For this 8th interview, we’ve chosen high-profile investor Jos White, who’s a partner at Notion Capital.
Jos is a very successful entrepreneur who co-founded 3 businesses: RBR Networks back in 1993 — acquired by Datatec five years later; Star Internet in 1995 — one of UK’s first Internet Service Providers, sold to Claranet in 2012; and MessageLabs in 2000 — one of the first SaaS businesses, acquired by Symantec in 2008 for $700M.
Then, he co-founded Notion Capital with three other partners. Jos is also an active angel investor in the US through Daring Journey Ventures, his own seed fund.
Created in 2009
Investment focus: mainly companies headquartered in Europe (or with significant operations in Europe) in B2B SaaS/Cloud services at Seed or Series A stages.
Investment thesis: SaaS/Cloud businesses with fast-growing, high margin, recurring revenues, talented teams, strong technology that leverages the multiple devices as well as huge volumes of data in the cloud and operating in large markets where the time is right for disruption.
Assets Under Management: > $300M
European SaaS portfolio: Adbrain, Brightpearl, Currency Cloud, DueDil, Elevaate, Idio, Move Guides, NewVoiceMedia, ProFinda, Tradeshift, Triptease, Volo, Wercker and Workable.
Insights from Jos White
Why do you invest in SaaS?
I co-founded one of the world’s first SaaS businesses, MessageLabs. It was the first company to move the process of email filtering and anti-virus/anti-spam into the cloud and deploy a more data-driven approach to recognize malware in a more predictive way. In 2008, MessagesLabs had reached $150m in revenues and had more than 500 people across 15 countries and was acquired by Symantec for $700M. At the time, it was one of the largest ever SaaS exits.
Myself and the three other partners at Notion were all part of the founding team behind MessageLabs. As investors the knowledge and experience of scaling a large SaaS business gives us our ‘unfair advantage’ in evaluating and supporting our portfolio companies.
Also, another reason is that I believe there’s a major shift from traditional on-premise software to cloud-based software. This is a mega trend in technology and it’s only the beginning. We want to invest in companies that will play a part in this transition.
What makes a good VC for a SaaS startup?
The interests of the VC and a startup founder need to be aligned.
An entrepreneur should make sure the VC has experience in the markets they are investing in, that they will back the company over the long term and can add value beyond the dollars. Founders should expect knowledge, expertise, contacts and an overall portfolio services platform from investors.
Obviously, a VC will never do the job for you, but they do need to be a coach on the sidelines, helping in areas like strategy, getting the right people in the right places, introductions and GTM planning.
Raising funds with a VC is a bit like a marriage, so be sure your interests are aligned, that you trust one another and that you enjoy spending time with each other.
What investment trends do you foresee for 2020 in the SaaS industry?
I think mobile-first and mobile-only B2B apps are going to be an ever more important growth area. Historically, you build a SaaS software for the desktop and afterwards for mobile. I think the future will be mobile-first and increasingly mobile-only, something you already see happening in the B2C world today. Right now there are very few mobile-only B2B apps and I think this represents a big market opportunity.
Furthermore, the first SaaS businesses addressed large, horizontal markets (like Salesforce) but I think vertical SaaS applications will be the next wave and you are already starting to see this. The future will be more industry-specific.
Lastly, I believe that more and more devices will have internet connectivity with the rise of the ‘Internet of Things’ and this is an opportunity for SaaS businesses to capture the huge volumes of data and turn it into intelligence for businesses.
Do you consider yourself to be in competition with U.S. VCs for SaaS startups?
Yes, increasingly. In Europe, the market isn’t so competitive, but the danger is that you can get too complacent… and then a US VC comes in and takes the deal.
For me, the very best deals are always competitive and definitely include US VCs. If a deal isn’t competitive, you have to ask yourself why.
As US VCs are more used to competition, they’re a lot better at competing for deals than European VCs. They know very well how to pitch entrepreneurs with their own value proposition and fight for the deal. It is something that European investors are getting better at and will be increasingly important to win the best deals.
What’s the n°1 SaaS startup that you’d like to have in your portfolio?
Slack. It’s a very impressive business. Their vision to replace email is very ambitious and represents a huge market opportunity. However, as they get bigger and bigger, they’re going to face some of the same problem as email in terms of its complexity and ubiquity — for instance, there’s already some spam with Slack. But, they are entering a massive market and the team seems very strong. It’s a fascinating company and will be interesting to see how far they can take it.