Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Hussein Kanji of Hoxton Ventures was recorded in January 2018.
Hussein Kanji, Partner at Hoxton Ventures, is based in London and the primary focus is on European ventures.
Sramana Mitra: Let’s get you acquainted with our audience. Tell us about your fund. How big is the fund? What sized investments do you like to make?
Hussein Kanji: I run an early-stage venture capital fund in London that invests in European technology companies that we think are going to turn out to be global winners in the economy. We mostly do new products and new market categories in terms of investments. We’re a $40 million fund. We just turned four years old at the very end of November. We’re still fairly young. We have a few investments that have turned out to be much bigger than we are.
One of our most iconic investments right now is a copay called Deliveroo, which is a food delivery company that’s in London, Singapore, Dubai. We have a few other companies that have turned out to be fairly big companies including Darktrace and Babylon Health. Our typical check is anywhere from half a million to $2 million.
Sramana Mitra: When you come into a venture, what do you like to see already in it in terms of validation? What are the ingredients that you are comfortable with?
Hussein Kanji: We’ve done everything from sheet of paper investing to things that are little bit later stage. They may have revenues. The thing we look for, more than anything, is that the company is operating in a brand new market or brand new industry category that hasn’t been formed yet.
The question that we often ask ourselves is what has changed in that economy or in that market that allows companies to be born today where it couldn’t have been born before. Sometimes it’s fundamentally technology driven as in you couldn’t have built this thing because the technology behind it was impossible a few years ago. Sometimes, it’s because of social or cultural change. Sometimes, it’s because of a whole series of changes are happening at the same time.
We look for evidence that there is a new market. We’re trying to find companies that are coming out of Europe that will be able to hold their own. Usually when these opportunities present themselves, multiple companies get born to try and capitalize on the opportunity. A bunch will tend to get born in US, Israel, or India. We want to make sure that the company we’re picking is likely to become number one in that category.
Then we look at the people. Oftentimes, these companies are very small. If it’s just the founders, the founders themselves sometimes tend to be younger or inexperienced because this might be their first big company that they’re building. We look a lot at who they hire around themselves. We find that’s a better indication about the quality of the founding team than anything else.
While we look at people’s backgrounds, we really look at who’s joined the company. If somebody who has quite a senior job at Google comes to work on the same project with the founders, it is a pretty impressive signal for us. That’s what we do.
Sramana Mitra: What about sector? You mentioned both B2B and B2C. Is that an accurate observation?
Hussein Kanji: In Europe, there isn’t a lot of density of great companies. You can think of lots of great American technology companies. Israel produces a ton. Europe doesn’t produce nearly as much. We think there’s about one to three companies every year that are born that will turn out to be these billion-dollar type outlier companies across Europe. We want to make sure that we’re a shareholder in all of those. Those are usually not clustered in any one area.
Our best company is a B2C company which is Deliveroo. Our next best company is a cyber security B2B company which does anomaly detection or threat detection on a network. The next company after that is an artificial intelligence healthcare company that’s both B2B and B2C. Our portfolio is pretty diverse.
Sramana Mitra: Geography is all of Europe then?
Hussein Kanji: Yes, we invest across all of Europe. A lot of our deals have been in the UK just because there’s a ton of innovation that comes out of the UK relative to the rest of the continent. But we have a deal in Frankfurt. We have a company in Vienna in the travel space.