EXCLUSIVE: Oxford Capital is to back around 12 seed stage tech start-ups in 2023 in a mix of new and follow-on investments.
The Oxford-based VC typically invests between £500,000 and £1m in seed stage rounds of up to £5m. This can add up to over £10m over a series of rounds.
“We’re looking to step up our seed stage investing activities in 2023,” co-founder and founding partner David Mott tells Growth Business. “We may look to double our seed stage investments.”
Oxford Capital invests in tech start-ups around the UK – particularly digital and deep tech but its interest spans mobility, retail, fintech, marketplaces, AI, B2B SaaS and nutrition and wellbeing.
Notable start-ups in the portfolio include investing app Moneybox, men’s fashion brand Spoke and footfall analyser Hoxton AI – a system utilised by conferences, shops and exhibitions to see where customer footfall flows in a space.
In total, the VC has invested over £500m into over 100 companies to date.
“At the moment valuations are bit more attractive and there’s still quite a lot of capital around,” Mott says. “We’re picking and choosing our co-investors that have that longevity and track record.”
One of those co-investors is Oxford spinout investor Oxford Science Enterprises (OSE), of which Oxford Capital is a shareholder and shares an office building with.
> See also: University of Oxford spinout investor raises £250m
It’s a mazy, lab-like space with start-ups, laboratories and investors all collaborating within the same walls in the heart of Oxford.
“Oxford for a thousand years has been this extraordinary knowledge cluster,” Mott enthuses. “When we started the firm, there were various technology clusters – Oxford, Cambridge, London, Nottingham – but it made sense that the big universities where a lot of tech and knowledge was originating from were within a couple of hours’ drive from our offices.”
That was back in 1999 when Mott was 26 years old and Oxford Capital was busy pioneering an EIS fund structure, merging elements of traditional private equity funds with the tax advantages of EIS.
Since then, the VC has averaged a deal a month in a mix of new and follow-on investments, investing consistently through ups and downs in the economy which has included the dotcom crash and the credit crisis.
“If any of our founders burn out, we see that as a failure.“
David Mott, co-founder of Oxford Capital
“We’re into our third or fourth downtown and what we’ve learnt from that is we should keep going,” Mott says. “In 2022 we spent a lot of time working on our existing portfolio. Nearly all have long cash runways that last beyond the end of 2023… but we’ve never said we’d stop investing.
“I think consistency has been key for us.”
Stress and strain
The VC has made a very conscious effort to support founders throughout those ups and downs. One in four founders suffer from loneliness, a far higher statistic than the national average.
“It’s a very real issue,” Mott says. “It’s also about helping people build their own resilience. As a VC that’s been around for two decades, we know how difficult the entrepreneurial journey is.
“In an upcycle it all looks easy and then in a downturn people face challenges – it’s more difficult to raise money, win clients, expand internationally, hire people and these things are realities which put a lot of stress and strain on individuals as founders.
“Hopefully we can be a supportive ear. We’re not forcing therapy on people, we are just saying, ‘We’re aware of this, we’re here and we can put you in touch with someone who has gone through similar challenges before. We can make connections.
“If any of our founders burn out, we see that as a failure.”
> See also: 10 tips to avoid office burnout
As admirable this duty of care is to founders who, for the most part, are working with their first institutional investors, it also helps bind founders to stick with their company until it is time to cash out.
“If the founders are still at the helm of their business at the point of exit, there is a huge out-performance in returns in our historical track record,” Mott explains.
“That often means building a company around them and trying to have some honest conversations about founders’ strengths and weaknesses.
“For example, entrepreneurs are getting younger, with gaps in their experience or skillsets. If someone is particularly good at product but maybe less good at something else, then do we bring in a COO a little bit earlier than you might otherwise?”
Another wider initiative is the encouragement of more start-up investment. In December, Labour’s shadow chancellor Rachel Reeves announced a plan to link UK VCs with pension funds – something Mott would welcome.
“The UK lags many countries in Europe and especially the US in that there is very little support for venture capital from pension funds,” he says. “We welcome all Government initiatives to change that. In practice, it’s very difficult.
“VCs are performing as well as private equity so it’s a much more established asset class and it won’t go away. I think it’s important pension funds do harness and tap into the potential of the ecosystem in the UK.
“There’s a perception that venture capital is very high risk. It obviously is. But you can mitigate that through portfolio construction, investing in multiple vintages, different cycles and managers.
“Overall, venture capital is performing as well as private equity and, in some cases, outperforming.”
As a pioneering VC in EIS fund structure, Mott and the VC were also happy to see the extension of the EIS scheme announced in the Autumn Statement.
“EIS is a really important part of the ecosystem,” Mott adds. “It helped educate and has expanded the market. I’m a great believer in the ecosystem being a numbers game: the more companies start and fail, the more successes there will be. We want to build that virtuous circle.
“Founders can learn from experience; investors can get loss relief. We’ve seen more successful founders become angel investors. It all feeds back in.
“EIS is a real beacon for the enterprise economy in the UK.”
What does Oxford Capital look for in founders?
Founders to build a partnership with: “Are they founders who can listen, engage and are interested than more than just taking our money and with whom we can have these strategic discussions with? We may be working together for five, seven or ten years, so if we can find some common ground early, that’s something we really look for.”
The ability to build a product: “Really having that as part of their DNA.”
Ability to attract people around them: “Those who really understand the market they’re addressing.”
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