In this interview, Heidrick & Struggles’ Scott Bae and Alexis Hennessy sit down with Lior Susan, the founder and managing partner of Eclipse Ventures, a venture capital firm dedicated to partnering with entrepreneurs, transforming industries that are critical to people's lives and national economies, such as manufacturing, supply chain, transportation, healthcare, and defense. Susan shares the leadership traits that he believes are uniquely critical to success in start-ups in the physical industries, as well as how leaders can seamlessly adapt between start-ups and large companies, how he thinks about investing in highly regulated industries, and his perspective on AI’s evolution and impact on the space.

Below is a full transcript of the episode, which has been lightly edited for clarity.

Welcome to The Heidrick & Struggles Leadership Podcast. Heidrick is the premier global provider of diversified solutions across senior-level executive search, leadership assessment and development, team and organizational effectiveness, and culture shaping. Every day, we speak with leaders around the world about how they’re meeting rising expectations and managing through volatile times, thinking about individual leaders, teams, organizations, and society. Thank you for joining the conversation.

Scott Bae: Welcome to The Heidrick & Struggles Leadership Podcast. I'm Scott Bae, a principal with our Industrial Goods and Technology practice covering the US and Canadian markets. Today I'm joined by my colleague Alexis Hennessy.

Alexis Hennessy: Thanks, Scott. Alexis Hennessy here, managing partner of Heidrick’s global Venture Capital Practice.

Scott Bae: Today we're pleased to be joined by Lior Susan. Lior is an investor, entrepreneur, and the founder and managing partner of Eclipse, a venture capital firm dedicated to partnering with entrepreneurs, transforming industries that are critical to people's lives and national economies, such as manufacturing, supply chain, transportation, healthcare, and defense.

Prior to Eclipse, Lior and his brother helped to build Intucell, a pioneer in software defined networking for global telecommunications networks, which was eventually acquired by Cisco. He also spent time at Flex, a multinational manufacturing leader, where he led the hardware investment platform Lab IX. Lior is also currently a board member at Bright Machines, Cerebras, Augury, and Ursa Major, among other companies. Lior, thanks for joining us today.

Lior Susan: Thanks for having me. It's great to be here.

Scott Bae: Excellent. Let's start with the beginning of the Eclipse story. You founded Eclipse to focus on transforming physical industries at a time when a lot of other investors were more focused on SaaS platforms.

What attracted you and Eclipse to industrial technology throughout your career, and what made you bullish on the need to transform these industries enough to start Eclipse in 2015? 

Lior Susan: Yeah, it's a great question. And it's funny. I recently told my life story to a friend who is starting a new company, and he said, "You're being purpose-built because you grew up on a farm, so that will be agriculture."

Then you went to the military—that will be defense. You left to start [Intucell] with your brother. And you landed at Flex to do manufacturing. So, you essentially all of your life are doing that. And I thought that I should start by saying that I thought about it from youth, about this idea of starting the firm, but of course that that would not be the case.

No, I think the short version, if you take the world’s GDP, around 85% is actually in physical industries—that will be automotive, manufacturing, logistics, defense, et cetera. And thus, industries had less than a single-digit tech penetration. When we started Eclipse just a little over nine years ago, it was obvious to me as someone that always been passionate about those industries, but also watching technology progression, that we were going to see a lot of companies like SpaceX and Tesla being built, and I wanted to be the person that helped build those companies.

Scott Bae: Yeah, I mean, it sounded like you wanted to capitalize on the dire need for innovation in the physical industries, and perhaps you had the crystal ball of this being ever more prevalent in today's landscape with what's going on in the world from a supply chain and geopolitical perspective.

Lior Susan: Yeah, it felt like it but, you know, I don't think we were smarter than anyone else.

It just was always the case that the majority of the world’s GDP was in those industries, and we as entrepreneurs and operators always had a passion for those industries. And it was just a matter of time till we were going to see COVID-19 or a geopolitical issue or a supply chain crisis or AI growth that would require those industries to change dramatically. And that would mean digital transformation and what we do here. 

Alexis Hennessy: Lior, I want to ask you about something that we think about a lot and our clients constantly are asking us to look for in the candidates that we bring forward for their different needs. You’ve worked in both start-ups and large companies throughout your career, which is actually pretty unique.

And for leaders, what are the biggest differences and similarities in these environments, and how can these leaders who haven't done one or the other best prepare themselves for moving on to that next stage? 

Lior Susan: I think the thing that we are trying to find the most is how the brain works. When you're transforming physical industries, it's not like in the world of software, where you are coming and creating a new industry. You know, the manufacturing industry has been around for hundreds or thousands of years.

It’s the same for construction, for mining, for energy. So, we actually, usually, use many tactics to understand how the brain works for those talents. And we mainly try to find folks that have the mindset for disruption and taking risks. I actually don't think there is a rule if they are coming from big companies or small companies.

Scott Bae: And Lior, to build on that point, what leadership traits do you believe are uniquely critical to succeed in the startup landscape in relation to the physical industries? And how are these nuanced depending on the growth stage of the company? 

Lior Susan: I think a lot of people think that you must be mega engineers because you are building something in the physical industries, and it's going to have a very complex solution, which is true. 

By the way, we actually didn't find that a lot of companies failed there. We actually find that the leadership that usually is missing is the understanding of the go-to market and the ability to raise capital to support that. Through attracting the capital, you attract the talent, and through attracting the talent, you're actually attracting the customers.

So, it’s about really focusing and putting a lot of emphasis on trying to find people that understand the market, the go-to market of those very large industries, and the ability to attract enough capital because those businesses can take capital.

Scott Bae: Right. It just comes back to the commercial edge and market savviness, customer centricity, you know, things that have been pressure tested over time.

Lior Susan: Yeah. In the software world, you don't hire like a bunch of folks to sell widgets over the internet for 20k, right? You're working on multi hundreds of millions of dollars commercial deals, and of course, you know the people that are buying on the other side are very savvy. And it needs to feel like someone on the sides of our companies can actually support a multi-year enterprise, with very large transactions, because someone will get fired on the customer side if it's not going to work.

Scott Bae: Right. And moving on to another point here, there's often the belief that highly regulated industries such as aerospace and defense, for example, are very slow-moving, and other investors may have shied away from such deals for that reason. Why is it that Eclipse embraces these types of investments?

Lior Susan: The markets that we operate in are regulated industries. The governments have a high intimacy with these markets because naturally the government's in charge to provide us with safety, energy, and infrastructure. So, the government is heavily involved, and yes, those industries historically didn't move in the speed of beats, but in the speed of software.

But I think it's all changed fairly significantly since COVID-19, and I think post-COVID, when essentially the world shut down, and we saw how many vulnerabilities we have in our physical industries. As a result, governments couldn't do their job well, and we saw the speed kicking in. Again, when you play, in our case, it will always will move slightly slower than the world of software.

But the prize on the other side, because those markets are way bigger, is of course more significant, and as a result, you see the richest man on earth who actually didn't start a consumer app—he started cars and rockets in both industries that will be heavily regulated. 

Scott Bae: Interesting. So, we now come to the hot-button topic of the last few years, which is AI.

We're seeing more and more industrial technology companies or physical industries embrace physical AI and machine learning, embedding it fully into their operations and products, yet technology is always evolving, of course. Are there any leadership capabilities that you believe are particularly important to keeping teams and the products they manage up to date when working with these fast-evolving technologies?

Lior Susan: Yeah, we've been investing in next-generation semiconductor infrastructure for nine-plus years since the inception of the firm. And right now, we are heavily enjoying the tailwinds of AI because the whole infrastructure needs so much innovation, and that's going from computing, networking, storage, power, data centers, et cetera.

On the other side, we are seeing exactly what you're talking about. Our companies and physical industries can take AI and use it for the world of construction or energy or defense for applications, returns on investments, and disruption, which the customers want to see more of.

And as a result, of course, there is commercial growth. I think on both sides, regardless of if you are in the picks and shovels or in the application layer, you are now required to build your platform through a modularity approach that allows you to keep up with the speed of innovation, because that of course can be a tailwind but also a headwind. We’ve been doing that for years and we feel really good about the opportunity. 

Alexis Hennessy: Lior, I want to shift back and talk about founders specifically. You've been one, and you've worked with a number of them throughout your time at Eclipse. When you think about the defining traits of a successful leader as a founder and what those certain traits are specifically, and also what the red flags are for you when you're assessing and figuring out whether or not you're going to back a founder.

Lior Susan: Yeah, Alexis, our founder, is actually not the typecast of what Silicon Valley was so familiar with over the last 20 years or so. You know, the hoodies from Stanford, with a bunch of pizza boxes on the floor out of their garage [in pajamas] writing code. This is very different than the founders that we are investing in working with.

Our founders are actually in their late thirties, mid-forties, have worked in companies like SpaceX, Nvidia, and Amazon, are building their own businesses and physical industries, and bringing quite a lot of operating experience. So, they might be first-time entrepreneurs, but they're not first-time managers.

It's not like what we were so familiar with from the world of software, consumers, and FinTech, and that's actually required us to look for different things. Those people usually actually have families and they won’t necessarily will do things like the 20-year-old hoodie-type founder.

But I would say that the areas we always focus on are how much experience the founders have with what the market is trying to disrupt, of which they always have too much or too little. You don't want them to come and be the same as the incumbents, working on the other end, and you don't want them to come and make statements that those very large industries will not like.

Finally, there is their ability to attract capital and hire, of course, the best people in the world. I don't think that those three things will be different from any other investors, but the flavors that we are looking for around them are very unique and different from other industries and what they’ll look for.

Alexis Hennessy: Yeah. It’s really interesting to hear the distinction between industries, right? And how that affects what you're looking for.

Lior Susan: Yeah, I'll give you an example. We signed a $1.2 billion commercial deal at the end of last year with one of our companies that I was involved with and the CEO of the Fortune 500 that signed the deal with us, he said, guys, don't screw this up. If you do, we'll lose earnings because we're going to move one hundred percent of our dependency on the manufacturing to you guys. I don’t think they will do this with someone that just finished university and started a company.

Alexis Hennessy: Yeah, I certainly wouldn't. Okay, finally, bringing it back to some of the turmoil that you were describing earlier in terms of what we're going through globally, geopolitically, everything that's been thrown at us.

As you think about your experience in the current environment, what are the two or three leadership capabilities that you believe will become more important in the coming few years for VC investors and executives in VC-backed companies? What's your prediction?

Lior Susan: So, in our sectors, one of the headwinds is the government's involvement. Also, the level of regulation also can be a massive tailwind if you have the right governments.

So, we need to have a high degree of intimacy in relationships with governments in the countries that we operate, to understand how they think. I think the government know-how, it's not a nice-to-have—it's a must-have. I also think access to scale capital is important. Our companies are going after 85% of the world’s GDP, call it a hundred trillion dollars, give or take. You need capital in order to disrupt that size of a TAM and our ability to help them with scale capital, not only equity, debt, financing, government funding, etc., is becoming more and more important. And last but not least is the talent, right?

We build things that are very complicated and there is a high differentiation in the technology, which requires brilliant engineers. In a world where software differentiation is getting smaller and smaller and actually in our sector is getting bigger and bigger, we need more of that talent as fast as we can find it.

Alexis Hennessy: Well, Lior, you've been so generous with your time answering all of our questions. This has been incredibly insightful and enlightening, giving us a lot to go and think about. Thanks for investing the time with us and thanks for the thoughtful answers.

Lior Susan: I appreciate you guys having me, and thanks for the partnership helping us to find incredible talent.

Alexis Hennessy: Happy to do it.

Thanks for listening to The Heidrick & Struggles Leadership Podcast. To make sure you don't miss the next conversation please subscribe to our channel on your preferred podcast app, and if you are listening via LinkedIn or YouTube, why not share this with your connections? Until next time.

About the interviewers

Scott Bae (sbae@heidrick.com) is a principal in Heidrick & Struggles’ Calgary office and a member of the Industrial Goods & Technology Sector.

Alexis Hennessy (ajhennessy@heidrick.com) is a partner in Heidrick & Struggles’ Los Angeles office. She is the global managing partner of the Venture Capital Practice and a member of the global Technology Practice.