By: Ben Freeberg
In 2008 the internet started to turn the startup world flat, as distribution and scale became cheaper and easier. You could now have 10 people working on an application in the U.S. and within one week have one million people using it in Turkey. There were no more geographic borders when it came to tech, so other talent rich areas could compete on a more level playing field versus American competitors in Silicon Valley. Hoxton Ventures is an early-stage technology venture fund that is taking advantage of these trends, investing across borders in new and transformative markets.
Even though the E.U. has ~150 million more citizens than the U.S. has, and has a very similar GDP and talent pool, startups in Europe are still less expensive. Hoxton is working to fill this gap, which still exists today, as there is ? the amount of VC dollars spent in the E.U. vs. the U.S. After being in business for almost four years, investing in new and transformative markets in the internet, mobile and software space, Hoxton has experienced two acquisitions, has seeded a “unicorn” (Deliveroo), and has attracted numerous U.S. follow-on investors for their companies.
What is their investment thesis?
Due to the lack of funding available for European and international startups, there is less competition on the funding side. So, unlike Silicon Valley, where a fund may specialize in B2B AI companies, Hoxton has the near-term opportunity to invest in category leaders who are entering a brand new market or disrupting an old industry at 1/10 the cost and a 10x more efficient rate.
Hoxton’s two partners, Hussein Kanji and Rob Kniaz, are computer scientists by background, and are interested in digging into the technology supporting the startups they diligence. The team is seeking out companies that can scale globally. Do the founders have that global ambition? Investing in tech in Europe has historically been very downside-protection oriented instead of the classic California venture approach of shooting for outliers. Hoxton and the up-and-coming venture community in the E.U. is on an exciting path to change that.
How does their portfolio fit In?
Behavox is a compliance software company for enterprise and is a perfect example of a company that is attacking a market that is being resegmented. Since the 2008 financial crisis, there has been a lot more legal consequence to insider trading and the like that management has to think about, both in the U.S. and Europe. Therefore, management is now incentivized to prevent illegal actions in any way they can.
Historically, executives would purchase compliance software to “tick the box”, but now companies are increasingly concerned with how good the software is at detecting malfeasance. Essentially the industry is going from Version 1.0 to Version 2.0, and better software is leading that charge. Behavox also has a large customer acquisition advantage being based in London and selling internationally, as London is home to most of the world’s largest banks.
This is exactly the type of company Hoxton is looking to back, a technologically proficient platform, in an attractive, quickly changing market with a unique acquisition advantage.
Adazza builds business intelligence solutions for companies with lots of unstructured data using machine learning. They’ve found an early application particularly in mobile carriers, especially where customers lean toward prepaid SIMs and the carrier doesn’t have the luxury of long term subscription data to mine. Many of these companies, don’t have an effective CRM or way to manage those customers and properly predict things like churn or assign long term value properly. Adazza uses machine learning to analyze the massive amount of data that flows through their platform, allowing companies to have a clear picture of their call logs, see patterns of use and in the end, reduce customer churn. One of Adazza’s partners has 100 million customers in Africa, and their team only has a couple of people managing those relationships. Therefore the data is completely unstructured. One this data becomes structured, there is an incredible amount of analytics you can run to allow you to better manage your customers and run your business.
In addition to strategic guidance, Hoxton has leveraged its geographically diverse limited partner base, in addition to its partnerships with U.S. university and charitable endowments in order to help Adazza get in front of the right potential telecom customers.
Thanks to Rob Kniaz and the Hoxton Ventures team for assisting us with this post.