Davor Hebel, Managing Partner at Eight Roads on the European entrepreneurial renaissance | E294

0:00Hi, everyone, and welcome to another European VC podcast. I am David and I'm your host for today. Today we have Davar Helble with us. Davar is a managing partner at 8Roads, a$11 billion global venture platform. You may recall that we've had Lucille from 8Roads on the show before, so do check out that episode. 8Roads has over 450 portfolio companies, of which 60 IPOs and many unicorns, such as Alibaba, Toast, Flywire, Chewy, Highball, Neo4j, or Fever. 8Roads invests in companies at scale-up stages, that's typically around A to C, and helps them win globally. Davor runs the Europe and Israel franchise with around 45 companies and$1.5 billion in AUM.

0:46Davor's investments count leaders across SaaS, consumer, digital health, and fintech sectors. That includes names like High Bob, Apps Fire, Fever, Fireblocks, Okin, Wallapop, Skilladv, Redpoints, Packlink, Remilia, InnoGames, and Treatwell. Davo was born in Croatia and studied in the US. Davo is also passionate about sports and he still tries to find time for some rowing, tennis, and berries bootcamp whilst raising his three kids who are aged 11, 9, and 6. If you're listening in and love our show, you know what to do. Drops a review, follow the pod, and subscribe at eod.vc. I need to tear down this wall.

1:27It's more than just an ally. This is a union of values. United and determined, we can serve as a model for other regions of the world. The nature of a problem requires a European response. Europe is a story of new beginnings. New beginnings. Let's start acting. Davor, welcome to the show. Super nice to have you. You want to share with our listeners how you got into venture? Thanks. Thanks, David. And great to be here. Yeah, I moved to, as you said, I was born in Croatia and I moved to California as an exchange student back in the early 90s and immediately fell in love with the entrepreneurial spirit of the valley and the broader American demographic.

2:20I also, that was a sort of, you might remember, beginning of the internet age and immediately fell in love with the internet. So I ended up continuing my studies in the U.S., studying computer science, getting my master's in computer science, and then joining a consulting firm called McKinsey, focusing on both strategy and technology. and then tried my luck in entrepreneurship when I was in business school and thought, wow, okay. Not only was it very, very hard to do that, it was also when I realized that not every VC is a very good partner to entrepreneurs. And I thought this would probably be a great calling, you know, the intersection of entrepreneurship and building things, technology and strategy.

3:04But then how do you get a job? The prevalence of belief in business school was, you know, go set up a very successful startup, sell it for a billion and then someone will hire you, which I thought, well, you know, I build something for a billion. Do I really want a job after that? But when I moved to London, I met a few folks and that was what I call the beginning of the entrepreneurial kind of ecosystem here. I call it the European entrepreneurial ice age because there was just so few people here. But because of my experience in, I guess, computer science, business and some startup, I was fortunate to get a few intros and ended up becoming an associate in 2005.

3:47And here I am 18 years later. Davor, let me ask you something about what you just said there. You said you found out that most VCs aren't necessarily good partners. It's been a while since you've had that realization. How does that inform you today in your day-to-day business? And of course, in the way you deal with your portfolio founders, but also with non-portfolio founders, I guess. Well, you know, it's really the hardest job one can have. And I try to bring a lot of empathy to the entrepreneurial struggle. You know, I think the entrepreneurship, the word sounds very fancy, but we'll know that underneath it all is just daily grind and struggle.

4:30And so I keep reminding myself that, you know, we are here in service of entrepreneurs and if they're successful, then, you know, we will by definition be successful and just try to kind of minimize some of the ego elements that come from just, and obviously fear sometimes as well, because what entrepreneurs do is really, really hard. And so it helps to keep that sort of entrepreneurial struggle at the forefront of our minds. And I think the ecosystem has evolved quite a bit. And I think we have plenty of good VCs these days relative to the times back then. What do you think, and this is you personally, not you, Aitroth, not the firm, you as an individual.

5:11What do you think is the most, your major role, the most value you bring to the founders you work with? It really is to be the sounding board. You know, if you think about who could they turn to, there's not a huge amount of people that founders can turn to in their own businesses. I mean, usually co-founders, oftentimes those relationships can be in specific areas, also not easy kind of to interact with or ask certain questions. I think the good board members and good investors are really can be the kind of the good counselors, if you will, for the founders. and in some ways you kind of want to be the first call when something is not going well, you kind of want to be the first call that an entrepreneur makes as opposed to somebody who you think, okay, if I call this guy, he's going to scream at me because I didn't do what I promised I was going to do.

6:06When you say the word counselor, do you see that oftentimes going beyond necessarily the business side? Topics like motivation or even things around mental health and so on and so forth? Or do you find that it's mostly around the business itself? I don't think founders really have this divide between work and life. You know, the work-life, the mythical work-life balance. I think it all is one. And sometimes it really is that the personal will spill into business, the business will spill into personal. So I think it's probably more holistic than that. And also, you know, entrepreneurial ambition is dynamic.

6:45I think a lot of people start in one place just wanting to express themselves and setting up a company or trying to solve a problem. And then they find themselves maybe getting to a certain scale and it's different. Running a 100 % company is different from running a 5 % to 10 % company. But then maybe tomorrow, now you're running a 1 ,000 % company. How does that make you feel? Is that still the role that you sign up for? How do you change yourself? how do you evolve yourself so i feel like there's just a lot of dynamic changes that founders go through so it's it might be this you know the same company name you know my famous you know my favorite quote from one of our founders oran you know he says look he tries to kind of fire himself every year and then rehire himself and ask himself so now what is my role you know uh next year i think to be a good counterparty to that you also need to be dynamic and you need to change your own outlook on the personalities, but also on the company as a whole.

7:46Yeah, that journey is definitely a huge challenge. I can't speak to it from personal experience, so I can only imagine, but yeah, tough. Davore, I'd love to ask you for a pivotal moment in your life and share with us how it shaped you as an investor. So I grew up in a family that was big in sort of team sports. and early on in life I sort of started to appreciate you know working together in a team and in many ways as I focused more on entrepreneurship and investing realized that you know high performing sports teams are very much similar to high performing startups and you know Michael Jordan probably wouldn't be who he is today if it weren't for I don't know came from those early moments.

8:37You know, my dad was an Olympian in water polo, played with a team, won the gold Olympic medal in 1968. My mom was also a world-class athlete in handball, which is another team sport. And so very early on, I think we started to debate and discuss importance of not just yourself, but the broader team. And now when I look at some of our most successful companies, it's interesting how the one thing that they have in common is they focus on building that culture. You know, whether that's, you know, you can still ask a lot from your people, you can still be razor focused on specific things, but usually they do this, you know, as a very strong team and as a very strong culture.

9:23So in some ways, I think of entrepreneurship as a great team sport and you oftentimes look at not necessarily just who's the Lionel Messi or you know who is the Cristiano Ronaldo but also you know who else do they have around them that complements them and oftentimes you know a great CEO will have an amazing CTO very different skill sets very different personalities usually but can be incredibly where one plus one equals five very much a believer in in making entrepreneurship with team sport In your introduction, I mentioned you being a father to three. So same question, but how does it shape you as a father, as a parent, as a family figure?

10:10I think it's similar, you know, trying to, you know, I guess an investor, you work through founders. You know, father, you work through your kids, you know, you can't do it for them. And I think as an investor, you know, you work, you know, really much only in so much that your founders are successful, you're successful, right? So it's a very much of a working through people as opposed to doing things yourself in many ways. And, you know, the other thing that is very, very interesting is, you know, everybody's different. You know, the personalities are so different. You know, in the Myers-Briggs type, you know, I've got very different Myers-Briggs profiles at home.

10:47And again, I think it teaches you a little bit around, you know, dealing with your founders. You know, not everyone is created equal. That doesn't speak about their potential at all. It's just about their preferences and how they like to show up and how they like to work. So I think parenthood does wake you up to the fact just how different people are. And we have the same thing on our team. We are quite a diverse group of individuals. And we try and somehow incorporate everybody's preferences and everybody's strength into a much more coherent whole. Let's go to our Take a Stand section. Take a start.

11:37Will you comment on this quote by Chris Smith from Playfair Capital? Gen AI is not going to have the impact on startups that people want and expect. I think in general, you know, technology tends to be overestimated in the short term and underestimated in the long term. So whilst I don't know exactly what people are expecting, I feel like, you know, we are seeing a lot of hype today and a lot of excitement. And, you know, if you think back, you're going to go back to some of the technologies that we've encountered in the past couple of decades, whether that was the advance of the Internet and the browser back in the early 90s or more recently, let's say an iPhone.

12:21I think probably I remember 2008 sitting in a TechCrunch panel debating, you know, what is this app store going on? What's the impact of the app store in an iPhone? And one thing it was clear is that no one predicted an app store with 100 billion of revenues, an Android store that is even bigger than that. And the overall world completely shifting, right? And almost building around these mobile devices. And so similarly, we're clearly now in a new AIS curve. And we're at the beginning, you know, we've been investing in AI for the last, say, half a decade with investments like Outkin, which is a federated AI solution for oncology, drug discovery, Elios, which is a mental health AI company.

13:10But with generative AI, I feel like the hype is very, very high. And probably in the short term, it's probably overhyped. But what I think will happen over the longer term, if we take it 10, 20 years, is that we are starting to see a fundamental change. And some of that change will come from the incumbents, both our portfolio companies and large corporates. Some of it will come from new startups that exist today. But probably some of the profound change will come from companies that don't even exist today. So in some ways, if we take a kind of 10 to 20 year view, I imagine that we're going to see quite a big change in how the world operates because of the generative AI, the S curve.

13:57And I just think we're in very, very early innings. And one thing that we are still trying to figure out is, you know, what are the killer apps? You know, is it, you know, me talking in Taylor Swift's voice or, you know, is there something more? And I think that something more is just starting to get developed. And so I think, you know, I'm very, very excited about the Gen.AI, but from a longer term perspective.

14:25I'm curious because, you know, you have an interesting viewpoint given, you know, the firm you're embedded in Eight Roads. And it's, as I said in the introduction, it's a global platform above all. how do you guys think about ai not necessarily gen ai but ai how do you guys think about ai in the firm uh how do you think about embedding it in your processes and so on and so forth yeah so in our firm i think we predominantly now looking at it you know we've adopted it already for sourcing uh i think it's a kind of an easy no-brainer and again similarly to i think the the maturity of other things, getting signals faster from publicly available data.

15:08It's a no brainer. I think what we haven't really got our head around is how we embed it into decision making. So all the efficiency pieces I feel like are easy to understand. Can it make our sourcing better? Yes. Can it make our mid office, back office processes more seamless? Yes. so any kind of automation i think that's all probably a no-brainer the question really is can you add it into the true decision-making process and i think historically you you know a few firms who've tried it i don't necessarily think it's been an you know a slam dunk yet but you gotta believe right that there is probably more that we can do with incredible patterns of data that exist out there i i'm a little bit skeptical when people talk about patterns you especially with 18, 19 years of experience, they want to be the guy who says, well, my patterns are...

15:59Because sometimes patterns change. But that being said, there certainly should be something that we can glean from all of that data that exists out there about all the investments that were done in the past. So we are looking at a few things. From a scale of 1 to 10, this is very non-scientific. How far do you feel you as a firm are in terms of integrating AI in your operations? Two. Does that worry you? No, because I think, like I said, I think 10, 20 years from now, I think the world will be different. I think we still have some time to figure it out. We were really in the early adopter thing.

16:39My favorite sort of statement is you don't necessarily need to be the first company into a space, but if you can be the last or the lasting company in the space, that's kind of what you're after. So I'd rather do it right than do it fast. In this particular case. But it's certainly something to think about. Yeah. I like that. The last thing. The point of being the first might as well be the last one. I like that. Davor, in the beginning, you mentioned a very interesting topic, which is the European entrepreneurial ice age. So let's refrain from doing any movie references because that's not the point today.

17:17But I'd love to ask you to expand a bit a bit on on on what this means um for you and how you've seen it develop and then we can we can have a conversation on the back of that if you roll back the years um you know europe was perceived to be quite an unfertile ground you know for great entrepreneurial ventures and partially you know it was because of the lack of role models partially was because of the lack of perceived ambition and you know certainly when i came out of business school entrepreneurship was not a very popular kind of call it thing to do whereas you know a lot of my friends when ended up going to facebook in in the valley and and other startups back then in europe you know you most of the folks would aspire to go to into finance and other things and in many ways i think what we've seen is that there is no Silicon Valley in Europe.

18:14There's clearly no one place. But what we have now figured out is that quite the opposite is true, which is amazing companies can come from anywhere. You know, we have unicorn companies in Paris, like Aukin. We have unicorn companies in London, like High Bob, in Tel Aviv, like Habsler, but also some surprising cities like Malmo in Sweden, in the case of Neo4j, Gant, Belgium and OTA Insight, Madrid and Fever. And what we started to see is that because of these modern distribution platforms and kind of globalization of the technology ecosystem, amazing companies can come from anywhere. And I think this is really the exciting bit because obviously some of those remote places also have better cost dynamics.

19:07So you have potentially more available talent at the lower cost. In some ways, we've come quite a long way. And this has been living less than a generation. Again, if you talk to people back in the early 2000s, how many$10 billion companies Europe was going to create, they were very skeptical. And here we now already have some amazing champions like Spotify or Aetion or many others. It's definitely a topic we've spoken a lot about on the pod, right? Obviously, we're all very European-focused and passionate, so we love the topic. But moving forward, do you feel comfortable with doing some kind of outlook into the future of what you see coming for Europe?

19:55Because, yes, we've come a long way, but it's far from being the perfect place to start and scale a company, right? it has its pros, but it also has its cons. What do you think will happen in the coming years? I am quite optimistic, David. And I sort of think of it as three levels of maturity. You know, the first one was just get something on the map, you know, some successes. And we've all, you know, kind of called the mini role models, you know,$100 million exit here,$300 million exit there. and you still were kind of insecure into the future of the ecosystem. I think we've then graduated to clearly the second, call it maturity level, where we can now point to many successful companies and many successful ecosystems.

20:48Now the next phase, I think it's beginning, is that we're actually starting to see in certain areas, Europe being the geography of choice for the best entrepreneurs. So you don't have to, no longer do you have to go somewhere else to build the most amazing company. In fact, we're seeing in cases like AI, in places like Paris, et cetera, some of the successful, and oftentimes there'll be successful European entrepreneurs who might have been in the Valley and other places, are now saying, you know what, for the next one, I'm going to relocate and I'm going to set it up in Paris. And I don't quite know how this is going to work out, you know because the the delta is still okay you know i think we will be quite happy if we got to 100 billion outcome right in terms of the ecosystem maturity clearly you know europe u.s has you know trillion plus dollar outcomes but i think we are starting to close that gap and um i do i do believe that in the next say 10 years or so we'll see 100 billion plus companies And then, you know, maybe what we will start to see is kind of the original technological, call it giants that emerged from Europe.

22:01And of course, there are some issues around, you know, the employment laws and a few other areas. But in terms of the entrepreneurial ambition, I'm confident that if you look at some of our most successful entrepreneurs in Europe, the ambition is there. We need to just work on making sure the rest of the ecosystem can kind of follow them and make sure they can be as successful as anywhere else on the planet. Having that said, we have seen a decrease in U.S. investor participation in Europe. Do you have any thoughts around that? That's great.

22:43As an investor in Europe, I think right now, I think every crisis needs to be framed in the right way. I think in some ways, you know, the sort of fittest survive. I think it's harder for somebody who is based in a faraway location to be a potentially even a great investor for a company that is based, let's say, in Berlin or second tier city in Sweden. So it's not really phasing me because for some of our most successful companies, I think Hybo just announced two new rounds of funding in the past 12 months with global investors. I think once you go up to a certain stage, I think capital is still very much available.

23:31And then for the earlier stage companies, I think the question really is who is the right investor for you as you're building? Clearly for seed, you want to have someone local. But I would argue even for Sirius A to C, the way we focus is you probably want someone who understands the local conditions as well as provide a global outlet and scaling expertise. So I'm not too worried about it, to be honest. And I think, again, over the next five or so years, we'll see this normalize, just part of a normal venture cycle. In line with what you said, you framed it, I think, in an interesting way. somewhat of a, I don't like to call it a crisis or a recession.

24:16I like to call it a return to normalcy. But yeah, but we've seen a contraction in VC and Europe compared to last year. Do you see that as an opportunity for specific sectors, geos, stages? What do you think about that? Yeah. Well, I call it back to basics. You know, building entrepreneurship is hard, and I think investing and making good returns is hard. And, you know, we certainly feel like, you know, in some ways there was a lot of tourism in the industry where people, you know, if you're really honest, 2021 was just an unrealistic picture of what investing in startups looks like. right it was just got way too easy um and anything that sounds looks too easy probably usually is right so i think you know we i was looking at some of the kind of unusual markets for example in spain um that we you know in in 2008 right after kind of as the global financial crisis happened there was a eurozone crisis i think spain was on its knees and similar moment maybe to the 2023 And out of that period, we saw this incredible resurgence of entrepreneurship.

25:32By now, I think there are about 11 ,000 startups in Spain. There's about 100 billion of value built in Spain. We ourselves have a number of unicorns, but it goes beyond, obviously, us. Companies like Fever and Wallapop and Packlink and Red Points and Amenities. But really what's interesting, I think, is there are companies that are either transforming regions or even have true global aspirations and success. And so I think what we like about our position in the market is we know that getting to Spain maybe is more difficult today than, again, when everyone was on Zoom. I think we believe in direct interaction with with entrepreneurs.

26:26We like working together, handing love with them. So, you know, we're not afraid to go to get on a plane for a single meeting, whether it's Spain, whether it's some other markets. And we are really starting to continue to see both the new role models develop in places like Spain. We see young talent choosing entrepreneurship still as their and I think this is the exciting bit, choosing entrepreneurial ventures, whether they're co-founders or whether they are employees, choosing that as their career choice. And then we are starting to see these cost benefits of some of these markets. And I was looking, I think Spain is seventh global tech hub for tech talent.

27:09So you certainly have high volume of technological engineers at, quote unquote, I mean, affordable is difficult to say at this point in anywhere in the world, I think, you know looking for tech talent but certainly more affordable than in some other locations and so i think this is the sort of you know the continued underlying growth of of the ecosystem and to your point uh yeah it's the the capital is harder to come by but i'm not sure that's actually necessarily a bad thing you know think back to the 2001 you know we got google and a number of other successful companies. You think about GFC, we got Uber, we got probably a couple of other incredible companies.

27:54So in some ways, it's actually not a bad time to be thinking about building a company because there's going to be less competition. It's going to be less competition as well. So now let's go into our shout out segment.

28:15I'd love to ask you, Davar, to give a shout out to a Co-Investor Angel or LP for being awesome. And of course, do share that story if you can. Well, the person I wanted to shout out, given also mentioned Spain is actually one of our portfolio CEOs. And hopefully that's not saying that one child is preferred to other children. This is really more about to mention Laura Ulukizu, who is the portfolio CEO of our Barcelona-based company, Red Points, which is a global leader in brand protection, both around product as well as impersonations with over a thousand customers around the world. And really, my shout out is not because of the company that she has built, but rather that her role in the broader European venture ecosystem that Laura has had, both in championing in Spanish startups.

29:09You know, she has made trips to the White House, visit the French President Macron and many others as part of the Spanish delegation, championing Spanish startups around the world, but also for working on empowering women in workforce and entrepreneurship. She's been voted the Entrepreneur of the Year in Spain and more broadly. She sits on a board of a kind of a international women's forum that is working on empowering women. So in some ways, her role and involvement goes way beyond, you know, red points and it's much more related to the ecosystem. So I just thought I would mention her, thank her and say that she's really been amazing for our European ecosystem.

29:57Thanks, Davor, for bringing an Iberian example to the pod as a Portuguese person. It's not Spain, but it's close enough. I'm happy to do that. Next time, I'll talk to someone from Portugal. Yes, please do. We'll get you on the pod another time just for that.

30:20we like to follow up the shout out segment with a small segment focused on the two biggest learnings from the last 10 years in your life well first one you know we talked a little bit about it around just you know the need to realize that founders are really our heroes of our generation and beyond what we discussed also that from an economic benefit the the largest amount of growth of the economy comes from jobs that are created by startups and small companies. In some ways, it doesn't have to necessarily be the venture-backed companies. In fact, the venture-backed companies are a small percentage of overall, I think it's like something like one-sixth of 1 % are companies that are actually venture-backed.