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Bootstrapped for 8 years, Xensam now has snapped up $40M for AI that manages software assets

Software asset management -- enterprise IT aiming, in part, to help companies save money -- continues to draw a lot of money itself. In the latest development, Xensam, a startup out of Stockholm 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 outside funding since being founded eight years ago.

The funding is coming from a single investor, Expedition Growth Capital out of London. Oskar Fösker, Xensam's CEO, who co-founded the company with his brother Gustav (the CTO), said in an interview that it will be used to continue developing its AI technology stack, to hire more people (it's now at 100 employees) and to break into the U.S. market.

The valuation is not being disclosed, but Fösker said he and his brother remain majority shareholders. The company itself has 200 customers -- some of the bigger names include Volvo's Polestar and Northvolt -- and annual recurring revenues are growing at 126% annually. It's not disclosing actual revenue numbers.

The world of software access management, which others in the space sometimes call software expense management or software license management, is a crowded one, not least because the problem getting tackled is big and important for multiple reasons.

Nearly $900 billion was spent globally by organizations on enterprise software in 2023, and some in the field have estimated that, thanks to the explosion in cloud computing and software sold as a service, a larger organization can have hundreds or even thousands of different licenses under its roof.

That can have implications across disparate areas like business spend, productivity and security, so it's no surprise that we've seen a rush of startups and larger tech companies building products to address the challenge of tracking and understanding the bigger picture of what is being used, where and why.

Xensam, in fact, got its start out of that competitive fray. The two brothers previously worked at another company called Snow Software, a big name in software asset management space. At the time they were there, it was scaling fast but losing pace, in their opinion, when it came to cutting-edge developments, such as the ability to better track SaaS usage by way of AI.

"After a while, it was clear that a hole was about to open up in the market, and no one showed any intentions to fill it," Fösker said. "This hole was to be the first, native SaaS player in the business."

A couple of side notes to Snow that speak to potential valuations, attention and consolidation in this space: One of Snow's biggest competitors was a company called Flexera. Last year, Flexera acquired Snow after it was reported that Snow was looking to sell itself for around $1 billion. Flexera meanwhile 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 have included IBM buying Apptio for nearly $4.7 billion.

Xensam's approach is to use AI to comprehensively scan and understand what is going on across an organization's network, giving a real-time picture of thousands of applications that might be in use across both cloud and on-premise environments.

"We’re using AI for various parts of the technology," Fösker said. "We’re using it to handle extreme amounts of data in the software normalization process," which he describes as the process where raw data gets normalized into standardized applications that is populated with meta data. This is the crux with why software usage management is key: A lot of that information is so siloed to the specific app that it's hard to have visibility in the wider organization when something is used or is not being used at all. Sometimes that means a company is overpaying for some service, and in a more alarming situation, sometimes that can throw up security vulnerabilities, or glitches in how things work.

Xensam's method of cutting through that mess and organizing it is what has set it apart, in other words. "This is the key reason why we’ve been able to completely beat the competition," he said, adding that it's also using AI in the front end. A chatbot that is trained on its system and software licensing rules "can interact directly with the system and provide everything from information from the system to prebuild reports based on an open specification."

He declined to comment on what, exactly, Xensam plans to launch next, nor what holes remain in the market to tackle, but he said that the startup plans to launch more products in Q2.

Meanwhile, the brothers' experience at Snow is also why the startup bootstrapped its business up to now.

"We don’t believe that a financial structure based on a Series A, B, C etc. for survival is a sound business model. It is 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 taking VC money, he said, was because they had figured out the business model on their own already.

"We’ve seen many companies raising money and losing a beautiful company culture while all focus is being changed to growth," he said. "Therefore, it was very important for us to find an investor that also shared 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 understands that model and how to work with that mindset as a VC perhaps better than some others.

“Xensam is one of the most impressive European growth companies we’ve come across," Oliver Thomas, founder and managing partner at Expedition Growth Capital, said in a statement. "In the nearly eight years they have been operating, they have built a critical solution which is enabling companies with thousands of employees to track, monitor and manage software usage. We’re delighted to be working closely with the company as their first external investor and look forward to being a part of their growth journey.”