Hoxton Ventures takes aim at Europe’s Unicorns

Unicorns

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Nine years ago, when Rob Kniaz moved to London from Silicon Valley, the U.K. – and Europe – were very different places for entrepreneurs. Kniaz had spent years at Google, Intel and Fidelity Partners: he knew how to spot a digital winner. England’s busy capital wasn’t just missing the Californian weather, though, but an appetite to build it big as an American.

“For every autonomy that was successful and able to sell, you had a lot of companies like here in the U.K., doing something,” he says. “But the U.S. market was six times as big, and the U.K. guy would receive less than the U.S. guy, and they’d go to France or Germany to try to expand their market, so it was a lot slower growth. And if you had a well-funded U.S. competitor, eventually the U.S. competitor would come over into Europe and buy the local firm.”

Kniaz teamed up with Hussain Kanji, a seasoned pro with bags of experience working at Valley heavyweights like Accel and Microsoft. Hussein knew the city from his time at London Business School. Between them, the pair knew they were onto something.

“For us, having operational background, we saw it was very unique – even for a good fund,” he says. “A lot of (local funds’) guys might be smart, financiers – but not tech guys.”

That was in 2008. Three “long and painful” years later, Kniaz adds, they had raised a shade over $30 million and were ready to spend it. Today Hoxton Ventures has a 17-company portfolio ranging from FinTech to food delivery – and has been hailed as one of the catalysts making London, and Europe, a fertile breeding ground for ‘unicorns’ – the industry epithet for a billion-dollar firm.

When Kniaz first moved across the Atlantic, he says, you might expect to see a unicorn emerge from Europe every year – perhaps every other. Today, though, that has changed: this year 13 companies made nine figures. Eight were from the UK. Germany (3), and France and the Netherlands (one each) rounded out the list.

Hoxton itself has two “clear winners” on the cusp of unicornity (or unicornness), according to Kniaz: DarkTrace, a security provider whose product is based on the human immune system, and Deliveroo, the food delivery service which this week secured a $100m round – its third of the year.

Deliveroo is now available in 50 cities, across 12 countries, with over 5,000 restaurants on its service. The money, the company announced, will help it expand to locations including Dubai, Hong Kong, Singapore, Melbourne and Sydney. Its latest round was led by Yuri Milner’s DST Global and Greenoaks Capital.

“We want to bring Deliveroo to as many people as possible,” William Shu, chief executive officer and co-founder, said on Bloomberg TV. “We want to work with the best restaurants in your local neighborhood and get that food to you in about half an hour. That’s our global view on what the customer wants.”

It was the operational excellence of the founders which attracted Kniaz. “In food delivery, getting food fast and efficiently is quite different to scale. For different neighborhoods, managing drivers: it’s quite hard. And this is why a lot of lower-end restaurants had their own drivers,” he says.

Hoxton has five more firms which are looking good, he adds – “They’re not quite at the billion-dollar tracker but they’re getting there” – and ten more companies that Kniaz claims have bags of potential.

Among those second five is BD4Travel, a German-founded ‘predictive analytics platform’ for the online travel industry (which this June raised $4.2m). Its founder Andy Owen Jones says that working with Hoxton has been “excellent…really intimate and knowledgeable about the market.

“It’s too easy for people to pull the wool over your eyes with the technology,” he adds. “So I think I would feel very afraid were I coming from a purely financial background to do something like this.”

Kniaz agrees that he and Hussain’s deep knowledge of tech markets in particular has helped Hoxton discover companies that, while spread across an array of sectors, have one thing in common: the ability to scale internationally, and fast. Founder ambition is the biggest attribute he looks for, and those who want to buck European entrepreneurs’ fondness for building medium-sized companies.

“It also pays to have a pretty broad network,” says Kniaz. “Silicon Valley, for better or worse, has the greatest density of those sorts of minds in the world. So if you have a good Silicon Valley network you can probably find experts in any sector of tech.”

Aside from the weather, he adds, London is finally beginning to achieve its potential as a hotbed of tech talent – beyond local centers like Berlin and Stockholm. “It really is the heart of Europe,” he says.

Speaking about Europe’s overperformance, partner Hussein Kanji told GrowthBusiness, “If you compare Europe to China, despite being a much larger market China is only producing about 22% of new Unicorns, and in other large markets Israel and India it’s tiny in comparison. And if you contrast the cash that goes into businesses here with other economies Europe is massively underfunded.

“So it’s a very interesting time to be a VC because we’re seeing businesses that are turning into very large companies and there’s very little money outside of the bigger funds,” he added.

British politics is one aspect of life in the capital that Kniaz admits to be concerning. On one hand, the Labour party has swung far to the left with its appointment of old-school socialist Jeremy Corbyn, a move guaranteed to worry entrepreneurs.

That has left a lacuna between Labour and its rival the Conservative Party, helmed by prime minister David Cameron, who has for years made overtures towards a UK divorced from the European Union. A public vote promised for 2016 will likely be held the following. But Kniaz is firm that Britain is best-served with, rather than without, Brussels.

“Business does better by being in Europe, and if you look at all the possible ways of how we’d leave Europe, I think the average citizen realizes that, despite immigration being a third rail that really sets people off more than everything else, economically Britain is better off being in Europe,” he says. “There’s a lot to work on in terms of mechanism and keeping the right alignment with Europe, but for the British economy being part of that market is too much too lose.”

For now, though, all is well. And Hoxton continues to win plaudits for its service to the expansion of London’s billion-dollar club. But the firm is based in Victoria, not Hoxton (neighbor of Shoreditch, home to London’s ‘Silicon Roundabout’) – so why the name?

“It’s a bit of a misnomer,” admits Kniaz. “When we started (the area) was just coming up, and it was a nice sort of transatlantic name that sounds vaguely British to an American, and doesn’t have too much of a connotation one way or the other to British people.

“The problem is that it’s bloody expensive there,” he adds. “If you look at rents in Shoreditch, they’re really high for what you get. So one of our investors got us a deal on a place in Victoria for a good price. So being young and scrappy ourselves, we took the bargain – and the name moved with us.”

With more DarkSpaces, Deliveroos and BD4Travels under its belt, ‘scrappy’ is not a descriptor Kniaz can throw at his charges much longer.