I had the pleasure to interview Dominique Vidal. He is an engineer by background who graduated from France’s CentraleSupélec in 1988. He began his career at Schlumberger, where he worked for ten years in product marketing and business development roles in the telecom and smart card industries. After that, Vidal became a partner at Banexi Ventures, a venture capital firm headquartered in Paris, where he led investments in multiple companies, including Kelkoo – a European shopping search engine. He then became managing director at Kelkoo and led it until its sale to Yahoo! in 2004, where he stayed and ran Yahoo! Europe until 2007. He then joined Index Ventures as a partner, where he invested in some of the most successful start-ups in Europe, including ASOS, BlaBlaCar, Criteo, Metapack, Navabi, Outbrain, and Squarespace. In 2019 he stepped back from his previous position to become an angel investor.
First of all, I would like to thank you for taking the time for this interview. How did you make your way into the world of venture capital after having studied engineering?
When looking at my career, you could say that I have had “three lives”. At first, I went from being an engineer to working in product marketing in an industrial company called Schlumberger. This can be considered unusual, but it involves very technical products, thus it requires more scientific knowledge than what you usually learn in business school. I spent 10 years in Schlumberger and became Head of Marketing, which gave me the opportunity to work with VC firms and to discover my interest in transactions. In 1999, together with a few engineers and Pierre Chazal, I founded Kelkoo (a European price comparison service). We spent 5 years developing the company to the point where we had 400 employees and then we sold it to Yahoo! in 2004. Following the deal, I integrated Yahoo! and became Managing Director of Yahoo! Europe for 3 years. In 2007, I joined Index Ventures – a VC firm investing in technology-enabled companies – to start a growth fund with Giuseppe Zocco. I spent 13 years at Index Ventures and in 2019 decided to become a Business Angel.
You mentioned that you were an entrepreneur, given that you co-founded Kelkoo, did it help you when you started working in VC?
Yes. Interestingly, I realized that in a venture team, if there is one thing that truly matters, is the background diversity. So that when you make investment decisions, you have the input from people with different points of view. That is why, at Index, there were 7 partners, most of whom came from different backgrounds (mainly banking, consulting & operating) before starting to work in VC.
In VC, you have to make decisions very quickly after only having met the company a few times because it’s a very competitive environment. When making an investment, there are 2 variables:
- The first is to qualify the opportunity, so to decide if you want to invest or not.
- The second, is winning the deal. This is the point where having an entrepreneurial background is advantageous. Because you get the opportunity to create a special connection with entrepreneurs – since they can probably relate more to you than to traditional investors, given that you were once in their shoes.
Index Ventures has become one of the most highly recognized venture capital teams in the world. Do you think you could share some perspective on how it happened?
In the VC industry, success brings success. Index had invested in Skype in 2002/3 and just before when I joined, they sold it. The company was acquired by eBay for $2.6 billion. At the time, this was considered an extraordinary return for a venture firm whereas today there are quite a few unicorn companies. This deal is what put Index on the right trajectory. From that point, Index got access to better deals and entered the “positive loop”. What makes Index unique is that it was – for a while – one of the only firms to have a team split between Europe and the US. Recently, more firms have started doing this, but our positioning, our team, the diversity of people we brought on, and the early success, were our key advantages. Also, every one of Index’s funds has always had at least one fund returner. Some examples would be Skype, Criteo, JustEat and Datadog.
Throughout the years, you’ve invested and been on the board of many companies through a variety of stages. How does your role in supporting these companies evolve as they grow?
In the early stage, I always try to define my role as a “business psychologist”; you don’t tell entrepreneurs what to do, instead you help them think. Obviously, sharing experience is also part of the psychology. A good entrepreneur will know what to do in the end, but they need someone that they can talk to during the process.
Anyways, the firm is a minority investor in the company thus we play an influential role rather than a decision-making one. Our goal is not to influence the entrepreneur into making the decision we want them to make, but rather just to help him consider other points of view that will help them make their decision and see the big picture.
And you’d be surprised, even with companies going public or at a later stage. Most of the time, being a CEO of a company is a very hefty job and having people you can talk to matters quite a lot.
…and would you say that the role changes a lot when it’s a very early-stage company?
So, what changes is usually the frequency of interaction. There’s a high frequency of interaction at a very early stage and with time there is gradually less interaction. But the good thing is – and that is what I enjoy about the VC role – that you work very closely with the company at an early stage. When time passes and we interact less, we still know each other very well and it’s easy to have the conversation that we need to have.
The type of decision also changes a lot, obviously. During the early stage, you may share some ideas or some thoughts on the price side, as an example. Whereas during the later stage, the company is very well organized and has a lot more resources internally to make most of the operating decisions. During the latest stage, we help with the funding rounds, finding new investors, etc., as well as with all decisions about what to do with the company: sell it, go public… Again, as I said before, at every different stage, there are some very critical decisions to make and VC allows you to be probably the first person they talk to when they need to make decisions.
Does your role change much in between being a VC partner and being a business angel?
Yes. It’s the entrepreneur’s choice to “use” you or not. When you have a relationship as a VC partner with an entrepreneur, the role they expect you to have – as we mentioned in the previous question – is mainly to help them make decisions. But depending on the company, and on the people, some will ask for more help, more support or more interaction, while others are going to need less.
As a business angel, it’s quite different. Obviously, there are infinite ways to exercise a role as a business angel. But what I try to do is to help young entrepreneurs get started. This usually means supporting them, helping them raise their money as well as letting them “use” your name etc. My criteria for investing as a business angel is young entrepreneurs – less than 30 years old most of the time – whose companies have strong technical competence. And most of what I did was because it was my network. I give them one meeting, one hour, and make a call. So, as a business angel, the investing process is easier than when working in a firm.
What do you look for when meeting the entrepreneurs?
Most of the time, what I am interested in is not only the company they are building and so on but the person I have in front of me. How did they get here, why did they decide to create this company, etc? Basically, trying to understand if they are capable of adapting – given that in start-ups, most of the time, what you expect to happen is not what actually happens. I am looking for the ability to cope with adversity and change of direction – the capacity to adapt to a fast-changing environment.
So, following the pandemic, how do you see the future of entrepreneurial startups in Europe?
The pandemic has been a very interesting factor in the industry. I remember thinking – when it started back in March – “it’s going to be bad”. The reality is that it has affected many people in many ways. Thus, the outcome ranged from catastrophic to extremely good and wasn’t easy to anticipate. In the case of most software businesses, companies had to accelerate their transformation, the way they operate and to make more digital processes. The process of digitization had started, and it was accelerated. As a result, companies like Datadog and Snowflake did extremely well.
…and are there any areas that you think are most likely to produce very interesting companies after the pandemic? Is it mostly tech?
I think that the tech industry is going to produce very interesting companies, specifically software businesses. I also believe that the whole sector around FinTech is doing amazingly well… Some notable transformations would be those of Shopify and Airbnb. Given that the travel industry isn’t in good shape, Airbnb’s success during the pandemic has been fascinating to watch. It is sometimes in difficult environments that you see companies like eBay emerge.
So, just after the many deals that you have done, do you think that there is a key to a successful deal?
The VC industry is about pattern recognition. In private equity, you can look at the financial numbers and the company’s recent growth, but in VC, we do not have as many numbers. Most of the time, companies have little or no revenue. Thus, you can identify patterns like a certain entrepreneurial behavior for example – which will make you more confident to make the investment. My advice to anybody who wants to be in the VC industry is to meet as many companies as you can. So, the more companies you meet, the better your “filter” becomes at identifying great companies. There’s no doubt about that. You are more likely to disregard very quickly what is not good and what you do not like.
So, pattern recognition is key. Having said that, it is important to understand that most of the times, about 60% to 70% of the money invested is gone but the rest of the money invested is going to produce a return and that 30% is one, two or three amazing companies that are going to make the bulk of the return.
What is difficult is trying to think about what makes these companies so amazing. Even if you’ve been able to disregard a few aspects that don’t make sense (or that you don’t like), sometimes you just have to take the risk. For example, usually, corporate governance is an important aspect when choosing to invest in a company. But Adyen, which is probably one of the best companies ever built in Europe over the last 20 years, had no board when we invested back in 2010. Usually, it’s a red flag and I can tell you that when we invested, we were skeptical about it. In the end, it was one of the best investments we ever made. So, it’s not only about intuition but also about being willing to take risks.