Sramana Mitra: I’m going to double-click down on some of these different types of businesses that you’ve invested in and ask you a few questions just to understand your thought process. What is it about a delivery company that is so unique? There are delivery companies all over the place right now in every continent and every country. Some of them are scaling well. Why is this particular company so special?
Hussein Kanji: Delivery was one of the early ones. Like I said, when a brand new market gets enabled, tons of companies are usually formed to try and build on that market. There was a company way back in the mid-90’s during the dot-com bubble called Kozmo. Kozmo tried to do delivery services in New York and it didn’t work. Kozmo didn’t work because they were trying to do it in a pre-smartphone era with pagers.
Delivery is all about efficiency and how many deliveries you can do an hour. The more delivery you can do an hour, the more you’re likely to pay the cost of the driver and pay the cost of running the business. It’s a utilization-driven business and doing it in the pre-smartphone era was tough.
When the smartphone came out, it made sense to do delivery. It wasn’t even just the smartphone. It was the fact that you have the accelerometer and the gyroscope built into the smartphones which gave you more precision about the delivery. If they’re walking around trying to find the house number and are spending five minutes on it, that’s significant enough to be able to cost you time.
Deliveroo built a ton of technology around this. They didn’t go to North America. They went to cities that were dense. When a neighborhood is dense, it means that their drivers don’t have to do very long duration trips, which means they can do multiple deliveries an hour.
We wrote the check. They have done phenomenally well. The company is worth over $2 billion now. It is, by far, the market leader in the food delivery space. There are lots of other copycats, but since this is a scale business, it’s very hard to displace when you get to scale. Their fleet and network of drivers are so much more efficient than anybody else’s. It’s hard to displace unless you’re going to throw tons and tons of money on it.
What they’re doing is they’re building their own kitchens. They’re going to restaurants and saying, “In this particular neighborhood, people are looking for your restaurant but you don’t have a restaurant in place. Instead of spending all this money building a restaurant, why don’t you come in and cook on-demand in our kitchen?”
Sramana Mitra: You have invested in a cyber security company. This is a field that is incredibly crowded. I’ve been in this industry for more than 20 years. From the beginning of time, cyber security has been one of the venture capitalist’s favorite area of investment. It attracts immense amounts of funding and entrepreneurs. What is it about your investment that is particular? How do you assess a cyber security deal?
Hussein Kanji: When we started our fund, we were pretty convinced that cyber security was going to be really interesting as an investment category. If you think about it, the bad guys are the ones who are more likely to use the newest and greatest technologies. The good guys will be playing catch up.
We came across a company called Darktrace in Cambridge. They have built some technology that allow you to effectively build a home alarm system for a corporate network. It’s a piece of software that sits on the network that figures out if there are any intrusions or network breaches that are happening in the network. If an alarm system rings too many times, you start tuning it out because you get too many false alarms. They had figured out how to make this thing ring when there was actually real activity going on.
There’s a lot of science behind how they did this. This is a new category. There’re lots of cyber security investments for making the walls stronger but not as much in terms of figuring out if something is going on inside your network. There are other venture companies that were funded trying to do exactly the same thing. They are all funded by really great venture firms. Battery had invested in one.
We were trying to figure out if this was the best in class. We called a lot of our connections in the security industry. One of them was the Chief Scientist of Cisco’s security division who then became the CTO at RSA. Through our network, we were able to figure out that this particular company may have an edge against the market. It had the potential to be number one. We wrote the check. The company has done phenomenally well. Most of its competitors have been acquired for decent sums of money, but they are small from a venture perspective.
There’s a company called LightCyber. They got acquired by Palo Alto Networks for $190 million. We are doing phenomenally well. We did about $120 million in bookings last fiscal year and about $40 million in revenue. We’re growing super fast. The company is worth about $800 million now. This looks like it’s going to be the home run winner in that space. You’re right. Cyber security is super crowded.
When we invest, we look at these new markets. Sometimes new markets in crowded spaces are new product categories, but this was a new product category that was being born. Our view is, when a new category is born and if the timing works out, these things grow exponentially and become really sizeable.