Andreas Schwarzenbrunner

This transcript was generated automatically (YouTube auto-captions) and then edited for readability: names and obvious mis-hearings corrected, filler words removed, speaker labels added where the speaker is clear. Passages that could not be understood are marked [unclear]; short omitted passages are marked [...]. Timestamps are approximate. The recording is the authoritative version.

Julius Ambrosius 00:00:13

Hello and welcome to a new episode of Campus To Capital. Today, Konstantin and myself are joined by Andreas Schwarzenbrunner, general partner at Speedinvest. Yeah. One of the powerhouses behind Europe's most ambitious early stage ventures. Hello, Andreas.

Andreas Schwarzenbrunner

Hey, pleasure to meet you guys. Thanks for having me.

Konstantin Girst 00:00:31

Yeah. Hey Andreas, also a warm welcome from my side, and let's get right into it. So, you did a bachelor's in business at the University of Economics in Vienna. And during that time I saw that you were an economic policy adviser for the Austrian Parliament, which I thought is really, really interesting, because I think in the worlds of finance and private markets and venture, having an insight from a political angle, from a regulation side angle, I think is quite unique, but I think it's fairly valuable in my eyes and really interesting, honestly. And could you maybe talk about what you took from that experience and what information that provided you with that you still amplify today when you look at potential investments and in your day-to-day operations?

Andreas Schwarzenbrunner 00:01:17

Yeah, I had to do [unclear]. So, as you said, actually aside economics [unclear], and my goal was always to work in politics and, or, policy, which for some people is the same, but it's actually very, very different in the way you work, in the way you operate. I was always very engaged in politics from a young age. So when I was 15 years, roughly, I took engage in politics, did a lot of other things that are not on my LinkedIn, because you mentioned the policy advisor role, but there have been a few other things that are not on my LinkedIn that I worked on in politics. And then during my studies actually my goal was either to, I don't know, work for the European Commission or the European Central Bank, that would have been actually my ideal goal, go down that route. Also thought about maybe going down the PhD route and then really do something in public service. Then I had the opportunity when I was actually quite young to work for a politician in the Austrian Parliament. So did a few different things for the Austrian Parliament and also in Parles [unclear]. And yeah, that was the first touch point where I actually was involved in the day-to-day work, so to say. I was writing speeches. I was preparing memos. I was preparing meetings. And then from a parliamentary assistant, so to say, cutting off [unclear]

00:02:47

as a policy advisor focusing on economic policies. My main tasks back then were actually financial markets. Well, it was the big time of the Euro crisis, after Greece and Spain, Portugal, Ireland, etc. was in 2009, 2010. After that, the whole Euro crisis unfolded and that was my main task actually back then. Because the way the European Stability Mechanism works, that was actually introduced back then after the Euro crisis, or during the Euro crisis, is that it needs to be approved by the different member states. And that was the committee I was working on, for European Stability Mechanism, financial markets. And yeah, it was, I would say, intellectually quite interesting, especially a lot of insights in what was really happening behind the scenes versus what was reported in news when it came to all the discussions back then, especially around Greece. And yeah, so that was my touch point in policy and politics, and the reason I left, because I assume that is the next question, is that I realized it actually doesn't really fit my personality type. I like when things move fast. I would say a very entrepreneurial person,

00:04:17

quite a risk taker, and a few things that, politics is the exact opposite, right? It was very slow moving, it was very bureaucratic. I was producing tons of paper that no one ever read, and that is also a bit frustrating because you feel like, okay, what did I actually get done today? It's very vague, and in the end decisions are made by elected politicians, no matter if they have any idea about how the European Stability Mechanism works, right? Because that's how democracy works. They are elected to decide on things, and all those things were actually quite frustrating. And I also told myself back then, whenever I go back to politics one day, maybe then only as an elected politician, because that's where you can really try things. And yeah, and all my friends went into the tech and startup bubble, because it was the first big wave at the same time of startups in Berlin, Rocket Internet. The first founders, so to say, and startup success stories, and their world sounded very different than mine. It was lots of young people, very international. They had office parties every Friday. Berlin was famous back then for the sentence "poor but sexy". And that's how I got in touch with the startup ecosystem, and realized

00:05:48

okay, maybe that fits much better to my personality and to the things that I'm interested in.

Host

Well, I think, despite the vague and not as fast-paced environment, I'm sure this regulatory experience is surely very, very valuable for your career today and also for this episode actually, because I think we have a lot to talk about on the European perspective in venture and also about tech regulations in Europe. But you talked about why you left. Could you maybe also tell us why you actually were initially interested in policy regulations?

Andreas Schwarzenbrunner

Yeah, I mean, to your point, it's funny, because I would say the first almost 10 years in my VC career no one bothered about my interest or background in politics, and now since a year or two it has completely changed. Policy is much more part of the debate also in our industry than it used to be. Why I was interested in politics: I still think it's the most meaningful work you can do. Might be people who disagree, but I think that the power of things that you can drive and change are at such a gigantic scale that hardly any business, I don't say no business, there are businesses at that scale, but hardly any business has. Even if, let's say, I come from Austria, which is a very small country, right, but even if you change

00:07:18

minor things in Austria, let's say the pension scheme, we're talking about hundreds of billions, right? And the dimensions that politics has are unseen in the private market, in the private sector often, and also the impact it has on so many people in their day-to-day life. And I think if you really, and it's an essential part of the way we live and the way we live together and the way we organize our society and the way we organize business and the way our lives work, and I think that's actually also really fulfilling if you really get stuff done, and yeah, that actually still excites me. I mean, I think this world of venture realized it now the last few years, and we see it, for example, let's take the whole energy space, right? As an example, there was this big wave of solar startups, heat pumps was really cool the last few years. All the companies around that, from HVAC to also companies around the energy grid, and how business models evolve around the higher penetration of renewable energy. All those topics are purely policy driven. And then people argue that, yeah, but it's also because it's getting much cheaper and so on. Yeah, but why is it actually getting cheaper, right? I mean, the big wave in heat pumps was

00:08:48

driven by subsidies. And that is all government incentives, government policy that was actually driving the energy market and still is. The energy market is an extremely highly regulated industry where you just cannot do stuff. Everything is regulated. If you want to be part of the grid, if you want to build, I don't know, a power plant, all those things are super complex. Even as a private individual, when you put solar on your rooftop, it is complex. And I think there are many other industries where you can feel that this is actually important. You could argue in Europe that sometimes it is too important, or probably it is too important, and we should regulate less. That is, I think, the other side of the equation.

Host 00:09:38

No, definitely, I do agree. Also if you look at the, yeah, automotive and EV industry, you clearly see that there's just a lot of influence. But I mean, during your career you have had the opportunity to work across Europe. I mean, you've worked in Munich, now in Vienna, and I think you also worked in the Nordics, in Stockholm. So based on that journey, what do you think does Europe still underestimate about itself when it comes to entrepreneurship and building and, maybe more importantly, also retaining both companies?

Andreas Schwarzenbrunner 00:10:14

I actually live in Paris now. I'm originally from, I live in Paris, and yeah, Stockholm as well. So pure European cities and European countries. And I think the thing that we underestimate the most is that we have everything it needs. So we have strong universities. We are strong in R&D. We're still a powerhouse of innovation in a lot of industries. People always talk about tech and software, but there are tons of other industries as well, from life science to pharma to, you named automotive, there are many other industries where Europe is actually world leading. Robotics is also a very good example, where we have actually a lot of expertise. We still have a lot of very successful companies. Often they are not publicly listed, or a lot of privately owned businesses, but they are still very successful on a global scale in very innovative fields. And we still do have a lot of money. I mean, people often underestimate, I think, how rich Europe still is, right? We are sitting on tons of assets, right? I mean, Europe is still a very rich continent, and if you look at the, I don't know, top 10, 20 countries in terms of GDP, but also if you look at GDP per head and if you look at other dimensions and assets and so on, there's always Europe as part of that, right? And the only problem we have is that we are not channeling

00:11:44

those assets and that capital into the right segment, so to say, to really also have a prosperous future and invest in growth. But I think what we underestimate is really all those things, that we are much better than we sometimes think we are in many of those dimensions. And we don't really need to hide. I don't think that we need to hide. We can be way more confident. One thing to add, I think what we also underestimate, and this is, I think, even a lot of people within Europe and also politicians have not fully understood, is actually the power of the single market, right? If you really close all the barriers, or if you get rid of all the barriers that still exist within the European Union, the single market within the EU would be the most powerful economic zone globally, and that has still so much potential, right? There was this famous report that everyone talked about last year, it was already last year, and the one thing he said, if there's one thing we should just get going, is close the single market and really make it one common single market, because that would be the biggest driver of growth in Europe.

Host 00:12:57

I want to say that I definitely agree, and I think this would also be a great opportunity to retain talent in Europe as well. I mean, we're seeing it right now, that a lot of talent is coming to Europe. I mean, a lot is going to the UK, but especially in Sweden. We see that Sweden becomes, yeah, basically a startup fabric. And you personally, you're very excited about industrial tech and sectors like construction, energy, as you also said, verticals many would maybe call slow moving, but construction, for example, is a multi-trillion per year industry. I saw that you posted a couple of years ago that it composes 10% of Europe's GDP, but it has suffered stagnant productivity. So could you maybe explain to us what makes these industrial sectors compelling for venture capital right now?

Andreas Schwarzenbrunner

I think you already gave the answer to some extent. Because the main reason is because they're just very big, huge markets, at least Trump will say [unclear], if you especially look at energy, if you look at construction. Real estate is also the biggest emitter of CO2 emissions in Europe, is the biggest sector in terms of employment. The biggest contributor of GDP

00:14:27

in Europe is construction, real estate, and also logistics is a massive industry. So there are many industries that I would say are more old economy, traditional industries, that are just very big, and also especially in some European markets, let's say France or Germany as an example, there's still a very strong industrial base. You still have a lot of companies in automotive, in machinery and in all those segments. And this is also the second reason why I'm actually quite bullish on those sectors: we also have a lot of know-how, and in those sectors we also often have a lot more know-how than our global peers, the Americans or in Asia, and I think this is also where we can play our strengths. So there are segments where we are just more competitive, and we not only have the experience and know-how, we also have the customers on the continent in those segments, and they're very big. I think those are two reasons, and the third is definitely that there is just a lot of potential for digitalization and productivity gains through technology, and that is also driven by the demographic change in Europe. Right? If you look at a lot of those sectors in, let's say, industrial or construction, or if you look at logistics, many of those jobs will need to be automated, not because it's only a question of technology, it's

00:15:57

also a question that there's no staff available, right? So it will be really, really hard for those businesses even to find the adequate staff in the future. That's why I think, let's say, automation, digitization is needed in order to, yeah, keep the level of prosperity we have in Europe, and at the same time also to really unlock the productivity gains, and that is, I think, for me three reasons why I like those industries a lot.

Host

Yeah. But when you look at industrial startups and their industries, I mean, it's not seldom the case that companies and startups that actually have exciting ideas or technologies fail, not because they have a bad product or a bad technology, but because of bad timing, because they're maybe ahead of their time. I mean, we had this a couple of years ago in the EV space, for example, with companies like Better Place, and I mean, if we would all know how to time the market and to time industries perfectly, we would have a lot less issues. So, and we don't know how to do the magic trick, but do you maybe have an opinion on this and maybe have an argument for why this happens and why we can't optimize for this issue?

Andreas Schwarzenbrunner 00:17:14

It's a very good question. I think, so there was one USC [unclear], I forgot the name, but he said: our job is not to predict the future but to see the present very clearly. So I think it's really hard, as you say, to say, you know, what's going to happen, because reality is no one knows, but there are signs in the market where you feel that there is momentum in a particular space. Let me pick one example. So automation in robotics, so really using more flexible software to reprogram a robot. So change specific tasks, was in the past extremely cumbersome. A few years ago, five, six, seven, eight years ago, you had the first big wave of robots that basically promised: we build software that allows a robot basically to change tasks without needing a full integrator or reprogramming of the robot, and so on, which is now, in the whole GenAI world, you have AI that actually can adapt to different use cases. And I think the promise back then, that you have a robot that can adapt to different situations, and let's say usually the robot picks, I don't know, a can here and puts it here, and to do something else, it would require to reprogram it. And then you have new software that allows you to, I don't know, this time the can is somewhere else and you need to put it somewhere else, and it can automatically do that.

00:18:44

And now with, let's say, AI, it's all getting a bit easier, also because you have more data points and computer vision, better data quality, etc. I think the promise back then was already very spot-on, and a lot of use cases and a lot of companies said, yeah, that's a use case I need, but I think two, three things were not ready. So first, I think technology was not ready, that this really worked seamlessly, also in terms of, let's say, computer vision, in terms of software, [unclear] in that sense as it is now was not a thing. And the second is a lot of customers, I think, were not ready. There were still a lot of question marks about the return on invest of those investments in robotics and so on. So I think a lot of things were just, the market was too early, but the proposal makes sense, and now, let's say six, seven years later, you see the exact same pitch, but you see very different signals. On the one hand it's easier on the technical level, that it works. On the other hand you see way more interest from customers and thought about use cases already. I think it's always important that the customer is already educated, they know what they want to solve with it, and it's just not like you put the technology out there and they're like, okay, what should we do with it? Now you have way more customers who know already what they want to do with it, and the question now is more, can they solve it with that solution or that solution and so on, but they know what the

00:20:14

use cases are. And I think that's always the risk that you have, is really that you are right in the market momentum, because you can invest early and in hindsight it made sense because the topic made sense, but it just never picks up and there's no customer need or customer demand, and I think that is super crucial. And how you identify these trends, I think it's really hard to say. I think you really need to just keep ears and eyes wide open to see what is happening on the market, and not only talk to VCs, you know, because we need to talk to customers, to really understand where they are in their journey, so to say. And the other thing, I think, that is also important: if you already have been wrong in the past, you also need to remind yourself that maybe now is the right time, because often investors have this problem that they invested in something and failed, and then they're like, okay, I don't want to invest in this again because that doesn't work. But maybe now it works, right? So you need to also be constantly aware that you maybe have a bias there and that maybe now the timing is very different and now the market is very different. But I think, yeah, momentum plays a really, really big role, that you are at the right place at the right time.

Host 00:21:39

And would you say that this shift is mainly caused by GenAI, that people become more tech adaptive also for other technologies, like robotics, for example?

Andreas Schwarzenbrunner 00:21:51

Not necessarily. I think there are a lot of other things that make it now, so to say, a useful technology, because if you look at the advancements in, let's say, sensor data and cameras and computer vision, there are many other things that are prerequisites, that all of this works, also hardware development and so on. If you stick to the robotics example, I think the only thing that has changed with GenAI is, yes, of course there are a lot of use cases that are potentially possible, but the other thing is also that the topic is so present that every company thinks about what they can do, right? So everyone is like, hey, what's our AI strategy? What are use cases we can look at? So there's a very different sense of urgency. I think that is definitely a big difference.

Konstantin Girst

Yeah, I think, I mean, there's also a general worry that people think they're going to miss out on the second industrial revolution if they don't adapt to GenAI at a rapid speed. And I mean, Julius and I are probably in a very advantageous position here, because, I mean, we're young. These technologies are given into our hands to play with. So I think we're at the forefront, but we're not in the positions to make the decision. So it's not necessarily, our generation will probably know how to work with these tools first and best, but we're not the ones to implement them and to decide on how to use them. So I think it's also very important to establish a certain connection there.

Andreas Schwarzenbrunner 00:23:20

I mean, I fully agree, and it's also a big problem, because if you ask you Bobby [unclear] if you would say that, I don't know, ChatGPT or other tools or Perplexity or whatever you use in your daily life makes your life easier, your answer would probably be yes.

Host

No,

00:23:33

definitely. Yeah, for sure.

Andreas Schwarzenbrunner 00:23:34

But the problem is, if you ask, you know, a 60-year-old CEO of an industrial company, probably not uses it, or maybe tried it out, but there often the feedback from the organization is still, yeah, the value add is limited. So there's a very different perception, I think, on what it really brings. And there's definitely, the younger generation has a very different view on that than the older generation, I think.

Host

Yeah, definitely. And I think we need to find a way to bridge the gap there somehow. And I mean, there are a lot of exciting things happening, and I think the rise is definitely there, but I think there's still a wall that needs to be overcome to come to a great optimal efficiency here.

Yeah. To go on to the Europe perspective. I mean, Europe is a great place. I mean, you're from Vienna. We live in Copenhagen, which are the two most livable cities on Earth. And also on the innovation side and on the company side, I'm probably, like you, very, very optimistic for Europe. I think there are great things happening. There are great fintech companies. We recently spoke to the CEO of Bitpanda. Then we also had the founder of a Danish neo broker that was backed by Y Combinator. So there are a lot of disruptive innovations happening, but that has not always been the case, that Europe is kind of approaching the forefront of innovation. And I know success does not happen overnight, but do you maybe have an idea

00:25:05

why you think that it's only now, over the past couple of years, that Europe is really also pushing in this area? Because before it clearly was, and maybe even still is, the US and some of Asia that is leading in bringing new fintech and technology innovations and firms up from the ground, basically.

Andreas Schwarzenbrunner 00:25:25

Yeah. First of all, slightly disagree with your view here, because I think what people always underestimate is that 100, 150 years ago we have been the true driver of innovation, right? If you look at everything from, I don't know, agriculture to automotive, there were so many things that have been developed in Europe and so many innovative companies that people still know until today. I mean, also if you look at Novo Nordisk in Denmark or if you look at, I don't know, Siemens in Germany, these are all companies that are 150 years old, that have been at the forefront of innovation for a very long time. I think what is true is that we have lost a bit this mojo, so to say, in the last 30, 40 years, especially in tech and software, and that is definitely true. So in the whole computer age we completely lost out, and there are hardly any big European tech companies, with a few exceptions, but I think this is definitely an area where we have lost out. Why do I think this is different now? I think first of all it's good timing. So the US tech ecosystem and Silicon Valley was formed in the 60s and 70s, right? And became big already in the 80s and 90s and was huge. And

00:26:55

you have now a generation of investors and also founders, so the first generation of them, they are 60 plus, right? So you have the second, the third, the fourth generation that even built two, three, four companies. So the whole ecosystem is just, you have investors that know how to invest in specific kinds of companies. You have founders who know how to scale a company. There are so many things, have been going through an IPO and so on. There are so many skills and areas of expertise that have been formed over the decades, and Europe just started very, very late. So I would say the last 15 years in specific was the first big wave of European venturing startups, and yeah, now you have the first generation of founders who do it the second time or third time, and you see the maturity in the ecosystem. Stockholm is a very good example, Berlin, London, Paris, etc., the pickups where you can see the level of maturity and also expertise is very different now, from founders but also from employees. I think this is also something that people forget about: you also need the right people that you can hire, who know how to scale a company from 10 to 100, from 100 to thousand, and those were skills that have been until recently only available in the US, because there are not that many examples in Europe where this happened. And I think now we have the first wave where we really create this flywheel that really creates also more and

00:28:25

more founders, and that also creates more and more successful companies. The second thing that has changed is the view of universities. At university, entrepreneurship was never really, so to say, a career path, and also professors were not incentivized on spinouts and spin-offs as they are in the US and so on. That has, for many universities, especially tech universities, changed. Also for students, entrepreneurship, by now starting a startup is a career choice, right? If you go to some unis, let's say ETH or Munich, that's probably the number one career choice, right? Probably everyone wants to start a company. And I think this is the second big driver, where it comes also bottom up, that you see that this is something people want to do, and that is also now socially accepted, right? People 15 years ago would probably have thought, if you told, I don't know, your mom that you now start a startup and not go into consulting, she would be like, what the... And now it's a career choice that I think is socially accepted, and that has also changed a lot. And the third is definitely that also the big corporates have woken up a bit, that they need to invest more in innovation and they need to invest more into the ecosystem with startups, etc. So I think there are a few trends that show that this is also permanent and not only, let's say, a short time change, but this is also, I think, a permanent change in the European ecosystem.

Host 00:29:56

Yeah. And you actually have a big stake in driving this shift, as you are a strong advocate of the Build in Europe initiative. So could you maybe explain to us what this initiative is really trying to solve at its core? I mean, we talked about it. Could you explain it a bit further?

Andreas Schwarzenbrunner 00:30:16

Yeah. So I think what we're trying to do is a bit, there are so many ideas around what the ecosystem needs or what should be done and so on, and especially around three areas: talent, capital and regulation. So what's the regulatory environment for startups? What's the whole capital and SCA [unclear], bridging the gap from startup to scale up? How do we finance more growth? How can we really work on a capital marketing [unclear] and better public markets, all those things, like better access to capital. And talent, like, as you said, one thing is what can we do to attract the best talent, but also how can we keep them, like, what is needed. And I think those three areas we wanted to look at together with really people from the ecosystem, and the goal is to really come up with concrete ideas, because I think one thing that I learned in politics is also that it's not enough to talk in headlines. If you really want to change things, you really need to have, let's say, concrete ideas. What does this really mean? And this usually must be as concrete as possible. Right? If you say to the European Commission, look, those are three things in that and that regulation that need to be adapted because that's a blocker, those are things that they can work with, right? Because that makes it very tangible. That makes it also very concrete for them, and then you can discuss it. But what does not bring you further is if you tell them, hey, we need more capital in Europe,

00:31:46

because that's so abstract. So what does this mean? And I think this is what we want to do, really concrete proposals on those three pillars, so to say, on a European level.

Host 00:31:59

And in this field of strengthening Europe, I mean, when we take a peek over the pond right now and look at what's happening in the US, with OpenAI fighting out bidding wars with companies like Apple to get top developers, I mean, this is a fight over talent between companies, but this also happens between countries, where we see people with great ideas or great skills going maybe over to the US as well, just because the environment there seems to be more beneficial or more friendly for their startup ideas. And in the perspective of strengthening Europe, how do you think can we successfully retain and maybe also attract top global tech talent to build and foster their ideas and companies in Europe?

Andreas Schwarzenbrunner

Yeah, I think on attracting them, I think the key prerequisite is already there. It's really nice to live here, and I think this is what helps already a lot. I think the second is really that, especially if you're a non-EU citizen, around visa, the whole bureaucracy is still very complicated, especially in a lot of countries, if you don't speak that language and you only speak English. A lot of those government processes, it's a really cumbersome process to get the visa, to do this in English, to go through all of that. I think that's one. The second part is really around taxation, around employee stock

00:33:29

options, all those things that are very different between member states, not as easy to manage also as a company, especially if you work in different geos. I think that's also one. The third is that you also need to have a community where, as an international, you feel welcome and you feel like you can basically plug into, and in a lot of European cities it's just not that easy, right? It's like London is easy, but many other European cities, I can say that from my own experience as an Austrian living in France, right? And I'm a European citizen. Even for me, it's not that they would be always happy that I'm here.

Host 00:34:18

Well, France is also known for that, right?

Andreas Schwarzenbrunner

It's

00:34:22

also a bit of a cliche, but of course it's the same in every country. It's just harder. And then we also need to make it easier for people to build a business, build a career. I think there are still many blockers. I mean, as I said, taxation is one, but also other, like, it's really hard also often to build a business here in Germany. I don't know, you need to go to the notary for everything, ESOP is really complex. There are so many things that are around building a business that are just easy in the US, and access to talent is also, if you build a business, having the right people there, what we said before. I think there are already more people in the US who know how to do that and so on. So this is now also slowly changing in Europe, but I think, yeah, there are a few areas where we can definitely do more. I think the problem is always a bit that if you look at labor law and if you look at taxation and if you look at ESOP and those topics, that is usually always managed on a country level, and that's why there is no European solution, which is also part of the problem, right? If you then move countries again within the EU, it's very complex and so on. So I think there are a lot of things we could solve more on a European-wide level than on a member state basis.

Host

Yeah.

00:35:49

Yeah. Hopefully this is a problem that can be solved because, as you said, TU Munich and ETH are great universities that attract talents from all over the world. I mean, probably also benefit a lot from the current political situation in the US. [...] [...] So I think Europe does have an advantage right now that we really have to use, and to keep the people in Europe after they study here, because I think that's the big threat, that they seek education at top universities in Europe and then just go back with all the knowledge that they got. So I think there's also maybe a responsibility for the universities, that they should not make education more expensive for talents outside of Europe, but I think there should be some kind of, I don't know, some kind of initiative from universities to make people stay after their studies. I don't know.

I think I actually see the risk on the other side, because I think it's rather that people study in Europe, get the education here, and they are from Europe, and then they want to go somewhere else, because I feel like, as you said earlier, people

00:37:19

come here because they like to live in Europe as well. I think maybe the threat is not that big on that side. Maybe it's rather that people come and then they want to stay in Europe because they like it here so much. I think in my eyes maybe it would be more interesting to make it more attractive to attract talent that actually has in mind staying, and not trying to keep people from leaving that want to go, maybe on the educational side. Later on in the career it's different.

Andreas Schwarzenbrunner 00:37:46

I think it's a bit of a question of where you are in your life, right? Because I always take this example: there are so many European founders in the US who are successful, right? And I mean, if you look at Shopify, if you look at Datadog and so on, all companies founded by Europeans, and Duolingo, right? And often if you ask successful entrepreneurs, or maybe they've exited the business, where do you want to live? Then they all want to live in Europe, right? So I'm also pretty sure, I don't know, that founders, once they're retiring, they're going to be back in Switzerland, and there's a reason for that. But there's also a reason why they left, and the reason why they left is, I think, that it is just not the best place in the world to build a career and build a business. And I think it's the best place to live, but it's not the best place to build a career in a business, and I think if we change those things, then we have a very powerful combination, because it's a good place to live, and if you also have the same opportunities, then why should anyone leave?

Host

Yeah, it's true. But I think, and we keep coming back to this, but one thing that I think Europe is actually strong in and that they're doing very well is clearing [unclear] on the regulation side and on the policy side. For example, in the digital payment space, I think the PSD2 is a very proactive and progressive regulation. And interestingly, it's

00:39:16

3 weeks from now, the AI Act will also be enforced, finally, after it was introduced last year. And I think that is not only a very democratic regulation act, I think it's also enhancing and also innovation friendly, in my eyes. And do you also agree? Do you think Europe is doing well in this, or do you also think Europe needs to do more on this side in order to encourage innovation here?

00:39:48

On the regulatory environment?

00:39:50

Yes.

Andreas Schwarzenbrunner 00:39:51

I don't think we should do more. I think we should do less. I think that we have the tendency a bit that we always try to come up with rules and the framework before we actually really understand the topic. I mean, AI is one, and the AI Act is a clear example of that, I think. We already tried to work on something where, when we discussed the act, there weren't even many solutions that people would use, right? So the world now looks very different, the world in two years will look very different. So the question is, do you really now build a framework that in two, three years is still going to be valid, or do you actually create a disadvantage for European companies? And I think the proof is in the pudding. I think it's really hard to say right now how this is going to pan out. I think for other areas, if you look at GDPR or if you look at other areas, I think it also made the world, especially for smaller businesses, extremely complex, because the only ones that really benefited were consulting firms and law firms who help you to implement it. And for the bigger ones, it was also a headache, but they have the resources to cope with it. But as a smaller firm, you often don't really have the resources and also the know-how to cope with all the different legalization. There are some areas, even healthcare, fintech,

00:41:22

etc., where it's even worse. And I think we create an environment that benefits the large ones versus the small ones. The EU actually wants to achieve exactly the opposite, but that's not what's happening, right? If you look at those regulations, it's easier for the large ones than the small ones, and the outcome is that, say, I don't know, you probably don't know that, but there's a rule in place that is called DORA, which is the Digital Operations Resilience Act, where financial services institutions in Europe need to basically prevet their vendors, and there are a few rules attached to that and how you do that. The outcome of that is, though, that there are many startups who just don't sell to financial services, because the hassle for them is so complex to really sell to a bank or whatever that they just don't do it. And this is exactly, I think, in a lot of areas, what's happening in Europe, that we create additional barriers, especially for smaller businesses, and I think this is not really fostering innovation.

Host

I think it's, in my eyes, because I think it's super relevant to protect infant industries and infant companies as well, but I think it's also kind of a tightrope act to a certain extent, in my eyes, because next to ensuring that they have enough room to grow, I

00:42:52

think it's also important that you kind of ensure that they will have sustainable business practices as well, right? So I think it's something that needs to be balanced in a certain way, and I guess I would probably agree with you that in a field that's still so dynamic, like AI, you probably need to have something in place, but then I think it needs to be able to be subject to change if needed and if necessary.

Andreas Schwarzenbrunner 00:43:16

Yeah. And the problem is a bit what I said at the very beginning about politics, right, and I need to be careful what I say, but I think the problem is also that this is in the end a political decision. That means you have a proposal by the Commission that is voted on in the Parliament, that maybe gets adapted along the way, but the decision is a political one, and I'm really curious how many AI experts are sitting in the Parliament, right? And maybe there are some, but there are definitely not a lot. And the same is true for the Commission. And I guarantee you, there are many that are voting on this that never even used ChatGPT. And that is the problem a bit with this decision making in politics, that you have limited understanding of the real life implications of such technologies, because the only thing they do is sitting in a meeting room with different stakeholders and everyone tells them their story, but it's really hard to grasp, and this is a bit, I think, the difficulty.

Host 00:44:35

I really like that we're kind of referring back to the starting point of the podcast, and kind of the zoom out we had today from the rather political perspective. But yeah, we talked a lot about regulation, regulation of AI, regulation in the whole startup and VC space, but maybe concretely talking about AI and what it really can do. I feel like we're past the hype phase. So where do you actually see AI driving real measurable value in the industrial sector today? So what use cases are no longer only theoretical?

Andreas Schwarzenbrunner 00:45:23

I think it's interesting that you say we're past the hype phase, because I think we're only at the beginning of the hype phase. I think this is just the start. I think there are many use cases. So, as I mentioned before, I think robotics is one. There are many things that are now doable, like reprogramming robots with the help of computer vision for different tasks, that can fully adapt to different environments, different use cases. Quality control, same, help of computer vision and AI to really automate quality control. Then there are of course many, many different back office processes where you already have agentic workflows, from, I don't know, procurement to logistics, where it's like, if the inventory is like that, then we order that, and that customer, or here book that on that customer account in our ERP, or that triggers, I don't know, a truck that picks up that. So I think there are so many use cases in, like, medium back office that can be done by agentic workflows, in procurement, in logistics, in payments, for those companies, etc. I think that is also one that we already see. And then there are also a lot of things on the factory floor, in

00:46:53

addition to, yeah, quality control and robotics, that really help automating production, from inventory management to different workflows that are handled by agents in different systems, so to say, triggering different workflows across the factory floor without a human in the loop. So there are some use cases that you see already, but I would say, compared to, let's say, topics like, I don't know, automating coding or automating customer support and so on, industry is for sure definitely still behind, but it's also way more complex in their setup.

00:47:40

Yeah. So that is definitely the area.

Host

Well, I think we're probably just at the start of the hockey stick curve, but I think it's going to be interesting to see when the AI and tech development is actually going to translate, and how it's going to translate, into real world benefits. But definitely, I think we are, from a society perspective and also from a venture capitalist perspective, at a very interesting point with a very exciting future outlook, because I think there's, I mean, yeah, as you earlier said, we can see the future, and maybe it's not even our job to try to predict the future, but I think there's definitely a very dynamic and interesting time of change ahead of us. And I also just wanted to say, I really enjoyed this conversation, because I think this was a very, very great ping-pong back and forth with sharing our opinions. So, thank you very, very much for this, Andreas. I enjoyed this very much. But I think in perspective of time, we should slowly be coming to an end. So, I wanted to thank you. And to our listeners also, I really hope you enjoyed this episode today. We'll be back in two weeks. And obviously, don't forget the usual. Check out our socials. Give our episodes a good rating. And also, if you're interested, because we didn't talk about this today very much, but if you're interested in the operations of Speedinvest, please also go and check out their website, check out the companies that they're working with. It's a very, very interesting environment. If you're curious about tech and new tech, so, yeah, go and give that

00:49:10

a go.

Andreas Schwarzenbrunner 00:49:11

And thanks a lot for having me. Super interesting question. I was already actually looking forward.

Host 00:49:18

Perfect. Thank you so much.