Investors and businesses have increasingly embraced AI, seeking automation, efficiency, and cost savings. However, the long-term sustainability of AI investments remains uncertain, with many early adopters potentially shifting their focus to new solutions. Oxx, a European venture capital firm, continues to back business-to-business (B2B) software companies, focusing on those with strong domain expertise and access to valuable data. The firm believes that AI is both overhyped in the short term and underfunded in the long run, and it prioritizes companies that can leverage AI for meaningful differentiation rather than as a passing trend. The broader tech investment landscape is also influenced by macroeconomic factors, including interest rates and market consolidation.
Oxx has previously made significant investments in various B2B SaaS companies, such as Kodiak Hub, Funnel, Gravitee, and Apica. These investments align with the firm’s focus on experienced founders who understand industry-specific challenges. The firm raised $190 million in December 2023 to continue supporting European startups, reflecting its commitment to this sector despite shifting investor sentiment. While AI-focused investment funds have gained traction, Oxx views AI as an integral part of software development rather than a standalone category.
Why do European enterprises rely on US software?
Johnsson points out that European enterprises often depend on American software solutions for digital transformation, despite Europe being home to many global industry leaders. He argues that this reliance does not make sense given the local talent and innovation available. While interest in SaaS investment surged during the pandemic, investor focus has since shifted, with fewer firms specializing in this area. Despite this, Oxx continues to support European SaaS startups, emphasizing the need for regional software solutions that cater to European businesses.
Can data infrastructure maximize AI’s potential?
Johnsson believes that AI’s effectiveness depends on strong data infrastructure, as enterprise data is often dispersed across multiple applications. Without proper data aggregation and structuring, AI-driven innovations cannot reach their full potential. Oxx has invested in companies working on data refinement, particularly in marketing, HR, and IT operations, and is now exploring cybersecurity-related data solutions. The firm sees long-term value in improving data accessibility for enterprises, making AI-driven applications more practical and efficient.
Economic factors also impact investment trends. Johnsson suggests that as interest rates stabilize and inflation declines, mergers and acquisitions (M&A) will likely increase, leading to renewed investment activity. He notes that private equity firms have vast amounts of capital ready for deployment, which could lead to a surge in acquisitions—particularly of AI startups. Many of these deals might focus on acquiring talent rather than products, as smaller AI startups often struggle with scalability.
Oxx views AI as a fundamental shift in how software is built, comparing it to past transitions such as cloud computing. However, the firm does not see AI as a niche category but rather as an element embedded in most software companies. Johnsson believes that hype around AI-focused investment funds will decrease over time as AI becomes a standard component of enterprise software rather than a standalone innovation.
Market conditions and technological advancements will continue to shape AI investment strategies. While AI has gained significant attention, the real challenge lies in making AI beneficial for businesses by addressing data management and integration issues. Companies that can provide solutions for these challenges may have a competitive advantage in the evolving tech landscape. Oxx’s investment strategy reflects its belief that experienced founders with deep industry knowledge are better positioned to drive meaningful AI adoption rather than following short-term trends.
