All right, Hemant Taneja, thank you very much for your time. CEO, General Catalyst. For those who don't know, you've invested in some of the biggest tech names that we can think of right now in terms of Stripe, Anduril, the defense company in the US, Helsing, which has been described as the European equivalent of Anduril, Snap, Grammarly, the list goes on, Anthropic, of course, the maker of the large language models that competes so fiercely with OpenAI. And so I want to start. There's a lot that we can talk about, given your position, the top at General Catalyst, and just how many deals you guys are making and you raised eight billion dollars for your latest fund last year. So you've got capital to deploy, but right now the news agenda is focused particularly in the financial markets on whether or not there is indeed an AI bubble. So I wanted to start there. Interestingly, in the last 12 hours or so, the CFO of OpenAI, Sarah Fry, has said she thinks there isn't enough exuberance when it comes to AI and its practical implications. You have the likes of Michael Burry who of course called the mortgage crisis in 2008, 2009 famously. He's put short bets on Palantir and he's put short bets on Nvidia, so he's bearish when it comes to this AI story. We're getting competing narratives. Where do you stand? Is there an AI bubble? And how do you navigate around it if there is one?
I'm actually curious. What does the crowd think? Raise your hands if you think it's a bubble. Less than I thought. Yeah. So look, I think my stance generally is that bubbles are a good thing because they mobilize capital and talent into important problems, important sectors. And I think we are in a really interesting time. There is a lot of capital going into technology. Broadly speaking, it presupposes a certain thesis of how fast AI is going to diffuse to actually recoup the investment on the capital that's being made. And you'll see some spectacular failures, but I do think the ones that are working are incredible. I mean, if you look at Anthropic with OpenAI, who would have thought that in a handful of years, you could actually truly create trillion dollar companies. That is going to happen. But at the same time, you're funding a lot of these research projects with billions of dollars today that don't have a commercial path going forward, and those may or may not work. So I think it's a nuanced situation where the overall returns are going to be really interesting but it's going to concentrate in a few companies on the other side of it.
And as we think about the question marks around an AI bubble, think about the spend on infrastructure and the deal making almost on a daily basis, announcement after announcement from the likes of OpenAI and NVIDIA investment of a hundred billion US dollars and OpenAI then uses their chips to deploy in data centers. They have a deal with AMD, OpenAI alone committing to $1.4 trillion of infrastructure, AI infrastructure investment, and that's just OpenAI, not to mention your friends at Anthropic. Do those kind of deals, and there have been accusations or at least skepticism suggesting that maybe there's some circularity to this financing, circular financing deals, does that concern you? How does that wash out?
So, circular financing happened in the internet days as well. If you go back and think about it, I do think that's happening. You know, if you look at OpenAI, it's an incredible company in many ways, changed the world forever. But it's a somewhere between 10 and 20 billion a year business that's talking about spending trillions of dollars that loses 10 or 20 billion dollars a year. So the scalability of that and how that's really going to happen presupposes significant growth of adoption of AI. And I don't think that's going to be just because they do that in consumer. It's also because we just think AI is going to diffuse through all the enterprise use cases. It's going to melt labor into productivity. And how fast that's going to happen is unclear. Although I would say we're going to look back and say 2025 was the year that diffusion of AI really started. We have lots of evidence on the ground with the companies we're backing. And if you didn't have that, then I think justifying the ROI on this large spend is very, very difficult. So I think in some ways we're betting on this workforce transformation, society-wide globally, to justify the ROI on the spend being done.
So 2025 is the year of diffusion and that helps
And that helps address the return on investment piece. When it comes to Europe, and we heard Tony Blair talking about his skepticism or at least saying Europe is well behind in this technological race, a lot of investors I speak to say Europe should focus on the application layer rather than the models, rather than the infrastructure. Are they right? Is that where the value occurs for Europe and the UK?
Look, I think Europe is certainly a contrarian market. We actually made a strong investment in Europe about three years ago. We acquired a venture capital firm here called La Famiglia with the idea that Europe will actually have its moment. And the backdrop here is we believe in this whole thesis around global resilience where every country is going to look for strategic autonomy. I think that's actually happening. We invested in Mistral. You can see that company and its models showing a lot of progress. It's a fast growing company now. It's got the European industry behind it. ASML just invested a lot of money to help scale it. So all of a sudden you've got a sovereign AI answer in Europe. I think we're seeing that in defense. We're seeing that in these sectors. And the other thing that's happening that makes Europe really interesting is that what used to happen was an entrepreneur starts in a certain country in Europe, they start to gain some traction and then they say which next market should we go to to scale and the answer was always United States because that's the big market compared to any single country here. But with AI that abstracts languages, regulatory regimes, all that can be handled seamlessly. When you start in any country in Europe, you can actually address the entire European market. So you're seeing these companies now get built here. I'll give you direct analogies. Lora competing with Harvey in the US or Parloa competing with Sierra in the US. We're investors in both of them. They're both exceptional companies. They're growing faster than their US competitors with better unit economics and I think there's a second mover advantage to this as well. So I am bullish around could you build large companies that can just focus on the European market first and foremost that could not be done before AI.
So there's a second mover advantage for Europe. Does the US market have to become their primary market at some point though?
It doesn't have to be because I think if you think about the European market, you think about the physics of building a company, even if the European market is let's say half of the US market, if you're a dominant player, can you go get to a billion, two billion, three billion in revenues in the first 10 years in these sort of AI services kinds of companies? Absolutely. So they don't have to. Now, I do think the ambition of the best entrepreneurs here and in the US everywhere is to be global and these companies are being global companies. But the point is they have an advantage in their local market and they have a product that can globally compete which from our perspective we want to meet the founders where they are and help build these companies in all these geographies where we do business. And I think the European on the ground quality of companies getting built today is way more interesting than it was 10 years ago.
And we're getting a lot of repeat founders as well. So the founders with that scar tissue that helps in terms of the European ecosystem. And when I think about those kind of founders, I'm thinking about Torsten Reil and the trio who lead up Helsing, which is again probably the best valued defense tech company in Europe based out of Germany, but they have contracts with defense departments across Europe and they're active in Ukraine. What was the rationale behind backing Helsing? How important is sovereign defense? What are the prospects for a company like Helsing at this point?
Yeah, look, I think if you think about any sovereign leadership that is working around their plans for the next 10, 20 years, everybody's got sort of a four-part framework. It starts with can you build AI-based deterrence. You think about how warfare is changing. Every country in Europe as a whole needs to create ecosystems that drive that. And the other sectors are obviously resilience in healthcare, diffusion of AI, and reskilling. Our belief has been that every region is going to develop a next generation of primes in defense. And so we invested in Anduril in the US in 2017 and it was very clear that Europe needed its own defense prime. And the fact that Torsten was classically trained in the US, moved back here, brought that intensity, that ambition, and is building a company that's first and foremost around strategic autonomy in defense for Europe. We thought it was a great opportunity and that company is doing incredibly well. It's off to a great start. It's got a lot of great traction with many countries in Europe. And we actually think the same thing's going to happen in India as well. We did a defense prime investment in India. So if you look at US, Europe, India, they're all going to build these modern primes that take advantage of AI and next generation technologies when it comes to warfare.
And automated drones is a big part of what Helsing does. And in the last year, I think we now have in Europe about a hundred drone startups. Torsten Reil told me a few weeks ago he thinks there is a bubble when it comes to drone tech in Europe and maybe 80% of them won't make it. Do you share that view? Is there too much money flooded into defense tech?
Look, I think it speaks to the size of the opportunity that you see a lot of capital when you see companies having these meteoric rises in defense. No one used to invest in this sector before, right? When you think about it. And now you've got these rapidly growing companies. So it does mobilize capital. I do think in the end it's going to be reductionist into a couple of primes, a handful of primes. You'll start seeing a little bit of an ecosystem develop around them from a supply chain perspective to make sure there's local resiliency in these defense sectors, but I don't see there's going to be 10 different drone companies on the other side of it that are material. I do think it's going to concentrate to fewer than that.
What does AI do to jobs? We had some data out just in the last few hours. The Challenger survey out of the US for the month of October. The biggest drop in two decades in terms of jobs, particularly focused on telecoms. And you have companies like Intel, Meta, Amazon all cutting thousands of jobs. Is this just the beginning of what's to come?
