Editor’s note: Philip Edmondson-Jones is a Partner based in Oxx’s London office and is a specialist SaaS VC investor who is an expert in SaaS go-to-market strategies. He has a deep understanding of how to scale SaaS companies and was instrumental in developing Oxx’s go-to-market fit toolkit. Phil has applied his specialist SaaS expertise to back businesses in fintech, insurtech, cybersecurity, vertical AI, martech and more, and has served as a board member for over a dozen top European scale-up businesses.
Can you tell us about your background and path to joining Oxx?
I started my career as an economist at the Bank of England during the last financial crisis, which meant that I got to learn the ropes in a tough macro environment. After that, I worked in various roles at Bank of America Merill Lynch and Marathon Asset Management before moving into strategy consulting at OC&C, where I primarily advised private equity clients on commercial due diligence projects. Then in 2016 I moved into the world of venture capital at Beringea, where I was a Series A generalist tech investor for about four years.
It was during that phase of my career that I discovered my passion for B2B software investing. That interest eventually led me to join Oxx in early 2020, which at the time was a relatively new fund with big ambitions to become one of Europe’s leading specialist B2B software investors.
Can you tell us more about Oxx and how it differs from other European VCs?
We’re a specialist investor that exclusively backs European B2B SaaS companies at the scale-up stage. For us, that means companies that have already proven their product market fit, meaning they have a product that’s live (and loved!) in the market, an early group of evangelical customers, and strong initial traction in their home country and (often) one or two other markets.
Beyond our laser focus on European scale-up stage B2B SaaS, what sets Oxx apart is the work we do to help our portfolio companies successfully navigate the transformational changes required in their unique scale-up journey. Primarily this involves supporting them in developing go-to-market fit, which we define as the journey toward having a predictable, scalable, and highly performant commercial engine. We also help our portfolio companies build out their senior teams and do a lot of hiring and organizational design work, as well as working with them to drive important strategic initiatives like international expansion, upgrading positioning, or revamping their pricing model.
Finally, we’re a boutique fund and only generally make three or four investments a year. That’s important because not only does it allow us to cherry pick the best software businesses to partner with, but it also means we can (and do!) spend a lot more time helping our portfolio companies than most VCs. As a result of this, our investment team is far more operationally oriented than you’ll typically find in the European VC ecosystem, with most of our investment team having direct tech B2B startup experience.
Given your experience working with SaaS companies on go-to-market fit, what do you think are their biggest pain points when it comes to getting their GTM strategies right?
The biggest overarching challenge is timing go-to-market expansion correctly. Businesses that try to scale too quickly tend to be inefficient, waste money, and underperform if they don’t have the right foundations in place. Just think of a company that completes a big funding round and immediately goes out and hires a bunch of new sales people without first having all of the necessary processes and infrastructure in place to put them to good use.
Conversely, when companies are too cautious and don’t invest in growth, even when there are the leading indicators to support it, they can wind up building their product too slowly, losing out to competition, and destroying value for their stakeholders.
Getting the timing right is really tricky. That’s why we spend so much time talking to companies to figure out how strong their foundations are, when it’s the right time to put their foot on the gas, and how to do so in the most effective and efficient way possible.
So when is it the right time? What signals do you look for before encouraging go-to-market expansion?
There has to be strong, unequivocal evidence of product market fit, and the most scientific way to prove that exists is by looking at customer engagement and retention metrics. The truth is that you can track all of the flashy KPIs and tweak all the definitions you want to tell a good story, but at the end of the day there’s really no hiding from how engaged customers are with your product and whether or not you’re able to retain them. That gives you the best evidence the foundations are solid.
As we dive deeper into different aspects of go-to-market expansion, there are different considerations to take into account. If a company is trying to assess whether it’s time to expand internationally, for example, we’ll look at things like the similarities in the product requirements across regions, whether top existing customers or partners can help with distribution, the strength of local competition, and if there’s a different regulatory landscape that needs to be considered, for example.
What can companies do to achieve go-to-market fit faster?
There are seven accelerators that we highlight in the go-to-market toolkit we’ve created. I won’t list them all out for you here, but can pick out a couple of key themes that they get at.
One of the most important ones for me is about the positioning of your products in the market. Companies that are approaching go-to-market fit have good traction with early customers and are moving toward more mainstream adoption. That’s exactly the point at which you have to think through very specific product messaging in terms of where you sit in the market versus your competitors and why people should use your product versus your peers’. Getting that messaging right and ensuring it jumps off the page is crucial.
Secondly, I’d note that customer onboarding is generally underappreciated and most companies don’t spend enough time on delighting their customers early on in their journey. Given that so many software users have been spoiled over the past few years by product-led growth companies that deliver fantastic user experiences, the bar is much higher. In today’s environment, the better companies are at engaging customers and communicating the value of their product, the easier it will be to achieve go-to-market fit quickly.
Do you have a sense of how go-to-market strategies in Europe might differ from those in other markets like North America?
The need to internationalize is one of the biggest differences. The US has such a massive domestic market and there’s so much capital available there that there’s really much less urgency around international expansion early in a company’s growth. In Europe, on the other hand, there are very few domestic markets that are large enough to sustain growth-stage companies on their own, making the need to expand internationally much greater. That, of course, creates a lot of cultural and product complexities that require a significant level of openness in areas like expanding product features and growing the commercial team in order to enable that expansion.
The other big difference is that Europe has lagged behind in terms of product-led growth. Europe has been slower at adopting that approach to driving product adoption and structuring teams accordingly. I would point out, however, that that’s starting to change, particularly as more US talent comes to Europe and the success of product-led growth becomes more firmly entrenched in the local mindset.
Last question, what’s your take on the VC market in general in Europe as we head into 2024? Do you foresee a return to some kind of normalcy?
It’s hard to say if there will be a return to normalcy. Instead, I think we might transition to some kind of new normal. So far in 2023, there has been reasonable levels of early stage VC activity in Europe, driven mostly by the generative AI boom. On the other hand, as everyone knows, activity at the later stages has been incredibly slow. There’s been a massive slowdown in late-stage venture financing and the IPO market has effectively been frozen for most of the year. This has meant that many VCs have turned inward, focusing on helping their portfolio companies and developing new thematic views that will drive future investment activity.
Over the past year, many scale up and early growth-stage businesses have looked to improve the quality of their business models by, for example, rationalizing their cost base, managing burn, and making sure that they have the appropriate level of runway in place. Many have also completed internal rounds or looked for venture debt financing to help carry them through. The consequence of all of that is that the length of time between fundraising rounds is extending.
I think that by the second half of next year, we’re likely to see the IPO markets unfreeze, an increase in M&A activity from big strategics, and public market multiples making a recovery alongside the economy more broadly. All of that should lead to a steady acceleration in fundraising activity as companies have sufficient confidence and performance to raise growth financing. We recently announced the closing of our second fund generation and are excited to partner with many more of Europe’s top B2B SaaS companies in the coming years!