Keeping calm in the boardroom with Lucile Cornet, Partner at Eight Roads Ventures

Lucile, you’re a series B investor, what is it about this stage that excites you?

I really like this stage because it’s tricky. I call it the teenage years for startups. Every stage of life as a startup is difficult but this stage requires a very different skill set. What got you to this point won't get you further, so you have to rethink how you’re going to do things. It requires a very different skill set from the zero to one phase. In the beginning it's really about firefighting and moving fast. Then, suddenly, once you are making a few million in revenue, you almost need to completely change hats and start thinking about things in a completely different way because it’s all about scaling and building your leadership team. I personally really like that stage because I think it brings out a very different side of entrepreneurs, where they need to become architects, so to say.

You've had a fascinating career journey leading up to your role at Eight Roads Ventures. Can you share how you ended up in the world of venture capital?

So, I grew up in Toulouse, in the south of France, and studied in France and Canada. When I was growing up I wanted to work in politics. I ended up working as a student in a regional assembly and realized how slow-moving the world of politics can be. I realized that I needed something more fast-paced. That being said, what had attracted me to politics in the first place was the human factor, meeting people, hearing about their stories, and building relationships for many years. I find a lot of similarities in my current job as an investor. To give an example, the last investment I made – which we announced last month – was in Swan. I have known the CEO Nicolas for 5 years almost to the day. I have met him countless times. I have followed his path and got to know him and his ambition over many years. And now, I’ll probably get to work together with him for another 10 years. That's the real joy of our work – building relationships with some of the most interesting people of our time, spending decades with them, and calling them friends.

After my time in Canada, I really wanted to stay abroad and work in an international environment. I ended up in London by chance. I took the traditional route and spent a couple of years in investment banking. It was the very early days of tech and I joined a fund called Summit Partners relatively quickly. They're an American fund that does late-stage growth equity investing. The traditional growth equity checks are 50 to 150 million EUR. Summit is a great fund and it was also a great school to learn about sourcing. They're known for their outbound sourcing model where you would dold call founders, introduce yourself, and talk to them about raising capital. This was before Zoom so it was all over the phone. it was a good place to learn about the importance of putting yourself out there. At that time, I was pretty young and I was talking to founders from all over the world trying to convince them to meet with us. It was a very formative experience and I stayed for three years. When I started to get to know the market a bit better I realized that I wanted to look at slightly smaller companies. I wanted to talk to people who were raising 15, 20, or 25 million instead.

Is that when you made the shift to Eight Roads?

Yes, that’s how I ended up joining Eight Roads, which was a very small team at that time. I took a bit of a bet. They were just rebranding to Eight Roads. Eight Roads had just emerged from Fidelity the large fund manager in the US. They'd been doing venture capital investments for a long long time. And I think around 15 years ago they started to realize “Hey, let’s be more ambitious here as we have something very successful that’s working, let's call it something else, set it up for success and raise funds.” That's when I joined.

The brand was completely new we just created the brand from scratch and the team in Europe was still small so there was one partner Davor and I was attracted to that more entrepreneurial setup. I took a bit of a risk and I've now been with the firm for 10 years. I don't know if I got lucky or if I was right, but we're now managing billions of AUM in Europe and have 60 portfolio companies in the region alone. It's been a fantastic 10 years.

What has changed in the 10 years you’ve been at Eight Roads?

The scale of it has changed tremendously. It’s not just Eight Roads but also the European ecosystem as a whole which has grown tremendously. There's now a lot of doom and gloom about Europe, with the latest LinkedIn and Twitter chatter about the Europeans lagging behind. That's certainly not what we see in the numbers, you can see very successful vintages. We can talk about 2021 as a bubble and there are certainly other moments when things didn’t go right, but generally, as an asset class, there are a lot of great companies and VC funds that have come out of Europe.

We continue to be extremely excited about doing scaleup investing across Europe and Israel. That’s been the thesis all along and that hasn't changed in the 10 years. We still focus on series B and invest anywhere from 10- 40 million. We usually invest at the exact moment when companies have something that is working, some revenue, maybe a few million in revenue, and when they're thinking, okay, “how do we scale?”

Why do founders seek investment from Eight Roads?

At our stage, I think it's still 80% about the people. They want to work with me, they want to work with Davor, they want to work with Michael. It's a lot about human relationships. The reason for that is that you're going to have someone on your board for 10 years, and they will probably be calling you every month, maybe more. A lot of entrepreneurs want to pick someone that they feel is going to be a good partner.

Another benefit is that we have global funds. So, similar to our team in Europe, we have teams in the US, India, China, and Japan. That's one small advantage we have compared to other firms. We can also share trends and learnings that we've seen from other parts of the globe. Even though these days I find that the world is coming back a little bit inwards I think there are some interesting lessons you can draw from what you've seen in other geos or other sectors.

What kind of investor are you?

It's certainly a rollercoaster to build companies and way more so for entrepreneurs than VCs by the way. But even as investors you go through the highest of highs and lowest lows. One day, all of your companies are doing great, then you get bad news, You get used to that roller coaster. One thing I've certainly been thinking a lot about is this: the way you react to entrepreneurs is extremely important. The way you react to something is really important to the other person.

Too often people just react in the moment. Sometimes they panic and, of course, that doesn't help. If there is bad news and you're just saying, "My god, this is bad." Then the person telling you the news knows there's no point and it becomes a bit of an echo chamber. That's something I've been trying to think about, especially in the boardrooms where you may have the rest of the management team there.

You can have a lot of impact because if you lose trust then everyone else is going to think “Even the board member is losing trust so should I look for another job.” This is almost like a self-fulfilling prophecy so you need to be pretty thoughtful about the way you react.

So I don't know if I'm good at it but that's certainly something I'm spending time thinking about not being the one that adds oil to the fire, right? I want to be the one that's going to be like, "All right, let's take a breath. Let's think about the choices we have."

Also, there's no point in pointing fingers when something happens. There's a time for that, but usually it doesn't help. You owe to be constructive. It's a tough job being an entrepreneur. So I’m trying to be supportive as well and to be a helpful elbow in those moments. I want to help to unpack things and think with a cold head about what we have in front of us and what the options are. I see that being more and more of our role because it's already such a volatile and stressful and changing environment and I feel like I need to bring that stabler, calmer voice.

Is there a book or podcast that has impacted your personal and professional development?

Grit - by Angela Duckworth. This book reminds me that there will always be people who are naturally better at certain things, whether it's sports or other skills. However, it's important to remember that hard work and effort can have a greater impact than you might think. This is an uplifting message. Talent is important, but effort and hard work are even more crucial. I also see this in my entrepreneurial endeavors. There's no special recipe for success; it's all about the effort you put in. Two great quotes are: “Enthusiasm is common, endurance is rare,” and “As much as talent counts, effort counts twice.”

What’s a personal experience or obstacle you've overcome that has shaped your perspective on resilience in business?

One thing I think a lot about is trying to unlearn a lot of the famous “common wisdom” from VCs. Things like you need to hire people “that have seen the movie before” to scale a unicorn. I think we all learned from the excesses of 2021 and hiring expensive people too fast. I certainly now prefer promoting young hungry talent from within than necessarily going for the sexy CVs or expensive search firms.

In terms of mentorship, who have been some of your key influences in both life and work?

Davor Hebel- who heads our firm Eight Roads- and who I have been working with for more than 10 years- has been a tremendous mentor for me, and continues to be. He has a very Socratic way of giving advice. He rarely says what he thinks but rather pushes you to find it in yourself. I try to do that with my entrepreneurs. I find when you have lots of smart people in a room- everyone has very strong opinions about how something should be done. But it's not our role as VCs to tell any founder what to do. Our role is just to ask the right questions, be a sparring partner, someone questioning the process- that’s the role. It doesn't mean being a cheerleader and always approving everything- but I think the method is more questioning the thinking process than the strategy per se.

At Eight Roads Ventures, you’ve worked on some exciting deals. When looking for potential investments, what are the key attributes you look for in a founding team?

We look for product market fit- usually between 2 to 20m of revenue. We look for teams that are great at execution. Series A - B is usually when the first growing pains arrive. It is all about attracting talent, running experiments, being data-driven, making mistakes, and learning from them. Big no-gos for me are bad managers who don’t add anything to the leadership team, and people who iterate ?too slowly.

Another thing that's pretty important to us is product usage metrics- and I see them too rarely in pitch decks. NPS but also usage data, ROI, number of users and frequency, testimonials, etc.

You’ve said that you’re “very optimistic about vertical SaaS at the moment” - what excites you about this industry and what kind of challenges does it need to overcome?

Vertical SaaShas been one of our thesis for the last couple of years and I feel pretty excited about it. As a reminder, Vertical SaaS is a type of software as a service that serves what I call the old-school industry, so the hair salons, the restaurants, the dentists, the electricians, the hotels.

The untapped potential of vertical software businesses is substantial, particularly because many still operate on-premise with physical servers instead of utilizing cloud-based or mobile app solutions. This observation is supported by anecdotal evidence, such as my brother in law who is a dentist in Hamburg and expressed satisfaction with now having a cloud-based software that he could access from anywhere. . The widespread prevalence of outdated technology in these sectors presents a compelling opportunity for growth and modernization. We're really excited because there's no way these industries are going to stay like this.

Another factor driving change, particularly in Western economies like Germany, is a significant labor shortage. Skilled trade workers, such as plumbers and electricians, are constantly booked due to this scarcity. Any tool that can reduce their administrative overhead, like invoicing and account reconciliation, allows them to spend more time earning money, which is why I invested in Hero Software, a company that develops software for this purpose.

The emergence of embedded finance is another exciting development. Our recent investment in Swan, an embedded finance provider, highlights this. By integrating financial products into software, businesses can streamline their financial management. Quoting, invoicing, and bank accounts can all be managed in one place, eliminating the need for manual reconciliation and payment tracking. This may seem simple, but it's a significant advancement from traditional ways.Using the same provider for software and banking services offers significant efficiency gains. The software can track client payments and identify late payers, enabling automated payment reminders and saving considerable time. Additionally, the software's access to small business records creates opportunities for future lending products.

How do you see Europe now and what is our role in Europe given what is happening in the US?

We were discussing this the other day as we were reading the headlines about the US. I have a couple of comments. I think venture capital and you know as well as I do, is a very long term game. Our average holding period I think is eight years and it's been going longer and longer. Imagine, Robin, that you’re doing seed investments, you're probably in there for 15 years in these companies. So, you also cannot gettoo influenced by some of the short-term macro and look at the long game.

We aren’t paid by our limited partners to focus on macro investing, such as predicting currency exchange rates, tariffs and geopolitcal moves. Our focus is on investing in the very best European tech companies and scaleups, which is what we are paid to do. Investing in the best companies of our time is crucial, as most of the returns come from only a few companies. These successful companies can emerge from anywhere; their origin, founder's background, or educational pedigree don't follow a set pattern. If you can find and support some of these entrepreneurs, the size of the returns and the success will outweigh any macro changes.

Therefore, the only thing that matters is ensuring that people continue to value entrepreneurship. In the past decade, more Europeans have embraced entrepreneurship. Maintaining a strong pipeline of entrepreneurs is crucial, and I don't foresee that changing.

Remember, our job isn't about averages; it's about finding that one outlier company. Exit multiples can also be misleading, as one successful company can significantly impact the overall results.

As an investor, how do you assess the long-term potential of a company versus just focusing on short-term returns? What metrics do you prioritize?

An interesting learning for us as a firm is to focus less on momentum at a given point. We sometimes get tempted by something growing fast at a given point. But what's really important are the fundamentals behind it. What is driving the growth? Is it repeatable? Is it predictable? Does the team understand what went right there? Is there a team capable of repeating or even scaling that success further?

The question was raised about the shape of our portfolio construction ?and whether it would be as power-law driven than in ?the early stage. The answer is yes. It still very much is. This means that 20% of investments would generate 80% of returns, and even within the 20% best, ?you probably have another power law where 1 or 2 companies drive everything.

The consequence of this is that every investment we make needs to reach a multi-billion-dollar exit, as a billion is not enough due to higher valuations in the late stages. This is a high bar, as there aren't many European companies reaching that level.

What would you like to do more of in your life (professional or personal)?

Reading fiction. I've probably reached my limit when it comes to podcasts, LinkedIn, YouTube, and other similar platforms. Although I still use them, I've recently found joy in reading about topics unrelated to technology. It's nice to step outside my comfort zone, especially since it's easy to get stuck in a bubble within the tech industry. You end up reading about the same people on LinkedIn and Instagram, and spending your entire life in that ecosystem.

I find it refreshing to discover completely new things and get out of the tech bubble. Plus, reading is nicer than looking at a screen, since you have to put your device down and you won't get notifications.

I started reading books that were completely unrelated to work. Some of my recent favorites have been: Lessons in Chemistry, Project Hail Mary, Klara and the Sun, all of which I really liked. I am about to start this book called Butter which I am super excited about.

With all your experience in the venture capital space, what advice would you give to someone just starting in the industry, both professionally and personally?

Pay it forward. Be a good human. This is a long-term game. Never promise things you cannot deliver. And always deliver the things you promised. Be available (that goes a long way). Leave space for serendipity.