EXCLUSIVE: VC firm Oxx is looking to invest in up to four B2B SaaS companies in 2023, according to its co-founder.
The London-based VC invests in software companies at Series A stage in the UK, Europe and Israel, investing between £5m and £20m in funding rounds up to £20m.
So far it has invested in 10 companies since its founding in 2017 including Swedish marketing data company Funnel and API management start-up Gravitee.
Its co-founder Richard Anton says the VC firm is actively deploying now the market is “much healthier”.
“The VC market is a lot more sane,” he tells Growth Business. “It went through excessive exuberance from 2020 and lost discipline in terms of valuations and the way companies were growing.
“It was growth at all costs rather than capital efficient growth. It was very difficult for us in that frothy period because the disciplines weren’t there. There was an absence of reality in that period.”
Anton has been in the venture industry since the mid-Nineties and worked in private equity firm Apax Partners’ venture arm investing in software at Series A stage.
“I saw the immense volatility that goes with early-stage software investing,” he says. “Early-stage software companies go through a process of finding a product market fit for their tech – that’s a very uncertain process in terms of its chances of success, how long it will take and the cost.
“Going through that period of the dot-com boom and bust, I came to the conclusion that it was much more attractive to invest at the stage where software companies had already found their product market fit and were relatively early in their scaling journey.”
In 2006, Anton met Oxx co-founder Mikael Johnsson when their respective firms were co-investing.
“We had the same philosophy about the way to work with entrepreneurs, which is to work as a partner to them, understanding their business area with a high level of emotional intelligence and be the antithesis of the archetypal sharp-elbowed financier.
“At Oxx, entrepreneurs say we understand SaaS and act like partners to them. That’s a distinction about us.”
After then working together at deeptech investor Amadeus specialising in B2B SaaS, they founded Oxx in 2017 with the ambition to be the go-to investor in Europe for B2B SaaS companies at early growth stage.
“The most attractive funds historically are the Nordics, UK and Israel because they’re very internationally orientated with similar ways of building SaaS businesses and how they enter the US,” he says.
“The companies face very similar challenges and we bring our skills in helping them grow in those places.”
Companies they have invested in include Goodlord, a residential lettings SaaS start-up which digitises the referencing and contract process, and Codility, which assesses software developers’ skills for recruitment and professional development.
“There’s a lot of doom and gloom about currently, but it’s not all gloom,” he reassures. “It’s a very good time to be building a business. Talent is available now, there was a war for talent last year and it was difficult to get it.
“It’s also a good time to invest in product development because the upturn will come. And all the while, you’ve got this juggernaut of digitisation of the global economy. It’s not stopping for a downturn or interest rate problems, it’s carrying on.
“That’s why we love SaaS – because software is growing as different sectors digitise. Within software there’s also the drive to the cloud. There’s lots of opportunities in SaaS, even in this environment.”
What Oxx looks for in founders:
You really understand the problem set you’re solving: “You understand the customer need very well, you’re an insider to the problem your company is solving.”
You have a vision: “A vision on how to build a potentially category-defining company. You should have a greater purpose for the company, doing something that is making the world a better place in some way. If you have that, it’s a good rallying cry in the company and something we can get behind. You can build a great business if you have that sense of purpose.”
Grounded and realistic on how to grow: “You are, like us, grounded in reality.”
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