comparison with ourself is useful, right? The comparison with others has other points, but I think you need at least to grow enough to catch up with the growth in expenses, right? And we have expenses growth in pensions and just social security, aging populations and all those things. I was reading about this, well, obviously, like what you saw now with
with France and their own like debt ratio and Germany having its own problems on competitiveness and growth. And these being two of the main engines in Europe after Italy is doing what it can. I’m always behind the curtain supporter of Italy, but it’s always difficult to do that. But I was watching a program on Bloomberg the other day and
They were like treating the case where Europe could actually add productivity as almost like a joke. Like it made them laugh. Like, you what can we do in Europe? Like, ha ha, we’re going to do anything. Right. And it is, it is pretty difficult. I think that the stakes there are really mostly on the, on the pension and social security side. If we don’t manage to grow the economy, like somebody’s going to have to pay that, that bill and it’s going to come as a reduction of quality of living.
for the average person.
Robin Wauters (12:45)
That’s the thing.
That’s the thing, right? Because Europe has a lot going for it. have relatively low levels of inequality. We have an open market. We have a solid economy. We have a solid legal framework. We have a great education system. So many things going for us. But if that productivity growth just doesn’t happen, then eventually the quality of life and your income standards go down, right? Like the net income real purchasing power.
actual money in your pocket has grown twice as fast in the US as in the last 25 years than in Europe. That’s huge, right? That’s incredibly big. it’s also creating an environment where you have polarization, where you have political extremes. So that’s one of the reasons I think there’s so much tension and that the extreme right is coming up because there’s like an environment or like a ground for civil unrest and struggles.
Daniel Faloppa (13:15)
I saw, yeah, yeah, yeah. And because of that, yeah.
Struggle. Yeah. You
increase the pressure on issues that are already difficult on their own and you add economical pressure to that. That’s how you get even worse outcomes. Yeah. was on the Economist. I think he was mentioning the average US citizen is like a third more productive now as a European one in terms of like output that they can generate. And then, of course, that translates into their own salary and purchasing power and so on.
Robin Wauters (13:43)
Exactly.
Daniel Faloppa (13:59)
which is incredible because like 20 years ago, like it was almost even, but because of this difference. Yeah, yeah, nice. Well, not nice, but.
Robin Wauters (14:05)
Yeah. And everybody, it’s
not nice at all. It’s one of the biggest problems that we have. it took me the Draggy report to kind of, you already kind of know when you hear about it and then you hear other things, but it took me the Draggy report to really, really see how big the problem is and how fast this can snowball into even bigger issues. So it’s, if you haven’t read it yet to everyone who’s listening or watching, read the Draggy report or at least a summary. It’s 67 pages. It’s doable.
Daniel Faloppa (14:35)
It’s not too bad. It’s doable. And, and yeah, that’s, that’s the funny thing, right? Everybody talks about it, but like, what’s the percentage of people that actually read it? It’s, it’s interesting. I haven’t read it like full disclosure, right? For sure. But yeah.
Robin Wauters (14:44)
It’s quite a dense report,
it’s not easy. The state of European tech is well designed, it’s meant to be read, so like the executive summary. The drag report is kind of a typical, very dry, very data-driven report, so it’s not a fun read. Let’s put it that
Daniel Faloppa (15:00)
He
was commissioned to do that report, right? If I remember.
Robin Wauters (15:03)
Yes. So the European commission
asked him to give his personal opinion, data backed as an economist, of course, to the commission on what is happening and what can be done. And by the way, not everybody agrees with either his conclusions or his remedies or the recommendations that he gives because it’s going to take a shitload of spending. And he doesn’t really offer that many solutions. It’s common debt and joint borrowing. But I mean, that’s problematic for a lot of EU member states, of course.
Daniel Faloppa (15:29)
Yeah, and that’s what they’re suggesting kind of everywhere now, right? With this return to governmental investing and strategic industries as well. And I think there is bit of covering up of interest because of course, the more as a government, the more you invest, the more power you have as well. yeah, it’s…
Robin Wauters (15:52)
And it’s very difficult
not to be political about this because if you’re going to spend 800 billion euros a year more on getting us out of this situation, that money has to come from somewhere. And that’s never an easy conversation to have.
Daniel Faloppa (16:02)
Yeah.
Yeah. So let’s talk about sort of what you saw. Right. So I think the State of European Tech report reports about eight times more investment in the past 10 years compared to the previous ones or something like that. And but like, you know, what did you see in your your years like reporting on the scene?
Robin Wauters (16:23)
By the way, one of my favorite statistics from the State of European Tech report is that in the 10 years before the last decade, I think about $43 billion was raised by startups. This year alone is going to be 45 or more, right? So in one year, and of course it’s gone down compared to 21 and 22, which were crazy years. But I mean, if you look a little bit further back,
Daniel Faloppa (16:37)
Nice. Yeah. 10x. Yeah.
Robin Wauters (16:50)
then of course it’s a great evolution. And then suddenly the numbers look fantastic, right? 10x is great. Sorry, what was your question?
Daniel Faloppa (16:56)
Yeah. And for, hun… No, no, like
it’s, I’m just like trying to, do you know what’s that in percentage to GDP and like compared to, compared to other countries? Like, are we still like extremely under, finance, let’s say.
Robin Wauters (17:09)
Not by heart. do know the spending that we have on R &D is incredibly low compared to the US per capita, which is one of the… Because people always look at Europe versus Silicon Valley, and I understand why. But what you really need to look at is how has R &D spending in the US evolved in the last 25 years compared to what Europe has done. They’ve gone from automotive and pharma to hardware and software to digital technology in the last 25 years.
We’ve stayed with automotive. The top three spenders in R &D here in corporate Europe are still three automotive companies, which is insane if you think about it. So we haven’t made that shift yet and now we’re forced to, right?
Daniel Faloppa (17:47)
Yeah. And that’s the whole US,
right? So we’re including like Texas, we’re including Wyoming, we’re including places that are not doing, it’s not only Google and Nvidia and yeah. Yeah. But then the, yeah, exactly. And, the, well, one of the things for me, at least one opinion that I was reading again on the economist is that Europe is less productive as the average company is much smaller.
Robin Wauters (17:54)
Exactly, exactly.
No, no, no, but it’s per capita, so at least you can make real comparisons, right?
Daniel Faloppa (18:13)
And if the average company is much smaller, they don’t have incentives to make these bigger investments to increase productivity. Plus, if they invest in R &D, obviously they do that to a lesser extent because just the returns are also smaller. If you cannot become a 5,000 or 50,000 people company that easily, so you’re also going to hold back on your R &D.
Robin Wauters (18:35)
Exactly.
We’re a continent of SMEs, right? Like we’re really built on small and medium enterprises. We don’t have a trillion dollar company here. In fact, of the 50 biggest tech companies, I think we only have four in Europe, something like that. So that is, of course, one of the problems.
Daniel Faloppa (18:48)
Yeah, could well be. So yeah. So
my question was like, aside from the European state of tech, like what did you see during your years reporting on the scene? Like what were the changes that struck out to you?
Robin Wauters (19:04)
Yeah. What I have always enjoyed a lot is going to the less mature ecosystems, let’s put it. So I would travel to places like Moldova and Romania and the Baltics. And I’d be quite interested in seeing how undeveloped the ecosystem was, but you can see any ecosystem has like a number of ingredients, right? You need startups and entrepreneurs at the center of it, but then you also need investors and you need corporates and you need schools and you need a service industry.
Daniel Faloppa (19:14)
Mm-hmm.
laws.
Robin Wauters (19:31)
You know, it could be legal PR events. And it could be, of course, policymakers may make up a big part of that ecosystem as well. But these are all like small ecosystems one by one, right? More and more, I’ve seen these level up to sort of a more bridged or connected version that we can finally talk about the European startup and investment ecosystem lately. In 10 years ago, when we started TechU, that wasn’t really the case yet. So that’s very encouraging to see.
Daniel Faloppa (19:34)
Yeah.
Robin Wauters (19:58)
The problem and the flip side of that is that if you have macroeconomic factors, energy crisis, war, what’s going on now, it immediately has a knock-on effect on the smaller economies and the smaller ecosystems. They are suffering a lot more from this drop in funding and this drop in interest from investors. They suffer a lot more. So it will be harder for them to get back on track than the mature ecosystems, which I think will be fine.
But along the way, you’re going to have a few casualties, right? Like look at Northvolt, Lilium, Insect in France. So there’s a couple of examples more. But then, yeah, you’re going to have big casualties along the way as well. the evolution that I’ve seen is that there’s more connection. There’s more unification. There’s more harmonization. There’s also organizations here in Brussels where I work and live that are now representing European startups that are basically a collection of
Daniel Faloppa (20:33)
Mm-hmm.
Robin Wauters (20:50)
of national startup associations acting as one voice to policymakers to really make their needs. So I think that’s a really good evolution. We’re to have our first, we’re recording this on the 2nd of December, which means yesterday was officially the start of the first commissioner for startups that we’ve ever had in Europe, right? It’s commissioner for startups, innovation and research, but it’s the first time that the word startups is in there for any commissioner, right?
Daniel Faloppa (21:13)
It’s our
version of Elon Musk’s dodge.
Robin Wauters (21:16)
Let’s hope not, but that’s another discussion.
Daniel Faloppa (21:19)
No, I get your point. And I think also like right now it’s becoming a European question when I talk to startups and they are from Europe and they are thinking like, know, where should we incorporate? Where should we start? Where should we grow? And I think back in the days that was not even on the radar. it was, you know, you would study a little bit the two accelerators incubators in your, maybe in your country, mostly in your city. And that’s where you would get started.
almost like stumbling without really like a plan. And now it’s already that knowledge is there, things are better. You’re thinking like, know, Berlin or Barcelona, Lisbon and Madrid and stuff. And yeah.
Robin Wauters (21:53)
That’s true. At
the same time, you look at the 50 last unicorns that were minted in the US and these founders are from India, Taiwan, China, but they’re also from Germany. They’re also from France. They’re also from Spain. So you can ask yourself the question, if we would have been able to keep those people here and not have this brain drain that we’re still suffering from even to this day, then what would have happened? And what if those people would have started those companies, but then eventually exited in the US, which
Daniel Faloppa (22:06)
Yeah.
Robin Wauters (22:22)
happens all the time. Look at Klarna now doing the US IPO or prepping for one. So how do you keep those people here and how do you keep those exits here? Those should be two of the main questions that you need to ask yourself as a policymaker.
Daniel Faloppa (22:36)
Yeah, yeah. And that’s pretty difficult. And it needs to be like a strategy that takes, you know, five to 10 years to do that. But then at least somebody should start it. Yeah.
Robin Wauters (22:46)
longer. Even longer
if you think about like reforming capital market union, reforming the education system to stimulate entrepreneurship or thinking about entrepreneurship. You know, the next generation of funds that needs to be more mature and founder friendly and sort of used to the environment that we have now. No, it might take 10 to 20 years, right? But yeah.
Daniel Faloppa (23:06)
Yeah. Do you think
that is like I have this idea, right? That like the cooperation in Europe is still in its infancy in the sense that it’s there like at face value. Like we do want to cooperate. We do want to work together. But then as soon as things get serious, then everybody’s trying to pull water to their own meal and things like break down because
I was hearing about this type of problems. think it was six, seven years ago, there was an initiative to make a European platform for funding for pharma companies because as soon as they need to raise more than a hundred million, they just leave, To add on top of all the other industries now, right? This was five, six years ago. So these initiatives are there, but I don’t know, is there a way to speed them up or do you think they’re going like…
as fast as they can and it just takes time for people to change their mind and adapt.
Robin Wauters (23:59)
When you have to make such profound changes, it’s not going to happen overnight in any case, right? Like to really have a mature investment system where the pension funds, for example, invest more into venture capital as an asset class, creating bigger funds, bigger outcomes, and more homegrown European success stories, that’s going to take 10, 15, maybe 20 years to get there. But if you don’t start that conversation now,
Daniel Faloppa (24:03)
Yeah.
Robin Wauters (24:22)
And that’s a good example, actually 0.007 % of pension funds is going into venture capital as an asset class in Europe. In the US, that’s, I actually don’t know the number, but it’s a lot more. It’s very difficult to do less than that. So even if you get that to 0.02%, that’s already, you know, yeah, which is, you know, it’s going to be a sea change in terms of the VC funds that we have here.
Daniel Faloppa (24:43)
Yeah, 10 times the capital. Yeah.
Robin Wauters (24:51)
being able to deploy the kind of money that we need for scale-ups to keep them here. So those are changes that need to happen. Everybody sees it. Everybody knows it. But of course, it’s going to take time to get there. And you can accelerate that, but it only takes a lot of political will. It takes a lot of unification, like people saying the same thing over and over again. Another example is the 28th regime. We’ve all seen the EU ink petition and the movement around it to have like a European
Daniel Faloppa (25:11)
Yeah.
Robin Wauters (25:19)
statute like a European company status that you can create rather than 27 different ones for all the member states that we have.
Daniel Faloppa (25:25)
at least,
yeah, and changing all the time and so on.
Robin Wauters (25:29)
So that’s a movement that I think has legs. That’s something that’s relatively low hanging fruit. Like it just takes a little bit of political will and negotiation to get there. It’s on the agenda. So we’ll see if it becomes a priority and if it actually becomes successful without getting watered down. But I’m hopeful for these kinds of initiatives that are Europe wide.
Daniel Faloppa (25:32)
Hmm.
So if you think about this flywheel in Europe as a whole, which of course every country is different and so on, but if we see about this flywheel of starting companies, having a successful exit or success anyways, and then reinvesting that capital, where do you think the flywheel is more hindered in Europe, is more slowed down by the current situation?
Robin Wauters (26:12)
Yeah. I think it’s what we talked about earlier, the creation of real scale-ups, real big global leaders in their markets. Those are the ones that typically have this trickle-down effect that doesn’t only create lots of millionaires, but it also creates knowledge. And if that knowledge stays inside the ecosystem, you can build on those foundations to do more scale-ups. The problem is we don’t have that many scale-ups because we don’t have the financing power to really create those gigantic leaders of tomorrow. Right?
Daniel Faloppa (26:18)
Hmm.
100%.
Yeah.
Robin Wauters (26:39)
We were very good at that flywheel at the early stage. There’s so many accelerators and angel investment networks and incubators and government funded initiatives and European funded initiatives. I think we’re good there. It’s not saturated, but we’re good. We’re doing well. Once you get to scale up phase in terms of financing and support and talent, that’s where it becomes problematic.
Daniel Faloppa (26:57)
Interesting,
interesting. yeah. Yeah. And I also, I see that I wrote an article, I think it was 10 years ago about the fact that the European tech scene is still behind. And it was like focused on this, but especially the talent part. I think the fact that you have little also like little adoption of stock options and employee incentives, like the few people that do that,
have that knowledge that do that process and they do the learning, they don’t have the financial safety net to then go and work for another scale up in the same stage. At some point there was an article on first round review, which nowadays I don’t even know if they still do articles, it was about a person, a woman from the US and she helped basically all the big tech startups in internationalizing. She did it like five times, among which Airbnb and some other companies.
the experience that a person like that has is invaluable to get to that stage, to do that successfully. I think Europe completely lacks those figures. If they exist, they are locked in in some company making some good money, but then they don’t have the financial freedom to go and distribute that expertise to other companies doing the same when they are more risky. Like Airbnb was internationalizing when they were 100 people.
Robin Wauters (28:07)
Absolutely.
Daniel Faloppa (28:14)
So it’s not yet an enterprise. cannot pay you like, know, a quarter of a million a year, European money, European bucks.
Robin Wauters (28:21)
Yeah, I think you
hit the nail on the head, right? We have so much talent here coming out of universities, technical schools, know, technical talent, developers, software engineers, designers, business schools even, right? Like management expertise, no problem. Once you get to the senior talent that you need to scale companies, and especially the ones that have done it before, that’s where the pool becomes very, very small. And everyone’s competing for that. US is competing for that.
Daniel Faloppa (28:45)
Yeah.
Robin Wauters (28:48)
as is Europe, right? So that’s a very, very limited talent pool that we are not sufficiently touching at the moment. There’s only one way out of that, and that’s just creating more scale-ups, right? As soon as you have more scale-ups, then these people are going to recycle into the ecosystem. If you make them stay and you give them a reason to stay within Europe, of course, then that’s already an incentive for you to start building the next foundation and the next generation of leaders, right? So talent is a big one. Talent rewarding.
As you mentioned, stock options is one example, but ESOP in general. I live in Belgium, right? But it’s such a big conversation going on in the fact that we’re so bad at it, right? In Belgium, if you give stock options to an employee, you get taxed beforehand. Before you even make those shares liquid down the line, you get taxed. So what’s the incentive for you as a founder to give them at all? Germany was pretty much the same, but they’ve improved so much that they’re now among the top ranked companies in Europe.
Daniel Faloppa (29:31)
Yeah. Yeah.
Robin Wauters (29:41)
And that happens over the last few years, right? So there is a way out of this, but you need to like hit that nail repeatedly to get there.
Daniel Faloppa (29:46)
Yes.
Yeah,
yeah, definitely. it’s doable. It is changing. yeah, interesting. Yeah, I mean, the Netherlands is in the same boat. Like regulation is coming out, but the original one and there are like the most used instrument at the time was stock appreciation rights, which for a startup normally paid out on profit and things like that. for a startup that those would not work and they never
Robin Wauters (30:15)
No, it’s difficult. For those listeners or watchers that don’t know, there’s a ranking called Not Optional, started by Index Ventures. It’s notoptional.eu. And there you can find the ranking of the European countries that actually do the best policies when it comes to ESOP. And I think the Baltics are historically in the lead there.
Daniel Faloppa (30:15)
But yeah, It’s okay.
Yeah. And if human resources are critical to your startup design and they’re going to be like an extremely important competitive advantage, then being in a legislation that allows these things, we were talking about this in the previous podcast episode with equity people, you cannot fix these things afterwards or like you can, but they are so extremely difficult to fix, right? You need to get stock options right from the start. so, so like, yeah, take a look at that website.
study these things and maybe move to be honest. Like, you know, I love Europe and everything, right? But then as a founder, like the startup is already so incredibly difficult that you cannot be like, you know, trying to fix the ecosystem at the same time, right? So you’re just going to use the ecosystem that you have and the advantages that you can find.
Robin Wauters (31:15)
Yeah, listen.
Even
if I’m a European ecosystem champion, I wanted to succeed, but I’m also not a policymaker. If the best thing for your company is to move to the U S as a founder or your entire company, then by all means do it. You know, I’m from an investor point of view. If that’s where you’re going to create value, do it. Like who’s going to, who am I to stop you? Right.
Daniel Faloppa (31:34)
By all means, yeah, I agree.
Yeah, it’s already hard enough. Yeah.
Yeah, no, a hundred percent, a hundred percent. So, okay. So this is like, you know, the sort of the difficult points, right? What do you think are the advantages and especially like, you know, how did they evolve over time, let’s say, but, know, for, for European startups, are there any, is there anything that we say like, there is a reason for this type of company to actually be here.
Robin Wauters (32:04)
Yes, so that’s where the talent creation that I talked about earlier. We have a lot of research expertise. think something like 30 % of global knowledge gets created by that 7 % of population, which is Europe on the global level, which means that we have a lot of research that happens here. Getting that research out of the universities and R &D centers and corporates.
Daniel Faloppa (32:13)
Mm-hmm.
Robin Wauters (32:30)
into the market to commercialize it as a startup and then scale up is another story, but it’s there. It’s definitely something you can build on. So even if we missed the boat in the last 25 years, look at the operating systems you’re using, the phones, the computers, they weren’t built in Europe, but they were built on European technology. Let’s all be quite aware that without science that happened here. So we missed the boat. Fine. There is still a chance for us to not miss the next boat, which is deep tech. Right.
and then we get to the topic that I mentioned earlier, is that science-backed research-driven innovations that have roots in academia is something that we still shine. And I take deep tech as a very broad term. It could be cardiovascular technology, could be mobility, could be cybersecurity, quantum computing and whatnot. That’s where I think we still have an edge. We have the political will, we have…
Daniel Faloppa (33:01)
Yep.
Robin Wauters (33:24)
At least the motivation to finance that kind of innovation from a European level. We have the talent, we have the know-how, we have the resources. I think there we can still make a difference and we can still shine.
Daniel Faloppa (33:36)
Yeah.
Yeah, that’s a good, I think there was a, I don’t remember what I was reading of like, you know, this, all this, anger in the fact that Europe cannot be competitive in software. was like, we don’t have to compete in software. Like software with the, with the next generation of AI’s software is has zero modes, like, or very, very small modes. Like it’s non-defensible. It’s so difficult to create value. Deep tech, hard engineering, hardware, medical, like everything that requires
a lot of engineering and potentially that even requires a patent or can be patentable could be where Europe shines. Plus, if you make something that is like sort of a big enough leap that can carry you through a difficult sales talent situation, growth talent situation. Yeah, that’s a good point. Yeah. And in those, like, do you see any specific country or do you think distributed?
Robin Wauters (34:19)
Absolutely.
There’s pockets of innovation
all across Europe and they’re usually centered around big universities or big technical schools. I think it’s not always the capital cities, could be Munich in Germany, could be Toulouse in France, for example, just to name a few. But there are pockets of innovation centered around expertise, resources, talents that I think are quite valuable. They should be supported, stimulated, incentivized to build bridges among one another.
as well and financed, financed like hell, right? To get to the next stage. But it’s happening mostly in the mature ecosystems, I have to admit. In the less mature ecosystems, it’s a struggle to survive on its own, let alone like be really innovative and take very, very big leaps in terms of ambition level and finances. It’s just a lot harder.
Daniel Faloppa (35:12)
Yeah. I do see also in sort of less developed ecosystem that the quality of problems that there are to solve is different for a startup, right? So like a startup that comes out of Germany from a very high technical school is going to be at the forefront of maybe car research or whatever. But in a different place, it might be that still some maybe distribution of
wealth, maybe it’s more like central to the current challenges or infrastructure or other things, which are maybe not the trendy startup themes that get financed by VCs, but they’re still massive entrepreneurial opportunities, in my opinion. Like if you look at Eastern Europe, for me, the opportunities there, not in terms of cutting edge innovation, but just in terms of wealth creation through entrepreneurship and through bringing this type of solutions.
can be really, really big. Interesting, yeah. And.
Robin Wauters (36:05)
Absolutely.
And it’s
not because you build a deep tech company in a mature economy that you’re going to be successful. Nordvolt was in Sweden or is in Sweden. Lilium is in Germany. Insect was in France. So these are all companies that struggle even despite being in a relatively mature ecosystem. So there’s no guarantees, but it makes it that much harder if you need a less developed ecosystem simply because you don’t have the support network around you to be able to scale. And there’s notable examples of
opposite, Like rematch, for example, the automotive company out of Croatia is a good example. It can be done, it’s just a lot more difficult.
Daniel Faloppa (36:44)
Yeah. Yeah. Yeah. I think what, for example, Rematch did great is to use that advantage of lower cost, but still very, very good artisans and craftsmanship and also just the incredible attraction that the local talent would have for a company like that to really hire the very best at the price that was competitive in a sense. And then I think they were designing and manufacturing every single knob.
of the car, right? Something that you could never ever do in Italy or Germany, even if you’re building like a super car that it’s going to cost a million euros each, right? So like, you know, I think if we, if we look at the, yeah, at the localized little advantages, there are, there are some, and like in this sort of deep tech innovation polls and innovation centers, like how far do you think we are compared to
to like China or the US in the same direction. Ahead, similar, like behind or.
Robin Wauters (37:42)
We’re running behind on all levels, think, when it comes to AI infrastructure, quantum, think we’re running behind, but at least we’re still participating in the race, is what I always like to say. There are some races that we’ve already lost fair and square. At the very least, we’re still competing there. But it depends on the resource that you’re given. Let’s take China for an example. The amount of money that they spend just on supporting sort of AI and quantum advancement.
You cannot match that in Europe with the current structure and the governance that we have. You can’t even hope to match. So you need to find other strengths and other factors that can play a difference. Right. So that’s it’s not undoable, but you’re just up against deep pocketed nations with a very, high stake in the game. So it’s.
Daniel Faloppa (38:26)
Yeah. And coordination,
they coordinated in a different way with a different push. Exactly. Yeah. Yeah. Yeah. Yeah. I was listening to this podcast. They were mentioning the fact that in China, they’re starting to make the first gigawatt data centers for AI. So it’s a single data center that consumes a gigawatt of power. And then they are adding
Robin Wauters (38:32)
Yeah, without the fragmentation.
Daniel Faloppa (38:51)
I don’t remember how much capacity, something like 20 % of capacity every year. Whereas the US is staying stable in electricity generation capacity and Europe is actually declining. So yeah, so that race, I agree with you. And in order just to compete in that race, you’re already five years behind, right? It takes 10 years to bring a new reactor online or a new dam or yeah.
Robin Wauters (39:11)
Absolutely. But
I mean, there’s a flip side of that is that you have a company like ASML, which by now everybody knows in this industry, and I just finished reading a book about them. But the fact that if that company collapses for whatever reason, or explodes or vanishes, the world economy would essentially stop, would grind through a halt, right? Like without ASML, there is no new technology and no new sensors and no new chips and whatnot. So the fact that we have this
Daniel Faloppa (39:31)
Yeah, for a while, yeah.
Robin Wauters (39:40)
value that we haven’t really, it fits into a very, very high stakes supply chain. Of course, it’s not going to disappear overnight, but it’s not also the first trillion dollar company in Europe. didn’t become that company. Why not? This is a question that we should be asking.
Daniel Faloppa (39:57)
Yeah, yeah, interesting. And why is that? Because the returns were made on a bigger scale where a lot more money was necessary. Bigger investments.
Robin Wauters (40:07)
I don’t know. I just know if a company like that was so valuable and it was based in the US or China, they’d be a lot bigger. Simply for the amount of resources and support they would receive from the government as sort of a defensive move would just be a lot bigger than in Europe.
Daniel Faloppa (40:21)
Mm.
Yeah, there is a lot and actually wanted to ask you about that. One of the things that I saw changing a lot in the past, especially five years, is this quote unquote meddling of governments in startup funding. I think up to five years ago, it wasn’t even a question. Everything was completely private. wasn’t even a concern. What’s the… Okay, if you wanted to get subsidies, sure.
But for the average sauce that wanted to do that normal progression to a unicorn and so on, it wasn’t even on the map, right? I think right now is almost flipped. Like there is so much consideration for what government can do, which industries are they focused on, how much is gonna be the stimulus, not only Europe, like in China for sure, but also in the US right now, the massive news that Intel got like 8 billion in funding from the government.
And they were mad because it was supposed to be 8.3. So do you also see that? you see the sort of the imprint of government being more and more present in the startup scene?
Robin Wauters (41:27)
Yes, I don’t think it’s a bad evolution. Let’s not forget that Silicon Valley was built on government subsidies and grants 50, 60 years ago. I’m not saying you need to replicate that in any way, but of course, it’s almost unimaginable to do this without government support. And that includes financial, right? The European Innovation Council is a good example. You have this 10 billion euro framework program from the European Commission.
to invest in critical technologies. And there’s a range of things that they do, right? Like the EIC accelerator for early stage, there’s EIC transition to get research out of the lab and into the market. There is the EIC funds that basically acts as sort of a follow-on fund for the accelerator and actually finance these long-term patient ventures that you need to support. I think that’s a good evolution and it’s blended finance. It’s equity, it’s loans, it’s a little bit of both.
They do direct equity investing, crowd in private investors as well, which I think is a great evolution. I think we need that kind of program. In fact, I’d love it if it was 10 times as big. I would love it if it was a 100 billion euro program and we’d finance advanced technologies that take time to come to fruition, but that lack sort of that. Our investors in Europe are typically quite risk averse. And I know that’s sort of a contradiction because why are you in venture if you’re risk averse?
Daniel Faloppa (42:31)
Okay.
Robin Wauters (42:48)
But the reality is it’s still very difficult for a deep tech company that has a long way to sort of a long development range, long sales cycles, takes time to sort of create value. Those investments are still very, very rare. Right. So the fact that the government there on a European level stepped in to change that and to really make a difference, I think is a good evolution. Did they approach it like 100 % correctly or is the money going right? So that’s a whole other discussion. But the fact that it’s happening, I think it’s good.
It’s good for the ecosystem, it’s good for Europe and it’s good for us as a society.
Daniel Faloppa (43:17)
Yeah.
Yeah, yeah, yeah. I would make it like 10 times bigger, but I would spend the other nine times in simplifying things rather than, you know, investing directly capital.
Robin Wauters (43:29)
You
True. And
as I said, like convinced pension funds to allocate more private capital to venture capital and you have played a major role without spending money.
Daniel Faloppa (43:40)
Yeah. Yeah. Yeah. I don’t know. I think, you know, the limited size of investments and the limited involvement of pension funds as well. Well, that’s also historical, but it has also a lot to do with the fragmentation of just not the European tax scene, but the European consumer market. Right. You need to physically launch in every country. You need to have different languages. You need to have different PR teams, different
Robin Wauters (44:01)
Yeah, yeah.
Daniel Faloppa (44:05)
appear in different journals, right? Whereas you get your article on the Financial Times or the New York Times or something that’s just read nationwide, right? And you get a pool of 250 something million customers straight away. And that’s what I think rather than investing so much directly, like work on opening those barriers and simplify that.
Robin Wauters (44:23)
That’s true.
But it’s not just
pension funds, it’s also university endowments, it’s insurance companies. Basically, and look at the savings that we have in Europe, we save such a massive amount of capital. you know, so there is a lot of money and there’s lots of capital, but it’s not going to venture capital for a reason. Fragmentation is one, but also the relative immaturity of the venture capital as an asset class in Europe. There is just not a huge track record yet for exits in this space and scale ups and leaders.
So obviously there’s going to be some level of hesitation from these big LPs to really invest in those kinds of funds. But eventually that will happen. And that’s what we talked about earlier. It’s going to take time, maybe even another generation, but we’ll get there eventually.
Daniel Faloppa (44:58)
Yeah. Yeah.
Yeah, yeah.
Yeah. Yeah. And the Deep Tech, like I’m a hundred percent with you, right? We did a few studies. We’re publishing a series of articles on best practices for fundraising. And if you look at different alternatives for capital for Deep Tech, like if your innovation is coming out 10 years from now, even if it’s going to be huge, like you likely don’t have the returns that are currently expected by a traditional venture capital that has
been learning their craft in the SaaS era in that type of return. And similar story is for biotech and all the longer innovation that takes a bit longer. And to be honest, that’s probably the case also in the US. And that’s why even OpenAI is just started by people with a ton of money that wanted to really play in that game.
but it’s a different way in the US to overcome the same problem. But it’s still like the returns that DeepTech has cannot be borne by venture capital or any way super profit motivated investors.
Robin Wauters (46:09)
Yeah.
The one thing I will add to that is that the impact of deep tech innovation is not just financial, right? It could be climate change, it could be societal, it could be humanitarian, it could be defense. So there’s lots of things that you can think about in terms of positivity or positive impact on the world than just financial returns, which is all the more reason to invest in that kind of thing rather than…
Daniel Faloppa (46:17)
Definitely,
Yeah,
as a government. Yeah, definitely.
Robin Wauters (46:34)
the next consumer application
or food delivery or game. Not against those industries, but it’s just that that’s not where the innovation is going to come from in the next decade.
Daniel Faloppa (46:43)
Or maybe it is and we don’t know it yet.
Robin Wauters (46:45)
Sorry, I lost you.
Daniel Faloppa (46:45)
Maybe it’s going
to be, I was saying, but maybe it is, know, but we’re not, we don’t know it yet. It’s the next type of food is going to be the next open AI, the new tomato. Nice. So you’re definitely positive on deep tech, hard tech. What’s your sort of opinion on the AI wave and how that’s going to change this type of power balances?
Robin Wauters (46:55)
Yeah, who knows, who knows.
I’m not an expert, but I think the way that we finance AI today, the infrastructure and the real big model makers are still based elsewhere. So we can still innovate. I think it’s going to be more on the application layer. It’s about employing AI as well in how you develop and create value within corporations, SMEs, as a consumer. I think we’re all going to ride the wave.
I don’t think it’s going to have that much of an impact on the European tech ecosystem in the sense that most of the financing and the big outcomes are still going to happen elsewhere. I think the real big outcomes is going to be in other fields, quantum computing, supercomputing, maybe robotics.
Daniel Faloppa (47:45)
Mm-hmm.
Super interesting. Super interesting. Awesome. Yeah. Yeah, we yeah, as much as we can. Personally, again, it’s the same story of the you might have to move to another country, right? Like what what we do competing as a small company against the whole world, basically, and try to be in the top, you know, one percent of people mind and attention and stuff.
Robin Wauters (47:55)
Do you use AI a lot yourself?
Daniel Faloppa (48:18)
is so hard that I think you need to take all the advantages that you can. And there are, think, well, we don’t use it in the way that it could be used, like make a thousand posts a day and fill the internet with useless articles. no, exactly. No. I think, actually, the reputation is going to be extremely crucial over the next 20 years.
Robin Wauters (48:33)
Please don’t.
Daniel Faloppa (48:41)
And if you do something like that as a company for even for a few months, it’s going to be forever on your blog, let’s say, and then it’s going to be used to train AIs. So it’s going to be how AIs perceive you. so it’s an incredibly bad thing to do. But what we do is we use it as a way to make automation a bit less tight and a bit more loose. So you’re already automating CRM things like
You know, if a client is one, it gets automatically added to the newsletter or something like that. But with AI, you can add a little bit of softness to that. And you can, for example, ask the AI if this is actually a professional email, if it’s their personal email. And if it’s their personal email, then you don’t add them to the newsletter. You know, like things like that are very, very useful. Plus a ton of learning. I think it’s a great way to get you up to average.
Robin Wauters (49:23)
No, contextual, yeah.
Daniel Faloppa (49:33)
Right. And as a startup, you have so many things that you need to know and you know zero about and the, and an AI can bring you up to average in, you know, an hour. Whereas if you had to learn about that, right. So for example, the, the druggy report, right. can read 67 pages, probably an hour, something like that. Or I can summarize that with AI get up to like an average knowledge is not, I’m not going to have the deep knowledge, the, the full thing, but I can get there in, you know, and there is a lot of knowledge that is not.
accessible, don’t think. Like, for example, knowledgeable contracts, right? Like you end up doing a contract that you’ve never done before. What has gone wrong with those contracts in the past? What has gone right? What shouldn’t be missed and things like that? You can get up to average lawyer knowledge, well, average person knowledge quite quickly. And that’s, yeah, it’s awesome.
Robin Wauters (50:23)
No, no, agree. mean, AI,
AI in the context of automation and development, as you mentioned, of course, but also developing new drugs, financial services, which I think is going to go through a massive, massive innovation wave in the next few years because of that. There’s so many things you can think about that’s going to change that I’m quite optimistic about what it’s going to do. And I’m quite sad to see that the European reaction has been to
implement legislation and guardrails and safety and make sure that we have a legal framework. And I know it’s necessary to have that conversation, but you have to sort of balance it with also investing in that innovation. And that’s not what we’re doing at the moment.
Daniel Faloppa (51:05)
Yeah. Yeah. The, again, I don’t think you need necessarily to win the race with the other countries. Like you can still create a lot of value in the end. What we’re trying to do is, you know, like this whole, this whole circus, right. It’s so that people can keep on or improve their standard of living. Right. And, AI doesn’t make, bread, right. But, so we don’t have to be winning that.
But if we get so much left behind that we, like our costs are going to catch up and they are growing exponentially on, again, on pensions and that thing. yeah, it’s quite interesting. I was talking with a founder the other day and he was like, yeah, man, I really miss the cowboy days of SaaS of like 10 years ago where everything was an opportunity. And I was like, well, you know, the AI thing is that, but now, right?
Like if you look at how products are consumed now versus how they will be in five years, like 20, 30 % of each day of each consumer is going to be vastly different. And that opens the space to a whole new services, products, companies, and so on. But I do agree with you, most of them are not going to be European.
Robin Wauters (52:13)
But one thing
is interesting. If you talk to a SaaS founder next time and I asked them just like 10 years ago, if you would have started your company versus you starting your company today with the AI tools and technology that you have available to you, how different would that look and how fast would it be to get to a point where maybe it would take you a year and now it takes you two months. If I think about TechU, 10 years ago, if I would have started TechU today compared to 10 years ago, it’d be
Daniel Faloppa (52:28)
yeah.
Robin Wauters (52:41)
a lot different, right? You just approach it differently. You’d have different tools helping you set up and establish and build relationships and sort of communication channels and tools. It’d just be a lot easier, but it also makes it easier for everyone else, of course.
Daniel Faloppa (52:56)
Yeah.
that’s, and that’s so like, completely agree with you. And it was already 10 times cheaper 10 years ago, because 10 years before it was like, you had to have your own servers. had to code everything from scratch. Right. Yeah. And you had to make websites with tables, with.net and CSS too. And beautiful, beautiful times. But no, but I completely agree. And I think that’s also something that has been missed by a lot of the investment community is.
Robin Wauters (53:06)
Yeah. Remember those days.
Daniel Faloppa (53:23)
The SAS game is known, is a lot cheaper, and the risks are known as well. So the traditional SAS, so first of all, the traditional SAS is hyper competitive. If you’re making a booking service for hairdressers, there’s a billion. And there is a little bit of network effect. You can be the first. You can kind of keep your own audience. But that’s your mode. So we went from my mode is that I’m the only one doing this, and I can have a first mover advantage in network effects to
traditional modes of we need to compete now. And what is our competitive advantage in this specific thing? That was already the case. Starting a SaaS 10 years ago would cost you probably half a million to 2 million. Right now, you can do the same thing with maybe 200k like two years ago. And now with AI, can do it in your, you take two weeks off as a good programmer and you can replicate that.
Robin Wauters (54:11)
You
Daniel Faloppa (54:14)
Is that a defensible advantage? Not really. And that’s why you’re seeing, you know, a thousand different skins on the same app on the app store, right? Because that’s what’s going to happen everywhere. So as investors, as VCs, like in my opinion, you should completely shift away from software. Like I still don’t understand. think still why come the last cohort was like 95 % software, you know, and
I think that’s going to come crashing down on a lot of investors.
Robin Wauters (54:45)
Look,
I think you’re 100 % right. And imagine being an investor in the enterprise SaaS software space today. The barrier to entry has become so low for these companies that you can basically bootstrap yourself to success. So the barrier for raising investment has become a lot higher. So if you’re an investor and you’re used to investing in early stage pre-seed, pre-revenue SaaS, then what’s your place in the world still, right?
Daniel Faloppa (54:54)
Mm-hmm.
Yeah, they don’t need you, yeah.
Robin Wauters (55:14)
I would think as an investor, I’d also be concerned about what is my role in all of this. Can I still make a difference? Either you go late stage funding and you invest in the winners or you build a company of your own at this point, I think.
Daniel Faloppa (55:26)
Yeah, and you do see that, right? You do see like a blossoming, let’s say a lot more venture studios, I think, in the past two years. You do see a lot more mega funds and like very, very big investment funds. What you don’t…
Robin Wauters (55:32)
Yeah, correct.
Yeah, think this middle
layer needs to switch to deep tech.
Daniel Faloppa (55:42)
I completely agree. And that’s what you don’t see, right? Or at least like so far, also because they got the mandate, they have a certain, you know, they need to invest the money in software maybe, but yeah, that’s still being grasped, I feel.
Robin Wauters (55:54)
Well, they’ve built
their teams and structures around it and it’s very difficult to shift from one thing to the next. But that’s obviously where the opportunity is in Europe, at least.
Daniel Faloppa (56:02)
Yeah,
I completely agree. Even abroad, like aside from like foundational models or like hardware, but even hardware is mostly deep tech, right? So, nice. Yeah, what’s your definition?
Robin Wauters (56:12)
Yeah, depends on what you call deep tech, but yeah, for sure.
It’s very broad, as I said earlier. Do you know that the term deep tech is relatively new? Do you know what they used to call it? They used to call it real tech, right? It was supposed to be sort of a, yeah, as long as it’s not like rooted in science and academia and research, then it’s not real tech. So real tech was deep tech. I’ve much preferred the term deep tech because at the very least it doesn’t create this opposition towards consumer facing apps or SaaS companies.
Daniel Faloppa (56:21)
I think I lost you now.
Mm-hmm.
Robin Wauters (56:45)
which I
think is still valuable, course. But deep tech for me is a lot, right? Like it’s climate tech, it’s mobility, it’s transportation, cybersecurity, biotech, pharma. There’s so much that sort of spans this space and not a single investor, not a single organization or government department right now is focusing on that because it spans so many industries that also makes it so difficult to evolve, right? You have to get aligned so many things at the same time.
But the value, the opportunity is so big that you have to, right? There is no other choice.
Daniel Faloppa (57:17)
Is there still this connection with like phase one research, phase two and phase three? Like is that still, I remember many years ago, that’s how you would look at it. Like phase one has to be financed by government because just the application is so far away and then phase two can be half commercial and then phase three is, is that still talked about or?
Robin Wauters (57:34)
Yeah, that
model has become quite diluted because of these opportunities for early stage government funding now blended with private investors and a collaboration with the industry. Look at an IMEC, for example, here in Belgium. There’s basically one huge research center for the rest of the world, but also has a startup incubator and a venture funding model and a follow-up fund for late stage. So that sort of harmonization of the industry into one company is what needs to happen in multiple pockets.
across Europe.
Daniel Faloppa (58:04)
Interesting. Yeah. So like kind of hubs around the, at least around the topic, if not around the stage, but at least around around the specific area of innovation. Awesome.
Robin Wauters (58:10)
Absolutely.
Fantastic. Good conversation.
Daniel Faloppa (58:17)
Yeah.
All right. think we got, we exhausted the topic, but that’s just because the next level is probably 10 hours. So we keep that for the next conversations, but yeah, super interesting. And it, well, it really, it really is right. The, but this is a, this is what hopefully needs to change shortly. And definitely I know you’re trying and we are trying as well, mostly around standardization to try to bring this.
Robin Wauters (58:25)
Yeah, exponential scaling of podcasts.
Daniel Faloppa (58:44)
standardized path for startups in Europe so that they can really focus on the problem and they don’t have to focus on everything else.
Robin Wauters (58:51)
Honestly,
the work that you guys are doing at Equidam is so valuable and so much needed. So I hope you continue and have lots of success and spread the word even further. But thank you for doing what you do and thank you for inviting me to this podcast. was a very interesting conversation.
Daniel Faloppa (59:05)
Thank you for coming. Thank you for coming. We’re looking forward to do another one soon.
Robin Wauters (59:10)
Cool, thank you so much, Daniel.