In this episode of the EUVC podcast, Andreas discusses with Mikael Johnsson, co-founder and General Partner of Oxx.
Andreas and Mikael discuss the key strategies and insights that have shaped Oxx as a leading player in the European B2B SaaS investment landscape. Mikael shares his extensive 24-year journey in venture capital, highlighting the evolution of his investment philosophy and the experiences that have driven Oxx’s unique approach to backing scale-up stage companies.
Oxx’s second fund, totaling $190M, underscores the firm’s commitment to supporting B2B SaaS innovators across Europe and Israel. With a team of six in Stockholm and nine in London, Oxx maintains a pan-European reach, enabling it to stay closely connected to the pulse of regional tech ecosystems. The firm’s notable investments, including Funnel, Gravitee, and SOCRadar, exemplify Oxx’s focus on high-potential SaaS businesses with the ambition and capability to scale internationally.
Watch it here or add it to your episodes on Apple or Spotify 🎧 chapters for easy navigation available on the Spotify/Apple episode.
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✍️ Show notes
Journey in venture
My journey into venture started already at university with a course in Management Information Systems dealing with how software could be used in clever ways to create innovative products and transform business processes. I was really fascinated by technology’s potential - especially when it came to software - to drive innovation and create new businesses.
As I entered the workforce in the late 90s there was a deluge of start-ups that came onto the scene during the dotcom boom and bust era. While the exuberance of the time eventually evaporated, there was real concrete evidence of how start-ups innovated and disrupted incumbent companies and markets by building great software. I then decided that the best way to capitalise on my interest and fascination would probably be in a start-up setting.
However, I didn’t have a great product idea, nor was I a skilled coder or experienced product or marketing and sales person, so I thought the best way to learn how to build a great startup would be to see lots of them, and develop pattern recognition in terms of which companies make it and which don’t.
I went on to become an analyst at a large Nordic venture firm, thinking I’d give it three years and then I’d be ready to launch my own business based on what I’d learned. Things didn’t quite pan out that way and I’ve now spent 23 years as a venture investor in B2B software and as of the last 10-15 years, that’s been all SaaS. I did eventually get to build my own business however, as we launched Oxx as a new firm on the scene in 2018, but not in the way I had expected upon entering the VC world in the year 2000.
A pivotal moment in your life
I started my career as a VC tech investor in the year 2000 - signing my employment contract on the very day that the Nasdaq index peaked - and the first 3-4 years of my career was spent in the aftermath of the dotcom bust.
That means I quickly learned that making investments is a very limited part of the job of being a VC investor - the really hard work is developing companies and getting them to a successful exit. It also means I developed a perspective on the cyclical nature of markets and how understanding these cycles is really critical to building great companies and generating strong investment returns.
Taking a stance
There’s too few European growth funds.
I don’t think there’s too few growth stage firms in Europe and nor do I think there's too few early stage firms. There’s a plethora of firms and money at each end of the spectrum. The challenge lies somewhere in between where companies have established product market fit, but haven’t yet built a scalable and predictable go-to-market machine to reach what we call Go-To-Market Fit.
Firms that find themselves at this stage need capital for scaling but can’t yet deploy the large amounts of money that growth funds want to invest in in an effective and efficient manner. Instead they need more nimble capital for building and testing the platform for long-term sustainable growth, and the capital required for this also goes beyond what the early-stage specialist firms can invest.
That means there’s a need for specialist investors who plug the gap between the early and the growth stages, both in terms of risk-appetite and capital amounts invested, but also in terms of understanding, expertise, and ability to effectively support these companies as they embark on building a platform for long-term sustainable growth.
We could also talk about the state of the VC market and where we are heading. It’s clear that the years of exuberance and excess are behind us and that we’re returning to an age of “smart money”. This means there will be significantly less money invested into venture as an asset class, my personal guesstimate is we’ll see a ⅔ drop compared to the height of the market, which would put us more in line with the long term median amounts invested.
This also means there’s going to be a really tough culling of both startups and VC firms. Way too many companies have been funded over the last few years as a result of the availability of cheap capital. Many of these companies will not be able to raise more money or turn their business around to profitability. Some will be consolidated through M&A, which is going to increase dramatically over the next 6-12 months, but many businesses will go under or fade away into oblivion.
This is equally true for VC firms, many of which have been established over the last couple of years and therefore lack a track record so will not be able to raise another fund.
Deep dive on positioning and how to make a company stand out.
I’m passionate about **positioning - i.e., how to make a company stand out in a competitive market and create sustainable competitive advantage.** The average team we meet hasn’t given this anywhere near enough thought, and yet it’s probably the most fundamental strategy piece for building a really large software company.
If you’ve found product market fit and want to build out your go-to-market, positioning should be the first stop on that journey. Product is an important aspect here, but too many teams think too narrowly about positioning and end up in a feature pissing contest that isn’t necessarily creating much value. The key thing is to focus on unique differentiated value, which can be multifaceted across product, price, technology, go-to-market, ICP, use case, vertical, eco-system, channels etc.
Shout out
There are lots of great people in our industry that I’ve had the pleasure of working with, but if you put a gun to my head I would give a shout out to Suranga Chandratillake at Balderton.
We have a couple of joint investments and he really is an investor that any founder should want to have by their side. He is very thoughtful and doesn’t talk excessively, but when he says something, he always brings a valuable perspective and often catches an angle that others have missed.
3 biggest learnings from last 10 years of life
Rome wasn’t built in a day - it takes time, grit and a hell-bent passion to build a great company. All successful companies go through tough phases in their development and most don’t come flying out of the gates in the early stages.
Great people cures all ills - mediocre people will kill any great opportunity
For me, building a great company is rarely a question of what to do - it’s much more about how to get everyone aligned on how to do it. Therefore, establishing trust, alignment and partnership with entrepreneurs and teams is key to being a really good VC investor.
If you were stranded on a desert island, what book, disc and luxury item would you bring?
If I’m on a desert island I guess Robinson Crusoe would be a good choice. Or maybe Ulysses by James Joyce, I’ve tried to read that book three or four times but never made it past the first chapter. I should be bored enough and have sufficient time to break that down on a desert island.
I’d bring my iPhone with all the Spotify playlists (I know that’s cheating). The album that would get played most frequently is probably something by U2 or the Police.
My luxury item would be a starlink modem fitted with a solar powered battery.
Advice for your 10 year younger self.
Actively and deliberately seek out risk (with a commensurate return of course) when you’re young and don’t have any commitments
Don’t sweat it - things tend to work out in the end.
Most people want to do well and do the best they can.
Tips & tricks from emerging European VCs
Never raise a first fund! :)
What is your unique differentiated value? If you can’t articulate that beyond “motherhood and apple pie”, don’t raise a fund
Start small and with a laser focus.
A counterintuitive thing learned in venture
Entrepreneurs and investors sometimes become the prisoner of their own success, which manifests in trying to deploy pattern recognition in an area where their “algorithm” isn’t really applicable.
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