Hoxton Ventures, the London-based early-stage VC firm best known for backing British unicorns Babylon Health, Darktrace and Deliveroo, is announcing its second fund, which has closed at a little less than $100 million.
That’s more than twice the size of the firm’s $40 million debut fund back in 2013, when new VCs setting up shop in Europe were still seen as a novelty. How the ecosystem has blossomed since then.
Founded by Rob Kniaz and Hussein Kanji — Fidelity and Accel alums, respectively — and joined last year by new partner and chief operating officer Rob Ludwig, Hoxton’s self-proclaimed strategy is, and always has been, to seek out startups that can scale globally into “large, category-defining leaders” in nascent industries. It is sector-agnostic and typically invests between $500,000 and $5 million into pre-seed, seed and Series A stage.
“We’re deliberately anti-thematic strategy, just as we were in the first fund,” Kanji tells TechCrunch. “Our job is to back tomorrow’s global tech winners from Europe. We feel most of these come from new market categories that [are] only now being born.”
“We also have a wider check-size range than some funds as we allocate a small portion of the fund to pre-seed companies, where we can take some riskier bets, where we have particular conviction around the founders themselves or a certain market,” adds Kniaz. “It will be years before quantum computing is ready to be commercialised, for example, but we think it’s important to have some exposure there to founders we think are exceptional.”
To date, it’s a strategy that appears to be paying off. The firm’s portfolio is currently valued at more than $7 billion in aggregate, while Hoxton’s first fund has the highest ratio of unicorns to investments, according to Dealroom.
Digging a bit deeper, there were 17 companies backed in fund one, which has thus far helped to produce three unicorns, six acquisitions and two restarts (“one good, one bad,” says Kanji). “Ten are still going, but one of these is walking dead, and don’t even get me started on the bad restart. Of the remaining eight companies, I’d say a handful have a shot at greatness. Behavox raised $100 million before the pandemic, and we’re big fans of what Dylan [Collins] and his team are doing at SuperAwesome.”
Meanwhile, industry observers have known that Hoxton has been attempting to get this second fund over the line for a while, but not everybody would have been aware of the way Brexit disrupted the VC’s own fundraising efforts, before the U.K.’s British Patient Capital stepped in to become Hoxton’s anchor investor.
Although the majority of this second fund was closed (but not announced) in early 2019, Kanji, who describes the team self-deprecatingly as “terrible” fundraisers, says the VC had a “really awkward experience with the European Investment Fund, which set us back by at least a year.”
“Yes, sadly EIF denied this publicly but they discontinued new fund relationships in the U.K. after Article 50 triggered, so that cost us a significant amount of time due to the length of their process,” says Kniaz. “By that time we had other commitments that had timed out, so we probably had and then lost and then re-raised nearly half of what we eventually raised. British Patient Capital were great in the process though and helped ensure we had some continuity as an anchor investor. We’ve been so pleased to work with them.”
To that end, the new fund began investing in early 2019 and has already made 20 investments across a range of sectors, including seed investments in FabricNano, a next-generation enzyme business; Fy!, a homewares marketplace; Kheiron Medical, an artificial intelligence radiology startup; and Preply, an online education company. I’m also told that approximately one-sixth of the fund’s investments so far were made after the start of the coronavirus crisis.