Headquartered in London and Stockholm, Oxx is a specialist investor focused on early growth-stage European B2B SaaS. Oxx’s recent announcement of the closure of their second fund cements their position as a long-term partner for SaaS companies across Europe.
We’re excited to be sitting down with Partner, Phil Edmondson-Jones for our second Investor Spotlight. Phil has been a specialist SaaS VC investor since 2016, and is an expert in SaaS Go-To-Market strategies.
Tell us a bit about your background before VC.
My background at university was in economics, and I started my career at the Bank of England working on monetary policy. I then spent time in investment banking in the Sales and Trading team at Merrill Lynch, after which I worked in strategy consulting at OC&C to gain some more hands-on, practical experience advising companies on growth strategies and PE firms on acquisitions or disposals. I then decided to move over to VC in 2016.
My VC career began at Beringea, a Series A technology generalist fund investing out of offices in the UK and the US. At the time, I knew I wanted to work in venture/growth, but I hadn’t yet narrowed down which sector I was particularly interested in, having quite a broad experience on the advisory side. Quickly after joining however, I found I was really passionate about the B2B side of investing, particularly within software. After 4 years at Beringea (and shortly after the first COVID-19 lockdown was announced), an opportunity arose to join Oxx, a dedicated B2B software VC fund.
Share with us your story at Oxx.
The first Oxx fund was set up in 2017/2018, and was founded by two ex-Amadeus Partners when they recognised a gap in the market for a dedicated, specialist B2B software VC fund to really focus at the scale-up stage of a company’s development in Europe. The founders had noticed there were several well-known, successful funds of this type in the US, but there were very few, if any, in Europe at this time. So they set up Oxx to become the leading brand in that space.
I joined after they had raised their first fund, and had invested in 2–3 portfolio companies, but the fund was still quite early overall in its commercial development. It was a really interesting time to be able to contribute to the growth of the business itself, as well as leading transactions and investing for the fund. It was a strange few months to begin with, what with not being able to meet many colleagues in the real world for the first few months, but it was a really great time to move over.
We typically lead Series B transactions with a round size of €10M-€25M in companies at the ‘scale-up’ or ‘early-growth’ stage. At this stage, companies generally have very clear evidence of product market fit, good early traction, and emerging evidence of “go-to-market fit” — which is essentially evidence that they have a scalable, repeatable, and efficient commercial engine ready to expand and scale effectively.
What’s interesting about this stage is that these companies are growing quickly YoY, they’re hiring lots of people, but they haven’t fully nailed their business model and so they’re not quite ready to raise a large €50M+ round. The benefit for us is that we get to work on lots of really interesting things, like scaling a business’s go-to-market engine, driving international expansion, and we are also heavily involved in completing and augmenting the senior team and board — all the things that get us out of bed in the morning to help founders on their journey!
We raised our second fund generation at the tail end of last year at $190M, up from a $133M Fund I, so we were really pleased to announce a significantly larger fund in what was a challenging fundraising environment overall.
What is the first thing you look for when assessing potential portfolio companies?
The most important thing, even at a Series B stage, is still the founder(s) and the quality of the management team. We look to back exceptional, mission-driven founders with brilliant ideas who have the potential to build category-leading businesses. And of course — a good match with our fund’s stage focus (clear product market fit and compelling early product & financial traction).
What we are trying to understand from some of these components (great founder, clear product market fit, early traction, etc.), is whether the business can grow to €50-€100M+ in annual revenue if enough things were to go right? We usually invest when companies are <€10M in annual revenue, so the key thought experiment is assessing could this business become materially larger, what needs to happen for this, and how do we achieve that?
What is the number one red flag that would make you pass on an investment?
For me, a pet peeve is inconsistencies. I don’t necessarily mean inconsistencies in a deeply analytical way, but instead big, glaring inconsistencies in how entrepreneurs describe the strategy of their businesses, or the way in which they present key financial numbers — either because they’re not known, or because communication has been a bit too casual. That’s something that can damage a high-quality relationship early on and when it happens, it almost inevitably erodes trust in an irretrievable way.
Otherwise, this might be cliché, but there’s a reason a software investor’s favourite metrics are net revenue retention and customer usage. There is no shying away from the amount of usage and engagement the customers have with your product, and how effectively you are able to monetize it. By the time you get to the Series B stage there will usually be a few years of track record to reflect on, and if you haven’t been able to solve your retention and engagement by now, it can be difficult for an investor to see a credible growth story behind the business. Not hitting the bar on these KPIs is probably the most frequent reason for us passing on opportunities.
What advice would you offer growth companies about financing their business?
On the personal side of things, the relationship between the CEO and the transaction lead at the investment company can last for the best part of a decade or longer. The main question is, who do you want in your corner? Someone you can get value from, but also someone you can call upon to support you when things get difficult. At the end of the day, this is very much a people-focused business.
Particularly over the last 5 years or so, there has been a wide expansion of the types of financing available for companies. There are different styles of equity financing (funds that will try to shoot the lights out, and those that try to develop businesses in a very capital-efficient way to drive towards profitability — and a whole spectrum in between), there are venture debt funds, revenue-based financing, and all sorts of other instruments available. So now, more often than not, companies have a more mature attitude to working out the cost of capital while they’re raising financing and try to use the right combination of instruments for them at that time.
Most often, I advise companies to really try to understand the following:
1. What is the set of things you want from this round of financing?
2. What will this enable you to deliver?
3. What does the current position of the business allow us to achieve?
From this, we can look to fund what is most suitable for what they need and find the solution that ticks the most boxes.
What makes a good founder?
There are many things, but having a really strong founder story, or “Founder Market Fit” is crucial, i.e. when the founder is communicating the business to you, is it contagious? Is there a powerful driver behind why they’ve created the business? It could very much be that there was a personal problem they faced at a previous company, but there are almost infinite compelling reasons which can drive a founder to start a business. The very best founders make you feel like they’re on a mission and would stop at nothing in trying to get their platform in front of as many people as possible. It’s a quality that’s hard to discern over an initial meeting or two, but getting to know founders over the course of a number of years — which we often do — you tend to get a good sense of this. Most often, the most successful founders will have this characteristic.
Another quality that cannot be overstated, is being a quick and effective iterator. Being someone who is really obsessive over collating data and feedback on what is and isn’t working as quickly as possible, and who’s able to change things with energy and impetus is incredibly important. When founders are not operationally agile, they open themselves up to becoming less competitive over time and having other businesses overtake them. Being able to make quick tweaks and improvements is really crucial. A component of this is to also be a good hirer. Don’t shy away from bringing on people who are more specialised than you are across different areas of the business. To be able to sell that story and bring people in well beyond your current standing as a business is a another key skill we look for in a founder.
