E421 | Ingrid Bonde Åkerlind, Oxx: Leveraging the ICP bow tie framework to back high-growth European B2B SaaS

0:00Nothing gets me so disappointed than when I'm talking to what looks like a really great company like amazing metrics, growing well, super cool product, but they can't describe who they're trying to sell to sell to. because if you don't know who you're selling to, you actually don't know why you're growing as well. The one that understands why they're growing well and who they should contact to grow faster in the future, that's the one I want to back because they've thought through the basics and that's going to give me conviction that they're going to be able to continue on that path. And as the market shifts, they will have the ability to recognize how they might also want to shift with respect to that.

0:36Tear down this wall. It's more than just an alliance. This is a union of values. Let's start acting. This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured. All right, everyone, welcome back to the European VC podcast. Today we have Ingrid with us, and Ingrid is an investor at Ox. For those that don't know Ox perfectly well and maybe even less so about yourself, tell us everything we need to know. Everything we need to know. Well, I'll try to be a little more brief than that. But first of all, thank you for having me, Andreas. I'm super excited to be here.

1:18So Ox, we're a specialist B2B staff investor based from London and Stockholm, investing across Europe. And we back companies at roughly Series A and Series B stage. But what we're really looking for is companies that have passed the product market fit gauntlet and are approaching what we would call go-to-market fit. That is, they're starting to repeatedly understand which customers to acquire, how to find them, how to close them, how to retain them, how to upsell them. Overall, to the firm, we take a relatively boutique approach. What does that mean in terms of stage? That means normally Series A-like?

1:54Yeah, so late Series A or more typically Series B, the stages that we'll be investing at. Beautiful. Just wanted to pinpoint that. No, for sure. For listeners, it's important to get it precise, for sure. Many always like to say, well, it's not like just the letter in the alphabet that we invest. It's more these. But then in the end, it is nice to have the nomenclature. I mean, the way... Now we're going off topic. You don't define your own positioning. Your positioning usually needs to fit in about two to three words. So that's why, for sure. But I said the other thing that's relevant to know about the firm is that we're relatively boutique.

2:29So we're compared to the few companies per fund. So that leads to a pretty high conviction approach. But then you get the privilege of really getting time to support each company and the portfolio very individually. If you just give us the stats, fund size and portfolio size then. So we're currently investing from our second fund,$100 million vehicle. and then we will be backing about 12 companies in this fund. So compared to other investors who would look at this stage, that's on the slightly lower side. Yeah, because naturally the portfolio is a bit smaller when you're in the later stages. Okay, there's a bunch I would want to ask you because I want to do a series on the later stages and the importance of understanding the different mechanics in the public market, but let's save that for another day.

3:19but I want to do that a little more because we haven't covered public markets at all on the podcast so that's coming up but what about Ingrid what do we need to know? Yeah sure so Ingrid has now been an investor for about four and a half years but before that and in some ways what I can still identify with quite a lot is that I used to build companies so my background prior to Oxt was spent on the startup side as an operator. Immediately prior to Oxt I would say the first marketing and growth hired a deep tech SaaS enterprise company in the computer vision space based out of Stockholm was with them from seed to series a so basically did the zero to one step of go to market and before that I worked with growth and pricing at blah blah car based at Paris for several years during that phase that was the internationalization hyperscale growth phase so I got the true privilege of getting to see companies from the inside growing quickly at various stages and the fact that essentially it's never perfect it's just a matter of how much controlled chaos are you able to handle what's been the biggest difference do you think for you in going from operations to investing i mean they're completely different fields to begin with even if i think it's getting more and more common that as people don't stick into just one career path to a shift from one role to the other.

4:43And especially with the growth of the European ecosystem that flywheel effects were creating, more angel investors are coming from the entrepreneurial side, for example. It's definitely two different career paths. And so the shift itself was one of mindset, actually, I think, too, in how you're thinking about it. From a more day-to-day approach, obviously, the feedback cycles get longer and there's a much more individualistic role of being an investor compared with a team where you're actually in the trenches and working toward the short-term goal, the perhaps in a project with 10 different people on a weekly basis.

5:16So there's a difference in sort of how you're actually spending your days as well. Do you find that the operator, the value of having been an operator really translates as good into being an investor as you would think or not as much? And I think it's obviously a nuanced question. the area where it translates the most obviously in my mind and that's sort of built in is that being a good investor is based on trust and empathy right so great all great investors truly regardless of background they're going to be very skilled in inspiring trust and empathy with the entrepreneurs they get the privilege to back and so obviously if it's an advantage if you are able to build trust and empathy from basically saying I can relate to exactly the problems you have today because I've been there myself.

6:04That just makes it easier. Similarly, I think from a very pragmatic point of view, it's kind of like having a bit of an x-ray lens. You get the deck from a company, you see the financial plan, you speak to the CEO, but you're able to quite quickly see, aha, because of this, therefore, I think this is going on underneath the surface. And that is something that otherwise you have to build up over years of experience as an investor. Where obviously the two things differ quite a bit is that as an operator, you don't have to have the financial lens on the business. So you're not thinking about the returns of this investment.

6:39And that's something that is that mindset shift. A good company for your fund is very different than a good company from an operative point of view or just in general. Yeah, because you're looking for very specific things when you're investing as a VC. All right. Now, you know, here's a talk really about what you call a bit from fussy to focused, meaning specifically your blueprint for nailing the ICP. Yes. And of course, it makes a ton of sense given what OX is all about and the state you described before that you're investing at. So it makes a ton of sense that this is where you're passionate and also where OX is developing thought leadership.

7:18But maybe let's start just, you know, to understand why is it that ICP is dear to your heart? Let's start there. And then after that, we unfold this bow tie, which you're calling. So that's going to be fun. I think it's interesting because in some ways, it's nothing new under the sun. Like investors have been speaking with companies for years about, you need to focus. You need to figure out who your target customer is. You really need to figure out your ideal customer profile, your ICP. But I've reflected in sort of two core reasons that this has become quite important to at least my personal experience.

7:54perspective as an investor. I think the first one is sort of the personal experience as an operator side. So when I rise at Volumental, my previous employer, as their first marketing hire event in 2018, I arrive and then I say, okay, what's our target customer segment? And the answer was, huh? Which you sort of like, aha, okay, I really am the first in marketing here. And the thing is the company was full of brilliant like computer vision scientists PhDs people were really smart like super smart but the company had grown to date the founder sales and so all that intuitive knowledge of who would be the best customer for me was locked up inside the founders and sort of the founding sales sales leaders brains and that works but then it breaks down post-PMF because suddenly you have to start onboarding people you have to tell them this is what you're supposed to do And so the need to really structure that is really started showing itself at that point.

8:54And so getting to work on that problem and build the process of figuring that out has sort of shown, I was lucky enough to see what's the effect that you can get from that. It's hard to prove quantitatively that you're truly able to shorten sales cycles, although that's obviously one of the goals of it. But it really helps you onboard, for example, new go-to-market hires and product hires more effectively. So that's really the personal view. But then if I put on the sort of investor lens of the past several years, nothing gets me so disappointed than when I'm talking to like what looks like a really great company, like amazing metrics, growing well, super cool product, but they can't describe who they're trying to sell to well.

9:35Because if you don't know who you're selling to, you actually don't know why you're growing as well. And so it's not that it's a sort of, ah, is this the 10th tick box of like, check if they have this as well. It's more because if I look at two companies at sort of the same stage, growing the same way, same metrics, the one that understands why they're growing well and who they should contact to grow faster in the future, that's the one I want to back because they've thought through the basics and that's going to give me conviction that they're going to be able to continue on that path. And as the market shifts, they will have the ability to recognize how they might also want to shift with respect to that.

10:14So those are sort of two different perspectives, but you can't get away from the basics, basically. I suppose it's at the end of the day why you should care. You're saying here you very quickly go to a straight pass if you're finding that they don't have a nail down their ICP and don't fully understand it and so on. How much work do you think is worth doing on this? At your stage, do you think that it's something that you, as an investor go in and work with the founders on and say, okay, well, everything else is working. So this is something you just need to get to work on? No, it's a super fair question.

10:51I think it's far too simplistic to say like, oh, you don't have that, so pass. That would be making that a tick box thing, right? Which I said is sort of not the point. And truthfully, I would say that almost in the majority of occasions, the companies that Ox partners with, we will end up supporting those companies to work to further refine their positioning. it's not done. It's kind of like you're never done with product market fit. You're never done with positioning. You're never done finding your target customer. So I think the more important tell that I look for is even if I might get an unclear answer from one person initially, the question is, if you speak to the marketing leader and then the sales leader and the product leader, maybe they're using different words, but are they kind of referring to the same type of customer that we're looking for.

11:41Is the roadmap that product is building going to be geared to the same needs that marketing is trying to find in the funnel? Will be geared to the same types of leads that sales says actually converts that are in the funnel? Those are signs that the intuition is there, even if it hasn't been completely codified onto paper. And that's something you can help with codify so that then you can actually onboard new people and help them scale. One of the things we in venture are really, really good at is giving advice and writing up big papers on things, or maybe not big papers, but small papers that are very simplistic and unnuanced.

12:15What would you say is the biggest issue with the advice you often see given when it comes to ICP development? I mean, it's simplistic, right? It's sort of focus. It's just even one word. It doesn't tell you how to focus, when to focus, who should do the focusing um it's just find a focus and if you don't have a focus but then no so it that's too simplistic um well i hope we can get into it but fundamentally the companies at different stages actually should think pretty differently about icp and the type and how much focus they should be giving to it at different stages of company maturity and the second thing is this is not necessarily the fault of the investors who are trying to give helpful advice to their companies is that what makes a good ICP is often slightly misunderstood.

13:05What you see is that it's often real in a relatively firm or graphic terms, like this geography, this company size, et cetera, because those are the easiest dimensions to unpick from, say, an online lead generator. Like, here's how you can pick out matching accounts to yours that your SDRs should call, when actually, yes, that is one layer, but there's a lot more underneath. That's actually the reasons that some customers will be better fixed or not. It doesn't necessarily mean that they have to be based in France or Germany. And then this is kind of where the ICP bowtie comes in, your whole concept where you're trying to go in and solve the current status of simplistic advice that is maybe a bit too focused on the normal vectors that you could describe geography and so on.

13:55So let's dive into it. tell us about the ICP bowtie, maybe also painted for people. So the reason it's called the ICP bowtie. I was going to say, I realized it's the podcast. So right now, hopefully the listeners, you have imagined to like close your eyes and visualize something. And we're going to, I'll try to take you on that journey. But basically I imagine the company's ICP journey over company maturity stage looks like a bowtie shape. So picture a bowtie and imagine that the The horizontal axis is your company getting more and more mature and growing larger and larger. The left side is the pre-product market fit state.

14:34The middle represents when you're passing through that PMF conflict. And the right side is when you pass through it and you're suddenly onto the post-product market fit stage and you're truly scaling. Just if I add a point here, or if you go on Spotify and actually view the video that's playing there or on Apple, or you can also watch it on EU.vc, because we do have video there now. So you can just go and just pull it up real quick, see this slide, because we'll be showing it at the same time. Thank you. That's very kind to both myself and the listeners here. But so imagine that still. And then imagine that this is a dotted bow tie with the polka dots.

15:20And each polka dot represents a customer inside the bow tie. So in the ideal world, and this is where, again, it's easy to give advice, but the ideal world really exists. Imagine that in that left face, the left side of the bow tie, you're experimenting. You have a great product, but you're still figuring out who needs it the most. so you're going to have tons of different colors of dots. You're going to have tons of different types of customers. The customers will not be the same yet. There isn't focus. And guess what? That's okay because you have to learn. If you don't try different types, you won't know what works the best.

15:57But then as you pass through that PMF phase, the center of the bowtie, you have to flip that thinking around. You've now figured out who needs your product the most, who will use it the most, who will love it. And you need to double down on going after these and start coaching the team to say no to other customers. So when you're sort of passing through that, all of the dots, those customers being represented should look the same. They should start being very similar in their characteristics. And basically the whole company marketing sales products shifts to trying to focus their efforts towards that one type.

16:32What are the characteristics? Because you're saying they should all be similar in their characteristics. What characteristics? Because it's not necessarily geo, gender, age. Yeah, but not gender for sure. But for sure, the firmographics still do matter, right? Like geography matters. Often company size matters. Revenue stage of that company matters. But the additional factors that are actually super interesting could be what the tech stack is. Is this a company with a very mature existing tech stack and you're going to fit in as one piece of this? Are you selling better to companies that all have a certain type of ERP or CRM because you fit well with that?

17:11What type of integrations might they have? So that's sort of a tech stack question. Another thing that can very well differentiate customers is, are they the more or less digitally advanced within their industry? That's going to change how they make purchase decisions. Perhaps the team that you're selling into could be looking different. it could be it could be a team with a high degree of specialization within the team and your your particular product fits super well with a certain type of specialist that might mean that even if another company has a very similar type of similar team if they're all generous maybe they won't like your tool as much and they're going to need a all-in-one tool instead those are sort of three examples of the sorts of things which i mean which is we're not talking these are characteristics that are easily determined from the outside.

18:00Some of these will only be able to be covered as they're going through a sales process, but they're going to be the leading indicators that actually would lead a sales team member to dig deeper and will be likelier to convert into customers. Now let's switch to the right side of the bow tie where the funnel starts to grow again so to say yeah tell us about that initially again ideal world you're going to really have that one type of best fit customer i think that's really what you're going to grow grow your customer base with but as the company matures eventually a company does earn the right to add additional customer segments on top let's say for example that you discovered that your particular product could fit in both the financial services and professional services industry back in the pre-PMF phase, but you ended up having to choose one for focus.

18:56But one day, a large enough company, you will have the resources to add a second customer segment as well. It's just that you can't do it too early because you won't truly have the bandwidth across the entire company to split focuses and still be able to achieve your goals. In a similar way, say, internationalization is actually quite similar topic as well, right? Timing internationalization well is a timing question of when do you have sufficient resources to really go after market? Acknowledging that it's not just about hiring too many salespeople, it's also thinking about how do we adjust marketing, how do we also incorporate this localization into our product roadmap, and how can we split up executive time to broaden our focuses?

19:39Can you talk a little bit about how to navigate the need for focus or saying no or not expanding to another adjacent market or ICP profile or however you would frame it? Because I can imagine that you have a bunch of founders or marketing people that are like, let's push for this because I can see an opportunity here. And that is where I often see that the real magic is in being able to stay focused, but kind of what are the arguments, the things that help people stay laser focused and not expanding too early and so on. How do you think through this? Because sometimes you should expand. For sure, sometimes you should expand.

20:27And the worst part about advice, right, is that there's always acceptance to advice. Perhaps in your particular market, there is a reason to say internationalized earlier. for a different reason. Maybe that's the sort of, let's say you start from a smaller European market. Well, maybe you have to internationalize to be able to prove to investors that your product would fit elsewhere to gain your next funding route, even if that might not be the best from a purely operational, let's talk ICP perspective. So all advice is not a one-size-fits-all, right? But the thing that's insidious is that sometimes I would argue that the problems don't appear immediately right you start to see there's a high demand for this product you start to get inbound demand coming from other sort of target customers and nobody wants to say no to that and initially it actually works you can can continue to sell to them you can continue to therefore raise more money based on the higher traction you can continue to expand the team quite quickly and the team can therefore take on these new target customer segments but what eventually starts happening is that misalignment can start settling it in so it can mean that for example the product roadmap needs to be reprioritized quite regularly according to there's a new customer segment here there's something else coming in there you can start having pretty classic marketing and sales misalignment as well which i don't think we need to explain what sort of the pains of that because money people come through that But metrics-wise, it starts to happen, right, is that your sales and marketing efficiency actually goes down because each deck needs to be customized to a different target customer.

22:10That takes time. Or you're not actually able to train people in the same way, so it's less effective. Therefore, your burn goes up. And eventually, therefore, your growth may very well start slowing down. But it doesn't happen immediately, right? It might happen a year or two after. So the discipline difficulty is trying to decide what is worth it to be opportunistic and when is it worth it to be sort of strategic. As a rule of thumb, I think that something to ask oneself is that, can I as quickly onboard a new salesperson onto my team if we try to take on this as well? because the key to many software companies as they're scaling is figuring out how to quickly onboard new people so that they can be as effective as the people already in the company.

22:59If you don't think you're able to do that, then that's maybe one heuristic of sort of, okay, that's just too much. What does a good firm look like when it comes to having an ICP bow tie that really works? where do you kind of how do you describe it when it looks perfect so to say i don't think perfect exists but um i'm happy to share sort of like what what did we arrive at at my previous company volumontal so i'll let i'll let the listeners grade my own work basically instead of talking about a fictional company so the problem that that company sold was an interesting thing it was a it was a 3d 3d foot scanner that would be pasted into a physical retail store and then a shopper would be able to step onto that footplate, scan their feet, and then browse through a personalized ranking of the shoes that they were to pick.

23:49So just sort of painting the picture here. So strong intuitions were there when I started. It was sort of best fit customers would care about fit. That made the little athletic shoe retailers in the customer base. And what we needed a pressure test was there for, okay, but that's kind of still pretty vague. Like what really? And I think sort of after the exercise, what we added onto it that really helped was from the firmographic perspective, like really narrowing the focus to Europe and North America in that case, that we tend to have similar shopper experiences. Therefore, our customers would have similar sort of user flows and their storage that the company needed to adhere to.

24:35The retailers or brands had to have, I think, at least 30 % of their sales needed to be in footwear. Otherwise, from a sort of margin of ROI perspective, it wouldn't make sense. So those are still firmographic things. A certain volume of stores, also pretty firmographic. But I think one of the things that was probably more interesting was that they really needed a central technology operations team. So they needed a team that was more established in thinking about innovative technology. At the time in 2018, they also needed to really value being technological and innovative. So they would often have some other technologies already present in their stores that sort of showed that they were already leaning into that direction.

25:16It was quite hard otherwise to be the first new tech into the store. Third, it was not a self-service product. That would have been too difficult of an adaptation. So they needed to themselves have the margins and therefore probably the premium positioning to be able to afford to have store clerks in their stores. So I started off there with the more classy, like, you're the country, size of companies, et cetera. But it's those subtler things about the natures of within the company, what do they look like, which actually leads to, aha, they probably experienced the problem in the same way. And they're, of course, going to fit relatively well.

25:54And it's just to bring it back to a topic that we on the European VC podcast often talk about, LP profiling, right? And the fundraise process. You know, the really good fundraisers that I know, they know 100 % what their LP look like. And they know what questions to ask to know whether they fit their profile or not. And because ventures for many people are inherently interesting, there's a lot of people you can spend a lot of time with and they'll be happy to lead you on in a conversation. So knowing your ICP, knowing who are the people you've actually been able to convert in a fundraiser process is incredibly valuable as well.

26:37yeah yeah i think one thing though that slightly differentiates that is that many venture firms that are out fundraising with lps there's only relatively few people that are actually trying to fundraise so many venture firms now the sunsourge but they don't reach that sort of scaling go-to-market fit phase the goal is not to grow a team with like ah we're gonna have three times as many investors in two years for next fundraise, which would require really trying to teach a very structured playbook. They're more the type, like the types of people in venture firms who fundraise, they're more like the sales maverick types.

27:14They're the people you hire pre-product market fit, who have this ability to just figure it out because that's the environment of ambiguity that they're used to working in. You need to get to a much larger scale before you actually like write down those things that fit intuitively in sort of the founders of the sales Mavericks heads, which is one of those reasons too, that you don't need that super structured focus on CP framework often really early in the firm's life because it sort of develops through intuition. I agree and I disagree. So yes, you don't need to write it down and make sure to disseminate it across a 50 person sales and marketing team, obviously.

27:55But where I disagree a little bit, or at least where I see a lot of emerging managers, spending worthless time or valuable time on worthless tasks is trying to get money from someone where it's not a fit. I actually think we have an inherent problem in terms of venture is for many LPs not a fit if you look at it objectively. So there's a lot of passion things, but then it's about identifying what are those passion parameters that allow an LP to be a fit. Yeah. I just see so many that don't understand why one LP would not commit or they don't understand why they're not a fit for ISMR Capital. I obviously get that a ton, right?

28:41Because they're like, well, we're a great firm. We have great performance. We're like, all of that is correct. But you also fall in some pockets that are not a fit. And I think probably what's even more frustrating then is that just as we've been talking now about ICP and sort of software companies and their customers, it's not about the firm or graphics. Look, but they're a fund, they're the right size, they have the right team, they say on their website that they want to do this. But it's actually things that are only uncovered in conversation. It's about their inclinations, what types of things do they like, what sort of segments, the qualitative side, so to speak.

29:18which is sometimes what frustrates people. And that is where you very quickly, if you know enough about the fundraising game, you know the questions to ask from each profile. Family office, you know what you're going to have to look for for a family office to figure out whether they will ever be someone who will commit for a fund of fun. It's a completely different set of questions. 100%. Yeah, so very interesting. Which is in some ways why those truly excellent sales mavericks that founders can hire who really help them figure it out, they are rare. Because it's not a skill that everybody has, that knowing which questions to ask out of a customer to uncover those things.