E592 | EUVC Summit 2025 | Lucille, Eight Roads & Marc, Altitude: Europe’s Path to Vertical SaaS Leadership

0:00Europe's SaaS landscape is being reshaped by a new generation of vertical SaaS startups. Companies delivering specialized solutions tailored to the unique needs of specific industries and firm sizes. These innovators are now leveraging AI and embedded finance to further disrupt their industries. But how can Europe fully harness this momentum? Mark Pencala, general partner at Altitude, backs early-stage SME-focused software startups creating impactful, verticalized solutions. Lucille Cornette, partner at Eight Roads, specializes in scaling such ventures into global leaders. Join them as they share strategies for driving growth in vertical SaaS, empowering founders, and positioning Europe as a global leader in specialized software innovation.

0:5180 % of the software IPOs in the last decades have been horizontal software. 80%. And we think it's about to change. So I'm Lucille, I'm a partner at 8roads. We're a global VC investing in Series B and we've been backing a lot of this vertical SaaS software amongst others. And I will kick it off topic. It was 2021 in summer, I was on vacation with my family. I really enjoyed it. I took one call. One. I took it with David. And he told me back then, you know, I'm going to build this platform with podcasts, going to be all cool with content and knowledge. You will love it. How little did they know what they're going to build?

1:34This is this. They did a fantastic journey. Thank you very much, David and Andreas. So by now we're not only friends. They are RLPs. We're business partners and I duly enjoy every second. So thank you very much. So I'm Mark. I'm one of the founding partners at Altitude. We're an early stage VC. We do SME tech investing. So we invest into early stage companies which are digitalizing the backbone of European economy. So SaaS is dead, long-lived vertical SaaS. We think that we are an inflection point in Europe and we have a fantastic time ahead of us and we duly bet the majority of all the money we've been raising on vertical SaaS.

2:14So what's wrong? What's the flaw in the current market when we're looking at a horizontal SaaS? So one thing which we're seeing, and I think there's lots of evidence, 30 % of the code which is written in Google has been type-coded. It's written by AI. And many companies starting these days can write code, build a company, generate 10, 20 million in revenues without a CTO, without the coder. So these vertical SaaS companies are distressing horizontal place. The second part, like enterprise sales is very, very tough. And when you look at vertical SaaS, they have a certain vertical, they have a certain Intel, they know how to sell it, they know their ICP, so they can kind of distress a certain market.

2:53And this is something which we're seeing every day in our deal flow and our portfolio as well. So what we believe is that it's time for tiny titans. Why do we call them this way? These companies we're looking for, they're small, lean, mean sales machines. They are capital efficient and they're default by nature, default alive by nature. So they raise capital and they can build crazy companies and actually be very successful and profitable. So what we're seeing right now in the vertical SaaS space is these companies are building very, very relevant modes compared to horizontal place. One of them is go-to-market motion.

3:29So we in particular love GTM Edge. So how can you actually create an ICP, target that ICP, create very low COCs and on the other side high LTVs? Second part is funding realities. When you look at horizontal place, it takes very, very long to sell to enterprise. It takes very long to kind of build this horizontal place. So VCs want to see one thing right now. It's traction. They want to see revenues. They want to see proof points. They want to see so many things, and it's very hard to do this in a horizontal place, and especially when you target enterprises. So what we see in Vertical SaaS Place is they build economic moats.

4:02They target a single pain point, build a feature, build a solution for that, sell it to the company, and actually along the way they upsell it. Last but not least, what we see is they get very, very early and fairly quick. at least we see it in our portfolio in the deal flow to a product market fit and This is very very difficult if you actually actually go after horizontal play And we love that mode in particular because they can actually go from this to other verticals. They can add more features and so on So Europe is well placed to be the vertical SaaS leader Why we here together? We didn't share that well.

4:35We've conducted a survey together We created a vertical SaaS map vertical 50 SaaS map in Europe and we looked at several hundred vertical SaaS companies in Europe. These have jointly raised over 2.5 billion in the past years. So we're not talking about the short-term trend. We're not talking about something small. We're talking about the starting point of something very big. They employ over 12 ,000 people, and this across multiple industries they're targeting, from healthcare to manufacturing to hospitality and, of course, fintech. So why is this the case? Europe is very particular. It's very different to the US.

5:08It's very different to other markets. There's 26 million SMEs. They contribute over 50 % to the GDP in Europe. And what's fascinating about that is when you look at enterprises, there's a high saturation when it comes to digitalization. And we think there's an undercapitalized opportunity of 1.2 trillion of value, which can be captured by digitalizing the European backbone SMEs. What's most fascinating for us, and that's why we built Altitude at the end of the day, is only 15 % of B2B VC funding is going into the digitalization of SMEs. Why there is the biggest opportunity, low saturation while the biggest market opportunity.

5:48So you're like, all right, Marc, Lucille, you like vertical SaaS, but what's new? What's fresh? Why now? I think there are four specific things that makes us extremely excited about vertical SaaS. First, number one, we have a big staffing challenge in Europe. You have seen all the headlines, not enough healthcare workers, not enough skilled trades, but also huge turnover. So if you speak to anyone running a business, a restaurant, a hotel, you can see 30-40 % turnover rates in these industries. Number two, it's very hard if you're a small business to stay competitive in the current world. The customer expectations, B2C customer expectations are rising.

6:29You're competing with well-funded multinationals that are adopting technology. And in general, if you don't digitalize, a lot of these SMBs will go extinct. The third thing that is really a new trend is this embedded finance revolution. So embedded finance is this concept that you can actually bring financial products and financial processes within software. And I'm a big believer that we'll see a lot of the business banking being eaten, so to say, by software companies. So think about embedding payments, bank accounts, lending, insurance within software companies. And we think there is no better place than some of these vertical SaaS that are effectively acting as operating systems for small businesses to be selling and embedding these financial products.

7:17And that's important because, of course, you can increase ACVs, you can increase the business model and making it a great flywheel. And the fourth thing is obviously AI. No good panel without mentioning AI. But that's obviously a huge opportunity to embed, so to say, like services as a software within this company, AI receptionist, AI scribe, AI planner for anything like team dispatch, but also pricing, resource allocation. AI CMO to help some of these SMBs with visibility and marketing? So what are vertical SaaS strategies which we're seeing which makes these companies in particular successful?

7:58So if you target a specific vertical in an industry, the first thing these companies do all of them is they build community and Sarah will be laughing because she likes that topic obviously. So building community, building Intel, being a thought leader will lead to lower cucks and this is very important. Second thing is the companies serve a solution for a single problem. And what they do thereafter is way more important. They build multi-product features. They build more features, they build more products, sell them to the same company. While they have a very low cut, they can increase the ACVs and can increase the LTVs.

8:32So the spread between both is increasing. And this metric is becoming a very driving and important metric in the whole ecosystem when you look at vertical SaaS. Furthermore, we've been talking about embedded finance. What we see as well as an interesting dynamic they build multiple layers of revenue So they start with a SaaS product then they do revenue share solutions on top They do kind of transaction based solution or embedded finance solution So they increase the revenues they're squeezing out per customer not only on a feature base, but they have multiple revenue streams Furthermore it's way easier to do M &A and roll up strategies within one single vertical if you do a horizontal play It's not that easy to kind of do the post merge integration thereafter and within one vertical it's an unorganic strategy to grow a company to become an industry or category leader or eventually at some point go up market.

9:18Furthermore API and platform strategies, well that makes all the sense in the world and this pays into the most crucial aspect, at least for me, what you have to have in the end of the day to be successful in the vertical sales play. You have to have deep workflow integrations. Why? Create stickiness on the one hand, lower lifetime values on the other, and at the end of the day it minimizes churn. So if you kind of check these boxes and this is what we are actually going as a catalog through the companies we're investing in, you can master vertical SaaS perfectly fine. So the future is vertical.

9:52It's not only SaaS, but it is vertical because this is the way how you can master the future while running a software company. Before you go, I just want to give a massive shout out to the partners who made the EAVC Summit and Awards possible. So please do not tune out. We're partnering with these firms because they're great people with offerings that we know from our friends in the ecosystem are truly world class. First up, I want to give a big thanks to HSBC Innovation Banking. They helped us in SAP the awards in the very beginning. And truly, they are the leading bank for anyone in European venture.

10:27There's a reason why everyone knows them. Google Cloud, they were our venue hosted the summit. What a team, what a big effort they put on to help us. We're hugely grateful. Make sure to reach out to Arabella or Oksana at the Google Cloud team to hear how they can help you as well as your portfolio. Massive credits goes to them. Ace Alternatives. We have so many friends in the Berlin ecosystem partnered with these guys. Just the best fund ops team around. And as with any good restaurant, where the locals are is also where you get the best service. And now they're expanding across Europe. So they're definitely someone to talk to.

11:03Hainspoon, they're longtime partners of ours in both our own legal work. They're great supporters of us here at EUBC and I definitely think that they are one of the go-to legal teams to have in your corner. CW Communications, our dear friends who helped us secure CNBC, Bloomberg, Financial Times and many more for this summer. It's a joy working with Dan and Kathy and the team. Fundcraft, Digital Native, Full Suite, Lux Headquarter and a great partner as you grow your firm out of Luxembourg. definitely a fund admin to consider in your stack. I can only say that the team are incredible to work with.

11:40I'm very thankful that I've gotten to know them. I think they're one of the up and coming fund admins that you want to be thinking about. Portfolio IQ by Synaptic. You may know them for the Discover tool, which is branded on a Synaptic, but Portfolio IQ is absolutely a product you should know because there's no one that understands intelligence better than this team. And finally, Goodwin. They are a truly world-class legal partner you can trust. They're hands-on, business-oriented, and expert in everything and anything transatlantic. So those were our partners for the summit and awards. I know this might have been a bit long and boring, but really, if you have these guys on your side, I don't think your firm could be in any better hands.

12:20And also, they're helping us do what we're doing every day for you.