Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let's get back to the investment piece now, with a
Speaker 2: particular focus on venture capital and the shift around climate,
Speaker 2: but also defense spending as well. Venture capital investors bracing
Speaker 2: a course and facing a dramatic year. The Trump administration's
Speaker 2: focus on oil and gas production, rolling back as well
Speaker 2: some of those environmental regulations and trying to act or
Speaker 2: at least gut the Inflation Reduction Act has of course
Speaker 2: wide ranging implications for startups and fundraising. Very pleased to say,
Speaker 2: joining us now in the studio is Tommy Stadlin, the
Speaker 2: co founder of Giant Ventures, a big player within this space. Tommy,
Speaker 2: we have seen data that suggests that the flows into
Speaker 2: some of these renewable energy startups and the climate shift
Speaker 2: has started and will start to ebb in twenty twenty five.
Speaker 2: Talk to us about what you're seeing in terms of
Speaker 2: climate tech investing. Is there a chill wind now over
Speaker 2: the space?
Speaker 1: Well, let me say, first of all, climate change does
Speaker 1: not care who's in the White House, and I don't
Speaker 1: want to alarm your listeners before they've had their morning coffee,
Speaker 1: but we're facing potentially a billion climate refugees, mass disruption,
Speaker 1: to the global economy. So climate change is real, it's happening,
Speaker 1: and I think rational actors are going to take action
Speaker 1: against that. So what we're seeing is that the long
Speaker 1: term decarbonization trend is going to happen. And if we
Speaker 1: get anywhere close to decarbonizing the global economy by twenty fifty,
Speaker 1: that I think is going to be bigger than the Internet,
Speaker 1: both in terms of the losers, who are the incumbents
Speaker 1: who have exposure to hydrocarbons, but also the winners, right
Speaker 1: that people have exposures of these amazing new climate technology companies,
Speaker 1: and so in the long run that trend is going
Speaker 1: to continue.
Speaker 3: What we're seeing is, yes, a.
Speaker 1: Bit of a pause while people figure out what ex
Speaker 1: actually is going on when the Trump administration, particularly in
Speaker 1: the US, But actually we are seeing the underlying these
Speaker 1: strong technology companies in climate those who don't require a
Speaker 1: green premium, where they're not asking either governments to pay
Speaker 1: a green premium or corporate customers are certainly consumers that
Speaker 1: businesses which can stand on their own two feet. Those
Speaker 1: companies are continuing to get funding and actually we've just
Speaker 1: been involved in some of the most competitive climate technology
Speaker 1: venture rounds we've ever seen. So it's steam ahead for
Speaker 1: the strong commercial climate tech companies.
Speaker 3: Those who require.
Speaker 1: More capital to scale up and get cost competitive with hydrocarbons,
Speaker 1: they are struggling at the moment.
Speaker 4: Yeah, I mean, Bloomberg figures show the kind of dramatic
Speaker 4: decline from twenty twenty four into twenty twenty five of
Speaker 4: climate tech investing. Do you really think that europe can
Speaker 4: hold out though against what is a sea change in
Speaker 4: the White House? Or does it change the pitches from
Speaker 4: companies in order to get that funding.
Speaker 1: We're definitely seeing companies change their pitch, and actually some
Speaker 1: of it is just a branding thing. So the words
Speaker 1: climate tech are not particularly popular in the US right now,
Speaker 1: we're seeing climate tech be rebranded as American dynamism. So
Speaker 1: trends like nuclear anything which is energy for renewable, for
Speaker 1: data centers in AI, more energy efficient AI chips, anything
Speaker 1: which fits with this kind of muscular nationalism we're seeing
Speaker 1: not just in the US but around the world is
Speaker 1: doing very well. So look out for kind of European dynamism,
Speaker 1: British dynamism, American dynamism. These companies haven't changed, but they
Speaker 1: have rebranded their pitch. To make it work more, particularly
Speaker 1: in the US. Okay, it's really interesting around the rebranding.
Speaker 1: Isn't it to kind of cut through at least avoid
Speaker 1: some of the scrutiny that may come from the Trump
Speaker 1: and administration who's courses? There's something of an animus around this sector.
Speaker 1: The defense space has been prominent. You're seeing massive spending
Speaker 1: from the German government adjusting their fiscal rules in dramatic fashion.
Speaker 1: You're seeing it from other nations as well to a
Speaker 1: lesser extent. What are you seeing in terms of how
Speaker 1: significant do you think that will be in terms of
Speaker 1: funding into the defense space and the startups in Europe?
Speaker 1: How are you leaning into that and is that pulling
Speaker 1: funding away from some of these climate stories. Well, if
Speaker 1: you just look at the numbers, we've seen about a
Speaker 1: fivefold increase in venture investments into defense tech. So that's
Speaker 1: still only about ten percent of European VC which goes
Speaker 1: into defense tech and surrounding technologies, but it's a massive increase.
Speaker 1: And in order to achieve that, we've had some investors
Speaker 1: in private managers have to remove their vice clauses. So
Speaker 1: we had a situation where LPs would say you can't
Speaker 1: invest in porn, gambling or defense right, and we've now
Speaker 1: come long way defenses escape that vice clause. And actually
Speaker 1: even for firms like Mine Giant Menus where we're backing
Speaker 1: companies that really matter, we're looking to create impact in
Speaker 1: the world as well as financial returns. People are saying, well, actually,
Speaker 1: isn't defense tech even more important than things like climate
Speaker 1: and health Because we don't have a strong democracy here
Speaker 1: in Europe, nothing else really matters.
Speaker 3: So it's in a complete.
Speaker 1: Turnaround from investors, from venture firms and also from entrepreneurs.
Speaker 1: We're seeing really strong entrepreneurial talent choosing to build their
Speaker 1: next company in defense, which here in Europe is just
Speaker 1: completely unthinkable five years ago.
Speaker 4: But is that money really now Because the money flowing,
Speaker 4: for example, from the massive German package, it's not expected
Speaker 4: to hit until twenty twenty six the UK defense space.
Speaker 4: Also the increase in spending, you know it's months years
Speaker 4: probably away from having a real impact. But you say
Speaker 4: that the investing is happening already at your level.
Speaker 1: I think the most interesing action actually is happening with
Speaker 1: C stage investments, which have started to do well already.
Speaker 1: So a company like Helsing for example, a really exciting
Speaker 1: defense tech technology company here in Europe that was started
Speaker 1: some years ago before all of this happened, but the
Speaker 1: interest now is very, very large.
Speaker 3: So I think what we'll see.
Speaker 1: Is companies who've been tinkering at the edges before this
Speaker 1: was an attractive area to invest in will now start
Speaker 1: to get the scale up capital they really need. The
Speaker 1: big question is will the incumbents in Europe, particularly the militaries,
Speaker 1: are they going to have the capacity to work with
Speaker 1: these defense tech startups in whether they have had no
Speaker 1: practice of doing for so many decades, unlike the US
Speaker 1: Department of Defense, which is so well versed at teaming
Speaker 1: up with defense startups from a very early stage.
Speaker 2: How do you, Tommy, how do you inject rationality into
Speaker 2: these new, very hot themes. There's a temptation presumably to
Speaker 2: pile in when a set I mean it's red hot
Speaker 2: right now, and there's a bunch of startups and we've
Speaker 2: spoken to a lot of them. A lot of them
Speaker 2: are not going to survive, and a lot and a
Speaker 2: few will do very well. How do you ensure that
Speaker 2: you have the metrics in place and the structure in
Speaker 2: place to ensure that you're putting the funding to play
Speaker 2: in the companies that really get to matter and thrive
Speaker 2: in the defense space.
Speaker 1: Well, venture in general is so trendering, right, and so
Speaker 1: everyone was a few years ago thought that blockchain was
Speaker 1: the next big wave.
Speaker 3: They thought AR and VR was going to be the
Speaker 3: next wave. Neither we rereadly were.
Speaker 1: Now it's ai, Now it's defense tech. What I think
Speaker 1: fundamentally is that there are two big mega trends. There's AI,
Speaker 1: which is going to fundamentally change the economy and particularly
Speaker 1: the venture world. There's climate, which is a much slower
Speaker 1: bum which is happening over a fifty year period of decarbonization.
Speaker 1: And you've got to pick which are the mega trends
Speaker 1: on which are not, and then just make sure you're
Speaker 1: backing brilliant founders because ultimately, the best venture investing happens
Speaker 1: regardless of what the trend, the sector, the company is
Speaker 1: by backing extraordinary entrepreneurs.
Speaker 4: I've heard the argument also though, that Europe can simply rebrand,
Speaker 4: as you mentioned, can can sort of change the label
Speaker 4: and still get the funding and still do the work
Speaker 4: in diversity, acuity inclusion, for example. You hear that quite frequently.
Speaker 4: Do you really think that the Trump administration is going
Speaker 4: to fall for that. They have a lot of kind
Speaker 4: of business leaders that the drive is going to be
Speaker 4: very pointed, isn't it? Is that really feasible for you
Speaker 4: to do that without there then being a clash.
Speaker 1: I think on one of the topics you've just mentioned,
Speaker 1: I completely agree with you. So diversity exctly an inclusion.
Speaker 1: There is zero appetite for those type of startups and
Speaker 1: even those corporate programs Europe in the US. That's been
Speaker 1: astonishing to witness the sort of overnight reversal of companies
Speaker 1: saying on their website, global companies saying this is a
Speaker 1: core value diversity inclusion, and overnight suddenly it's not so
Speaker 1: much of a core value it's removed. The difference there,
Speaker 1: I think is unlike some of these diversity startups or
Speaker 1: diversity policies where the ROI is harder to prove. In
Speaker 1: climate tech, this is not a cost center anymore. We're
Speaker 1: not talking about the year two thousand here where these
Speaker 1: companies were lost making. These are seriously impressive companies that
Speaker 1: are powering things like AI and are fundamentally cheaper than
Speaker 1: the hydrocardon alternatives and.
Speaker 3: Even in the US, people who want to.
Speaker 1: Make money, which includes the entire Republican Party, are going
Speaker 1: to get behind those trends, and so I think that
Speaker 1: is a fundamental difference to the clean tech one point
Speaker 1: o boom and bust.
Speaker 4: I've also got one other question around the defense and
Speaker 4: defense tech space. I mean, there is huge anticipation in
Speaker 4: the UK about what money is going to flow from
Speaker 4: Britain's additional defense spending capabilities, and there are high hopes
Speaker 4: in the SMEs that that money from the MOD will flow.
Speaker 4: But there's been disappointment for years, if not decades, in
Speaker 4: this space. The MOD underspends and then perhaps will you know,
Speaker 4: make a huge order from one of them primes and
Speaker 4: the SMEs are kind of left to wither. Do you
Speaker 4: really think that things are going to be different this
Speaker 4: time around?
Speaker 3: No, I don't.
Speaker 1: I think the MOD has proven time and time again
Speaker 1: it is not capable of effectively working with startup technology,
Speaker 1: and I think what we'll see is the best UK
Speaker 1: defense technology companies will have to go to the US
Speaker 1: and partner up with the US, which is counter to
Speaker 1: everything that we're seeing in the geopolitical trends. In terms
Speaker 1: of European resilience. But I think that's just the reality
Speaker 1: because the US government is so far ahead on their
Speaker 1: ability to team up with startups. So we have to
Speaker 1: fix that. But my hopes are not high for the
Speaker 1: mod's ability to do that. They just don't have the
Speaker 1: people in place to do it.
Speaker 2: That's a damning It's a damag statement, isn't it about
Speaker 2: the ability for the MOD to adjust to this moment
Speaker 2: on the climate story? Is there a scenario where with
Speaker 2: the US ripping up the Inflation Reduction Act and going
Speaker 2: full bore on oil and gas, that Europe can position
Speaker 2: itself to lead and win on climate technologies.
Speaker 1: I think it's a massive opportunity for Europe to lead
Speaker 1: and win. And one of the really exciting things we're
Speaker 1: seeing is corporate, large corporate industrial players in Europe are
Speaker 1: waking up and saying, okay, we can now partner with
Speaker 1: climate technology startups and lead this decarbonization in a very
Speaker 1: profitable way. And so a giant many of our investors
Speaker 1: RLPs are the big European industrials who see this opportunity,
Speaker 1: and so I think Europe has.
Speaker 3: To sort of make use of the timing with.
Speaker 1: The Trump administrations reversal on climate change and make use
Speaker 1: of our strengths here, which basically is the big industrial giants,
Speaker 1: people like BMW, who now have an opportunity to really
Speaker 1: step up and lead and stop the you know, for
Speaker 1: fatal reversal that they're facing with people like Tesla stealing
Speaker 1: their lunch.
Speaker 4: Our decisions being stored called by the Chomp administration. I mean,
Speaker 4: we're all hesitating until tomorrow and we get the sort
Speaker 4: of tariff news. Is the startup and VC space also
Speaker 4: pausing because you know, you're full of energy and ideas,
Speaker 4: and yet it does feel like there's so much uncertainty
Speaker 4: now that a lot of the big businesses that we've
Speaker 4: report on are pausing major decisions.
Speaker 1: I can only really speak for my world, which is
Speaker 1: a venture and a giant. We have invested more into
Speaker 1: climate technology in the first quarter of this year that
Speaker 1: we've ever invested before. Some of the rounds we've just
Speaker 1: led to sort of Series B rounds in Silicon Valley
Speaker 1: have been more competitive than any venture round I've experienced
Speaker 1: in my career to date. So for the best assets,
Speaker 1: the best climate technology companies which show a clear return
Speaker 1: on investment because they're making money today, there has been
Speaker 1: never been more appetite than I've ever seen in my career.
Speaker 2: Tommy, briefly on talent, because you talked about your theory,
Speaker 2: or at least your forecast that actually a lot of
Speaker 2: the defense tech companies are going to have to go
Speaker 2: to the US either to raise or to list in
Speaker 2: some form, or to get those contracts from the Pentagon.
Speaker 2: What are you saying on talent? Has the Trump administration
Speaker 2: adjusted the flow of talent? I mean, up until the
Speaker 2: end of last year, multiple founders and I would speak
Speaker 2: to would talk about the allure of the US, whether
Speaker 2: it's to raise funding, whether it's to list, whether it's
Speaker 2: to find talent, whether it's to build headquarters, whether it's
Speaker 2: to lean into the US market. Is any of that allures,
Speaker 2: any of that shine coming off.
Speaker 1: I think we are seeing a talent flow out of
Speaker 1: the US for sure, and that ranges from global superstars
Speaker 1: like Reid Hoffman, who we had with us at Giant
Speaker 1: the other day, who spending more and more time here
Speaker 1: in Europe, all the way down to young technical talent
Speaker 1: moving from the US to places like Canada or to Europe.
Speaker 3: And so yeah, there is a bit of a Trump
Speaker 3: brain drain going on.
Speaker 1: From those who frankly don't want to live in an
Speaker 1: administration which has those values. So that's another really exciting
Speaker 1: comportunity for Europe to stand up and gain in the
Speaker 1: innovation economy.
Speaker 4: Okay, I think we'll leave it there. Tommy, thank you
Speaker 4: so much for being with us in the radio studio,
Speaker 4: giving us lots to think about.
Speaker 3: Stay.
Speaker 4: Tommy Stadlin is the co founder of Giant Ventures and
Speaker 4: that picture for venture capital and what money is being
Speaker 4: invested now in Europe given the Trump administration.