Software asset management—enterprise IT aims, in part, to help companies save money—continues to pull in a lot of money on its own. In the latest development, Xensam, a Stockholm startup that provides AI-based tools to help businesses understand and track where and how software is being used, has raised $40 million. This is the startup’s first external funding since its founding eight years ago.
The funding comes from a single investor, London-based Expedition Growth Capital. Oskar Fösker, CEO of Xensam who co-founded the company with his brother Gustav (the CTO), said in an interview that it will be used to continue to develop the AI technology stack, hire more people (now 100 employees) and to enter the US market.
The valuation was not disclosed, but Fösker said he and his brother remain majority shareholders. The company itself has 200 customers – some of the biggest names, including Volvo’s Polestar and Northvolt – and annual recurring revenue is growing 126% year-on-year. It does not disclose actual revenue numbers.
The world of software access management, which others in the field sometimes call software output management or software license managementit is full, mainly because the problem at hand is large and important for many reasons.
Almost 900 billion dollars spent globally by organizations on enterprise software in 2023, and some in the field have estimated that, thanks to the boom in cloud computing and software sold as a service, a larger organization could have hundreds or even thousands of different licenses under its roof.
This can impact areas as diverse as business spending, productivity and security, so it’s no surprise that we’ve seen a rush of startups and larger tech companies building products to tackle the challenge of tracking and understanding broader picture of what is used, where and why.
Xensam, in fact, started from this racing battle. The two brothers previously worked at another company called Snow Software, a big name in the software asset management space. At the time they were there, it was scaling quickly but falling behind, in their opinion, on cutting-edge developments such as the ability to better track SaaS usage through AI.
“After a while, it was clear that a hole was going to open up in the market and nobody showed any intention of filling it,” Oskar said. “This hole was going to be the first, native SaaS player in the business.”
A few paragraphs about Snow that talk about potential valuations, attention and consolidation in this space: one of Snow’s biggest competitors was a company called Flexera. Last year, Flexera got Snow after it was reported that Snow wanted to sell himself about $1 billion. Meanwhile, Flexera was last valued at nearly $3 billion in 2020 when it was acquired by Thoma Bravo (which still owns it). Other big deals in this area include IBM’s purchase of Apptio for nearly $4.7 billion.
Xensam’s approach is to use artificial intelligence to comprehensively scan and understand what is happening in an organization’s network, giving a real-time view of thousands of applications that may be in use in both cloud and on-premise environments.
“We use AI for different parts of the technology,” Fösker said. “We use it to handle extreme amounts of data in the software normalization process,” which he describes as the process where raw data is normalized into standardized applications that are loaded with metadata. This is the main reason why software usage management is key: a lot of this information is so siled in the specific application that it’s difficult to have visibility into the wider organization when something is being used or not being used at all. Sometimes this means that a company is overpaying for a service, and in a more worrying situation, it can sometimes cause security vulnerabilities or bugs in the way things work.
Xensam’s method of sifting through this chaos and organizing it is what sets it apart, in other words. “That’s the main reason why we’ve been able to completely beat the competition,” he said, adding that it also uses AI on the front end. A chatbot trained in the licensing rules of the system and its software “can directly interact with the system and provide everything from information from the system to pre-built reports based on open specifications.”
He declined to comment on exactly what Xensam plans to launch next, or what holes remain in the market to address, but said the startup plans to launch more products in the second quarter.
Meanwhile, the Snow brothers’ experience is also the reason the startup has taken its business to this point.
“We do not believe that a financial structure based on a series A, B, C, etc. for survival is a healthy business model. It’s based on too many external factors,” he said. “We knew we would have to be financially stable … to be sustainable.”
So the turn to eventually get VC money, he said, was because they had already figured out the business model on their own.
“We’ve seen a lot of companies raise money and lose a beautiful corporate culture while the whole focus has shifted to growth,” he said. “Therefore, it was very important for us to find an investor who also shares our cultural values, which we believe we have in Expedition.”
For its part, Expedition describes itself as typically the first outside investor in startups — meaning it works with a lot of bootstrapped founders, so it understands that model and how to operate with that mindset as a VC perhaps better than some others.
“Xensam is one of the most impressive European growth companies we have come across,” said Oliver Thomas, founder and managing partner of Expedition Growth Capital. “In their nearly eight years in business, they have built a critical solution that enables companies with thousands of employees to monitor, track and manage software usage. We are delighted to be working closely with the company as their first outside investor and look forward to being part of their growth journey.”
