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14 February 2024·7 min read

Konrad Koncerewicz

Head of VC & Startups, Vestbee

VC Of The Month — OXO Ventures

OXO Ventures is a part of OXO Group, which was founded in 2014 in Budapest, Hungary as a purely private VC group with an angel investor background and a strong angel and institutional investor network. The group has been active in the CEE region for the first 7 years — in 2021, it expanded its activity to the entire Europe and now also operates in Rotterdam, the Netherlands. 

After successfully closing the first angel fund, OXO decided to establish an investment vehicle, which has been listed on the Budapest Stock Exchange. This listed holding company currently holds a portfolio of 17 startups with diverse verticals and continues to invest in further companies. The main focus of OXO Group is on secondaries and small cap buyouts. 

It also operates a tech incubator company, investing at seed stage up to €200,000. The group's future plan is to also establish sector-specific VC funds focusing on seed and series A investments. 

Fund strategy overview 

Geography: Europe
Preferred industries: greentech, fintech, cybersecurity, B2B SaaS, deeptech and AI
Investment ticket: €200k– €5M
Company stage: multi-stage
Product type: equity investment
Product stage: all stages
Revenues: prefer revenue, but consider all stages

Q&As with Peter Oszkó, Founder & Managing Partner at OXO Holdings

What are the 5 main things you look for in a startup?

It sounds like a cliché, but the team is the most important. A good team can recognize the true value of their own business, and it doesn't matter if the company is selling pencils or developing the most advanced AI tool; the best entrepreneurs always know where the real market opportunity for a great product or service lies and how to sell it. Obviously, we focus on other topics as well, such as the traction they have achieved so far, feedback from existing customers, some financials, and upcoming target markets. However, these factors come from the founders and serve as a measure of their readiness.

What disqualifies a startup as your potential investment target?

We use a pre-screening list for every startup that has applied on our webpage for funding. This list includes basic ESG and business type statements. If the company, for example, violates the UN Global Compact or engages in greenwashing, or if we determine that the idea is not feasible, we reject them from that stage. Additionally, if the applicant is completely outside our scope, we reject them. For example, we haven’t invested in any crypto companies.

What in your opinion differentiates the best founders from the rest?

In my opinion, there are no best or worst founders. Rather, there are different types of founders, who I would largely categorize into three: "early successes," "later successes," and "failures." 

  • The first type can plan for the long term, not just the short term. They understand market trends and aim to build a company, not just a product. They possess the talent to think ahead, or perhaps have been fortunate enough to succeed. 
  • The second type is similar, but they had to learn how to think long term and build a company instead of solely focusing on a product. 
  • Lastly, there is the third type who continually plan for the short term, love the product, but fail to recognize the importance of building a complex company, or simply have been unlucky.

What startups should take into account before making a deal with a VC fund?

Having an institutional investor, or having a new, external player in the cap table, means a lot and has a lot of advantages but also disadvantages. Involving a VC fund means you will have a partner who can help with their network or expertise to grow the business, which is good. However, it also entails certain liabilities. I'm quite certain that founders hate preparing monthly/quarterly reports for the VC fund, but these reports can also help you gain insight into your own business every month/quarter. 

My message to all founders is: I believe it's worth inviting investors to the company if you want to grow faster, but be careful to find the right investor for your business. It's always a long-term relationship.

What is your approach to startup valuation and preferable share in the company?

The fair price is reached when the buyer and seller agree, and both sides feel satisfied with the deal. Startup valuation is a true mystery, especially in the early stages, as the company's worth can fluctuate from being worth millions of euros one day to being worth a fortune or nothing the next. Naturally, we utilize different approaches to determine the true value of the company, but we only proceed with a deal when we are satisfied with the price. 

As a multi-stage investor, the preferable share always depends on the round size and the maturity of the company, but I would say that we always acquire a minority stake. It could range anywhere between 5% and 25%. At the same time, funding size is much more critical than valuation itself, and founders should focus on determining the right size of raised funding at each stage. Inadequate size of funding can jeopardize the feasibility of the whole projects, while overfunding can quickly amortize the long term interest of the founders regardless of any valuation.

How do you support your portfolio companies?

In my opinion, the most important aspect is strategic support. Investors possess experience with various companies and have witnessed different examples of successes and failures. We must provide our portfolio companies with everything they need to make the optimal choices for success. Furthermore, the network holds importance in our sector. We must grant portfolio companies access to our network both in terms of general business partnerships and further funding rounds.

What are the best-performing companies in your portfolio? 

We had the opportunity to include Commsignia, a company that develops V2X communication systems, in our portfolio at a very early stage. They successfully raised their B round last year, and we are eagerly anticipating the next steps, along with fellow investors such as LG Electronics, Samsung Catalyst Fund, and Qualcomm Ventures, to name a few. 

Additionally, one of our portfolio companies, Gravity R&D, achieved an early exit in 2022 by being acquired by the Nasdaq-listed company, Taboola. 

What are your notable lessons learned from investments that didn’t work out as expected?

The market environment can be highly volatile. Even if you come across the world's best founder team with an exceptional product at the opportune moment, the market can still undergo drastic changes. We have been witnessing this during the pandemic and subsequent economic crisis. 

Adaptation becomes the key to survival. Founders who can successfully adapt to the changing market environment have a higher chance of achieving true success, while those who cannot, may fail.

What are the hottest markets you currently look at as VC, and where do you see the biggest hype?

In Europe, two main sectors are currently leading the deals: climate technology and AI. We strongly believe in the potential of climate technology because the green transition is inevitable if we are to achieve the goal of limiting global warming to 1.5°C by 2030. Innovation plays a critical role in this field, and therefore, it is necessary to provide more capital for its development. 

On the other hand, AI is currently in a hype phase, and there are concerns about its overvaluation. It is difficult to predict its future performance beyond 2024, so it would be prudent to exercise caution in making any further predictions.

In your view, what are the key trends that will shape the European VC scene in coming years?

When it comes to sector trends, I firmly believe that the aforementioned two sectors will continue to lead for the foreseeable future. However, in terms of macroeconomic trends, the pressing question becomes: "When will central banks begin to lower interest rates?" Given the current market environment where inflation and interest rates are higher and the economy shows signs of slowing down, it is not favorable for risky assets such as venture capital. 

Predicting the exact timeline is difficult, but one can hope for a decrease in interest rates by the end of this year at the very least. A consequence of the market slowdown is that more realistic and lower startup valuations will likely persist for a longer period of time.

Related Posts:

VC Of The Month — Roosh Ventures (by Konrad Koncerewicz, Head of VC & Startups, Vestbee)

VC Of The Month — AIP Seed (by Konrad Koncerewicz, Head of VC & Startups, Vestbee)

VC Of The Month — ZAKA (by Konrad Koncerewicz, Head of VC & Startups, Vestbee)

 

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