Hoxton Ventures Launches a European Early Stage Venture Capital Fund, Bringing U.S. Investing Perspective to Europe
Accel and Fidelity Alumni Open Microcap Venture Fund in Europe
December 4, 2013 – Hoxton Ventures announced the close of Hoxton Ventures Fund I, L.P., an early stage venture capital fund investing in European technology companies. The fund brings the successful U.S. microcap venture investing model – a small fund run by former technology executives working closely with entrepreneurs to build value – to Europe.
Each of the partners of Hoxton has direct experience building technology companies, and subsequently investing in early stage startups. The two founding partners, Hussein Kanji and Rob Kniaz, held operational roles at Microsoft and Google, and left their respective venture capital firms, Accel Partners and Fidelity Ventures, to set up Hoxton. Dylan Collins, a venture partner with the fund, is a successful serial entrepreneur with several exits and investments in the software and media sectors.
Hoxton plans to make 4-6 investments a year and focus on European startups that can scale into large, category-defining leaders in newly emerging industry categories.
“Recent research shows there are 4-6 billion dollar companies being formed each year in the U.S., largely on the back of technology industry changes,” noted Kniaz. “Europe is consistently producing a 1-2 of these types of companies a year. Finding, funding and nurturing them is our mission.”
“We think after the US and China, Europe has the best conditions to build large, valuable companies – ahead of even Israel and India,” added Kanji.
As a fund mirroring the microcap venture strategy responsible for most of U.S. returns of the last decade, Hoxton invests early into companies. “In the past couple of years, we’ve seen a gap emerge in the early stage European market. It is difficult for entrepreneurs to raise their first £1-2 million. Too many European investors prefer to wait for businesses to mature,” said Kanji.
Europe has historically been a difficult geography in which to build companies and its venture capital market has underperformed U.S. venture as an asset class, leading many institutional investors to cut back their allocations. However, entrepreneurial conditions in Europe are changing rapidly, creating a growing mismatch between an increasing entrepreneurial talent base and a declining venture capital market.
“We are very happy to be contrarian investors concentrating on European entrepreneurs. We think this is a poorly served geography,” said Kanji. “A lot has changed on the ground and the quality of startups is improving rapidly. Too few investors have first-hand knowledge of building companies, and offer experience that can really help entrepreneurs scale their businesses.”
Recent success stories in Europe include the IPO of advertising technology company Criteo, mobile gaming companies Rovio and Supercell, analytics company Qliktech, and social gaming company King.com.
Hoxton is one of the few new venture firms to form in Europe in the last few years. “Our investors are excited by our approach, and like that we bring a Silicon Valley perspective to the changing market in Europe. We’ve been pleasantly surprised by the response from investors,” said Kniaz.
Hoxton expects many of its investments will become part of the U.S. technology ecosystem, either by opening offices or relocating parts of their team to the U.S.. “The fact that we place a heavy emphasis on Silicon Valley, even though we are based in London, makes us unique amongst other European funds” said Kanji. “We work hard to provide a bridge to the U.S. market – to recruit talent, secure partnerships and ultimately maybe even exit to U.S. companies.”
“We focus on making sure our companies are well connected in Silicon Valley,” added Kniaz. “For example, we recently invested in Campanja in Sweden, a startup building on top of Google’s ad platform. We convinced Ram Shriram, a board director of Google, who was also one of its earliest angel investors, to co-invest with us. It was his first European investment.”
Kanji and Kniaz have been actively investing over the past 18 months, and have made five investments to date, two from the fund. One of their first investments, Llustre, was acquired by Fab.com last summer, only twelve weeks after its launch.
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