Where innovation happens
episode summary [full transcript below]
This special episode is all about regional innovation — at both a systems and people level.
We cover what does and doesn’t work in making certain places become hubs of innovation and economic growth (aka “innovation ecosystems”). But we also discuss — going back and forth between the structural and individual — when to intervene for entrepreneurial talent; the nature of ambition, yearning, and finding one’s path; and more broadly, mindsets for navigating risk/reward and dynamism in different regions including London and Europe. We also discuss new ways of funding breakthrough R&D at a national level, tech trends of interest including crypto, and much more.
Our special guest — in conversation with editor in chief Sonal Chokshi, who also brought him to the a16z Podcast over 8 years ago in its first-ever UK roadshow in December 2015 — is Matt Clifford, who’s played an important role in the London entrepreneurial and tech ecosystem since 2011. Matt is the Chair of Entrepreneur First (which he co-founded with Alice Bentinck over a decade ago); and is also the Chair of the UK’s Advanced Research and Invention Agency (ARIA). [Before this episode was recorded, Matt was also the Prime Minister’s representative for the AI Safety Summit — which he helped organize at Bletchley Park (the historic home of computing in the UK); after this episode was recorded, Matt was appointed by the UK secretary of science to deliver an “AI Opportunities Action Plan” to the UK government, which was just announced last week.]
Fittingly, this episode was recorded live from Andreessen Horowitz’s first international office, in London; for more on our efforts there, and other content from there, please visit a16zcrypto.com/uk.
As a reminder: None of the following should be taken as investment, legal, business, or tax advice; please see a16z.com/disclosures for more important information — including a link to a list of our investments.
transcript of the full conversation
- Welcome to “web3 with a16z”, I’m Sonal Chokshi, and today’s episode is all about innovation around the world – at both a systems-, and at a people-, level.
- So, we discuss not only what does and doesn’t work in making certain places become hubs of innovation, and economic growth… But also discuss: what makes entrepreneurial talent; the nature of ambition and helping people find their path; and more broadly, navigating risk / reward/ and dynamism in different regions including London and Europe.
- My special guest is Matt Clifford, who’s played an important role in the London entrepreneurial ecosystem — I had Matt on the OG a16z Podcast back in 2015, so we also discuss what’s changed since then to now — as well as: new ways of funding breakthrough R&D, tech trends of interest, and more.
- For more context:
- Matt is the Chair of Entrepreneur First (which he co-founded with Alice Bentinck over a decade ago);
- He’s also the Chair of the UK’s Advanced Research and Invention Agency (or ARIA);
- And, before this episode was recorded, Matt was also the Prime Minister’s representative for the AI Safety Summit — which he helped organize at Bletchley Park (the historic home of computing in the UK)
- And then after this episode was recorded Matt was appointed by the UK secretary of science to deliver an “AI Opportunities Action Plan” to the UK government (this was just announced a few days ago)
- Anyway: it’s all fitting and exciting, because *we* recorded this episode live from Andreessen Horowitz’s first international office, in London — which we opened late last year — for more on our efforts, and other content from and about there, go to a16zcrypto.com/uk.
- As a reminder: None of the following should be taken as investment, legal, business, or tax advice; please see a16z.com/disclosures for more important information — including a link to a list of our investments.
- Now, on to the episode:
Sonal: Matt, welcome.
Matt: It is great to be here; it’s good to be back. We were just saying…
Sonal: Yes!!… I was about to say, you- we did a podcast together. You were on this podcast on our last London roadshow, which was 2015!! <Matt: yah> — and you were one of -that was the very first time we met in person!
Matt: It was, it was. I mean we’ve been going a while now, and what we’ll probably talk about is how the London ecosystem has grown; -But our initial thesis — which-which we remain very dedicated to, is — the world’s missing out on some of its best founders.
In Silicon Valley, <Sonal: yah> if you’re ambitious and smart, it’s the most obvious thing in the world to start a company. <Sonal: right!> In Europe, that’s still not true!
If you go around Oxford or Cambridge or Imperial College — or any of these great universities — and you say like, you know, what do the smartest, most ambitious people want to do? — Yah, more and more, it’s on the agenda; but it’s still probably banking… consulting… <Sonal: yahh> you know, big companies?
Sonal: I don’t know how you describe EF or Entrepreneur First, as an org?
Matt: We call-call ourselves…the thing we’ve landed on after a long thought of iteration is we’re a talent investor. We invest in people <Sonal: Talent investor… ahhh!> — before they have companies — and help them go through that like zero-to-one journey. We’re taking people who, purely on the basis of who they are, <yah> we think we want to make a bet on.
Sonal: I like that you’re saying that you’re a talent investor; I mean VCs and other — any, actually, creatives; anyone — would say that’s their job <Matt: right> is investing in talent. And that’s an art, not a science. So,
Matt: Yeah, yah. Well I know that Marc and Ben have taken a lot of inspiration <yah> in building your firm from talent agencies.
Sonal: Yes the CAA, that was inspired by Michael Ovitz; <Matt: yah… exactly> he was an advisor early on.
Matt: And-and we have a sort of similar view that almost like the world’s most talented, ambitious people need sort of agents. <yah> I mean like that’s not quite how we frame it–
Sonal: It’s really fascinating because you said you’re not an agency; neither are we… Because actually, the model — obviously was talent-focused, but it was more about a network <mm> and network of networks — which is how we used to think a little bit; I mean, I don’t know if that was ever formally how it was described, but at least from my perspective, I used to think of a16z when I joined in the early days — which is now a decade ago, <crazy> — as a network of networks. <Yah>
And that was where the Ovitz model came in, which is: How do you sort of, you know, kind of give back — like continue cultivating talent — so in that way, growing people even before they want the thing or even helping them, so it’s not transactional.
Matt: Exactly; a lot of what we talk about is our team’s job is to go out and find extraordinary people… <Sonal: yah> who are still figuring out what to do with their lives.
My co-founder Alice and I, you know we started our careers as management consultants. We were at McKinsey, and, in many ways it was a really great experience. But if you say like Why did you end up there? <Sonal: No, heck no!> <laughs> it wasn’t because, at six years old, I was running around the kitchen being like, “Mommy, mommy, I want to be a management consultant.” It was the path. <Sonal: That’s right> It was what people did in whatever it was, 2008, when I graduated.
And so, you know, our view was if you really want to move the needle on like increasing the supply of great founders, you can’t wait for them to figure out that like, that’s the obvious path — you have to create a path, <Sonal: yah> and that’s what Entrepreneur First has been about from the beginning.
One of the things that we think about a lot is like the nature of ambition… <Sonal: mmm!> and how it’s very culturally determined.
Sonal: Ooh! let’s talk about that…
Matt: Well what I mean by that is it’s not like all ambitious people have the same… like, vision of how to realize their ambition, you know like — <Sonal: that’s absolutely true> And so, you know, it would be the craziest thing in the world to try and force people to be entrepreneurs.
But we have quite a big team now around the world, and they go out and they find people who are clearly extraordinarily talented but at the very start of their journey — we typically focus on people early in their career, sometimes like you know, while they’re at university or equivalent — And you know their job, yes, obviously, is to help them think about startups and, if they want to build a startup, bring them into our community and help them do that; But their job is not to push where it’s not right. It’s to genuinely be almost like a career… counselor, like a, like an actual, someone whose interest is shared with the person.
And so, one of the things that we believe — if you like our theory of change — is that if you can actually intervene at a point where people are trying to figure out like, wh-How do I have this talent? <Yes> How do I maximize my impact in the world? — and you can show them this path of entrepreneurship and show what’s possible — then actually that will increase the supply of great founders, and then great companies in the world.
Sonal: So I do want to pick up a little bit on two threads — One, about this-what you said about the nature of ambition, something you think about a lot; but also what you said about this culturally determined aspect of it — and that, to me, suggests some of the structural context/ the surrounding context that supports entrepreneurship. Beyond the individual.
So let’s split it up into the people, and then the surrounding <Matt: Yah… yah> kind of content and ecosystem.
So, on the surrounding context and ecosystem: One kind of obvious thing…this is something we talked about a lot — In the early days, in the a16z podcast, I recorded a lot of episodes with, like, Iranian entrepreneurs and various people around the world, and it was really fascinating how the risk tolerance is very different culturally in different regions. <yah> And one thing that I think, it’s so cliché, but it is true for a reason, is unique about Silicon Valley is there is a tremendous tolerance — I don’t want to say the word “failure”, because I hate veering into failure porn; <Matt: Yah, I totally agree> I think that’s the wrong way to… It’s, like, actually… — <Matt: Failure sucks, always> — Well, I hate when people are, like, “Failure Friday”, and failure this — Like, yes, of course, normalize talking about it, recovering, repairing, but don’t, like, glorify failure for god’s sake; everyone wants to succeed.
But what’s really interesting about it is that there is, like, this forgiveness and recovery and resilience that — whereas in certain cultural regions and areas, there’s almost, like, a punishment or a feeling of self-hatred if you don’t succeed. This is even beyond individual level; I’m talking about like culturally.
Matt: No, totally. So I think there’s two things: One is attitudes to failure. But I think it’s also what is valued? What is esteemed?
I mean like the really special thing about Silicon Valley is this idea that if you’re in Silicon Valley and if you tell- you tell someone you’re a founder, that immediately has a set of connotations <Sonal: You’re right> that are almost exclusively positive <Sonal: yes>, is very legible. People know what you mean. People can read that as a sign that you are ambitious. <Sonal: That’s right>
When we started Entrepreneur First, there was this slight sense that if you said you were a founder… that was a euphemism for you were unemployed. <Yah> And so actually, I think the cultural meaning of entrepreneurship is one of the biggest sources of leverage you have, just like making it like: This is a thing that smart, capable, ambitious people do; and it’s a vehicle for changing the world. It’s- it’s such a powerful idea.
And to give you a really concrete example — because I think like from the UK and the U.S., similar enough systems that it really resonates, but: — you know, the first international office we opened was in Singapore.
And, in Singapore, the #1 career path for the smartest, most ambitious people is to go be a civil servant. As a result, the government of Singapore is probably one of the most effective and efficient.
Sonal: That’s so interesting. <Yah!> I didn’t know that. It’s actually the opposite in so many other places.
Matt: I’ve just been serving in government; actually, the people have been amazing! But I would say, like:
As a result, the cultural value of entrepreneurship in Singapore, it’s just been very…I think it’s been harder there to sort of create this sense that like, if you say you’re a founder, you’re doing something that’s as like legitimate, as prestigious, as your friends that have gone off to be, you know-
Sonal: Yes! We should talk for a second about why entrepreneurship for a minute, because it seems like an obvious thing. Like what are we talking about; this is a show, a startup focus — we’re both startup-focused cultures. But actually, it’s not obvious.
Matt: It’s not obvious.
Sonal: I mean, if I were telling a policymaker — I think they know this, but like: The reality is startups represent innovation. They’re an engine of growth. They create jobs.
They’re create- they’re generative. They’re not extractive. They’re not just taking the stable what you already have, that’s established. They set you up for the future.
I mean, there’s so many…there’s layers and layers of why this matters, so just to kind of hit on that; But to your point — so I have to ask you this then — I don’t want to be stereotypical, but of course, there’s going to be some generalizations just to kind of understand this – But:
My impression of London — I’m born and raised in the United States, but my grandparents settled in London; this is in the ’70s, before I was born — And the impression I got from- culturally is that there’s kind of, like — I don’t want to say classist, but very much a credentialist society: Like, you care very much about what school you went to. And I think that could be true in some ways in Silicon Valley, but, people kind of don’t really care what school you went to… or what you did… Would you say that is true today? Do you think that’s evolving? And I’m bringing this up because you mentioned this point about what value <yah> that certain words and these concepts signal. So, I’m curious for your perspective there.
Matt: You know, I- one of the essays that I wrote when we’re early on in EF that was trying to talk to this, that I called “Don’t Be a Badge Collector”.
I think I probably wrote that around the time I was first on the podcast, <yah> but I think it’s held up pretty well. And what I was saying is like, I think there is a cultural temptation (let’s call it), in the UK to be like, I’m going to work really hard to get into the best university I can, so I can get the best graduate job I can…
And one of the biggest risks for smart people, I think, is that you get into a mode where success is measured by whether you make your boss look good. And their success is measured by whether they make their boss look good and seeing, like all the way up, what you’re actually doing.
To your point about, you know, you mentioned, like, startups are a positive-sum game. There’s a risk in a lot of career tracks that – that, I’m not saying you’re not creating value, but your actual goal is to win the upward political battle within whatever bureaucratic structure you’re in, right? (When I say political, I mean small “p” — I mean, this can be in big corporates or it can be in, you know, whatever.) –
I think what’s beautiful about startups — and the reason, you know, I’ve spent more or less my entire career helping people build them — is that they’re ultimately all about what you can do for other people.
Sonal: That’s… fantastic way of framing it!
Matt: You only succeed if you build something that is so valuable that someone else will pay for it. <Yesss> You cannot win in any other way. There is no boss to make it look good. There is no like grading scheme that some teacher is going to tell you got an A on. <yes!>
It comes down to this very start thing: Did you do something for someone else that they thought was so great they wrote you a check?
Sonal: That’s right. And it is not people-pleasing, because often, you’re going against established convention. <Matt: Absolutely> You’re often butting your head or punching through an industry that is not accepting a new way of doing things. <Matt: Absolutely> (I’m just thinking of my former partner, Martin Casado, and the enterprise team, when he was doing, software-defined networking; he was punching against very established old-school methods for what networking looked like — that was very hardware-based. And so it’s like, you have to literally punch, like, you’re completely going against all conventions.
Matt: The bar is so high to actually prove that that value is <yes, yes> … And do you think-I sometimes think one of the challenges we face today is that if you are smart and ambitious, it’s now so easy (in some senses) to find a comfortable path — that is about making your boss look good all the way through a career and acquiring money and influence and prestige but actually maybe never really doing something that creates an enormous amount of value. You know, like…
Sonal: I mean, now that you say it, it seems SO obvious — but it’s really not. Like, just to pause on the idea: When you’re doing a startup, you’re building something that other people want and need. That’s a really profound idea.
On that note: It’s also very fascinating because of the economics of startups, <Matt: mmm> Because usually, if you’re working for a company — you were talking about you and Alice being at McKinsey, consulting — people think they’re making good money… but you’re really captive to your salary. Actually, the wealth is not generative.
And one thing that I think is really powerful about startups is that startups are the ones that innovated on the idea that employees can have a share of the returns on the work they do. So even though you might be building a product for customers and consumers that people want, if you succeed — you know, it can also go to nothing; obviously, that’s a very real risk — But if you succeed… there can be very real gains for the people who put things in, especially for those that took a risk early on.
I don’t know how the options and the economics work in UK startups — but that is, I think, a defining feature of Silicon Valley in the early days. <Absolutely>
And so I just wanted to point that out because it’s actually resonant to what you said about not only pleasing people and being captive — but you’re also helping other people and then actually creating value for the employees too. They’re always increasing the size of the pie — for everyone — in some form. So I mean not to be cliché, but that’s very true.
Matt: You know, in a way I think there’s a really important sort of ethical point here, which is: That founders, yeah, they can make a lot of money, but they only get to capture value that they create. <Sonal: That’s right.> And I think that that is actually a really important idea.
And I find, again, we focus mainly on people early in their career when we’re working with founders, <mhm> and I just think that idea really resonates with people. Yeah, of course, they would like to be successful, but they want to do it within a framework where they feel they create something.
Sonal: Of course! <yah> I mean, otherwise, it’s just gambling and —
Matt: — Or extraction.
Sonal: Extraction, exactly. It’s like value-add versus value extraction, <yah> exactly.
You know, it’s funny though because it’s also…you know, I’m not going to get political- at all political, but just in terms of capitalism, stakeholders, people having a voice, and empowerment:
I saw this list, it periodically makes its round on Twitter, of people — the most wealthy families, in Europe — And that list of the top five has not changed over centuries. <yah> Which is crazy because that just means it’s generational wealth passing along. Whereas in the United States, that list is (I mean, granted it’s younger country) but at the same time, the list is changing constantly! The top 10 wealthy people, the top 5 wealthy people.
And again, it’s not about the money — I don’t want to make that the focus — but just pointing out that when you think of this dynamism? <Matt: yah> — This thing that a culture can change, be advanced, add new value, startups can be generative;
It’s just really interesting to me because a lot of those people are startup-made; <totally> like most of those people are not access to old money.
Matt: Right. And you know, I think again, not wanting to be political, but you know actually the thing that I think is nonpartisan, and everyone can agree on is that, actually, the thing we need is positive-sum games. <Sonal: Oh, 100%> You know the thing, like different people have different views on how we tax wealth…
But the bit that everyone can agree on is: If people — what we want to reward in society, is people that are creating valuable things. We don’t want to reward extraction. And one of the beautiful things about startups is they can’t extract; they’ve got to create! And I just think there’s just something very valuable about that and very powerful that actually I see people across the political spectrum sort of kind of getting behind.
Sonal: Yeah, I agree.
On this note, though — we’re talking about the structural context right now, before we move to the individual — so let’s add a little rigor to the what does “ecosystem” mean, because I know that can be very buzzword;
I’ve studied entrepreneurial ecosystems for a very long time, covered them for a very long time, as you know — and including like interviewing all these different people throughout the world who are experts in this, like, what an ecosystem means — and a couple of themes emerge:
One, you obviously need talent. You need really strong universities and research ecosystem. You also need, for the people that hate to admit this, government support.
So the other thing is, there’s a really important balance between top-down and bottom-up. <totally>
And on the bottom-up side: You obviously need communities of entrepreneurs, because there have been, as you know, many experiments, including planned cities, planned innovations, like, where people are trying to do these centrally planned top-down innovation initiatives, <yah>… They never work. Ever. There have been many, many, many over the years, and not one has worked. (Some argue Singapore; that’s a different, unique, complex case. And I don’t know if it’s as “entrepreneurial.” It’s a successful nation-state, <right> but that’s a separate thing.)
So that’s one aspect.
Secondly, on the top-down side, you obviously need enabling conditions, like respect for property — like, in the U.S., we talk about respect for property rights. It can include respect for intellectual property. It can include support such as funding, like DARPA in the United States, which funded the internet, things like that… Supportive pro-innovation policies.
And then, so the bottom-up side is the community, the top-down; and then, obviously, the talent that comes in the form of universities, because universities are drivers of research and innovation.
So now on your point about the science and technology side, talk to me about what you think is happening uniquely in London, because we’re sitting here.
Matt: Yeah, yeah so I mean, so you mentioned DARPA. My sort of side hustle outside Entrepreneurs First is I’m the non-executive chair of ARIA, which is a new government-backed, well, government-funded R&D funding agency. It’s based on DARPA, basically.
Sonal: What does ARIA stand for?
Matt: ARIA stands for the Advanced Research and Invention Agency. <Sonal: I know what you’re talking about, okay, yeah.> So it’s been given (I guess in U.S. terms), about a billion dollars to basically fund breakthrough R&D that might otherwise not get funded.
So really trying to take some of what worked at DARPA — in particular, this idea of this program manager-led model… <yes yes yes> Empowering brilliant scientists with visions to just go out and build the networks and coalitions of researchers to realize that vision in a way that’s all about, <that’s right> actually, a lot of things we’ve already been talking about: It’s about ambition, it’s about incentives, <yup> it’s about alignment, all these things.
And one of the things that’s been really striking to me in sort of roughly a year that we’ve been um up and running is:
1) Just the depth of the scientific talent — across the whole UK, so not just London or not just Oxford and Cambridge, but truly across the whole country.
2) It’s almost like too strong a word but, like, the yearning for something like this. <wow!>
Well, when you look at why does ARIA need to exist, we do a ton of great science in the UK, — and actually, I’m lucky to have been involved in a lot of the science funding organizations that exist — But I think one of the challenges is that with scale… comes a sort of more bureaucratic approach, right? <yes> And so if you’re trying to run science funding for a whole country, of course you need to show value for money for taxpayers, and you need to sort of have a lot of process.
But the consequence of that — and it’s not a UK thing, this is a global thing — and people like Patrick Collison and others have written about, the challenges of where science has got to — I think of it as a career/ ambition/ incentive problem. So if you go talk to incredible postdocs across the UK, across the U.S., and you say, “What’s your most ambitious idea?” And they tell you. And then you say, “Cool. And so you’re working on that?” They’re like, “No.” You’re like, “Why not?” And they’re like, “Well, because I need to get this next publication, which needs to get this many citations, <yah> because then I’ll be able to get my next grant. And if I do that, then one day, I’ll be able in 10 years to get my own lab.” And then… you’re like, Wow, this is crazy.
We have some of the greatest minds of their generation playing a bit like the making-your-boss-look-good game. This is the making-the-grantmakers-happy game.
Sonal: That’s exactly the same thing. I’m so glad you brought that up because this is important. So I want to break down a little bit more about what you’re saying because, you know, a lot of people have tried different forms of how to fund R&D <yah> and do it in a way — and industrial R&D is what you’re talking about — and in a way, that’s efficient and a lot of lessons learned here, which I think are fascinating.
So one, you mentioned the concept of a program manager. <yah> For those that don’t know, like, DARPA had this famous model where they had program managers. And it’s quite fascinating because like one example is Regina George, you know, <yah> and she went to Google later on. But I remember being at Xerox PARC when her group funded (and this is public), advanced manufacturing initiative <right> and reconfiguring manufacturing and all these different things.
And there’s so many different interesting things about it because, one, first of all, many of these initiatives can be very multidisciplinary; which universities are not well set up to do, where people are very siloed in their departments. <totally> And so having these grants can sometimes be like kind of these umbrellas for different disciplines to come together — including across multiple universities.
Matt: Yeah. I was gonna say multiple universities, and sometimes even different sectors. So, like, universities and startups <That’s right. That’s right> and nonprofits or whatever. Yeah.
Sonal: That’s right… Totally. One example was, back in the day, we did content-centric networking. It was various types of things. So that’s one interesting thing.
The second thing — this is a very little-known fact that people don’t know about this model, is…and I remember being fascinated by this when I was working with my colleagues, helping them out with some stuff at SRI, who were thinking about this — which is Stanford Research International, and they’re very famous for getting lots of research grants and different things — It’s fascinating, because most people, when they think of government funding and program managers, they think of it as being this one-way model <mm> where: Government gives money, program manager allocates it, someone has a strong point of view, and it goes A, B, C, D.
It’s actually much more nonlinear and interactive than that, <yah> — where you actually have smart scientists informing the program managers for what proposals they want to see. Because actually, the word in the grant-making business is: If you’re bidding on an RFP (request for proposal), by the time it comes out, you’re too late. <right> You should be shaping what proposals are coming out in the first place. And that is a two-way dialogue between the government <Absolutely> and universities.
Matt: And that’s a big part of how ARIA is working and planning to work, which is to say — but hopefully in an extremely transparent way — Here is an area that we’re excited about where we think there is a thesis. Before we make grants, before we do an RFP, we want to workshop this with people that have a really broad range of views on it so that we know what are the things we should be looking out for? You know what I mean?
Again, there’s a risk of a cliché here, but so much of the challenge of this stuff is you don’t know what you don’t know. <Sonal: That’s exactly right> Particularly across disciplinary boundaries.
There’s a lot of academic literature that suggests that surprise is the key to scientific breakthrough. Surprise comes when you have a different knowledge base or perspective–.
Sonal: Oh yeah, yeah. At Xerox PARC, JSB (who’s John Seely Brown, used to manage it back in the day), used to always say it’s at the interstitials, <Matt: 100%> at the edges, and these kind of in-between industries.
I mean, I do think that surprise or serendipity is very important, but I want to be careful that we don’t glorify innovation as this “aha, eureka!” moment when it’s many little things <yah… totally> that can come together incrementally.
And I actually think — but tell me if I’m wrong — when you say “surprise”, you also mean this emergent quality <that’s exactly> that you don’t know what you said, you don’t know what you don’t know, and it can actually come up bottom-up because you’re not top-down saying… Like, you can say, we know this is an interesting area. You may even have a loose hypothesis/ thesis — but you don’t have it so opinionated and targeted that you’re literally veering into central planning, which is where I would say places like China fail!
Matt: Totally. When I’m talking about surprise, I’m talking about almost exclusively a bottom-up phenomenon. <yes… yes> Like what happens when the biologist talks to the computer scientist about a problem that has roughly the same contours, and they never realized before the biologist? You know, and then you’re like, Oh, and that can be an incredibly productive thing.
Sonal: You’re preaching to the choir because whenever I used to give tours — that wasn’t my job, but because I was the head of editorial at PARC — I did give like these muckety-mucks <right> the tours every now and then –
And it was funny because one of the messages…it’s so true because they had always ask, like: How did this one place — not just once, not a one-hit-wonder — repeatedly create one innovation? And we’re talking world-changing innovations, Ethernet. <Matt: Absolutely… absolutely> I can’t even say… the GUI… there was endless lists of things that they did — lasers. And the big part of it had to do with this multidisciplinary thing <100%> and putting them in the same thing.
But here’s the other thing that people don’t know — and this ties to what we’re talking about — It wasn’t just you put a bunch of smart people from different disciplines in one building, and go, Hey, collaborate. — The founder of Xerox PARC gave them a mission. And the mission was: to build the office of the future.
It’s a very simple mission — broad enough to enable all kinds of innovation; yet specific enough to provide a funnel so it’s not like crazy town where people are like Oh, I want to build a sneaker that rolls down the hallways, and I can skate through the blah blah blah. You know. <chuckles>
Matt: Yah, yah, totally, 100%. I think that idea of mission, I mean, that’s the other bit that, you know, Ilan, our CEO at ARIA, has… I think one of the reasons I’m so happy he’s doing that job is that — just the sense of mission he has about what we’re trying to do. It’s just so palpable.
Sonal: That’s powerful. How did ARIA come about? Did the government approach you guys, did you guys approach the government; how did this come about?
Matt: Oh, yeah, the government created this by Act of Parliament early in 2022 <mhm> and then ran an open process to hire a CEO and a chair.
And you know, I had been — probably, well, mainly because of the work I’ve been doing at EF — I’d been very interested in this idea of like, how do you do institutional innovation? — Because, you know, as you say, talent investing is a bit weird; it’s not the same as VC. — So you know I’ve always been interested in this, like: How do you do institutional innovation to increase the supply of-of things that you want? <yah>
And in a way, EF is trying to increase the supply of great founders. ARIA is trying to increase the supply of scientific breakthroughs <mhm> through this sort of institutional innovation. And so you know I wss, I just applied. And um slightly to my surprise, I got the job. <Sonal: I’m not surprised> I mean, Ilan was based over near home for you; he was in Berkeley, and he was running this incredible thing called the Activate fellowship <yah> — which is a-sort of deep- deep tech entrepreneurs out of academia.
Sonal: What I think is very fascinating about you being involved, is the other part of having these — when you said their goal was to increase the number of scientific breakthroughs — The other half of it is, how do you then actually take those breakthroughs and make something of them.
Because as you know, there’s no shortage of brilliant ideas and things coming out, but, there has to be a system <Matt: 100%> that can absorb and help support and nurture it. And so I think it’s fascinating that you’re involved because then it’s also wait, you don’t only have to go through this classic linear model of university funding X — you may also be able to do a startup; you may collaborate with a big company; you could go here; a big company can acquire the patent … There’s such a variety.
Matt: Yeah. It’s interesting that you landed on that because I would say probably the most important structural strategic question we’ve had to answer for ARIA so far is: Who’s the customer? <oh> So if you think about DARPA, the D is defense. <that’s right> It’s pretty important. They’ve done a good job of doing this sort of bottom-up side of it, but there is a big like <Sonal: There is a top-down, yeah> They are building things that the Department of Defense ultimately has to- .
Sonal: I mean, the internet was originally invented to be resilient in the case of a disaster. <Matt: …disaster> Right. Of course, it became something else. As is the case, but yeah.
Matt: Yeah. And we are We are ARIA. Not DARIA. We don’t have a big customer.
And that was a big, important decision, not to be…we are of government, but we’re very independent of it. We’re, what we call in the UK, a non-departmental public body, which basically means we’re outside government. <Got it> And so the question that Ilan rightly asked right at the beginning is, we’re not going to have a customer, what is the exit path? We find something great. <Riiigt> What do we do with it?
And the answer — probably not surprising, given that they appointed an entrepreneur as CEO, an entrepreneur as chair — is we think the answer is scientific entrepreneurship;
And Ilan’s answer to this is we need to make sure that the interface between ARIA and the ecosystem — the entrepreneurial ecosystem — is really porous in both directions.
Sonal: I agree. Both directions is the keyword.
I love that you guys say “scientific entrepreneurship” because our tagline (I’ve said this publicly in talks), our two-word phrase at Xerox PARC was “entrepreneurial scientists” <right, right> — so scientists who are entrepreneurial but are not actually starting startups, <yes>
And they have this kind of entrepreneurial mindset: There’s a reason they’re not in academia. There’s a reason they’re not in industry. They’re in between. They’re a really unique interface. So I think that’s fascinating.
We don’t have to talk about this right now, but just one other quick-quick note is: It’s also important to make sure process doesn’t get in the way. Because one piece I edited was Patrick Hsu and Tyler Cowen on the Fast Grants… And, one key insight — and this obviously came out of the pandemic — is that sometimes you also have to deploy capital quickly. And sometimes, government process — and there’s a good reason for it — can get in the way of doing that, from allocating funding.
Matt: I mean, that’s been like, that’s been core to how we think about this — how do we get out of the way? And, you know one of the reasons I think DARPA has succeeded is there’s very few veto points. <yah yup yup> It’s not like you have to get 20 people to say yes. <yah> And we do something very similar at Aria. You know, you, the program directors have to convince Ilan, <mhm… yup> basically.
And you know, my job as the chair of the board is to scrutinize the whole — but not get into the weeds, not be another veto point.
Sonal: That’s fantastic, I’m glad you guys are aware of that.
So now: Let’s shift back to the individual; <yah> we’ve talked about the structural. You said something incredibly fascinating earlier, which is how you’re obsessed with ambition and this question of ambition… You also said another really beautiful, profound, powerful word, which is “yearning” — this idea that people have this yearning.
And the reason that struck me is because when you talk about how you guys are actually trying to support people early in the pipeline to become entrepreneurs — and know that’s a path for them — what really struck me is it’s fascinating that you even have to do that, that we should even have to do that culturally and societally?
Because if you really think about it: Children are born creative, and are born entrepreneurial, you know, X, Y, and Z, or “Let’s trade on the school thing. Let’s trade lunches. I’ll give you two pretzels for one KitKat,” — whatever it is. It’s commerce. Sometimes it’s about building things together on the playground.
So I think there’s something kind of sad that people lose that… impetus. And one question I have for you from your unique vantage point, at Entrepreneur First, is:
When you say you try to get people early, What is a sweet spot when you say earlier in their career; is it right as they’re in their high school, college, like?
Matt: In London, we have two tracks, and actually the same in Paris — so we operate in London, in Paris, in Bangalore, and in New York —
And the two tracks we have is: We have a track for people as they graduate from university. <Sonal: Yup> And then we have a track for people in (we don’t put a hard limit on it, but you know) the first five years of their career; so you know, they’ve got a little bit of work experience but not much. <Oh, got it> I think those two moments are quite special moments — as well as yearning and ambition; another word we think about a lot is becoming.
Sonal: Oh, becoming. Look at you, I love it!
Matt: As, well, as I’m very influenced by my colleague, Arnaud Schenk, who’s a brilliant guy who runs a program for us called Polaris.
Sonal: Oh I love him. He’s on our- chat group with us,.
Matt: Yeah, he is. Yeah, exactly. Exactly. And-and he… <Sonal: And Saloni and some others> He’s really convinced me of this — that ambitious people have a sense of who they want to become, but often less of a sense of how.
Sonal: Ah, so they know who but not how.
Matt: And so a big part of EF’s role is to try and help people become the person they want to be.
Ambitious people have a sense of who they want to become, but often less of a sense of how.
Sonal: That’s so interesting. So Marc used to always say in the early days, when people would ask him, like — there are three pulls for a startup: It’s product, it’s market, it’s people.
And he would always say that people is the one you bet on the most, because:
Product can change, market can change (and that can actually sometimes be a lagging versus a leading indicator) — <Matt: yah> but people are where you can really find that sort of, you know, true north, that sort of cutting forward, which; that differential that you’re looking for in that kind of a business. It’s really interesting.
So what I like about what you’re saying — because my question, you’ve answered it, is very precise, which is: At what point do you kind of intervene, so to speak? <Matt: yah… yah> And what you’re saying is by doing it in college and the early five years of their first job, that is the how. <Matt: It is the how> Because they have a sense of what.
Because my argument was going to be, like, why not do it sooner? <Matt: I mean– > Like crypto, for instance, we’re actually seeing highschoolers, <yah, yah> they’re obsessed. Like, they want to learn. <Yup, yup> And it’s not for financial reasons. It’s building. It’s creativity. It’s, like, expression.
Matt: Yah we are, we’re the same. We want to engage with people early. The thing that keeps it very grounded is that — it’s really about what is the community, what is the infrastructure — that you can provide to people that helps them figure this out for themselves.
You know we’re not a cult; we’re not trying to tell them who to become. But it’s like, how can we- how can we sort of provide a peer group that makes people say: Actually, I don’t want to be a banker. I don’t want to go be <Sonal: yah> working a 100000-person Big Tech company… And now I’ve found my people: I’ve found the people that not only validate that- that sense, but actually can help me get there.
Sonal: You also need, like, support if you’re struggling with trying to figure something out because you’re not alone!
Matt: And it’s the feeling that your choices are-are valid. I mean, sounds so basic, but, there’s so much to figure out right.
Sonal: Right. Because you don’t have the structure of, like, a classic top-down company, the bottom-up thing. <yah>
The other quick thing is that this reminds me again of childhood development, because there’s a body of work that says that it’s not the parents, it’s nature-nurture debates — but it’s actually the peer group that defines your development the most. (This is a very controversial and very important body of work from Judith Harris in like, the aughts. And it was a very, um, important movement in child psychology and development.)
…So just on this note, so as you do this work, and we were talking about how hard it is to have like this-this, this you know when to harness people’s ambition — are there any icons you think that people need? Because in the U.S., “The Social Network” movie was a moment. < Matt: I think it made a huge difference> Right. Like, the Zucks. Because the other thing is this capital gap early on, where people can get angel funding but not like the next phase — I would argue that’s a similar thing in the talent game for building a company where you can find like the early employees, but not the people who can scale it.
Matt: I think that’s still a gap.
Sonal: That’s still a gap there?
Matt: I think it’s closing, but it’s closing more slowly, <Sonal: yah… yah… yah> — because it just takes longer because you need those companies to, to mature and exist.
But you know, I think this is also why this like idea of… ambition should be global from day one, like — Yes, we want this to be a great ecosystem in London, but we’re not nationalists!
Sonal: <chuckles> That’s a great point.
Matt: When I think about EF’s best companies, the ones that’s scaling fast, they’re the ones that have embraced having to be U.S. companies as well as British companies.
Sonal: Yes. I totally agree.
So, going back to the structural context before we go more into people, because I do want to drill with you on the talent side more — but, on the more structural ecosystem context – So:
You know, we talked, like, again, over seven years ago, very exciting. You’ve come a very long way — very proud of the work that you and Alice and your team have done at Entrepreneur First — but like you also have a unique vantage point, given your work into the London ecosystem and the tech ecosystem. So what are your views on what’s working/ what’s not working at a high level? And then, what’s really changed? <yah> I mean, think about it, it’s kind of fun that we’re doing this again after seven years.
Matt: It is. Well it’s so funny because um — and I think this is a thing that a lot of entrepreneurs wrestle with — I remember when we started, we were so convinced we were too late. We left our jobs in 2011, it took a little bit of iteration for EF to become what it is now. But I remember in 2011, we were like, Maybe this ecosystem is saturated. And just look back now, I’m like, I think there was like one organization describing itself as a seed fund. When we do demo days today, you know you get like, 2000 people.
So the ecosystem has grown massively.
And I think that’s true at like every layer of the stack if you… I think the talent, we already talked a little bit about how att-attitude as a young talent has changed. But also the proliferation of angel investors, seed funds.
And then the bit that I’m excited about more recently — and I guess this is… sort of you guys coming here and opening an office is a good example <yes!> — is that for a long long time, people talked about, like the capital gap in the UK ecosystem: Yeah, you could raise a seed round, maybe a series A, but you know, series B was really hard. <yess> And there’s a way to go — but both in terms of local firms growing up and kind of building reputations and track records — but also the sort of most famous and storied American firms <right> coming here, I think that’s a huge net positive for the ecosystem.
Sonal: Yes, so that’s more a difference of degree though than kind; <I agree> like, in terms of, you’re saying, there’s more investors, more capital available, more people doing things, more entrepreneurs — would you say there’s any differences in kind.
Matt: I think the difference in kind I would most point to — and it’s going to seem like I’m obsessed with this theme, but — is just about ambition.
Sonal: I love it. I love that obsession. I’m on board with that theme.
Matt: I remember, when we got started in 2011, one of the things we heard — and there were some really ambitious startups back then — In fact, I remember that when we recorded our podcast seven years ago (yah, whenever it was, eight years ago) <I think it wss 8 years ago, 9; who knows at this point!> — One of my fellow guests on that was Michelle Yu, who’s one of the founders of Songkick. Now, that was one of the first, like, real first-generation London startups and was super ambitious, but they were unusual. Most 2011 London startups arguably were sort of trying to get bought.
Sonal: That’s right, that was the exit strategy, not to grow big, and get massive slowly.
Matt: Yeah. And that’s not a criticism of those founders. I think it’s a lot about what sort of ambition will the ecosystem support. <Sonal: That’s right> And so the difference of kind I would point out is that I think we now have people who are truly trying to build the global category winner from London, from the UK. <yes!>
Now, we’re not there yet. It’s amazing what Daniel has done with Spotify. <yes> In general, we’re still at the end. There are some really extraordinary European success stories, but you know I think they’re still — we’re still sort of pointing to things that happened a little while ago.
I do get the sense — and maybe crypto is an area where this might happen — where you know you, I do think that 10 years from now we’ll look back and say, you know, the early 2020s was actually a pretty special time… to build globally ambitious companies from Europe.
Sonal: I’m so glad you brought up crypto because when I think of crypto — this goes back to the earlier point about the positive-sum game and the incentives — It’s really about incentive mechanisms and incentive alignment. And that’s actually the beautiful thing about crypto is it bakes these things in structurally; so there’s a lot of ways to align different parties of people together to build things. So I kind of agree with you that this could be a very unique time.
Matt: Well I think one of the exciting things about crypto — from a geographic perspective — is that it is, it sort of like, natively global. It’s not one of those things where you look to a domestic market and then expand. <Sonal: That’s exactly right>
And when I think about two of the crypto companies that we’ve invested in together ( Andreesen Horowitz and Entrepreneur First) — Gensyn and Aztec — I think what you see is these are people trying to build infrastructure for a different world, <yes!> But they’re not building it for London or the UK or for Europe… it is inherently global, <yes> in ambition.
Sonal: We had MC Lader, COO of Uniswap, on [this podcast], and she was saying how this is a really unique type of product launch because you’re instantly global. <yah> Most other times, you used to have, like you’re saying, these regions, <yah… yah> you would land and expand in this market, then that market, grow in this market. It does not go that way.
Matt: I think it also plays to London’s strengths in a lot of ways, in that the other thing that I observed… — Now, we’ve been investing in crypto companies at EF for a long time, I think we started the London Bitcoin Meetup in 2014 or something with Imperial College. <Sonal: Oh you did?> One of the things — and I’m sure you’ve seen this with probably a better vantage point than almost anyone –
But, you know when you go through these hype cycles and then winters, it’s easy to get discouraged. But one thing that I find so exciting and moving from a talent investor point of view is when I look at like, what are the investments we’ve made in founders that build in this space that have worked. They’re actually all- ALL the ones that were just trying to fundamentally build real technology.
Sonal: Ah! Interesting. As opposed to?
Matt: Well, what I mean is, like, I think, at the height of a boom, you do get a lot of froth. <yah> And I have to say, like, some of that felt pretty extractive, you know. <Sonal: Yeah. Of course, it did. Yeah> But I look at Gensyn, I look at Aztec, and I’m like, these are engineering-led companies, <Sonal: oh- > You know they’re building incredibly hard products — and that’s what gives them the right to win. <Yes>
And I do think Europe is not that good or hasn’t been that good at the hype, frankly. In some categories, hype helps a lot… But what I’m really excited about is like, I think one of the things that we are really good at in London, in the UK: Is like, science and technology. You know, actually doing hard engineering tasks.
And I think that for me, when I think about the future of crypto, I think like we just still need a lot of fundamental new technology… to make this work.
Sonal: This is why I’m in the space; this is actually a big reason why I came to the crypto team full time, because of our R&D, and research and development side — it’s SO technological, the depth, that expertise — For those inside, it’s phenomenally engineering-focused, and I love <Absolutely> that kind of building.
And I agree with you; there is, as you said, there’s always a frothiness in every cycle, and that’s okay, because sometimes that creates the buzz that then brings the people that then… <Matt: it crowns in talent, it crowns in capital> Right. And then the few people stay through every cycle and more and more people build. And we’re in a phase right now where the building and the product, the things that are happening are phenomenal.
So, my last question for you is, what would you say — given that this is art, not a science; but I’m going to make it a little scientific for a moment — are the qualities that you see that make someone a good entrepreneur. Or what, what kind of- in your talent game, like what is the quote “formula” or filter that you use?
Matt: I don’t think there was a formula… but I think that being exceptional is more of a habit than sometimes we admit. <Sonal: yah> And… what I look for — I mean, if I’m interviewing a 21-year-old who’s like never worked anywhere, <Sonal: yah> — and what I’m always asking is: what have they done?
However unrelated to starting a startup. That they had to do on their own volition — without anyone telling them — <yes!> where they went above and beyond… <Sonal yup> and something happened. Like that idea of agency in the world <That’s powerful>, I think, is probably the single most important thing.
Sonal: I think that’s a fantastic note to end on. It’s ambition, yearning, becoming.
And, I love the line you said about ambition is global — ‘cause we’re here in the UK; I’m from Silicon Valley; but we’re talking about a global phenomenon. Thank you so much for joining this episode, Matt… It’s so great to have you back.
Matt: Thanks so much for having me again… It’s great to be here.