Our product-market fit journey (so far)

OxEO is raising its first external investment round. This is the second in a series of five short posts written to support that effort. If you are a qualified investor and would like to see our deck, please get in touch.

Our short history as a company has been punctuated by our participation in various incubators and accelerators. We started with the European Space Agency’s ESA Business Incubation Centre at Harwell, and have since been part of the Copernicus Accelerator, Astropreneurs, the UK Space Agency’s Leo programme, and the Creative Destruction Lab. Each experience has taught us something valuable, and we’re very grateful to have had these opportunities.

One question that mentors in all these programmes have consistently asked us, is: who is your customer? And to answer it, we have been through various iterations of product-market fit. Lots of great articles exist on this topic so here, I just share our own experience to date.

My background is in the capital markets. I started out as a graduate trainee at Citibank Global Asset Management (now part of Legg Mason) before joining Bessemer Trust, where I ran emerging market and Japanese equity portfolios. Later I founded a capital markets advisory firm which was sufficiently successful to let me pursue a doctorate in environmental risk. So when I co-founded OxEO, targeting customers in the capital markets, I was confident I knew their profile. We were focused on investment managers — people doing the job I used to do. I understood their process. I understood their pain. I knew the solution they needed.

With this self-belief, we painted a sufficiently convincing picture of the opportunity to get onto our first incubation programme. This gave us resources to work on the product, but as we advanced, progressively more questions were asked regarding the market. So, we set up an advisory panel of ‘expert users’ — half a dozen individuals from some of the leading ESG investment firms in Europe.

We convened the panel for our first demo day last autumn. They were all great: engaged and enthusiastic, asking us the difficult questions that would help refine the proposition. Afterwards, I asked them if they would provide us with ‘letters of intent’ — non-binding commitments that are used to evidence customer demand. I had assumed this would be straightforward. It was not.

I will spare the details but in short, the commitments were not forthcoming, for reasons that ranged from compliance to process. This was an unexpected setback, but I figured that we just needed to widen the pool beyond six.

We tapped our network and met several more investment managers. As you can probably guess — same response. Enthusiasm and encouragement, but no commitment. I was perplexed. Was it natural risk aversion — what Michael Lewis describes in Liar’s Poker as “equities in Dallas”? I didn’t think so. The people we were talking to were smart and switched on. Most of their firms had recently launched ESG funds. Inflows were booming. Our product would transform stewardship and active engagement. They should be all over this.

And that is when I finally got it. The reluctance to commit was not despite the ESG boom. It was largely because of it. With funds flooding in, where was the incentive to spend time and money on an early-stage, experimental product that their clients were not even asking for? The customer segment that I thought I knew was behaving entirely rationally. And entirely not in the way that I had assumed.

That realisation prompted a small but very significant pivot in our product- market focus. And wow, has that made a difference. The first person we approached spoke to us on a Friday, sent us an NDA the next Monday and was helping to co-develop the product by Tuesday.

We now have deliverables to meet this autumn, which is part of the reason for raising our first external investment round. No doubt our assumptions about this process will also be challenged. But so long as we keep learning, we’re happy with every day being a school day.