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00:00Talk to us about why Europe needs sovereign defence capabilities, why Europe
00:06can't just keep buying the hardware and the software from the US. Why is it so
00:10important that Europe has that that sovereign element to its defence
00:13capabilities? Yeah, so Tom I think the past months specifically have shown that
00:18we can no longer rely on allies we previously assumed were going to
00:22sustain our sovereignty or resiliency over the long term. So I think that's one
00:26part of it. The second part of it is that defence technology has always led to a
00:32large part of civil civil innovation. So think through semiconductors you know
00:38they were first invented in the context of defence or DPS and so I think
00:41innovating at that frontier is crucially important as we think about the long
00:46term sort of resiliency of our economy and the growth thereof and so if we think
00:50about what's happening currently then a lot of the value creation defence is
00:53really shifting towards tech enablement specifically AI and that is something
00:58that essentially means we are enabling mass hardware systems through AI and
01:03through sort of software and that will kind of lead to a constant sort of
01:08iteration cycle constant updates and will really define who has access and who
01:12retains access to these upgrades and these updates and I think in the look at
01:17the past cycles the f-35 is an example that is often quoted because we
01:22basically are buying something that we fundamentally don't control. There's a
01:26so-called kill switch in there that if you know whoever kind of sits at the
01:31other side of it doesn't believe this thing should fly then it won't fly and so if
01:35we take that same analogy into modern defence systems and we want to make sure we
01:40are in control of our own destiny and that is why we do need to build for
01:45sovereign you know AI and defence technology because we want to innovate we
01:49want to be understand that we are kind of capturing value on shore off of that
01:53innovation and third you want to be in control of our own destiny when it comes
01:56to how and when these things get deployed.
01:59And that risk of having technology cut off by the US technology that we
02:03currently import how real do you think that that risk is if not now then into the
02:07future how are you thinking about quantifying that risk?
02:10You know it's not me for me to say that. I do think that we should just stand on our
02:16own feet. I think that's what the world is asking of us and that I think we should be
02:20demanding that of ourselves. We have amazing entrepreneurial talent in Europe that is
02:25capable of building sovereign technology and I think our allies will respect us for that
02:30and they will be leaning on us even more when we're able to build a credible
02:35deterrent stack. And you have backed at General Catalyst Helsing the most valuable defence tech
02:40company in Europe. How much progress has been made do you think in this effort since you
02:46started really making the case a couple of years ago?
02:49So first of all Helsing is an incredible example right I think it's it's caused very much into
02:54our thesis of what we call global resilience at General Catalyst. So we believe that each region needs to be in
02:59control of their own resiliency and sovereignty when it comes to critical technologies. So we do invest in
03:05into the context of health into energy into defence and also manufacturing and we believe that each region should be capable of kind of building out their own resiliency stack. So in that context if you take that to defence, we have backed Andrew in the US, we've backed housing in Europe and we have a similar play that we recently blacked in India.
03:25And so we currently believe that each of these regions will produce very large outcomes when it comes to modern defence primes. I think each region will likely have one, maybe two, modern defence primes.
03:35modern defence tech primes that are emerging. We believe housing is the one that will play that role for Europe. And I think we're already seeing how, you know, they have built a very unique and very differentiated AI software platform.
03:47And off the back of that they are innovating when it comes to modern defence hardware technologies. So take drones, take undersea, underwater gliders, take anything that is space defined capabilities.
03:59Think about the launch of the CA-1 Europa that we saw last week in the context of our, of a UCAV drone that Helsing is building. And so these are essentially hardware systems that are entirely software defined. And that is where Helsing is
04:05I think has a real shot at kind of becoming a very dominant prime in that category, but will also become a very relevant integrator to existing legacy systems, which will still be needed, but they need to be able to talk to one another, they need to be able to be orchestrated in real time.
04:23And a lot of that capability will come through space surveillance, for one, but will also be coming through sort of collection and intelligence when we're collecting on the field in real time, that then needs to diffuse across all sort of different systems, be there, you know, like modern new ones and existing ones.
04:50And Helsing, of course, has come out of Germany and Germany now front and centre in terms of defence spending, hundreds of billions of euros being committed to spending and building out the defence capabilities of Germany that will have an impact across, across, across, across Europe.
05:04Is there a risk that that defence spending goes to the legacy primes? Are you seeing that money trickle down to the Helsings of the world? How do you see that, that equilibrium if there is one?
05:15So I think, Tom, there are two perspectives on that. One is, is Helsing seeing government procurement? Yes. They actually were the first company or the fastest company ever to get a programme of record.
05:25And they are live and they have programmes of record with multiple European states, which is impressive, which we haven't seen in prior decades.
05:32And I think that really comes down to the urgency that Europe is feeling to get on their own feet and to and to really embrace this technology.
05:39If you think about the total market share that the likes of Helsing are getting in defence spend more broadly, I think it still needs to grow.
05:46I think where sovereigns and sort of state procurement really needs to make a rapid shift in mindset is really when it comes to procurement.
05:56So the existing procurement is too slow and is not really directed enough towards sort of modern defence technologies.
06:03It's very much oriented vis a vis the sort of old legacy incumbent.
06:07So if you think about the numbers that recently leaked in political on where some of the job and spend is going, then we have basically mandated 26 billion that are going into frigates.
06:16And then the question is, what do frigates really do when you think about the protection of the NATO eastern flank, right?
06:21It doesn't do very much. So the question becomes like, how do we think about building a drone wall?
06:25That is something that Helsing has been propagating since the early days. And it's really something that can be done very fast and can be something that doesn't cost as much.
06:35But it's really, really effective when we think of all the recent events around sort of the eastern flank, the intrusion of Russian drones.
06:43What changes that procurement piece then? Is it a is it a cultural shift? Is it defence ministries making structural changes?
06:50Is it embedded in entrenched interests that need to be unpicked? What is the solution to speeding up and adjusting and making that procurement process more flexible?
06:58Yeah, I think it's all of what you just said. I think it's primarily I think the realisation of how drastic the results in Ukraine are.
07:07People are saying it's 80% drones and 20% traditional systems. What we are seeing with Helsing Ukraine is actually more than it's 95% drones and 5% traditional systems.
07:17And that if you really inhale that number and you think about what we have on stack in Germany currently or in other European countries, then we are not really well equipped to kind of take that on right now.
07:30And that also comes down to building our supply chains. So if we really think about the spending, then it should go towards enabling modern defence primes, making sure the state really acts as a firm anchor customer,
07:40not with smaller amounts in terms of equity funding, which has been the traditional approach. The traditional approach of Europe has always been, oh, we give an equity check to a young emerging company that is essentially classified in SMB.
07:51Nobody wants to remain SMB forever. People want to grow. Companies have the ambition to become global champions. And so if we think about the likes of Helsing, that what must happen is that governments actually say I'm carving out a two, three, ten billion dollar contract for Helsing to build a drone wall.
08:05That that would be a clear statement. So really ring fencing budget to make sure that solutions that require primarily air and sort of AI based defense orchestration,
08:15that this is something that is really given and handed to modern defence primes that are capable of building this fast. That's one. And then I think the second shift that needs to happen is really around supply chain buildup.
08:26So I think right now we have a massive lack in sort of our existing supply chain infrastructure in Europe because all these systems are really at top scale. And for a lot of it, we still rely on Chinese and American sort of technology component.
08:42And so that is a huge opportunity because what we can basically do is in the context of these new mass hardware systems is essentially repurpose a lot of the technologies that exists, especially in Germany in the German middle stand.
08:54And that currently is sort of activated towards sort of automotive technology as one part and really taking that and sort of repurposing it towards defence systems.
09:02There would be an incredible sort of and very sensible shift. We're already seeing that in parts of sort of our existing sort of drone procurement stack at Helsing.
09:11But I do think there will be many more examples of that, which could be an interesting sort of catalysation also of of how we can sort of reactivate that part of the economy, especially in Germany.
09:21That's really interesting. And you talk about the size and scale of contracts that could go to some of these defence primes to start up primes, the tech primes.
09:28Is that the key that unlocks the scale or do governments need to do and take other steps to allow and encourage and help these companies, these European tech companies, defence companies scale?
09:40Well, I do think that is a big part of it. I think what governments need to do is a realise dependency on US technology or any foreign technology really is dangerous.
09:48So I think kneeling onto European technology is absolutely paramount. Second part is they need to embrace the fact that we need to allocate large budgets and act as an anchor customer to these companies,
10:00which essentially will bring in more folks like the likes of us that then kind of put large equity dollars and innovation based sort of equity funding behind these companies to really scale.
10:10You, of course, have been early in this thesis and Helsing has done and has been very successful in terms of raising capital and stands out as that that key European tech defence name.
10:21Are you worried though, as you look across the funding, that there's areas where this is looking a little bubbly?
10:26We were hearing from the CEO of Rheinmetall who says he thinks there's a bit of a bubble, for example, in the drone space.
10:32Is that a concern that you share or is it looking rational at this point?
10:36You know, Tom, I think every technology wave always carries a bubble and boom at the same time.
10:42So I think the same is true for AI funding more broadly, if you want to if you want to call it that.
10:46And so the way we look at the ecosystem is I think you do need competition for the best innovation to succeed.
10:54And I think it's actually a good thing that we're seeing more funding going towards the sector that we're seeing more founders directing their research,
11:01directing their energy and their sort of creative energy towards that sector because it has been under invested for so long.
11:06And I do think there's a large, large and very sort of unexplored part of that modern defence sector that can still be built.
11:12I do, however, also agree that there is, you know, that you need to sort of clearly look at the capability sets of these teams.
11:20I think it's rare that you see a team like in the case of housing that really brings together all of these key components under one roof
11:27and really has the proven capabilities to really build a technology of that scale and really also deliver on it.
11:34Last question. And this may be very difficult to answer, but I'll try on current trajectory from what you see.
11:40When do you think we'll be able to say Europe has sovereign defence tech capabilities?
11:46It's a good question. I think if you really want to make it very concrete, what you do want to see is that no unmanned system from Russia can ever actually enter European ground, right?
11:59That it actually gets, you know, deterred and prevented from doing so much earlier than is currently happening.
12:04And that instead of talking, we're actually able to just have facts speak for themselves.
12:08And I do think there are obviously clear measures around, you know, how many drones do you want to have on reserve.
12:14But I think just the now cascading effect of budget approval, which had happened earlier this year in Germany,
12:20and then seeing that manifest an actual sort of procurement speed and the proportion of how much of that is going to new technologies,
12:27I think that will be a real indicator. I have very little sort of, let's put it this way, I'm actually very convinced
12:36that once that capital starts flowing towards these companies that they're able to execute and that they're able to really deliver on their promise much faster
12:43because they're so hungry to deliver on great outcomes and they actually are completely ready to deliver at scale.
12:50So that's something I'm very much looking forward to.
12:52I said that was the last one. It is quite remarkable that we do not yet have a drone wall in place
12:59and that lawmakers are saying and governments are saying in Europe we could have this in place in 12 months.
13:04Given what we're seeing, given what you've seen, given what Helsing has been building out,
13:08the fact that Europe does not have a drone wall on some levels seems remarkable.
13:12There are still 12 months maybe away from that happening.
13:15I don't think it has to be 12 months. I think if you speak to Helsing, I think they could deliver that much faster.
13:19That's the one answer I will give you. The second thing I often think about, Tom, is if you, you know,
13:25went 20 years forward in time and then looked back on this current day and age, are we really translating urgency
13:32that we kind of see and feel from an external perspective into the realisation to really act on it as fast as we need to?
13:38I think people are very much holding on to this sort of 2029, we need to be ready by 2029,
13:44and kind of keep that as sort of some number where I was like, well, how do we know that this is really the case?
13:49Why don't we believe that if we are saying 2029, others will say, well, then I come in 2028, right?
13:54I think the question becomes like translating that urgency that I think everybody is now sensing and feeling
14:00that gets sort of expressed in more and more sort of dangerous ways.
14:07Then the question becomes like how do we really make sure we activate towards that with the power of our sort of entrepreneurial ecosystem in Europe that is ready to build?
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