As we gear up for the upcoming 0100 Conference Europe 2024, we had the opportunity to gather insights from Péter Oszkó, Founder and Managing Partner at OXO Holdings. Péter will be speaking at the panel titled “European VC Market: Trends for VC Investments in 2024 and Beyond” alongside industry experts from IRIS, 360 Capital, and Mangrove Capital Partners.
Founded in 2014, OXO Holdings is a multi-stage investment firm based in Budapest and Rotterdam, focusing on pioneering tech ventures across diverse industry verticals in Europe. With a strategic emphasis on the CEE, DACH, Benelux, and Nordic regions, OXO Holdings maintains a diversified portfolio of future-proof tech investments.
The firm's investment policy spans the funding spectrum, from early-stage incubation to growth and scale-up investments. OXO Group operates various investment vehicles targeting distinct industries, sectors, and stages of funding, including pre-seed and seed-stage entities in the CEE region, post-revenue tech ventures across Europe, and direct investments such as secondaries, strategic buyouts, and pre-IPO transactions, primarily focusing on the CEE region.
Notably, OXO Holdings places a strong emphasis on the ongoing green transition, supporting purpose-driven entrepreneurs in the climate technology field, aimed at fostering a greener future in Europe.
What are the benefits of being a multistage and multi-sector fund?
“Being a multistage investment entity with an agnostic investment approach allows us to build a diversified and crisis-resistant portfolio of promising tech investments. By spreading investments across different sectors and stages as well, the company can optimize risk-adjusted returns based on our experience. Consequently, balancing high-risk, high-reward early-stage investments with more stable, later-stage opportunities enables a favorable risk-return profile for the overall portfolio”, explained Péter Oszkó, highlighting the benefits and synergies that this multi-sector strategy brings to its portfolio companies.
“This approach allows us to finance selected tech ventures from early stage to growth and scale-up phase, which is beneficial from the investment target’s point of view as well, having a strong financing background throughout its life cycle. Furthermore, identifying promising and innovative companies in the early stage and taking part in several investment rounds during its growth trajectory enables us to acquire meaningful ownerships at reasonable valuations, fostering high IRR in case of a potential future exit”.
Projections for 2024/25 in terms of sectors
Despite challenges in venture capital fundraising observed in 2023, OXO Holdings remains optimistic about the market's outlook. Anticipated interest rate cuts may herald a market rebound, attracting institutional and retail investors back to alternative investments.
“2023 was a very dry year in terms of venture capital fundraising and consequently investments. Funding to European startups last year was down 39% year over year (YoY) in 2022 reaching only $52 billion. (Crunchbase, 2024) Nevertheless, in my opinion, the market will experience a slight rebound this year due to the anticipated interest rate cuts, which may attract institutional and retail investors back to alternative investments”.
The firm foresees significant investments in climate tech sectors, including clean technologies, e-mobility, agricultural technologies, and energy-related innovations. The ongoing shift towards sustainable and efficient technologies is expected to drive investments in the energy sector. Trends in deal flow and application suggest increasing capital intake for disruptive energy-related projects, reflecting the growing urgency for environmental stewardship.
“Given that around 520 billion EUR should be invested in the green transition every year in Europe to achieve the climate goals by 2030, only 21,3 billion USD was invested in 2022. (EEA, 2023) Furthermore, in 2023 a significant drop was seen in the climate tech domain, investments falling to 11,75 billion USD. (PWC, 2023) The decreasing trend has created a significant demand for Greentech funding. Investors, particularly in the tech sector, need to concentrate on both climate impact mitigation and adaptation tech investments. Startup companies offering hardware and/or software solutions for key areas in the green transition are emerging, therefore more funding is essential to support this system”.
Another industry that OXO Holdings is keeping an eye on is the energy sector, which is anticipated to attract more and more investments in 2024-2025 primarily due to the ongoing shift towards more sustainable and efficient technologies. “As the world continues to demand cleaner energy solutions, a wide range of innovative solutions and projects will emerge, attracting increasing levels of investments as well. We are also experiencing this trend on our own deal flow and application trends since more and more energy-related projects are seeking capital to disrupt the market with their innovative methods, processes and solutions”.
Challenges Ahead:
Looking forward, VC and PE managers may encounter hurdles in securing commitments amidst geopolitical uncertainty and high interest rates. According to Oszkó, establishing a competitive edge and attracting institutional investors will be paramount, requiring tech ventures to convincingly demonstrate profitability and viability.
"After years of an abundant market, VCs need to prioritize their investment strategies, potentially leading to market consolidation. The challenge of fundraising in the coming year lies in differentiating oneself from other VCs to attract potential institutional investors and family offices. LPs' risk appetite remains cautious due to geopolitical uncertainty and relatively high interest rates. As a result, they will be highly selective in their investment choices, seeking competitive advantages and unique investment approaches with a balanced risk-reward profile. Consequently, VC firms with entrenched legacies or specializations will be particularly appealing to LPs seeking to allocate capital. However, emerging funds will continue to perform well, maintaining LPs' interest."
While a slight rebound in VC investments is anticipated compared to 2023 levels, VCs are expected to deploy their dry powder cautiously, especially in the first half of the year. This cautious approach is influenced by lingering macroeconomic uncertainties, particularly concerning the trajectory and pace of interest rate cuts. It is imperative for tech ventures to build profitable and viable businesses with promising growth trajectories to attract VC investors in this environment. The era of oversold startups is waning, leading to more realistic valuations in the foreseeable future.
