The Exchanges

Q Can I ask on a macro level, how do you think venture is more misunderstood Today, if that's on a micro, where it's like, it's not about avocado toast and cappuccinos and thrill tobacco, you know, Klaus. On a macro level, how is it misunderstood?

A So the macro level, it's pretty simple. For me, the progress of a society is the way how they can handle risk. And entire Europe has had societal and economical progress, especially in the fifties, sixties, and seventies. And we were basically very good At financing innovation at the magnitude of four percent of GDP. So the banks financed it because they were in a regulatory framework where they were allowed to, to do this kind of investments. And the innovation at that time was Bosch, Siemens, Porsche, you name it. Um, so today the regulation has changed. Banks do not finance innovation and startups anymore. So, and Today, the only regulatory compliant way of financing innovation is venture. And in Europe, we are at all .5% of GDP. So we are under financing innovation by factor eight in comparison to the levels that made us wealthy in the fifties, sixties, seventies.

AI assessment note: “Today, the only regulatory compliant way of financing innovation is venture.”

Q I mean, flattery will get you everywhere, but I want to start with a crucial first question, which is one that I haven't phrased quite like this before. Adidas or Puma, and how did Puma lead to the start of your investing journey?

A Wow. So you obviously did your homework. This is a very crucial question. So not in terms of the sport shoes, obviously, and as a Swiss German, I should say that is on, but as a life lesson, Puma made a very big impact. And I guess you always have like two or three of those in your life. And Puma was, was the halo moment for me. So as you know, I grew up in the German countryside, hence my crazy accent here. And, um, it was close to Mönchengladbach, and I was the son of a farmer, so, um, at 1617, 18, I knew a lot about how to work in the fields and do all this nasty work that nobody ever wants to do in that age, but I was lucky that my grandma wanted me to hate banks, yeah, and the way she thought about it was, look, I give you, um, 20,000 bucks, And you buy stocks. If you gain something, it's yours. If you lose it, I cover it. And she thought I'd go to the local saving and loan bank, get a bad stock recommendation, lose the money, and I'm mad at the bank. But, um, as it turns out, my affinity for football and Mönchengladbach was that they played in Puma shoes, and Puma did the IPO, and I said, look, grandma takes the losses, so I can go in fully leveraged. And at the time, I was making 10 bucks pocket money a month, I made a 100,000 with Puma in three months. So I said, look, two phone calls, hundred years of pocket money, I become an investor. So, and at that moment, um, the,…

AI assessment note: “I made a 100,000 with Puma in three months. So I said... I become an investor.”

Q Can I ask, do you think it is realistic for us to move our percent spend of GDP from two percent, I believe it is now, to three and a half? Is that a realistic ask?

A There's an overview. I commissioned a study, so which, in which I analyzed all this kind of stuff, yeah, and, um, so I, um, clearly came out that in terms of threat, historically, most of the European countries have spent in the vicinity of three and a half percent. Poland is at six or seven. The Baltics are even higher, and Finland is also way higher. So this is actually not a crazy number. So, and, um, I, I tried to understand what are the repercussions if we went in, as a German, so three and a half percent. Basically, that meant we had to spend a hundred billion extra, roughly, right? So, with all the, um, economic theories, if you drop a hundred billion into an economy, provided you can spend a lot of it in, in the home base, so let's say Germany or even Europe, then you immediately Basically get back 80 to 110% of GDP effect. You would get 25, 30% of immediate tax effect. Yeah, you would get back, and you had something like 40% of, of, of, of household income. So, if for a period of four, five years, the net effect on Germany, to put it a little bit polemically, if you ask the German electorate, do you want to be indebted with 63% of GDP and not able, To defend yourself, or with 68, 69% after the five years, and you would be able to defend yourself. I think that's, that's the ultimate question that, that we have to ask, and this, this is basically the, the choice that, th…

AI assessment note: “So this is actually not a crazy number.”

Q I mean, that's absolutely nuts. So they're having Michelangelo take the photo. Um, what can we do that the US does? You said there, we don't get financial literacy like the US does. We don't do it the way the US does. What does Europe not do that the US does?

A Ah, so, in terms of, first of all, I think we do suffer the, the different aspects of the heterogeneity of our continent, yeah, so there is no point in having, uh, three stock exchanges, because at the end, liquidity is everything, and, and we should basically say- So we should have a European stock exchange. Yes, we should, yeah, so there was an attempt, Yeah. Um, but it was blocked by politicians. Um, so it's, it's still a little bit like a regional egoism. Yeah. So which, um, which, which is understandable, but which basically is part of the problem. Yeah. So the second one is we do not have deep, deep capital pools. So, I mean, when you think about a huge step was in 1974 when you had the ERISA act. Yeah, so that pension funds in the U.S. were to invest in, in venture funds. So, and this made a big difference, and we don't do, we don't do this in, in Europe. So, in, I think the, the most pension funds invest according to the endowment model in the U.S., meaning you get basically a venture allocation of 10 to 13% plus, and the European pension funds invest oh point oh two percent in venture. So, and this is, first of all, it's, it's already shocking because, um, the numbers in the US, it's not that the risk has risen, it is that the, the, also the return has over proportionally risen, um, and if you think about it in a different way, basically what, if you forced, and you, I…

AI assessment note: “a huge step was in 1974 when you had the ERISA act”

Q Do you think, do you think we know what's important to us? You know, Trump is consistently saying, we need to spend a significantly higher portion of GDP on defense, and we need to start paying for defense ourselves, and we're going, wah, wah, wah, wah, you keep paying.

A That's what I mean, that's what I mean, that you're perfectly right with this, and I think also, um, in this case, I, I think, Trump has a point, because it's pretty naive to think that everybody else pays and, and we don't need to pay, yeah. And it's even worse. So look, if you think about the German budget, um, not only didn't we pay two percent, uh, but whatever we paid of the 1.4, 60% of that is salaries and pensions. It's not that you buy equipment and become more, um, able to defend yourself. It is, yeah, conceptually wrong. So I think that's what the, coming back to the question, what worries me most is a very, very clear view. What do we, what do we need and execute on it?

AI assessment note: “I think, Trump has a point, because it's pretty naive to think that everybody else pays”

Q Well done, team. I mean, it's impressive. Um, okay, so we have that. Another one. You got into Meta, or Facebook at the time. How did that happen? And when we were chatting before, you walked me through kind of why it was exciting for you. Talk to me about getting into Facebook when you did.

A I was following the social media stuff, as there was a company called, um, Xing in Germany, and there was, like, Friendster, and then you had, like, MySpace, and it was fascinating that Friendster being, like, the sort of first social media, yeah, the only thing they basically invented is, I could see through whom I know somebody else, the six or seven degrees of what, knowing each other. So, and then suddenly, Myspace came and they just added music to it. And the whole herd moved away from Friendster to Myspace. And suddenly MySpace was the hottest thing on earth. And then Facebook came along and suddenly introduced like clear names. So voyeurism. So, and then everybody moved there. And so until then I did not feel that there was one single argument why the, the, the value was captured. And then they, uh, they, they announced that they were willing to do, introduce the API. And at that moment I said, Jesus, if that's the API then, or the music, or the innovation, it's easier to happen within Facebook because you take advantage of the network and don't need to build the network again, and then the value will stay. And at that time I needed to figure out how I get into it, and then I, for two months, called everybody I knew in, um, in, um, In the valley, and I ended up with Matt Kohler, like a little coincidence, because I was at Benchmark as a VC, and he was with Benchmark, and…

AI assessment note: “I needed to figure out how I get into it... ended up with Matt Kohler”

Q Can I ask on a macro level, how do you think venture is more misunderstood Today, if that's on a micro, where it's like, it's not about avocado toast and cappuccinos and thrill tobacco, you know, Klaus. On a macro level, how is it misunderstood?

A So the macro level, it's pretty simple. For me, the progress of a society is the way how they can handle risk. And entire Europe has had societal and economical progress, especially in the fifties, sixties, and seventies. And we were basically very good At financing innovation at the magnitude of four percent of GDP. So the banks financed it because they were in a regulatory framework where they were allowed to, to do this kind of investments. And the innovation at that time was Bosch, Siemens, Porsche, you name it. Um, so today the regulation has changed. Banks do not finance innovation and startups anymore. So, and Today, the only regulatory compliant way of financing innovation is venture. And in Europe, we are at all .5% of GDP. So we are under financing innovation by factor eight in comparison to the levels that made us wealthy in the fifties, sixties, seventies.

AI assessment note: “Today, the only regulatory compliant way of financing innovation is venture.”

Q like, the frequency of tweeting and posting and how that correlates. Ventures become, I don't know how else to say it, um, a marketing business above everything else. Um, with venture investors tweeting, writing, uh, doing podcasts, believe it or not, doing video series, we've all become content creators. How do you feel about the evolution of venture, where we all have to bluntly sell our wares being our cash?

A I do believe that, or I, that's always how I've done it. So if you have a certain mission, and the mission requires you to To be a little bit more outspoken or to reach a broader audience, then I think this is a perfect methodology to do this. Yeah. So then because you cannot achieve that aim in a different way. But what you are alluding to and what I'm despising is the, the self promotion stuff. Yeah. So thinking, oh, look, I'm a cool entrepreneur. And for them entrepreneur means Sitting in Soho House in Berlin with an avocado toast and a cappuccino and thinking we rule the world. Yeah. And then just in the afternoon thinking of some random, some random entrepreneur say, hey, great, uh, thankful to be part of the journey. So this is something where I say, look, geez, uh, yeah, there's so much more urgent things to do for a VC than doing those kind of things.

AI assessment note: “what you are alluding to and what I'm despising is the, the self promotion stuff.”

Q Can I ask, do you think it is realistic for us to move our percent spend of GDP from two percent, I believe it is now, to three and a half? Is that a realistic ask?

A There's an overview. I commissioned a study, so which, in which I analyzed all this kind of stuff, yeah, and, um, so I, um, clearly came out that in terms of threat, historically, most of the European countries have spent in the vicinity of three and a half percent. Poland is at six or seven. The Baltics are even higher, and Finland is also way higher. So this is actually not a crazy number. So, and, um, I, I tried to understand what are the repercussions if we went in, as a German, so three and a half percent. Basically, that meant we had to spend a hundred billion extra, roughly, right? So, with all the, um, economic theories, if you drop a hundred billion into an economy, provided you can spend a lot of it in, in the home base, so let's say Germany or even Europe, then you immediately Basically get back 80 to 110% of GDP effect. You would get 25, 30% of immediate tax effect. Yeah, you would get back, and you had something like 40% of, of, of, of household income. So, if for a period of four, five years, the net effect on Germany, to put it a little bit polemically, if you ask the German electorate, do you want to be indebted with 63% of GDP and not able, To defend yourself, or with 68, 69% after the five years, and you would be able to defend yourself. I think that's, that's the ultimate question that, that we have to ask, and this, this is basically the, the choice that, th…

AI assessment note: “So this is actually not a crazy number.”

Q health, and you actually led the investment in NECO, which is, I've spoke to Shaq, obviously, before and Daniel before. Can you just talk to me, why, why did you have such conviction on NECO? Because I remember when you did that deal, actually, Klaus, and you moved so fast. Just talk to me about that, and how you came to move so fast on it when other people didn't.

A So I, I think this is the, the entrepreneurial spirit, yeah, and basically it's a little bit the spirit that, yeah, we can take very fast decisions in the organization, but I was on my way to, to Munich at that day, and I, I was discussing with Daniel for long, yeah, if he ever wanted to open it up, and, um, so if he, um, felt like he wanted to open it to investors, and at that At that moment then, I said, okay. He said, like, Klaus, I, I think I should open it up. I'm contemplating. I said, all good, all good. So I changed the direction and didn't fly to Munich. I flew to Stockholm. I was two hours later in Stockholm, had my scan, went through everything, and I issued the term sheet the same evening. Yeah, so, um, so the, the, and sometimes this has to do with, with total uncorrelated experiences you have. So I'm regularly going to Lanzerhof, which is a clinic in Germany where you have, like, precautionary examinations, and they talk with you about how important it is to have it in certain intervals, so not only have you all the parameters of your blood, but you also have it over the period of time, so you can see it. So I basically was subconsciously trained for a situation like with NECO, where you had the same phenomenon with, um, With, with, um, the, the moles, the skin examination, also with the blood, uh, so that you have it over a certain period of time. And everything …

AI assessment note: “I was subconsciously trained for a situation like with NECO”

Q Final one before we do a quick fire, and I hope it's okay for me to ask personal, but you have incredibly hard-working, ambitious children. Like, I, I know them, and respectfully, it is quite hard to bring up children in, uh, affluent families to have that hunger, ambition, work ethic. What's the secret?

A Look, at the beginning, it hasn't been like that, very affluent, so the beginnings weren't that, that, um, that glorious. It was a long journey to, to get where, where we are now, and, um, we had a very normal and very tight family life, so I very consciously, uh, decided to be basically, during the 12, 2000, at home at, at five or six, Yeah, and then we had supper, then we did homework, and then I brought them to bed, and then at nine I sat down at the, at the desk again. So this was a very conscious decision, yeah. If it is unilaterally, it explains, yeah, why, why, why this is the outcome. Now I think there has been a lot of, um, um, very valuable input my, my then wife was, was giving to the kids, then the love, and, And the, the home that, that she created. So this is probably everything working together there.

AI assessment note: “we had a very normal and very tight family life”

Q I don't feel like we are under financing innovation in Europe. When you look at deal cycles, when you look at deal pricing, when you look at quality of deals, I think we have dramatically too few good companies for the amount of cash that we have, which is why we're seeing the exorbitant prices that we are in Europe. Am I wrong?

A I think this is what you're describing is a cyclical element to it, and there is no, no doubt that we do need to finance innovation, and There will always be phases of more liquidity, of exuberated pricing, and the pendulum always swings between the left and the right. So, and if you think about the fact that basically from a start where we accompany a company until we exit, it is easy, 1008 to 10 years, if you really want to make sure you get all the value creation. All of the phenomenons that you would be describing will happen at least once, yeah, in the lifetime of that company. So, um, this is something where I'm not concerned. Structurally, there is a lot of science that, um, the world has changed a lot. If you think about the 2000 and early 2010, there were no technical founders. So that, and I thought lengthily about In fact, why is that? Because we had the copycat nations where the, the, the, the Samba brothers built the machine rocket internet, but this was basically an absence of technical innovation. And the reason was an interesting one, at least the one that I thought was a plausible one, is that at that time in continental Europe, very few people that had an affinity to technology They had economics at school. So they were basically really afraid of becoming self-employed. So, and if you see the first, yeah, German value added tax declaration that you need to do …

AI assessment note: “what you're describing is a cyclical element to it, and there is no doubt”

Q and he's like, it's the unique combination of our team which makes us successful. And I've met many defense companies today as an investor, and they're a product expert, but they've got no idea how to sell to MODs. And they've got no CEO ability. My question being, do you agree with me that the biggest challenge is the unique skill set of founders to sell into this market effectively?

A Oh yes, of course. And basically they, it is their gift and they're fast tracking the development of the ecosystem. Yeah. So basically when I started with AOL in 1995, I was responsible for online banking. Right? To, to bring online banking to the German banking landscape. There was nobody in German banks that wanted to do online banking. So you, there was no way how to sell online services into banks. So it is all a process. So as much as this is a process to do that now in MOD. So that is why the, the mission of the NATO innovation fund is bringing this trust levels. So, because now people say, oh, we get financed, so we can start a dual-use company, which wasn't the case before. The entrepreneurs basically were left alone. And then, oh, with the NATO, yeah, there are some people in the MODs that now are responsible to embrace early innovation and, and adopt it. So, these processes need to be accelerated, and this is how, how the ecosystem will be developed.

AI assessment note: “Oh yes, of course. And basically they, it is their gift”

Q I mean, to be fair, I didn't see the portfolio before, so I'm happy to put a, like, pin in that one. Um, I do want to ask a incredibly successful angel turned venture investor. What element of being an angel do you miss out most? That's from Shaq.

A So I know I've, I would have guessed this from Shaq because we have this discussion very often and there are clear, um, advantages of being an angel. So you are very, um, you're very free. You, you do not need to do fundraising. Yeah. So you basically all, so the decision takes as long as you want to. Um, so, but you always die one death. Yeah. So meaning a platform has also something interesting, and you can achieve something with a platform that you cannot achieve as an angel. So, and I think there's maybe, there's a right time for, for being the one or the other. So I think, um, Mark Evans, who I admire a lot, he was spectacular good at, at benchmark, but afterwards now even better as an angel. So, um, so I think maybe there, everything has its time.

AI assessment note: “you're very free. You, you do not need to do fundraising.”

Q with being, in this case, defense. Specifically, when we spoke before, and when I had a founder, actually, of Andrew on the show before, he was fascinating. He was like, no, no, no, defense is not a category. You can't build a portfolio around defense. Really, the Andrew of X is just Andrew. Do you agree that it is not a large enough category to build a venture portfolio around?

A No, I don't. Yeah. Um, so it, it, it, it, it's not, it is. It will become anyways. Yeah. So at, look at my famous quote always is when Uber started in, um, in San Francisco, people said, but the taxi market is only two hundred fifty million, and today Uber's revenue in San Francisco is six hundred million. So, and if you do the math on, on, um, on, on defense, which we can do a little bit later, you will see that's massive Money coming into it, creating this market, and creating a lot of opportunities there. But at the same time, I'm not so keen of building portfolios. If I find cool companies that make a difference, that is where the beef is. And if you have one or two of them, every portfolio looks great. Yeah, and we, there's a lot of things you don't know about the market, and we have to work Very much in building the ecosystem, hence my willingness and drive to, to serve as a chairman of the NATO Innovation Fund to exactly build this ecosystem.

AI assessment note: “No, I don't. Yeah. Um, so it, it, it, it, it's not, it is.”

Q Why do you not like the idea of portfolios? For many people brought up in the last 10 years, it's what venture is built around, and you know, early stage, you're told, 20 to 40 is the right number for the right levels of diversification, and there's the standard portfolio tropes. Why do you,

A It is a, it's a mean to an end. You have to build portfolios in order to get money from institutional investors. But on the way there, you make a lot of concessions. So you have to think about how much do I reserve per company? Am I at some point shot out? Or what is the, can I reuse proceeds to get to a pretty high investment grade? Because if you do three times the money, but if you have a hundred minus 20% over 10 years management fee, that's 80, times three, it's 240. But if you have a hundred percent investment, great, because you can use proceeds, then three times is 300. So you see, this has nothing to do with any company that's just trying to please the framework around the rules of deployment, so to say. And, um, I think this is, um, something we need to obey to because we are, we, we do need this money, but This is for me something that has nothing to do with investing. So, and if you find the cool companies, this is basically what, what, what, what I'm intrigued by.

AI assessment note: “This is for me something that has nothing to do with investing.”

Q So, When we think about enhancing defense capacity, when we chatted before, you said, when it comes to defense, we need to make the electorate understand how bad the situation is. What do you think we most need to understand that we don't understand?

A There has been a long time of, of, of the peace dividend, so to say. Yeah, I mean, me included, I had never thought that we would get to this kind of a situation where, um, We, we have, we, we are at, um, we are, we see a war in, in, in, on Europe territory. And, um, and if it then comes to the fact that we seriously need to think about being able to self-defend ourselves, then you start to make up the mess. So what has, what has been achieved? What did we do with, with the, in the ministries of defense? And some numbers are very misleading. So, for example, everybody says, yeah, but Russia has the capacity or the economic power of something between Portugal and Spain. But in terms of purchase power parity, they're spending more on defense than the entire NATO member states. And there are, for me, these kind of things happen gradually, more with facts of observation. So, for me, it was not or still very difficult to see that an entire continent is depending on Yeah, availability of internet if Elon Musk with Starlink has a good day, and if he has a bad day, he shuts it down, and this is basically what, what defines an availability of a certain technology. I think for a continent, this is too poor. There needs to be a consistent strategy how we basically level ourselves up in terms of, of, of our capacity there.

AI assessment note: “in terms of purchase power parity, they're spending more on defense than the entire NATO”

Q Does Germany and the UK have significant munitions to defend itself today? Do you think?

A The ammunition is, is a cruel one, yeah. So, so the, the, the, the numbers I have from the military is like four days in Germany and UK and five in France, which is 25% more, but it doesn't make a difference. Um, and there are other effects which are just mind-boggling. So, for example, that with the new hypersonics, if they have a warhead, the reaction time of any The US president is 12 minutes. Before, when the rockets weren't that fast, you had a way higher reaction time. So basically, there are a new, yeah, there's a new reality that, that forces us to think more technologically about it. Or the other example which I found very, very, uh, surprising, to say the least, is, um, even if you buy US fighter jets, Yeah. So the way how it works is you are the owner. It stands somewhere in the hangar, and you want to, you know, start flying. You have to put it in the way where, where you want to fly, and then this data is sent to the US, and if they like it, the machine starts. If not, it doesn't start. So this is not exactly how a sovereign, um, how a sovereign, uh, spirit works, I would guess.

AI assessment note: “numbers I have from the military is like four days in Germany and UK”

Q Will we have nationalized or, uh, kind of continentalized Security winners. And what I mean by that is, Andro wins the US, Helsing wins Europe, because you have this sovereignty of provider. Is that what will happen?

A There's, this will have a very big influence, yeah. So that's why I, for example, also believe that some, the player like an ESA Aerospace, Yeah, is a, is a perfect situation for sovereignty investing. So, you do, the space will be a very, very big opportunity, and a very crucial technology, um, ecosystem to, to co-own, so to say. And, um, think about it like the Starlink. So, Starlink, if it can connect to a mobile device like Apple, theoretically, the entire European telco industry would be obsolete. So, and if suddenly the self-driving cars are more dependent on low orbit satellites, do you think that in the competition between Tesla and the European car industry, we would have easy access to the Starlink? And even if we wanted to have our own constellation, would we have easy priority on the transport on SpaceX into low orbit? So these are very, very fundamental technologies where we either left out or we have a very stringent plan how we get into those.

AI assessment note: “There's, this will have a very big influence, yeah.”

Q What do you find the hardest thing that we have to embrace as we think about spending the hundred billion effectively?

A Well, you have to reinvent an ecosystem, and an ecosystem that basically hasn't ever worked together. So, there are very few startups that ever worked with primes. There are very, very few startups that have worked with the MODs, and vice versa. So, this has all to be, um, so reinvented. Everybody has to get to know each other. Everybody has to develop a certain level of trust. And the interesting Way, what I'm currently thinking is how does this, um, ecosystem develop? What is the, the mature market? Is it a little bit like the pharma industry? Because the pharma industry, if you think about innovators, they are basically a gigantic organization if it comes to distribution and regulation, but not invention. So, a big prime as Moloch in distributing because they have I have years and years of lobbying into the MODs, and they're pretty good at regulation, because if you want to sell something, you need to fill out 800 pages of what do I know, and they all have that, and startups will never have that to some extent, only the big ones like the Helsings and the Androids. So, the question is, how many of the startups become sizable companies and become a prime in their own sense, or Will we have a market like a pharma market where you have basically a lot of innovation that gets, um, accelerated through the corporation with, with primes?

AI assessment note: “you have to reinvent an ecosystem, and an ecosystem that basically hasn't ever worked together.”

Q Do the capital requirements fundamentally change, and does venture as a product need to change to fit this changing landscape? If you think about Helsing's first round or Angelo's first round, I don't have the data, but I would imagine it is significantly more than a traditional seed or pre-seed round.

A Look, of course, and not only if it's a pre-seed or pre-seed round, it's also, if you think the process through, has to be To some extent also at the gross capital stage, because if the gross capital is always provided from the US, then basically you are abolishing your own sovereignty at that stage already again, because then you have the influence in the boards, which then comes from the big investors, which might have at some point a, yeah, um, a different interest than as if it was a European one. Um, so it's interesting to see, um, and the examples we have in, in the US are Might not be a hundred percent transferable to, to Europe, because the US defense budget has like, 14% R&D, which translates into ninety-four billion own R&D a year, which is, ah, allotant, which is proprietary findings that then finds its way. In Europe, it's four percent, and so nine billion. So, the necessity, when it comes to embracing innovation, um, To cooperate with the VC world and VC-financed innovation is way, way higher in, in Europe than it is in the U.S.

AI assessment note: “Look, of course, and not only if it's a pre-seed or pre-seed round”

Q health, and you actually led the investment in NECO, which is, I've spoke to Shaq, obviously, before and Daniel before. Can you just talk to me, why, why did you have such conviction on NECO? Because I remember when you did that deal, actually, Klaus, and you moved so fast. Just talk to me about that, and how you came to move so fast on it when other people didn't.

A So I, I think this is the, the entrepreneurial spirit, yeah, and basically it's a little bit the spirit that, yeah, we can take very fast decisions in the organization, but I was on my way to, to Munich at that day, and I, I was discussing with Daniel for long, yeah, if he ever wanted to open it up, and, um, so if he, um, felt like he wanted to open it to investors, and at that At that moment then, I said, okay. He said, like, Klaus, I, I think I should open it up. I'm contemplating. I said, all good, all good. So I changed the direction and didn't fly to Munich. I flew to Stockholm. I was two hours later in Stockholm, had my scan, went through everything, and I issued the term sheet the same evening. Yeah, so, um, so the, the, and sometimes this has to do with, with total uncorrelated experiences you have. So I'm regularly going to Lanzerhof, which is a clinic in Germany where you have, like, precautionary examinations, and they talk with you about how important it is to have it in certain intervals, so not only have you all the parameters of your blood, but you also have it over the period of time, so you can see it. So I basically was subconsciously trained for a situation like with NECO, where you had the same phenomenon with, um, With, with, um, the, the moles, the skin examination, also with the blood, uh, so that you have it over a certain period of time. And everything …

AI assessment note: “I basically was subconsciously trained for a situation like with NECO”

Q What do you find the hardest thing that we have to embrace as we think about spending the hundred billion effectively?

A Well, you have to reinvent an ecosystem, and an ecosystem that basically hasn't ever worked together. So, there are very few startups that ever worked with primes. There are very, very few startups that have worked with the MODs, and vice versa. So, this has all to be, um, so reinvented. Everybody has to get to know each other. Everybody has to develop a certain level of trust. And the interesting Way, what I'm currently thinking is how does this, um, ecosystem develop? What is the, the mature market? Is it a little bit like the pharma industry? Because the pharma industry, if you think about innovators, they are basically a gigantic organization if it comes to distribution and regulation, but not invention. So, a big prime as Moloch in distributing because they have I have years and years of lobbying into the MODs, and they're pretty good at regulation, because if you want to sell something, you need to fill out 800 pages of what do I know, and they all have that, and startups will never have that to some extent, only the big ones like the Helsings and the Androids. So, the question is, how many of the startups become sizable companies and become a prime in their own sense, or Will we have a market like a pharma market where you have basically a lot of innovation that gets, um, accelerated through the corporation with, with primes?

AI assessment note: “you have to reinvent an ecosystem, and an ecosystem that basically hasn't ever worked together”

Q way, like a wise elder adventure that I can learn from. And the challenge that I have, though, is on the founder side, we've seen the industry so transactionalized where founders say, Klaus, I want Lake Star, thank you, but I'm deciding on Friday, and you have a much shorter time to build a relationship, to build conviction in a founder. How do you embrace and feel about that transactionalization?

A So, first of all, I do not get involved in a lot of companies. Yeah, so, and I'm totally fine, um, if, uh, a founder rejects it for, for some reason, because Yeah, there's young, and in most cases young, and there are a lot of new things coming to him at the same time, and it's very difficult to get them into a certain chronology. And, um, at the end, I made a, might have also made a bad job in, in promoting what I, um, what, what I can contribute. So, on the flip side, for me, it is way more satisfying to see that Those top entrepreneurs that I've backed, I've always, when they did the second, um, the second business, I was always allowed to be one of the leading investors, be it with the SumUp or with Nico or with, with other businesses.

AI assessment note: “I'm totally fine, um, if, uh, a founder rejects it for, for some reason”

Q way, like a wise elder adventure that I can learn from. And the challenge that I have, though, is on the founder side, we've seen the industry so transactionalized where founders say, Klaus, I want Lake Star, thank you, but I'm deciding on Friday, and you have a much shorter time to build a relationship, to build conviction in a founder. How do you embrace and feel about that transactionalization?

A So, first of all, I do not get involved in a lot of companies. Yeah, so, and I'm totally fine, um, if, uh, a founder rejects it for, for some reason, because Yeah, there's young, and in most cases young, and there are a lot of new things coming to him at the same time, and it's very difficult to get them into a certain chronology. And, um, at the end, I made a, might have also made a bad job in, in promoting what I, um, what, what I can contribute. So, on the flip side, for me, it is way more satisfying to see that Those top entrepreneurs that I've backed, I've always, when they did the second, um, the second business, I was always allowed to be one of the leading investors, be it with the SumUp or with Nico or with, with other businesses.

AI assessment note: “I do not get involved in a lot of companies. Yeah, so, and I'm totally fine”

Q with being, in this case, defense. Specifically, when we spoke before, and when I had a founder, actually, of Andrew on the show before, he was fascinating. He was like, no, no, no, defense is not a category. You can't build a portfolio around defense. Really, the Andrew of X is just Andrew. Do you agree that it is not a large enough category to build a venture portfolio around?

A No, I don't. Yeah. Um, so it, it, it, it, it's not, it is. It will become anyways. Yeah. So at, look at my famous quote always is when Uber started in, um, in San Francisco, people said, but the taxi market is only two hundred fifty million, and today Uber's revenue in San Francisco is six hundred million. So, and if you do the math on, on, um, on, on defense, which we can do a little bit later, you will see that's massive Money coming into it, creating this market, and creating a lot of opportunities there. But at the same time, I'm not so keen of building portfolios. If I find cool companies that make a difference, that is where the beef is. And if you have one or two of them, every portfolio looks great. Yeah, and we, there's a lot of things you don't know about the market, and we have to work Very much in building the ecosystem, hence my willingness and drive to, to serve as a chairman of the NATO Innovation Fund to exactly build this ecosystem.

AI assessment note: “No, I don't. Yeah. Um, so it, it, it, it, it's not, it is.”

Q Wow. What are the biggest ways that we could make mistakes?

A So, this is a trust thing, and if, um, there's this very fragile situation now that you have to sell into the MOTs, you have to break the procurement processes as they are, and if you, if Protagonists get into the game that just do it because it's easy or they perceive it's easy to raise a fund in defense and then become active. Yeah. There might be a risk that this fragile trust level there, um, is, is, um, is jeopardized. So I think we do need to, it's very important at the beginning. We are very serious and very sober and honest players in that field so that we We do not lose that. There's this beginning trust thing.

AI assessment note: “There might be a risk that this fragile trust level there, um, is, is, um, is jeopardized.”

Q Will we have nationalized or, uh, kind of continentalized Security winners. And what I mean by that is, Andro wins the US, Helsing wins Europe, because you have this sovereignty of provider. Is that what will happen?

A There's, this will have a very big influence, yeah. So that's why I, for example, also believe that some, the player like an ESA Aerospace, Yeah, is a, is a perfect situation for sovereignty investing. So, you do, the space will be a very, very big opportunity, and a very crucial technology, um, ecosystem to, to co-own, so to say. And, um, think about it like the Starlink. So, Starlink, if it can connect to a mobile device like Apple, theoretically, the entire European telco industry would be obsolete. So, and if suddenly the self-driving cars are more dependent on low orbit satellites, do you think that in the competition between Tesla and the European car industry, we would have easy access to the Starlink? And even if we wanted to have our own constellation, would we have easy priority on the transport on SpaceX into low orbit? So these are very, very fundamental technologies where we either left out or we have a very stringent plan how we get into those.

AI assessment note: “There's, this will have a very big influence, yeah.”

Q Amazing companies there. Sadly, it can't be all winners, and, you know, sometimes we make the wrong decision. When you think about your biggest loss, what was your biggest loss, and how did that shape your mindset?

A It's also a mentality thing, yeah. So I come from that area in Germany called Cologne, Bonn, and Dusseldorf, who are Very easygoing people. So they have like a little bit like, I would say they're like the Dalai Lama. Sometimes it's good if you get what you want and something is good when you don't get what you, what you want. And, um, I have felt that in many, a lot of, a lot of cases, even if you don't get what you want, it turns out well and it's for a good reason. Yeah. So I still remember, yeah, being son of a farmer, I didn't have a clue about Anything what I want to do in life, and that didn't so much change after, uh, my studies. So I thought, no, that'd be cool to be in, as Goldman or McKinsey or BCG or Monk Stanley, and I applied several times everywhere, but they never wanted to give me a job. So, um, there are, so kudos to their smart H&R departments, because I would have been a terrible employee. Uh, but, so, it was clearly not what I wanted, but in hindsight, it was, Yeah. The savior of my life. Yeah. So otherwise it would have been way worse. And it's the same with, um, um, with, with companies. So my, my biggest, uh, um, yeah, nightmare, I wouldn't say, but at that time it was a pretty nightmare, was a company called Wunderloop, where basically I worked with a friend of mine, like three, three and a half years, just to lose 60% of my wealth. Yeah. And, um, and, …

AI assessment note: “Wunderloop, where basically I worked with a friend... just to lose 60% of my wealth”

Q Amazing companies there. Sadly, it can't be all winners, and, you know, sometimes we make the wrong decision. When you think about your biggest loss, what was your biggest loss, and how did that shape your mindset?

A It's also a mentality thing, yeah. So I come from that area in Germany called Cologne, Bonn, and Dusseldorf, who are Very easygoing people. So they have like a little bit like, I would say they're like the Dalai Lama. Sometimes it's good if you get what you want and something is good when you don't get what you, what you want. And, um, I have felt that in many, a lot of, a lot of cases, even if you don't get what you want, it turns out well and it's for a good reason. Yeah. So I still remember, yeah, being son of a farmer, I didn't have a clue about Anything what I want to do in life, and that didn't so much change after, uh, my studies. So I thought, no, that'd be cool to be in, as Goldman or McKinsey or BCG or Monk Stanley, and I applied several times everywhere, but they never wanted to give me a job. So, um, there are, so kudos to their smart H&R departments, because I would have been a terrible employee. Uh, but, so, it was clearly not what I wanted, but in hindsight, it was, Yeah. The savior of my life. Yeah. So otherwise it would have been way worse. And it's the same with, um, um, with, with companies. So my, my biggest, uh, um, yeah, nightmare, I wouldn't say, but at that time it was a pretty nightmare, was a company called Wunderloop, where basically I worked with a friend of mine, like three, three and a half years, just to lose 60% of my wealth. Yeah. And, um, and, …

AI assessment note: “was a company called Wunderloop, where basically I worked... to lose 60% of my wealth”